[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                   EMPOWERING CONSUMERS AND PROMOTING

                   INNOVATION THROUGH THE SMART GRID

=======================================================================



                                HEARING

                               BEFORE THE

               SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 8, 2011

                               __________

                           Serial No. 112-32

                               __________

 Printed for the use of the Committee on Science, Space, and Technology


       Available via the World Wide Web: http://science.house.gov




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              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

                    HON. RALPH M. HALL, Texas, Chair
F. JAMES SENSENBRENNER, JR.,         EDDIE BERNICE JOHNSON, Texas
    Wisconsin                        JERRY F. COSTELLO, Illinois
LAMAR S. SMITH, Texas                LYNN C. WOOLSEY, California
DANA ROHRABACHER, California         ZOE LOFGREN, California
ROSCOE G. BARTLETT, Maryland         BRAD MILLER, North Carolina
FRANK D. LUCAS, Oklahoma             DANIEL LIPINSKI, Illinois
JUDY BIGGERT, Illinois               GABRIELLE GIFFORDS, Arizona
W. TODD AKIN, Missouri               DONNA F. EDWARDS, Maryland
RANDY NEUGEBAUER, Texas              MARCIA L. FUDGE, Ohio
MICHAEL T. McCAUL, Texas             BEN R. LUJAN, New Mexico
PAUL C. BROUN, Georgia               PAUL D. TONKO, New York
SANDY ADAMS, Florida                 JERRY McNERNEY, California
BENJAMIN QUAYLE, Arizona             JOHN P. SARBANES, Maryland
CHARLES J. ``CHUCK'' FLEISCHMANN,    TERRI A. SEWELL, Alabama
    Tennessee                        FREDERICA S. WILSON, Florida
E. SCOTT RIGELL, Virginia            HANSEN CLARKE, Michigan
STEVEN M. PALAZZO, Mississippi       VACANCY
MO BROOKS, Alabama
ANDY HARRIS, Maryland
RANDY HULTGREN, Illinois
CHIP CRAVAACK, Minnesota
LARRY BUCSHON, Indiana
DAN BENISHEK, Michigan
VACANCY
                                 ------                                

               Subcommittee on Technology and Innovation

                  HON. BENJAMIN QUAYLE, Arizona, Chair
LAMAR S. SMITH, Texas                VACANCY
JUDY BIGGERT, Illinois               JOHN P. SARBANES, Maryland
RANDY NEUGEBAUER, Texas              FREDERICA S. WILSON, Florida
MICHAEL T. McCAUL, Texas             DANIEL LIPINSKI, Illinois
CHARLES J. ``CHUCK'' FLEISCHMANN,    GABRIELLE GIFFORDS, Arizona
    Tennessee                        BEN R. LUJAN, New Mexico
E. SCOTT RIGELL, Virginia                
RANDY HULTGREN, Illinois                 
CHIP CRAVAACK, Minnesota             EDDIE BERNICE JOHNSON, Texas
RALPH M. HALL, Texas
                            C O N T E N T S

                      Thursday, September 8, 2011

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Benjamin Quayle, Chairman, 
  Subcommittee on Technology and Innovation, Committee on 
  Science, Space, and Technology, U.S. House of Representatives..     8
    Written Statement............................................     9

Statement by Representative John P. Sarbanes, Subcommittee on 
  Technology and Innovation, Committee on Science, Space, and 
  Technology, U.S. House of Representatives......................     9
    Written Statement............................................    11

                               Witnesses:

Dr. George Arnold, National Coordinator for Smart Grid 
  Interoperability, National Institute of Standards and 
  Technology
    Oral Statement...............................................    12
    Written Statement............................................    14

The Honorable Donna Nelson, Chairman, Public Utility Commission 
  of Texas
    Oral Statement...............................................    20
    Written Statement............................................    21

Mr. John Caskey, Assistant Vice President, Industry Operations, 
  National Electrical Manufacturers Association
    Oral Statement...............................................    24
    Written Statement............................................    24

Mr. Rik Drummond, Chief Executive Officer and Chief Scientist, 
  The Drummond Group
    Oral Statement...............................................    29
    Written Statement............................................    31

             Appendix I: Answers to Post-Hearing Questions

Dr. George Arnold, National Coordinator for Smart Grid 
  Interoperability, National Institute of Standards and 
  Technology.....................................................    52

The Honorable Donna Nelson, Chairman, Public Utility Commission 
  of Texas.......................................................    55

Mr. John Caskey, Assistant Vice President, Industry Operations, 
  National Electrical Manufacturers Association..................    58

Mr. Rik Drummond, Chief Executive Officer and Chief Scientist, 
  The Drummond Group.............................................    51


                   EMPOWERING CONSUMERS AND PROMOTING



                   INNOVATION THROUGH THE SMART GRID

                              ----------                              


                      THURSDAY, SEPTEMBER 8, 2011

                  House of Representatives,
         Subcommittee on Technology and Innovation,
               Committee on Science, Space, and Technology,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 10:11 a.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Benjamin 
Quayle [Chairman of the Subcommittee] presiding.


                            hearing charter

              COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY

               SUBCOMMITTEE ON TECHNOLOGY AND INNOVATION

                     U.S. HOUSE OF REPRESENTATIVES

                   Empowering Consumers and Promoting

                   Innovation through the Smart Grid

                      thursday, september 8, 2011
                         10:00 a.m.--12:00 p.m.
                   2318 rayburn house office building

1. Purpose

    On Thursday, September 8, 2011 the Subcommittee on Technology and 
Innovation of the Committee on Science, Space, and Technology will hold 
a hearing to examine the status of efforts to develop open standards 
for smart grid technologies and drive innovation within smart grid 
development. This hearing will provide the Subcommittee with an update 
on current standards development accomplishments, as well as the 
actions needed to empower and protect consumer interests while 
promoting innovation through the growth of the smart grid.

2. Witnesses

      Dr. George Arnold, National Coordinator for Smart Grid 
Interoperability, National Institute of Standards and Technology

      The Honorable Donna Nelson, Chairman, Public Utility 
Commission of Texas

      Mr. John Caskey, Assistant Vice President Industry 
Operations, National Electrical Manufacturers Association

      Mr. Rik Drummond, Chief Executive Officer and Chief 
Scientist, The Drummond Group, Inc.

3. Brief Overview

    The hearing will examine efforts led by the National Institute of 
Standards and Technology (NIST) to coordinate the development of a 
common framework and standards necessary to ensure a secure and 
interoperable nationwide smart grid. The smart grid is a planned 
nationwide network that uses information technology to deliver 
electricity efficiently, reliably, and securely. The smart grid is 
designed to improve the transmission of electricity from power plants 
to consumers, provide grid operators with information about conditions 
of the electricity system, integrate new technologies into the grid, 
and allow consumers to receive more information about electricity 
prices and availability from the electricity system. This represents a 
leap from a one-way, analog system of disconnected power suppliers to a 
two-way, digital, interoperable national network. As envisioned, the 
smart grid is a more efficient way to distribute and diversify power 
sources, creating capabilities to make the grid more efficient by 
reducing demand peaks and increasing capacity utilization while 
providing consumers with innovative tools to reduce energy usage, 
potentially saving them money.




4. Background

    The electric grid has changed little since the end of the 
nineteenth century. Since President Roosevelt directed the Rural 
Electric Administration to electrify the continent, electricity and 
information has flowed in one direction; from generator to end user. 
Electricity has to be used the moment it is generated, and because the 
capacity for the generation of power matches the consumption of power, 
the electricity supply system must be sized to generate enough 
electricity to meet the maximum anticipated demand. A modern smart grid 
is designed to change this completely. The smart grid is envisioned to 
operate with a two-way flow of electricity and information capable of 
monitoring everything from power plants to customer's individual 
appliances. This will provide utility operators and consumers the data 
necessary to better manage energy usage, allowing for better control of 
costs and lower electric bills.
    The Energy Independence and Security Act of 2007 (EISA) (P.L. 110-
140) set requirements for a ``reliable and secure electricity 
infrastructure.'' Under EISA, NIST has ``primary responsibility to 
coordinate development of a framework that includes protocols and model 
standards for information management to achieve interoperability of 
smart grid devices and systems.'' NIST supports one of the key roles in 
the growth of the smart grid--bringing together manufacturers, 
consumers, energy providers, and regulators to develop ``interoperable 
standards.'' In other words, NIST is responsible for making sure the 
many pieces of the smart grid are able to work together.
    The American Recovery and Reinvestment Act (ARRA) invested 
approximately $4.5 billion, matched by $5.5 billion in private funding, 
to modernize energy infrastructure in America. The ARRA included 
funding for NIST to conduct its work on interoperability standards for 
the smart grid. Interoperability, the ability of diverse systems and 
their components to work together, is vitally important to the 
performance of the smart grid at every level. It enables integration, 
effective cooperation, and two-way communication among the many 
interconnected elements of the electric power grid.
    Because the smart grid will touch so many aspects of life in the 
twenty-first century, the development of standards involves a wide 
range of national and international stakeholders, from both the private 
and public sectors. Stakeholders include appliance and consumer 
electronics providers; municipal electric utility companies; standards 
development organizations; and state and local regulators. NIST has 
identified 22 stakeholder groups-each of whom has representation in the 
standards development process. NIST's work will cover the entire 
electricity system including generation, transmission, distribution, 
and end-user equipment and devices.
Standards Development

    NIST's work on the smart grid has been enabled by funding from both 
the ARRA and NIST's annual appropriations. ARRA funds totaled $17 
million to bring together stakeholders to develop a framework for the 
smart grid and coordinate the development of standards, including $12 
million provided by the Department of Energy and an additional $5 
million from ARRA funds appropriated directly to NIST. To support the 
NIST Smart Grid program, Congress appropriated a total of $2.3 million 
in fiscal year (FY) 2009, $5 million in FY10, and $8.3 million in FY11. 
The President's budget request for FY12 includes a $22.8 million 
initiative entitled ``Interoperability Standards for Emerging 
Technologies,'' which would include an additional $9.1 million to 
support NIST's Smart Grid program.
    NIST has been driving the creation of a smart grid architectural 
framework, and interoperability standards in a three-phased plan. Phase 
one (complete) engaged stakeholders to identify applicable standards 
and requirements, gaps in currently available standards, and priorities 
for additional standardization activities. Phase two (ongoing) 
established a public/private partnership called the Smart Grid 
Interoperability Panel (SGIP) to continue development of 
interoperability standards and drive longer-term progress. Phase three 
(ongoing) is the development of a testing and certification framework 
for smart grid standards.
    In January 2010, the NIST-led process published the Release 1.0 
Framework and Roadmap for Smart Grid Interoperability \1\, which 
provided an initial foundation for an interoperable and secure smart 
grid. The framework included a high-level conceptual reference model, 
the identification of 75 existing families of standards applicable to 
the ongoing development of the smart grid, and 16 high-priority action 
plans to fill gaps in the standards portfolio (three have been added to 
the original 16 listed in the Release 1.0 NIST framework). NIST is 
updating the framework based on work carried out since Release 1.0, and 
expects to publish Release 2.0 by the end of 2011.
---------------------------------------------------------------------------
    \1\ NIST Framework and Roadmap for Smart Grid Interoperability 
Standards, Release 1.0. January 2010. http://www.nist.gov/public--
affairs/releases/upload/FERC-letter-10-6-2010.pdf
---------------------------------------------------------------------------
The Smart Grid Interoperability Panel (SGIP)

    The SGIP is a private/public partnership that engages stakeholders 
from the entire smart grid community in a participatory public process 
to identify applicable standards, gaps in currently available 
standards, and priorities for new standardization activities for the 
evolving smart grid. Membership in the SGIP has grown to over 680 
organizations, including private companies, universities, research 
institutes, industry associations, standards setting organizations, 
laboratories, and Federal, state, and local government agencies. Almost 
1800 individuals participate in the committees and working groups, and 
an elected 27-member governing board representing 22 different 
stakeholder groups oversees the SGIP.
    The SGIP is executing 19 priority action plans to fill standards 
gaps, and is also continuing work on the Catalog of Standards \2\, 
which contains descriptive information about standards deemed relevant 
to the smart grid through the SGIP consensus process. The first six 
entries have been approved by the SGIP membership and have been entered 
into the catalogue. Each standard considered for inclusion in the 
catalogue goes through a cybersecurity review by the SGIP Cybersecurity 
Working Group, to identify potential vulnerabilities and necessary 
mitigation actions.
---------------------------------------------------------------------------
    \2\ Available at: http://collaborate.nist.gov/twiki-sggrid/bin/
view/SmartGrid/SGIPCatalogOfStandards.
---------------------------------------------------------------------------
    The SGIP is also working on the development of a testing and 
certification framework for the smart grid. The SGIP Testing and 
Certification Committee published the Interoperability Process 
Reference Manual, Release 1 \3\, which provided the structure and 
processes for testing and certification programs relevant to the smart 
grid.
---------------------------------------------------------------------------
    \3\ Interoperability Process Reference Manual, Release 1.0. 
November 2010. http://collaborate.nist.gov/twiki-
---------------------------------------------------------------------------
    To guide future planning for NIST's work on the smart grid, NIST 
also established a Smart Grid Federal Advisory Committee. The 
Committee's input to NIST helps guide long-term SGIP activities and 
also assists in directing research and standards activities at NIST. 
The Committee provides input to NIST on smart grid standards, 
priorities and gaps, and on the overall direction, status, and health 
of smart grid implementation by the smart grid industry. The 
Committee's first report, focused on the long-term direction of NIST's 
smart grid work is expected near the end of this year.
Regulation

    EISA directs the Federal Energy Regulatory Commission (FERC) to 
institute a rulemaking to adopt such standards and protocols as may be 
necessary to insure smart grid functionality and interoperability in 
interstate transmission of electric power, and regional and wholesale 
electricity markets'' at any time after NIST's work has led to 
``sufficient consensus'' in the Commission's judgment. In the past, few 
interoperability standards have been adopted in regulation for national 
infrastructures. The vast majority of standards in these industries are 
used on a voluntary basis.
    Based on work conducted by the SGIP, NIST notified FERC in October 
2010 that it had identified five families of existing voluntary 
consensus standards as ready for consideration by regulators. FERC 
hosted a Technical Conference to invite public discussion of whether 
sufficient consensus was found to institute a rulemaking proceeding. On 
July 20, 2011 FERC issued an Order in which it found there was 
insufficient consensus to institute a rulemaking proceeding at that 
time to adopt the initial five families of standards.
    ``The Commission finds there is insufficient consensus for the five 
families of standards under consideration. For this reason, the 
Commission will not institute a rulemaking proceeding at this time with 
respect to these standards. The Commission encourages stakeholders to 
actively participate in the NIST interoperability framework process to 
work on the development of interoperability standards and to refer to 
that process for guidance on smart grid standards.''
    The five families of existing voluntary consensus standards were 
``foundational'' standards covering common information models and 
protocols for utility energy management systems, substations, 
distribution systems, and intercontrol center communications. The five 
standards were among the most mature standards identified in the NIST 
Framework, and the ``insufficient consensus'' conclusion of FERC calls 
into question whether voluntary standards for smart grid may be 
sufficient without a mandatory rulemaking process.

5. Issues for Examination

Enabling Cost-Effective Smart Grid Investments

    The development and adoption of standards for the smart grid has 
been an unprecedented, complex undertaking, enabling electric utilities 
to deploy and use technology advancements in an accelerated manner. 
There has been significant investment in the smart grid, with many 
smart grid related technologies, such as smart meters, deployed with 
ARRA funds despite the fact that many standards have not been set. 
Given the scale of possible future investment and the need to retrofit 
existing technologies, interoperability is imperative. The Subcommittee 
has requested that witnesses address the need to ensure investments in 
the smart grid are cost-effective to keep electricity affordable. This 
includes discussing how the interoperability standards being developed 
through the NIST framework process ensure present investments in new 
technologies generate future value through interoperability and 
upgradability.
Unlocking the Potential of Innovation in the Electricity Sector

    Transforming the electricity grid to a modern smart grid can help 
spur the creation and deployment of new products and services in the 
electric sector, boosting economic growth and job creation. Building an 
updated transmission infrastructure including modern information and 
communications technologies provides a foundation for innovation. 
Witnesses have been asked to address how the development of open, 
interoperable standards can help create the markets for smart grid 
technologies essential to America's ability to lead and create jobs. 
International coordination on smart grid standards will reduce trade 
barriers in smart grid technologies, helping drive international trade 
and investment. Witnesses have also been asked to discuss the 
importance of working to cooperate with other nations on smart grid 
interoperability standards, which is critical to increasing market 
opportunities for American industry.
Empowering Consumers

    Providing consumers information about energy use and consumption 
helps them to better understand how they are using electricity, 
allowing for better management of that use. The Subcommittee has asked 
witnesses to address how encouraging the development of a portfolio of 
smart grid technologies and programs, including innovative third-party 
applications, can help consumers save energy and encourage the 
development of a market for smart grid technologies. It is important to 
provide consumers with information and to allow innovation to flourish, 
but it is also important to protect that data to ensure consumer 
privacy. Consumers need to be adequately informed about the benefits, 
costs, and risks associated with smart grid systems.
Securing the Grid

    The Subcommittee has requested that witnesses address the complex 
cybersecurity challenge that smart grid technologies pose. With 
advanced metering infrastructure, smart appliances, and third-party 
service providers, there are a great number of entry points through 
which to stage cyber attacks. By exploiting loopholes in cybersecurity, 
attackers could breach the privacy of customer power usage data and 
could potentially overload systems or cause false readings. It is 
especially important to ensure that the evolution of standards and 
guidelines keep pace with the evolving cyber threat in order to protect 
the grid from cyber attacks, improve recoverability, and ensure the 
Nation's security and economic prosperity.
    Chairman Quayle. The Subcommittee on Technology and 
Innovation will come to order.
    Good morning, and welcome to today's hearing, entitled 
``Empowering Consumers and Promoting Innovation through the 
Smart Grid.'' I want to thank all of you for coming. Mr. 
Sarbanes from Maryland is stuck in traffic due to our weather, 
and I thank you for braving the weather this morning. In front 
of you are packets containing the written testimony, 
biographies and Truth in Testimony disclosures for today's 
witnesses. I will now recognize myself for five minutes for an 
opening statement.
    Today's hearing will evaluate the progress that has been 
made on the development and implementation of a nationwide 
smart grid. The blackout that darkened the Northeast in the 
summer of 2003 opened our eyes to the vulnerability and age of 
our electrical system. One of the planned improvements is to 
modernize our electrical grid to create a system that can 
communicate information and relay electricity in two 
directions: both to and from the consumer. The smart grid has 
the potential to improve the reliability of electric power 
delivery, and promote economic growth through the development 
of new technologies. Given the scale and complexity of our 
electric grid, this transition will require systems that can 
seamlessly communicate.
    In 2007, the Energy and Independence Security Act directed 
the National Institute of Standards and Technology to 
coordinate the development of a common framework, including 
protocols and model standards for the implementation of smart 
grid technologies. NIST plays a key role--bringing together 
manufacturers, consumers, energy providers and regulators to 
develop interoperable standards to ensure that the smart grid's 
many pieces are able to work together.
    As a non-regulatory agency, NIST has a long history of 
collaborating with industry to develop voluntary standards. 
However, the Energy Independence and Security Act empowers the 
Federal Energy Regulatory Commission to initiate a rulemaking 
process to adopt standards where it believes a sufficient 
consensus has been achieved. I am concerned with the prospect 
of mandating standards and the effect such mandates could 
potentially have on innovation. There may be parts of the smart 
grid where formal regulation is unnecessary and a consensus 
standard is sufficient to ensure interoperability. I generally 
believe that we should avoid imposing regulations on industry 
and innovators, when a collaborative product is possible 
through NIST's non-regulatory process.
    The Committee on Science, Space, and Technology has held a 
series of hearings assessing the transformation of our electric 
delivery system to a smart grid. Today's hearing will further 
detail the progress that has been made by examining the status 
of efforts to develop the open standards that are necessary to 
support cost-effective deployment of smart grid technologies.
    We should not underestimate the value of standards. Open, 
consensus-based standards help facilitate the development of 
new innovative technologies by promoting plug-and-play 
operability for smart grid devices in both the national and 
international markets. I am especially interested in how a 
smarter grid could enable small companies to develop new 
products based on a transparent standards platform that is 
available to all innovators. With the many renewable energy 
companies in my home state of Arizona, I am also interested in 
how the updated grid could allow small generators and 
intermittent renewable energy sources to play a larger role in 
our electrical system.
    I would like to thank all of our witnesses for their 
participation today.
    [The prepared statement of Mr. Quayle follows:]

  Prepared Statement of the Subcommittee on Technology and Innovation 
                          Chairman Ben Quayle
    Good Morning. I would like to welcome everyone to today's hearing, 
evaluating the progress that has been made on the development and 
implementation of a nationwide smart grid.
    The blackout that darkened the Northeast in the summer of 2003 
opened our eyes to the vulnerability and age of our electrical system. 
One of the planned improvements is to modernize our electrical grid to 
create a system that can communicate information and relay electricity 
in two directions--both to and from the consumer. The smart grid has 
the potential to improve the reliability of electric power delivery, 
and promote economic growth through the development of new 
technologies. Given the scale and complexity of our electric grid, this 
transition will require systems that can seamlessly communicate.
    In 2007, The Energy and Independence Security Act directed the 
National Institute of Standards and Technology (NIST) to coordinate the 
development of a common framework, including protocols and model 
standards for the implementation of smart grid technologies. NIST plays 
a key role-bringing together manufacturers, consumers, energy 
providers, and regulators to develop ``interoperable standards'' to 
ensure that the smart grid's many pieces are able to work together.
    As a non-regulatory agency, NIST has a long history of 
collaborating with industry to develop voluntary standards. However, 
the Energy and Independence Security Act empowers the Federal Energy 
Regulatory Commission (FERC) to initiate a rulemaking process to adopt 
standards where it believes a sufficient consensus has been achieved. I 
am concerned with the prospect of mandating standards and the effect 
such mandates could potentially have on innovation. There may be parts 
of the smart grid where formal regulation is unnecessary and a 
consensus standard is sufficient to ensure interoperability. I 
generally believe that we should avoid imposing regulations on industry 
and innovators, when a collaborative product is possible through NIST's 
non-regulatory process.
    The Committee on Science, Space and Technology has held a series of 
hearings assessing the transformation our electric delivery system to a 
smart grid. Today's hearing will further detail the progress that has 
been made by examining the status of efforts to develop the open 
standards that are necessary to support cost-effective deployment of 
smart grid technologies.
    We should not underestimate the value of standards. Open, 
consensus-based standards help facilitate the development of new 
innovative technologies by promoting plug-and-play operability for 
smart grid devices in both the national and international markets. I am 
especially interested in how a smarter grid could enable small 
companies to develop new products based on a transparent standards 
platform that is available to all innovators. With the many renewable 
energy companies in my home state of Arizona, I am also interested in 
how the updated grid could allow small generators and intermittent 
renewable energy sources, to play a larger role in our electrical 
system.
    I would like to thank all of our witnesses for their participation. 
I would also like to welcome and thank the gentleman from Maryland, Mr. 
Sarbanes, for his role in the hearing today. I now recognize him for 
five minutes for an opening statement.

    Chairman Quayle. I would also like to welcome and thank the 
gentleman from Maryland, Mr. Sarbanes, for his role in the 
hearing today, and I now recognize him for five minutes for an 
opening statement.
    Mr. Sarbanes. Thank you very much, Mr. Chairman. I 
appreciate you calling this hearing. This is a critical 
hearing. We are looking forward to hearing from our witnesses 
today with respect to the progress that is being made in this 
standard setting.
    Putting in place a smart grid for the country is a huge 
priority, and of course, if you look at the Energy Independence 
and Security Act, that was one of its premier objectives back 
in 2007. There was a real boost to your efforts, of course, 
with the American Recovery and Reinvestment Act in terms of 
dollars being put behind this effort. The effort is well 
underway.
    I have only come to this Committee recently but I 
understand there was a hearing about a year ago that examined 
the progress that was being made, and I take it that there is 
really three phases that this effort represents. The first 
phase was setting up this framework and roadmap for the smart 
grid interoperability. The second phase is to get this panel 
working, and I know we will hear about that today, and then the 
third phase is really to go out and test this and certify it 
and make sure that it is really working. There is a lot of 
tentacles involved in this. You are pulling in a lot of 
different input from many, many different sources, of course: 
the private sector, prior public standards efforts that have 
been in place and so forth.
    So we are looking forward to this update and we want to 
know what we can do to help facilitate the progress that you 
are making both in terms of tools that you have and the 
resources that are available to you.
    We all want a grid that is more reliable and resilient, 
that is more efficient and cost-effective, and you can read 
into that last phrase ``not wasteful,'' and one that is secure. 
That is obviously a key concern these days as well.
    Now, we can look at this through various lenses. I mean, we 
just went through this tremendous weather event here on the 
East Coast with the hurricane. In Maryland, we had hundreds and 
hundreds of thousands of people that were without power for 
days on end. The systems we have for reporting outages and 
attending to them are in some ways antiquated when you compare 
it against the smart grid vision that we have, and when we get 
to that kind of place, you are going to be able to identify 
where these outages have occurred, respond to them more 
quickly, figure out how to bypass transformers and other parts 
of the grid that may be down so that you can keep power in 
place for as many of the customers, whether they be businesses 
or individuals, as possible. So that is certainly one lens to 
look at this smart grid enterprise through.
    Another I bring, which is, I guess, somewhat parochial but 
my district pretty much surrounds the NSA organization in 
Baltimore, which is located at Fort Meade, and there have been 
concerns over the last few years by leaders at NSA about 
whether just the power source is going to be there to sustain 
their operations over time. So that goes to the question of 
whether you have a reliable source of power for these critical 
assets that exist out there, and so we are obviously very 
interested in the reliability, in the efficiency of these 
operations and the security, which I think is something that 
you will get to in our discussion.
    So we know that there is a lot left to do. I do want to 
commend NIST. From my understanding of the progress you've 
already made, there is a lot of different balls in the air here 
and of course everyone wants to get this in place as quickly as 
we can.
    So I appreciate the testimony that you will present here 
today. We are looking forward to it.
    Thank you, Mr. Chairman, for calling the hearing, and I 
will yield back my time.
    [The prepared statement of Mr. Sarbanes follows:]

         Prepared Statement of Representative John P. Sarbanes
    Good morning. I want to thank our witnesses for being here with us 
today for this important status update on the smart grid standards 
effort. And Chairman Quayle, thank you for holding this hearing.
    As many of you may know, the subcommittee held a similar hearing 
just over a year ago. At that point in time, the smart grid standards 
development process was still in its relative infancy. NIST had 
recently published the Framework and Roadmap for Smart Grid 
Interoperability - Release 1.0, and the Smart Grid Interoperability 
Panel (or SGIP) was just getting its feet off the ground.
    Since this smart grid effort is as fast-paced as it is vast, I 
believe it is appropriate and prudent for us to check in on how this 
NIST-led effort has unfolded over the last year and learn more about 
where we are and where we are headed.
    I think we would all agree that our electricity grid is in 
desperate need of modernization. There is no doubt that the United 
States would be better served by an electric grid that is more reliable 
and resilient, more efficient and cost effective, and more secure. And 
our nation will be closer to energy independence if our grid can 
accommodate the addition of more renewable energy resources and provide 
information that helps us reduce energy use and minimize energy waste. 
A smart grid has the potential to deliver all of this for us at a 
fraction of the price that is already projected to be spent on grid 
modernization and expansion.
    A smart grid will incorporate two-way communication capabilities 
into the electric grid, facilitating a constant flow of information 
between electricity suppliers and consumers. This will enable better 
alignment between electricity supply and demand, improving our ability 
to prevent power blackouts and brownouts which cost the U.S. economy 
$80 billion per year.
    It will provide grid operators with immediate and detailed 
information on the power disruptions that do occur so that power can be 
restored more quickly and efficiently. It can also reduce the cost of 
electricity by providing consumers access to real-time information on 
the current market price of electricity, offering people the choice to 
use energy when it is cheaper.
    The scale and complexity of developing a smart grid is astounding. 
And the investments--both public and private--that will be needed to 
make it a reality are significant. That is why we need to make sure 
that we do this right and that all of the various pieces will work 
together. We can help ensure that the investments that are made today 
will continue to pay off long into the future if everyone involved in 
this important endeavor is playing by the same rule book. And that's 
where standards come in.
    I think we will all be impressed by the work that has already taken 
place and is currently under way on the standards that are needed to 
help us realize a true smart grid.
    And I think we will be equally impressed by the work that remains 
to be done to make the smart grid goal a reality.
    Certainly, the task with which NIST has been charged is a daunting 
one. By all accounts, the progress that has been made in such a short 
period of time is staggering, and NIST's effort to keep the train 
moving with everyone on board has been a remarkable accomplishment.
    It's essential that we continue to build on this momentum and keep 
our eye on the ball. For this reason, I look forward to hearing from 
our witnesses whether there is anything more that we here in Congress 
can or should do to ensure that progress continues and that those 
participating in this process have the tools that they need to see this 
effort through.
    Thank you, again, for being here today. I look forward to your 
testimony.

    Chairman Quayle. Thank you, Mr. Sarbanes.
    If there are Members who wish to submit additional opening 
statements, your statements will be added to the record at this 
point.
    At this time I would like to introduce our witnesses, and 
then we will proceed to hear from each of them in order.
    Our first witness is Dr. George Arnold, the National 
Coordinator for Smart Grid Interoperability at NIST. Next, we 
will hear from the Hon. Donna Nelson, Chairman of the Texas 
Public Utility Commission. Our third witness is Mr. John 
Caskey, Assistant Vice President of Industry Operations at the 
National Electrical Manufacturers Association. Our final 
witness is Mr. Rik Drummond, CEO and Chief Scientist at The 
Drummond Group.
    Thanks again to our witnesses for being here this morning. 
As our witnesses should know, spoken testimony is limited to 
five minutes each. After all witnesses have spoken, Members of 
the Committee will have five minutes each to ask questions.
    The Chair now recognizes our first witness, Dr. Arnold.

                STATEMENT OF DR. GEORGE ARNOLD,

     NATIONAL COORDINATOR FOR SMART GRID INTEROPERABILITY,

         NATIONAL INSTITUTE OF STANDARDS AND TECHNOLOGY

    Dr. Arnold. Chairman Quayle, Ranking Member Sarbanes and 
Members of the Subcommittee, I would like to thank you for the 
opportunity to discuss NIST's progress in accelerating the 
development of standards for the smart grid, which as you 
noted, is central to the Nation's efforts to promote 
innovations that increase the reliability, efficiency and 
security of the electric delivery system and provide benefits 
to consumers.
    The basic structure of today's grid has changed little over 
its 100-year history. The U.S. grid is operated by over 3,200 
utilities using equipment and systems from hundreds of 
suppliers with little past emphasis on standardization, 
resulting in many proprietary systems that do not interoperate. 
The successful transformation of this aging infrastructure will 
have important economic and consumer benefits.
    As you have noted, under the Energy Independence and 
Security Act of 2007, Congress assigned NIST the primary 
responsibility to coordinate the development of standards for 
the smart grid. NIST is providing strong national and 
international leadership in carrying out this assignment.
    In April 2009, NIST announced a three-phase plan to carry 
out its responsibilities. The initial phase resulted in the 
January 2010 publication of the NIST Framework and Roadmap for 
Smart Grid Interoperability Standards, Release 1. This document 
described a reference model for the smart grid, identified 75 
initial standards and specified 16 high-priority action plans 
to fill gaps. Another significant milestone was the September 
2010 publication of the NIST Guidelines for Smart Grid 
Cybersecurity, Release 1, which provides foundational guidance 
for the cybersecurity of the grid.
    The second phase of the NIST effort established the Smart 
Grid Interoperability Panel, or SGIP. The panel's membership 
has grown to over 680 private and public sector organizations 
with almost 1,800 individuals participating in its committees 
and working groups. The SGIP also provides a forum for 
international collaboration, benefiting U.S. exports of smart 
grid products. The SGIP has achieved many significant 
accomplishments since its formation, which are described in my 
written testimony. The SGIP is making progress in developing a 
smart grid testing and certification framework, the third phase 
of NIST's effort, which is chaired by my colleague, Mr. 
Drummond. To date, five private sector organizations have 
announced testing and certification programs following the 
SGIP's guidelines. NIST is in the process of updating the smart 
grid framework, and we anticipate publication of Release 2.0 by 
the end of 2011.
    NIST's smart grid work has been enabled by funding from 
both the Recovery Act and NIST's annual appropriations. A 
significant portion of NIST's smart grid budget has been used 
to fund the administration and operation of the SGIP. In the 
longer term, our vision is that the SGIP will mature into an 
independent organization funded primarily by the private sector 
to evolve the standards framework after NIST's coordination 
role is complete. However, it will take several years for the 
SGIP to develop a business model and private sector funding 
sources that are self-sustaining.
    To guide the longer-term planning for NIST's work, NIST has 
established a Smart Grid Federal Advisory Committee whose first 
report is expected in November 2011.
    Throughout this process, NIST had worked closely with the 
Department of Energy and federal and state regulators. EISA 
directs FERC to institute a rulemaking to adopt standards as 
necessary after NIST's work has led to sufficient consensus. 
However, voluntary use of consensus standards rather than 
regulation may be sufficient in most cases to ensure the 
interoperability of the smart grid.
    In other national infrastructure such as the 
telecommunications system and the Internet, few, if any, 
interoperability standards have been mandated through 
regulation. In 2011, a FERC decision found that there was 
insufficient consensus to institute a rulemaking proceeding and 
expressed support for the NIST process and referred 
stakeholders to the NIST process for guidance on smart grid 
standards.
    Our standards efforts play an important role in promoting 
innovation that will benefit consumers. The standards help 
avoid stranded utility investments by facilitating 
interoperability and upgradeability. The standards promote 
vendor competition and economies of scale that will result in 
lower costs for consumers. The standards help enable the 
development of innovative third-party applications and smart 
appliances to help consumers save energy and reduce peak usage 
and overall usage. Finally, through this work, NIST is leading 
the development of rigorous open standards and guidelines for 
cybersecurity and data privacy through public-private 
cooperation.
    NIST is proud to have been given an important role in this 
initiative, and I thank you for the opportunity to testify 
today. I would be happy to answer any questions you may have.
    [The prepared statement of Mr. Arnold follows:]

Prepared Statement of Dr. George Arnold, National Coordinator for Smart 
 Grid Interoperability, National Institute of Standards and Technology
Introduction
    Chairman Quayle and Members of the Subcommittee, I am George 
Arnold, the National Coordinator for Smart Grid Interoperability at the 
Department of Commerce's National Institute of Standards and Technology 
(NIST).
    Thank you for the opportunity to appear before you today to discuss 
NIST's progress in accelerating the development of standards needed to 
realize a secure and interoperable nationwide Smart Grid. I last 
testified about our progress and plans before the Subcommittee on 
Technology and Innovation on July 1, 2010. \1\ Today, I would like to 
update you on our accomplishments, where we are going, and some of the 
key actions needed to ensure protection of consumer interests, 
including cost and privacy, while driving innovation within Smart Grid 
development.
---------------------------------------------------------------------------
    \1\ Testimony of George Arnold before the House Committee on 
Science and Technology Subcommittee on Technology and Innovation United 
States House of Representatives, July 1, 2010, available at http://
gop.science.house.gov/Media/hearings/ets10/july1/Arnold.pdf
---------------------------------------------------------------------------
    The Smart Grid, which will modernize the United States electric 
power delivery system, is central to the Nation's efforts to increase 
the reliability, efficiency and security of the electric delivery 
system and also to help build the infrastructure that will facilitate 
clean energy sources to American homes and businesses. The Smart Grid 
utilizes advanced information and communications technologies to enable 
a two-way flow of electricity and information. This marriage of energy 
and information technologies will create capabilities to make the grid 
more efficient by reducing demand peaks and increasing capacity 
utilization and providing consumers with tools to reduce energy usage 
and potentially save money. It can also increase reliability, enable 
more widespread use of distributed and renewable energy sources, and 
facilitate electrification of vehicles.
    The Smart Grid is an important contributor to the Administration's 
overall goal of fostering innovation and creating jobs in a clean 
energy economy through policies that catalyze private sector 
investments to modernize the nation's electrical infrastructure. NIST's 
mission--to advance innovation and U.S. industrial competitiveness--
fits well with this goal, and we are committed to helping make that 
vision a reality. As former Commerce Secretary Gary Locke noted, ``If 
we get this right, if government and business can team up effectively, 
we have an almost unprecedented opportunity to change how we use 
electricity, reduce greenhouse gas emissions, and create new jobs in an 
emerging industry.'' \2\
---------------------------------------------------------------------------
    \2\ Commerce Secretary remarks at Jobs and Competitiveness Round 
Table, Durham, NC, June 13, 2011, available at http://www.commerce.gov/
news/secretary-speeches/2011/06/13/remarks-jobs-and-competitiveness-
round-table-durham-north-carolin
---------------------------------------------------------------------------
    Modernizing and digitizing the nation's electrical power grid--the 
largest interconnected machine on Earth--is an enormous challenge and a 
tremendous opportunity. Several years ago, the National Academy of 
Engineering described electric power and the electric grid as the 
greatest engineering achievement of the 20th century, and the largest 
industrial investment in the history of humankind. \3\ The basic 
structure of the present grid has changed little over its hundred-year 
history. The U.S. grid, which is operated by over 3200 electric 
utilities using equipment and systems from hundreds of suppliers, has 
historically not had much emphasis on interoperability or 
standardization, and thus has incorporated many proprietary interfaces 
and technologies that result in the equivalents of stand-alone silos.
---------------------------------------------------------------------------
    \3\ Nat'l Acad. Eng., Greatest Engineering Achievements of the 20th 
Century (2003), available at http://www.greatachievements.org.
---------------------------------------------------------------------------
    The successful transformation of this infrastructure into an 
interoperable system would support the Administration's vision of a 
highly reliable electrical grid that uses a diverse suite of energy 
resources, including distributed and renewable resources, energy 
efficiency, and supports electric vehicles. This 21st century grid 
would be a significant engineering achievement with important economic 
and environmental impacts.
NIST's Standards Role: A Framework for Interoperability
    A nationwide, interoperable and secure Smart Grid would optimally 
be harmonized with international standards. Under the Energy 
Independence and Security Act of 2007 (EISA), Congress assigned the 
NIST the ``primary responsibility to coordinate development of a 
framework that includes protocols and model standards for information 
management to achieve interoperability of Smart Grid devices and 
systems . . . '' [EISA, Section 1305]. That Act further specifies that 
the interoperability framework should be ``flexible, uniform, and 
technology neutral.'' Congress instructed that the framework should 
accommodate ``traditional, centralized generation and transmission 
resources'' while also facilitating incorporation of new, innovative 
technologies, such as distributed and renewable energy resources and 
energy storage.
    NIST is providing national and international leadership to drive 
the creation of interoperability standards needed to help make the 
Smart Grid a reality. We are engaging industry, government, and 
consumer stakeholders in an open and public process. We have published 
a first Release of a standards framework for the Smart Grid, \4\ are 
nearing the completion of a second Release, and, together with the 
private sector, have made significant progress in creating an ongoing 
public/private partnership that will provide a process for the 
continuing development and maintenance of Smart Grid standards needed 
to support the electric grid for decades to come.
---------------------------------------------------------------------------
    \4\ NIST Special Publication 1108, ``NIST Framework and Roadmap for 
Smart Grid Interoperability Standards, Release 1.0,'' January 2010, 
available at http://www.nist.gov/public_affairs/releases/upload/
smartgrid_interoperability_final.pdf.
---------------------------------------------------------------------------
    Our work to establish protocols and standards for the Smart Grid 
has been carried out with a great sense of urgency. Deployment of 
various Smart Grid elements, including smart sensors on distribution 
lines and smart meters in homes, and of distributed sources of 
renewable energy is already under way, and has been accelerated as a 
result of Department of Energy (DOE) Smart Grid Investment Grants and 
Smart Grid Demonstration Projects and other programs supporting 
renewable energy generation. Without standards, there is the potential 
for technologies developed or implemented with sizable public and 
private investments to become obsolete prematurely or to be implemented 
without measures necessary to ensure security.
    While we are driving this program with a strong sense of urgency, 
we must also keep in mind that the foundation we lay with these 
standards likely will establish the basic architecture of the grid for 
decades. Any fundamental mistakes made at this stage may be difficult 
and costly to correct later. We especially cannot afford to make 
incorrect architectural choices or adopt weak standards that would 
compromise the security, reliability or stability of the grid. We need 
to work both quickly and carefully.

    I would like to provide a brief overview of our efforts and 
accomplishments to date.

    In April 2009, NIST announced a three-phase plan to carry out its 
EISA responsibilities. In May 2009, the Secretaries of Commerce and 
Energy convened a meeting of nearly 70 top executives from the power, 
information technology, and other industries, and asked those 
executives whether their organizations would commit to support the 
process established by NIST.
    The NIST process had three phases:

      Phase 1, which took place from April 2009 to January 
2010, engaged stakeholders in a participatory public process to 
identify applicable standards and requirements, gaps in the currently 
available standards, and priorities for additional standardization 
activities.

      Phase 2, which began in November 2009 and is ongoing, 
established a public/private partnership called the Smart Grid 
Interoperability Panel (SGIP) to continue development of 
interoperability standards and drive longer-term progress.

      Phase 3, which is also ongoing, is developing a testing 
and certification framework for Smart Grid standards. \5\
---------------------------------------------------------------------------
    \5\ Opening Remarks of George Arnold, Smart Grid Interoperability 
Standards Technical Conference, held on 1/31/11 at FERC Headquarters 
available at: http://elibrary.ferc.gov/idmws/
File_list.asp?document_id=13888084

    The NIST plan has received broad support and active participation 
from industry. In a letter, the U.S. Chamber of Commerce commended NIST 
for its ``willingness to reach out to the private sector on these 
issues.'' The Chamber described the NIST-led process as ``transparent 
and inclusive.'' \6\
---------------------------------------------------------------------------
    \6\ U.S. Chamber of Commerce's Response to Notice requesting public 
comments on the second draft of NISTIR 7628, the Smart Grid Cyber 
Security Strategy and Requirements (75 Federal Register pages 18819-
18823 at http://edocket.access.gpo.gov/2010/pdf/2010-8415.pdf, Docket 
Number: 100202060-0143-01). Comments available at: http://
collaborate.nist.gov/twiki-sggrid/bin/view/SmartGrid/
NISTIR7628Draft2CommentsReceived
---------------------------------------------------------------------------
    In January of 2010, the NIST-led process reached a major milestone 
with the publication of the Release 1.0 Framework and Roadmap for Smart 
Grid Interoperability (NIST Special Publication 1108). \7\ This 
document provides an initial foundation for an interoperable and secure 
Smart Grid and has been widely cited by the Smart Grid stakeholder 
community, both domestically and internationally. The Release 1.0 
Framework described a high-level conceptual reference model for the 
Smart Grid, identified 75 existing families of standards that are 
applicable to the ongoing development of the Smart Grid, and specified 
16 high-priority action plans to fill gaps in the standards portfolio 
with new or revised standards.
---------------------------------------------------------------------------
    \7\ Supra, note 3.
---------------------------------------------------------------------------
    Another significant milestone in the development of the NIST 
framework was the publication of NIST Interagency Report (IR) 7628, 
``Guidelines for Smart Grid Cyber Security,'' in September 2010. \8\ 
This three-volume document, which has also been widely cited by 
industry and regulators, provides the foundational requirements and 
guidance for efforts to ensure cybersecurity in the Smart Grid.
---------------------------------------------------------------------------
    \8\ Available at http://csrc.nist.gov/publications/
PubsNISTIRs.html#NIST-IR-7628. 
---------------------------------------------------------------------------
    The Smart Grid Interoperability Panel (SGIP), established by NIST 
in November 2009, is a public/private partnership. The SGIP provides a 
mechanism for NIST to ``solicit input and cooperation from private 
entities and other stakeholders,'' as directed by EISA. In the long 
term, NIST envisions that the SGIP will mature into a permanent, stand-
alone organization that will support the continuing evolution of the 
Smart Grid standards framework after NIST's EISA-directed coordination 
role has been completed.
    During its first two years of operation, the SGIP has focused its 
efforts on establishing processes and procedures for its work; 
overseeing and expediting the completion of the Priority Action Plans 
established in the NIST Release 1.0 Framework; creating additional 
action plans as needed; developing the cybersecurity guidelines for the 
Smart Grid including a methodology for reviewing the cybersecurity 
aspects of standards; and developing a testing and certification 
framework.
    Membership in the SGIP has grown to over 680 organizations, 
including private companies, universities, research institutes, 
industry associations, standards setting organizations, testing 
laboratories, and government agencies at the Federal, state and local 
levels. Almost 1800 individuals participate in the committees, working 
groups, and priority action plan teams working under the panel, 
representing these hundreds of organizations. An elected 27-member 
governing board, representing 22 different stakeholder groups, 
including electric utilities, electric equipment manufacturers, 
building automation providers, information and communications 
technology companies, state regulators, and venture capital firms, 
oversees the SGIP.
    While the vast majority of participants in the SGIP are from the 
private sector, members of NIST's technical staff and management also 
play a role as technical contributors and leaders in the various boards 
and committees of the SGIP, working alongside their private sector 
counterparts. The NIST participants bring to the SGIP technical 
expertise in standards and measurement science in the areas of power 
engineering, information technology, industrial control systems, 
building energy management, communications, and cybersecurity.
    The international partnerships that NIST has built with the 
governments of other countries have resulted in global recognition of 
SGIP's role. The SGIP provides a forum for international collaboration 
on smart grid standards development. The number of international 
participants in the SGIP has increased significantly over the last year 
and these efforts are designed to reduce barriers to trade in smart 
grid technologies and services around the world. International 
coordination on smart grid standards will help drive international 
trade and investment in this fast growing sector and U.S. exporters of 
smart grid products will benefit as a result. The SGIP has achieved 
many significant accomplishments since its formation. I would like to 
highlight a few.
    The SGIP has been executing 19 priority action plans to fill 
standards gaps (three were added to the original 16 identified in the 
Release 1.0 NIST framework). These action plans have resulted in a 
number of key standards deliverables, which include:

      A Smart Meter Upgradeability Standard, published by 
National Electrical Manufacturers Association, that will ensure that 
many of the large number of meters to be installed over the next 
several years can be upgraded to accommodate anticipated updates to 
metering standards.

      Internet Engineering Task Force Request for Comments 
(RFC) 6272, which specifies the various Internet protocols to be used 
in the Smart Grid.

      Publication of NIST IR 7761, which provides guidelines 
for utilities and their suppliers to assess wireless communications 
standards for use in various Smart Grid applications.

      A customer energy usage information data standard, 
published by the North American Energy Standards Board (NAESB), that 
enables entrepreneurs to develop third party applications to help 
customers to monitor their energy usage and save money.

      The selection of three standards published by Society for 
Automotive Engineers (SAE) International to support electric vehicle 
charging.

      Publication of an ``SEP 1.x to 2.0 Transition and 
Coexistence'' guideline, which will ensure that millions of meters that 
have already been deployed using early versions of the Zigbee Smart 
Energy Profile (SEP) will be able to interoperate with future IP-based 
home area networks. This is especially important to states like Texas 
that have pioneered in the early deployment of smart meter technology.

    Another key early deliverable from the SGIP is the Catalog of 
Standards, \9\ containing descriptive information about standards 
deemed relevant to the Smart Grid through the SGIP's consensus process. 
This catalog will provide key input to future releases of the NIST 
framework.
---------------------------------------------------------------------------
    \9\ Available at  http://collaborate.nist.gov/twiki-sggrid/bin/
view/SmartGrid/SGIPCoSStandardsInformationLibrary
---------------------------------------------------------------------------
    A critical element of the SGIP's process is a cybersecurity review 
of each standard considered for inclusion in the catalog. The SGIP 
Cybersecurity Working Group, which is chaired by a NIST staff member, 
reviews each candidate standard against the requirements in NIST IR 
7628 to identify potential vulnerabilities and necessary mitigation 
actions.
    Phase 3 of the NIST plan is the development of a testing and 
certification framework for the Smart Grid. In December 2010, the SGIP 
Testing and Certification Committee, which is co-chaired by a NIST 
staff member, published the ``Interoperability Process Reference 
Manual, Release 1,'' \10\ providing an important foundation for this 
phase of the plan. This document specifies the structure and processes 
for testing and certification programs relevant to the Smart Grid. To 
date, five private sector organizations have announced testing and 
certification programs conforming to this guide. The most recent such 
program, established by a consortium of four industry alliances to test 
and certify using the Smart Energy Profile 2.0 protocol, will certify 
interoperability of consumer appliances with the Smart Grid to reduce 
or delay energy usage when the grid is overloaded.
---------------------------------------------------------------------------
    \10\ SGIP Interoperability Process Reference Manual, Version 1.0, 
available at: http://collaborate.nist.gov/twiki-sggrid/pub/SmartGrid/
SGTCCIPRM/SGTCC_IPRM_Version_1.0_Updated.pdf.
---------------------------------------------------------------------------
    NIST is in the process of updating the Smart Grid framework based 
on work carried out since Release 1.0 was published in January 2010. 
NIST has posted a draft of Release 2.0 \11\ and invited public 
comments, and we anticipate publication of Release 2.0 by the end of 
2011.
---------------------------------------------------------------------------
    \11\ Available at http://collaborate.nist.gov/twiki-sggrid/bin/
view/SmartGrid/IKBFramework.
---------------------------------------------------------------------------
    NIST's work on the Smart Grid has been enabled by funding from both 
the American Recovery and Reinvestment Act of 2009 \12\ (Recovery Act) 
and NIST's annual appropriations. The Recovery Act funds totaled $17 
million, including $12 million provided by DOE and an additional $5 
million from Recovery Act funds appropriated directly to NIST. More 
than half of NIST's work through the end of FY11 was supported by the 
Recovery Act funds, which will have been completely expended by the end 
of this fiscal year.
---------------------------------------------------------------------------
    \12\ Pub. L. No. 111-5, available at http://www.gpo.gov/fdsys/pkg/
PLAW-111publ5/pdf/PLAW-111publ5.pdf.
---------------------------------------------------------------------------
    To support the NIST Smart Grid program, Congress has appropriated a 
total of $2.3 million in FY09, $5 million in FY10, and $8.3 million in 
FY11. The FY12 President's Budget sustains NIST's Smart Grid efforts by 
providing funding to accelerate development of needed standards through 
priority action plans, establish the testing and certification 
framework, and ensure smart grid cybersecurity standards and guidelines 
stay ahead of evolving threats.
    A significant portion of NIST's Smart Grid budget has been used to 
fund private sector contractors that support the administration and 
operation of the SGIP. In the long term, our vision is for the SGIP to 
mature into an independent organization, funded primarily by the 
private sector that will continue to support the evolution of the Smart 
Grid standards framework after NIST's EISA coordination role is 
complete. However, it will take several years for the SGIP to develop a 
business model and private sector funding sources that are self-
sustaining.
    To guide future planning for NIST's work on the Smart Grid, NIST 
established a Smart Grid Federal Advisory Committee in September 2010. 
The first report of this committee is expected in November of 2011, and 
it will provide important input to guide the longer-term direction for 
NIST's Smart Grid work.
Engagement with Regulators
    EISA directs FERC to ``institute a rulemaking to adopt such 
standards and protocols as may be necessary to insure smart-grid 
functionality and interoperability in interstate transmission of 
electric power, and regional and wholesale electricity markets'' at any 
time after NIST's work has led to ``sufficient consensus'' in the 
Commission's judgment.
    The development and adoption of standards for the Smart Grid is an 
unprecedented, complex undertaking. In the past, few, if any, 
interoperability standards have been adopted in regulation for national 
infrastructures such as the electric grid, the telecommunications 
system, or the Internet. The vast majority of standards in these and 
many other industries are used on a purely voluntary basis, without 
government regulatory action. Similarly, voluntary consensus 
interoperability standards may be sufficient in many cases to insure 
the functionality and interoperability of the Smart Grid in interstate 
power transmission and regional/wholesale electricity markets, without 
government regulation.
    In the first exercise of its type under EISA, NIST notified FERC in 
October 2010 that it had identified five families of existing voluntary 
consensus standards as ready for consideration by regulators. \13\ To 
invite public discussion of whether there were sufficient consensus to 
institute a rulemaking proceeding, FERC hosted a Technical Conference 
on January 31, 2011, followed by a supplemental notice on February 16, 
2011 soliciting written comments from interested parties. \14\
---------------------------------------------------------------------------
    \13\ NIST letter to FERC Chairman Jon Wellinghoff, October 6, 2010, 
available at: http://www.nist.gov/public_affairs/releases/upload/FERC-
letter-10-6-2010.pdf
    \14\ Federal Energy Regulatory Commission (FERC) Notice of 
Technical Conference re Smart Grid Interoperability Standards under 
RM11-2. December 21, 2010, available at: http://elibrary.ferc.gov/
idmws/File_list.asp?document_id=13875396
---------------------------------------------------------------------------
    On July 20, 2011, FERC issued an Order, \15\ in which it found that 
there was insufficient consensus to institute a rulemaking proceeding 
at that time to adopt the initial five families of standards. At the 
same time, FERC's Order expressed support for the NIST process:
---------------------------------------------------------------------------
    \15\ 136 FERC 61,039, Order, ``Smart Grid Interoperability 
Standards,'' Docket No. RM11-2-000, issued July 19, 2011, available at: 

http://elibrary.FERC.gov/idmws/file_list.asp?accession_num=20110719-
3029.

     ``We believe that the best vehicle for developing smart grid 
interoperability standards is the NIST interoperability framework 
process, including the work of the SGIP and its committees and working 
groups . . . The Commission recognizes and appreciates the 
comprehensiveness of the smart grid interoperability framework process 
developed by NIST . . . Therefore, we encourage utilities, smart grid 
product manufacturers, regulators, and other smart grid stakeholders to 
actively participate in the NIST interoperability framework process to 
work on the development of interoperability standards and to refer to 
that process for guidance on smart grid standards.'' \16\
---------------------------------------------------------------------------
    \16\ Id.

    NIST believes that FERC's action is consistent with NIST's public 
comments to the Commission that it can send appropriate signals to the 
marketplace by recommending use of the NIST Framework. \17\
---------------------------------------------------------------------------
    \17\ Comments of US National Institute of Standards and Technology 
in response to the Commission's Supplemental Notice Requesting comments 
under RM11-2, April 7, 2011, available at: http://elibrary.ferc.gov/
idmws/File_list.asp?document_id=13909438
---------------------------------------------------------------------------
    FERC's decision is also consistent with the Administration's 
``Policy Framework for a 21st Century Grid,'' \18\ released on June 13, 
2011, which recommended to FERC that in order ``to enable the 
development and implementation of smart grid standards, merely 
embracing the standards as best practices in the field--rather than as 
mandatory ones--is sufficient . . . '' FERC's support of the NIST 
Interoperability Framework could encourage utility companies looking 
for smart grid solutions to rely on the framework for guidance, but 
leave it to individual utilities to decide how to best comply.
---------------------------------------------------------------------------
    \18\ White House. ``A Policy Framework for the 21st Century Grid: 
Enabling Our Secure Energy Future.'' June 13, 2011, available at: 
http://www.whitehouse.gov/sites/default/files/microsites/ostp/nstc-
smart-grid-june2011.pdf
---------------------------------------------------------------------------
    NIST believes that FERC's decision did not close the door to the 
possibility of future rulemaking if it is determined that adoption of 
certain standards is necessary to ensure their deployment to ensure 
interoperability.
    Testimonies, comments and reply comments received from the FERC 
technical conference were valuable sources of input to NIST and the 
SGIP. Based on our evaluation of this input, several steps are being 
taken to improve NIST and SGIP processes. For example, SGIP has 
initiated a task group to consider how to add reviews of reliability 
and implementation issues within the SGIP.
Ensuring Protection of Consumer Interests
    Let me conclude with a discussion of critical actions being taken 
to ensure protection of consumer interests, highlighted in the 
Administration's ``Policy Framework for a 21st Century Grid.''
    Regulators and utilities need to ensure that their investments in a 
Smart Grid are cost-effective to keep electricity affordable. The 
standards being developed through the NIST program play a critical role 
in this respect. They will help ensure that present investments in new 
technologies will generate future value for rate-payers by facilitating 
interoperability and upgradeability. These standards will also reduce 
market fragmentation and help create economies of scale, providing 
consumers greater choice and lower costs. They will help promote 
healthy vendor competition that will result in lower costs for 
utilities and, ultimately, for consumers.
    Policymakers should ensure that residential and small business 
consumers have access to a portfolio of easy-to-use Smart Grid 
programs, technologies, and policies that empower them to manage their 
energy use effectively. The standards being developed through the NIST 
program will help enable timely consumer access to data that can help 
them control their energy usage. The standards will encourage the 
development of innovative third-party applications to help consumers 
save energy and encourage development of a market for smart appliances 
that can reduce energy usage during peak demand periods. The standards 
will also offer policymakers a solid framework for protecting consumer 
data privacy.
    Finally, the Federal government must continue to facilitate the 
development of rigorous, open standards and guidelines for 
cybersecurity through public-private cooperation. Cooperation between 
stakeholders can help identify and address the diversity of cyber risks 
the electric power sector faces. The Federal government will work with 
the private sector to provide the appropriate level of support for the 
continuing evolution of those standards and guidelines, to keep pace 
with the evolving threat. The three-volume report, NIST IR 7628, 
Guidelines for Smart Grid Cyber Security, \19\ presents a framework 
that organizations should use to develop effective cybersecurity 
strategies tailored to their particular combinations of Smart Grid-
related characteristics, risks, and vulnerabilities. Volume 2 of NIST 
IR 7628 is devoted to privacy guidelines for Smart Grid data, and NAESB 
is in the process of developing a business practice standard for data 
privacy consistent with the NIST guidelines. Organizations in the 
diverse community of Smart Grid stakeholders--from utilities to 
providers of energy management services to manufacturers of electric 
vehicles and charging stations--can use the methods and supporting 
information presented in the report as guidance for assessing and 
mitigating risks. This approach recognizes that as the Smart Grid comes 
online, the electric grid will rapidly change from a relatively closed 
system to a complex, highly interconnected environment. Each 
organization's cyber security requirements should evolve as technology 
advances and as threats to grid security inevitably multiply and 
diversify.
---------------------------------------------------------------------------
    \19\ Supra, n. 7.
---------------------------------------------------------------------------
Conclusion
    The Smart Grid, with the unique investment opportunity afforded by 
the Recovery Act, represents a great opportunity to renew and modernize 
one of the Nation's most important infrastructures. NIST is proud to 
have been given an important role in this initiative, and is committed 
to achieving the Administration's vision of a cleaner, more reliable, 
more efficient and effective electricity grid that creates jobs and 
helps reduces our dependence on oil.
    Thank you for the opportunity to testify today on NIST's work on 
Smart Grid interoperability. I would be happy to answer any questions 
you may have.

    Chairman Quayle. Thank you, Dr. Arnold.
    The Chair now recognizes Chairman Donna Nelson to present 
her testimony.

   STATEMENT OF THE HONORABLE DONNA NELSON, CHAIRMAN, PUBLIC 
                  UTILITY COMMISSION OF TEXAS

    Chairman Nelson. Thank you, Chairman Quayle. Good morning, 
and good morning to Ranking Member Sarbanes and Members of the 
Subcommittee. I am Donna Nelson, Chairman of the Public Utility 
Commission of Texas. Thank you for the opportunity to appear 
before you today to discuss the progress that we have made in 
Texas in implementing a smart grid. I would like to highlight 
several things that I think have made our program in Texas 
successful.
    To tell the story of the smart grid in Texas is to tell the 
story of the success of the competitive electric market in 
Texas. The ERCOT region of Texas--and ERCOT stands for Electric 
Reliability Council of Texas--is located entirely within the 
state of Texas, and that makes Texas different than any other 
state in the continental United States in that it represents 85 
percent of the electric load in the state. The ERCOT region has 
a successful competitive market. We have competitive 
generation, we have competitive retail providers, which we call 
REPs, but the TDUs, transmission and distribution utilities, 
the ones that own the wires and poles, are still regulated by 
the commission, and the competitive market has served us well 
in Texas. It spurred a lot of investment and it ultimately 
spurred the installment of smart meters.
    In the mid-2000s, though, natural gas prices were rising; 
Texas is a natural gas on the margin state, and our state was 
growing and so policy leaders in Texas have a view that they 
really want everything to be able to provide electricity. We 
need all resources. And one of those resources is of course the 
demand response that you can get from the smart grid 
technology.
    Against this backdrop, the state legislature wanted Texas 
to have that tool so they passed legislation encouraging the 
implementation of advanced meters and directed us, the PUC, to 
establish a cost-recovery mechanism for utilities. We did that. 
We adopted a rule, and it covered customer and REP access to 
data, minimum standards for advanced meter system deployment, 
cost-recovery and utility deployment plans. The four major 
utilities in ERCOT, that would be CenterPoint, Oncor, AEP and 
Texas New Mexico Power, have received approval from the 
commission for deployment of smart meters in their service 
territories. They have, to-date deployed 4 million smart meters 
and are scheduled to deploy a total of 7 million by the end of 
2013.
    I would like to touch on a few key components that we 
believe have allowed for fast deployment. First, the state 
legislature encouraged deployment but did not mandate it. 
Second, the legislature explicitly provides that customers own 
their own smart meter data and are in control of authorizing 
access to an entity other than their retail provider. Third, 
the Texas PUC has overseen an implementation initiative in 
order to make the smart grid a reality. The initiative is 
comprised of a stakeholder collaborative with representatives 
from utilities, vendors, REPs and consumers. And finally, REP 
strongly supported the rollout of the smart grid technology 
because in a highly competitive retail market, they wanted to 
have a competitive advantage over other companies.
    State commissions maintain jurisdiction over the 
distribution grid and have the ultimate responsibility for 
adoption and enforcement of rules relating to utilities and 
retail markets. It is important that the processes at NIST and 
at the FERC continue to recognize the role of state 
commissions. We believe that the creation of open national 
standards can create a level playing field across industry, 
sectors and the markets. In the long term, standards should 
ensure interoperability of devices across utility service 
territories and across the country. I want to stress that a 
balance must be struck between existing standards that enable 
deployment and allow for benefits to reach consumers today 
while working to refine and create future standards to address 
the smart grid of tomorrow.
    Let me close by stating that regardless of whether a state 
has restructured its electric industry as Texas has done, there 
are many benefits to be realized from the smart grid. Many 
customers want more information about their electricity bills. 
Currently, two of our largest utilities are conducting pilots 
and they are finding that customers are responding very well to 
the smart grid and are reducing their electric usage. And 
standards are constantly evolving because technology does not 
wait. Policy at the federal and state level should continue to 
recognize the need for customer choice and control and provide 
guidelines for the smart grid, not mandates.
    Thank you so much for the opportunity to testify today and 
share the Texas experience.
    [The prepared statement of Ms. Nelson follows:]

  Prepared Statement of The Honorable Donna Nelson, Chairman, Public 
                      Utility Commission of Texas
Introduction
    Chairman Quayle and Members of the Subcommittee, I am Donna Nelson, 
Chairman of the Public Utility Commission of Texas (Texas PUC). Thank 
you for the opportunity to appear before you today to discuss the 
progress we have made in Texas regarding the adoption and 
implementation of a smart grid. I would like to highlight several 
things that I believe have made Texas a leader in deploying smart grid 
technology and in delivering the benefits of that technology to 
consumers.
    To tell the story of the Smart Grid in Texas is to tell the story 
of the competitive electricity market in ERCOT. The Electric 
Reliability Council of Texas (ERCOT) region is located entirely within 
the state of Texas and includes approximately 75% of the state's 
geographic area, 85% of the electric load, and 22 million consumers. 
The Texas legislature restructured the electric industry in the ERCOT 
region in 1999. As a result of that restructuring, Retail Electric 
Providers (REPs) provide electric service to consumers at prices that 
are not regulated by the Texas PUC, while the Texas PUC continues to 
regulate the rates of transmission and distribution utilities (TDUs) 
pursuant to traditional rate of return regulation.
    The competitive model has served Texas well. Today, prices in the 
competitive areas are lower for consumers than they were in 2001 before 
the competitive market opened. Consumers can shop from a myriad of 
product including prepaid service, time of use pricing, fixed and 
variable pricing, and renewable energy. The Texas PUC oversees a 
website at PowerToChoose.com that allows consumers to shop for electric 
service from among hundreds of product offerings. The competitive ERCOT 
market has also spurred the investment of $36.5 billion in new 
generation, and Texas leads the nation in installed wind generation 
capacity.
Smart Grid Initiatives
    State legislation has encouraged the implementation of advanced 
metering by directing the Texas PUC to establish a cost recovery 
mechanism for utilities that deploy smart meters and related networks. 
The Texas PUC adopted a rule in May 2007 related to smart meter 
deployment. \1\ The rule addressed customer and REP access to data, 
minimum standards for advanced metering systems (AMS) deployed, cost 
recovery, and utility deployment plans. Four utilities in ERCOT 
(CenterPoint Energy, Oncor Electric Delivery, American Electric Power-
Texas and Texas New Mexico Power) have received approval for the 
deployment of smart meters in their service territories. Those 
utilities have presently deployed approximately four million advanced 
meters and are scheduled to deploy a total of approximately seven 
million by the end of 2013. The Texas PUC has approved over $2 billion 
dollars in Smart Grid investment in the ERCOT region.
---------------------------------------------------------------------------
    \1\ 1 See PUC SUBST. R. Sec. 25.130, available online at: http://
www.puc.state.tx.us/rules/subrules/electric/25.130/25.130ei.cfm
---------------------------------------------------------------------------
    CenterPoint Energy was awarded a $200 million stimulus grant from 
the DOE. CenterPoint Energy will use $150 million of this grant to the 
accelerate the deployment of 2.2 million smart meters that were 
originally scheduled for completion in 2014 and are now scheduled to be 
completed by mid-2012. CenterPoint Energy is using the remaining $50 
million to fund an Intelligent Grid initiative, which will automate 15% 
of CenterPoint Energy's service territory with advanced distribution 
management capabilities. This will include a ``self-healing'' system 
that will automatically identify outages, isolate faulted sections, re-
route power, and improve overall reliability performance. This has also 
enabled CenterPoint Energy to provide proactive alerts to customers via 
email, text message, and phone for issues such as outages and storm 
preparation. CenterPoint Energy has created or retained 550 jobs as a 
result of the DOE grant.
    By the end of 2013, Texas will have nearly seven million smart 
meters installed within the ERCOT region. In its smart meter 
rulemaking, the Texas PUC mandated a robust set of functionality--and 
did not mandate technology. These meters are home area network (HAN) 
enabled, record and transmit data in 15-minute increments, and are 
required to adhere to open standards. Energy management devices that 
are connected to the meter and the utility system are also being 
provided to customers on a voluntary basis.
    The installation of smart meters and the associated systems are a 
core component of the smart grid. Meters with a robust set of 
functionality are the building block to achieving significant 
improvements in customer service and lower costs. To fully realize the 
benefits of this technology, providers and their customers need access 
to information that shows how much electricity the customers use and 
when they use it. In approving utility deployment plans, the Texas PUC 
authorized the development of a web site that makes smart meter 
information available to customers, REPs, and other energy service 
providers. This web site, SmartMeterTexas.com, enables customers with a 
smart meter installed in any of the four utility territories to go to 
one location and view their electricity usage on a 15-minute basis. 
This website is also compliant with the American Disabilities Act.
    One of the major challenges with implementing the smart grid is 
that the realization of benefits does not occur overnight. The smart 
grid, comprised of a ``system of systems,'' takes years. In Texas, we 
recognized that realization of the benefits will require revisions to 
the existing framework--including market processes, utility and REP 
systems, retail and wholesale systems at the ERCOT ISO, and Texas PUC 
rules.
    I would like to touch on a few key components that we believe have 
allowed for faster adoption and realization of benefits of this 
technology. First, a progressive state policy led by the legislature 
has encouraged deployment, not mandated it. Second, the statute 
explicitly states that customers own their smart meter data and are in 
control of authorizing access to an entity other than their REP. This 
has ensured that customers have access to their smart meter information 
allowing them to have more choice and control. Customers can also 
access their data on a real-time basis with a device installed inside 
their home. Third, the Texas PUC has overseen an implementation 
initiative in order to make the smart grid a reality. The initiative is 
comprised of a stakeholder collaborative with representatives from 
utilities, vendors, REPs and consumers. This stakeholder process has 
addressed issues relating to customer privacy, changes in wholesale and 
retail markets, customer protection rules, access to data, changes to 
utility systems, the development of the SmartMeterTexas.com web site, 
and the requirements for the home area network. The work resulting from 
this process has allowed REPs and other energy service providers to 
take advantage of the new functionality from the utility systems--
thereby developing products for customers at a faster pace. And, 
finally, REPs strongly supported the roll out of smart grid technology, 
because, in a highly competitive retail market, they wanted to have a 
competitive advantage over other REPs.
    Retail products with features including usage comparisons, smart 
phone apps, online web tools and analysis, and other innovative 
services all are leveraging the ongoing smart grid investment. Further 
supporting the development of new choices for consumers includes an 
initiative by Reliant Energy. Reliant Energy received a $20 million 
stimulus grant from the DOE. More than 250,000 customers are 
benefitting from at least one Smart Energy product or service, such as 
those listed above, that Reliant offers. Reliant will enroll 500,000 
consumers on Smart Energy Products and Services by March of 2013.
National Standards Effort
    The Smart Grid is an emergent technological ecosystem that offers 
many possibilities to many different stakeholders. Participation in 
developing standards is paramount to: defining interoperable 
requirements connecting the different software components and 
technologies comprising the Smart Grid; ensuring reliability, safety, 
security and privacy are adequately addressed; assisting in optimizing 
value and avoiding limiting Smart Grid potential; assisting in defining 
reasonable and necessary component performance characteristics 
comprising the Smart Grid; assisting in defining common ground for 
interaction between new groups of stakeholders participating in the 
Smart Grid; and providing the opportunity for educating participants in 
developing and supplying components for building and/or operating the 
Smart Grid.
    The creation of open, national standards can create a level playing 
field across industry sectors and the market. In the long term, 
standards should ensure interoperability of devices across utility 
service territories and across the country. This national set of 
standards should recognize and encourage an ecosystem of existing and 
evolving standards. A balance must be struck between existing standards 
that enable deployment and allow for benefits to reach consumers today, 
while working to refine and create future standards to address the 
Smart Grid of tomorrow. This process should result in the creation of a 
national set of standards that can provide direction for utilities, 
industry and market participants.
    State commissions maintain jurisdiction over the distribution grid 
and have the ultimate responsibility for adoption and enforcement of 
rules relating to utilities and the retail markets, including the 
functions and operations of electronic equipment that is a part of the 
distribution network or metering infrastructure. It is important that 
the processes at NIST and at the FERC continue to recognize the 
important role of state commissions. The Smart Grid Interoperability 
Panel (SGIP) has provided an excellent forum for those presenting 
different views to meet and develop common standards and 
recommendations sufficiently broad to define Smart Grid.
    The development of standards is the subject of much discussion at 
all levels of government. Standards are not static but are constantly 
evolving. Once a standard is adopted, there are revisions to improve 
the standard based on real world applications. While some have 
advocated for a federal package of mandatory standards for adoption, we 
do not believe that the federal government should take action to 
mandate standards. If we settled on standards when the internet was 
first created--the internet likely would not have evolved to where it 
is today.
Conclusion
    Many residential energy customers are technically savvy. Use of the 
internet, smart phones and smart technology is increasing. As a result, 
an interest in products such as pay-as-you-go, time of use rates, and 
access to information is growing. Policy makers must recognize that it 
is vital that consumers have the ability to understand their energy 
usage and costs. While the traditional utility model provides this 
information thirty days after the fact, the smart grid, if implemented 
properly, will make this information available to consumers on the next 
day or the same day, depending on the technology.
    Regardless of whether a state has restructured its electricity 
industry, there are many benefits to be realized from the Smart Grid. 
Customers require more information about their energy bills. Experience 
continues to show that customers will take advantage of this 
information. Policy at the federal and state level should continue to 
recognize the need for customer choice and control, and provide 
guidelines for the smart grid, not mandates.
    Thank you for the opportunity to testify today and share the Texas 
experience.

    Chairman Quayle. Thank you, Chairman Nelson.
    The Chair now recognizes Mr. Caskey for five minutes to 
present his testimony.

                 STATEMENT OF MR. JOHN CASKEY,

    ASSISTANT VICE PRESIDENT, INDUSTRY OPERATIONS, NATIONAL 
              ELECTRICAL MANUFACTURERS ASSOCIATION

    Mr. Caskey. Good morning, Chairman Quayle and Members of 
the Subcommittee. My name is John Caskey, and I am the 
Assistant Vice President of Operations and the Director of the 
Power Equipment Division at the National Electrical 
Manufacturers Association, NEMA. Thank you for providing me the 
opportunity to testify today. My testimony today is informed by 
more than 30 years of experience in the energy field. As the 
Director of the Power Equipment Division at NEMA, I work 
directly with the manufacturers that produce products that make 
up the electric grid and the evolving smart grid. In addition, 
I am the Vice Chair of the Governing Board of the Smart Grid 
Interoperability Panel, SGIP, and the Chair of the SGIP Vision/
Mission/Roadmap Task Team. On the SGIP Governing Board, I 
represent the standards development organizations and the 
specifying organizations.
    NEMA is the trade association for the electrical and 
medical imaging manufacturing industry. Founded in 1926 and 
headquartered in Rosslyn, Virginia, our member companies 
manufacture products used in the generation, transmission and 
distribution, control and end use of electricity that exceeds 
$120 billion in worldwide sales.
    One of NEMA's primary missions--of particular relevance to 
today's hearing--is that we are a standards development 
organization, or SDO, accredited by the American National 
Standards Institute.
    NEMA member companies are technology leaders and have been 
researching, developing, and deploying Smart Grid technologies 
for many years. In most cases, the technology needed to support 
smart grid are already available and have been deployed on a 
limited basis across the country. However, what has been 
missing is a complete set of standards and associated testing 
and certification requirements that ensure interoperability of 
the different components of the grid. This is our greatest 
challenge.
    The Energy Independence and Security Act of 2007, in which 
this Committee played a critical role, blazed new trails in the 
development of smart grid. Title XIII of EISA charged the 
National Institute of Standards and Technology with the lead 
role in coordinating the development of a framework and model 
standards to ensure interoperability in the smart grid. NEMA is 
one of the non-government agencies named in EISA to work with 
NIST on the implementation of the interoperability framework of 
standards for smart grid.
    One example of NEMA's role as an SDO is the development of 
the NEMA smart meter upgradeability standard. This standard was 
developed and approved through an ANSI-accredited process 
within 90 days of NIST's request for NEMA's help. This standard 
was accomplished through the cooperation and work of five major 
meter manufacturers, several utilities, the Department of 
Energy, and NIST. NIST's formation and funding of the SGIP 
public-private partnerships has been crucial for bringing all 
the smart grid stakeholders together to develop needed 
standards.
    NEMA believes that the Federal Government should continue 
to serve as a partner with industry in the effort to establish 
smart grid standards. These standards are ultimately what will 
empower the consumer and drive cybersecurity, improved 
reliability and cost minimization. In addition, promoting these 
U.S. smart grid standards internationally is one way to 
strengthen the export market for U.S.-manufactured products. 
NEMA has taken the lead with the assistance from the Department 
of Commerce to promote the U.S. smart grid roadmap in Mexico 
and Canada. In addition to a U.S. trade and development agency 
program, NEMA is promoting the U.S. smart grid roadmap in 
China. As these countries and others adopt their smart grid 
architecture and standards, it opens the market for American 
manufacturers and creates the opportunity for more American 
jobs.
    Three additional thoughts I would like to leave with you 
today. Number one, the next major step for the SGIP is to 
create a roadmap that will lead the organization forward for 
the next three years. The NIST framework has led us this far by 
identifying the most immediate standards work that needed to be 
completed over the first two years of the SGIP. Now the SGIP 
leadership needs to focus on providing direction for the next 
phase of smart grid development.
    Item two is, there continues to be confusion about the 
definition of consensus and the possibility for mandatory smart 
grid standards. Many people, including myself, define consensus 
as a product or policy that everyone can live with. Others feel 
that a consensus requires a super majority such as 75 percent. 
Still others feel that passing a simple majority of 51 percent 
signifies consensus. NEMA believes that the SGIP should work 
with FERC and NIST to resolve this issue before any standards 
are made mandatory by any federal agency.
    The third point is that smart grid standards are radically 
more complex than most existing standards. Smart grid standards 
require an evolution from simple physical standards such as 
defining the physical attributes of an everyday 120-volt 
electric appliance plug to very complicated communication and 
protocol standards that may offer hundreds of variations in the 
application of those standards. This issue radically changes 
the meaning of compliance and our understanding of the concepts 
of interoperability and plug-and-play. This may be the first 
time that commissions and consumers will be exposed to the 
realization that you can have two products that meet the same 
standard that do not talk to one another and do not provide the 
same functionality.
    I am happy to address these issues in more detail and 
answer any questions you may have. Thank you, Mr. Chairman, for 
inviting me here to testify today.
    [The prepared statement of Mr. Caskey follows:]

 Prepared Statement of John Caskey, Assistant Vice President, Industry 
       Operations, National Electrical Manufacturers Association
    Good morning, Chairman Quayle and Members of the Subcommittee. My 
name is John Caskey and I am Assistant Vice President of Operations and 
Director of the Power Equipment Division at the National Electrical 
Manufacturers Association (NEMA). I want to thank you for providing me 
the opportunity to testify today.
    My testimony today is informed by over 30 years of experience in 
the energy field. As the Director of the Power Equipment Division at 
NEMA, I work directly with the manufacturers that make products that 
comprise the electric grid and the evolving smart grid. I have had the 
opportunity to work with National Institute of Standards and Technology 
(NIST) and most of the other stakeholders in the Smart Grid community 
since the signing of the Energy Independence and Security Act of 2007 
(EISA).
    I serve as the Vice-Chair of the Governing Board of the Smart Grid 
Interoperability Panel (SGIP), Chair of the SGIP Vision/Mission/Roadmap 
Task Team, and a member of the SGIP Business and Operating Procedure 
Working Group.
    NEMA is the trade association of choice for the electrical and 
medical imaging manufacturing industry. Founded in 1926 and 
headquartered in Rosslyn, Virginia, our member companies manufacture 
products used in the generation, transmission and distribution, 
control, and end use of electricity that exceed $120 billion in 
worldwide sales. These products are used in utility, medical imaging, 
industrial, commercial, institutional, and residential applications. In 
addition to our headquarters in Rosslyn, Virginia, NEMA also has 
offices in Beijing and Mexico City.
    One of NEMA's primary missions--of particular relevance to today's 
hearing--is that we are a Standards Development Organization, or SDO, 
accredited by the American National Standards Institute (ANSI). A NEMA 
standard defines a product, process, or procedure with reference to one 
or more of the following: nomenclature, composition, construction, 
dimensions, tolerances, safety, operating characteristics, performance, 
rating, testing, and the service for which the products are designed.
    NEMA believes that standards play a vital part in the design, 
production, and distribution of products and systems destined for both 
national and international commerce. Sound technical standards benefit 
the user, as well as the manufacturer, by improving safety, bringing 
about economies in manufacturing processes, eliminating 
misunderstandings between manufacturer and purchaser, and assisting the 
purchaser in selecting and obtaining the proper product for his 
particular need.
    NEMA member companies are technology leaders and had been 
researching, developing, and deploying Smart Grid technologies for many 
years, well before the term Smart Grid was even coined. However, as 
technological advances accelerated across the power equipment and 
telecommunications industries, the need to establish a set of 
interoperability standards for the Smart Grid became increasingly 
important.
    The Energy Independence and Security Act of 2007 (EISA), in which 
this Committee played a critical role, has blazed new trails in the 
development of the Smart Grid. Title XIII of EISA charged the National 
Institute of Standards and Technology (NIST) with the lead role in with 
coordinating the development of a framework and model standards to 
ensure interoperability in the Smart Grid. NEMA is one of the non-
government organizations named in EISA to work with NIST on the 
implementation of the ``Interoperability Framework'' of standards for 
Smart Grid.
    From the perspective of an organization with more than 85 years of 
experience with standards development, NEMA applauds the work done thus 
far by the National Institute of Standards and Technology, the Smart 
Grid Interoperability Panel (SGIP), and the National Coordinator for 
Smart Grid Interoperability.
    The benefits we will see as a result of the development of a Smart 
Grid are extraordinary. Layering on communications and other 
technologies to improve the intelligence of the electrical delivery 
system will increase grid reliability, improve power quality, reduce 
the frequency and duration of outages, promote economic growth through 
development of new technologies and an improved electric 
infrastructure, bolster efficiency by giving grid operators and 
utilities greater situational awareness, and--as the name of today's 
hearing indicates--empower the ratepayer to become an active 
participant in the electricity delivery system.
Legal Authority
    As you know, the House Science, Space, and Technology Committee was 
instrumental in creating the foundational legislation that has put our 
nation on a course to develop a Smart Grid.

    EISA Section 1305 states:

    ``The Director of the National Institute of Standards and 
Technology shall have primary responsibility to coordinate the 
development of a framework that includes protocols and model standards 
for information management to achieve interoperability of smart grid 
devices and systems. Such protocols and standards shall further align 
policy, business, and technology approaches in a manner that would 
enable all electric resources, including demand-side resources, to 
contribute to an efficient, reliable electricity network. In developing 
such protocols and standards--

     (1)  the Director shall seek input and cooperation from the 
Commission, the Office of Electricity Delivery and Energy Reliability 
and its Smart Grid Task Force, the Smart Grid Advisory Committee, other 
relevant Federal and State agencies; and

     (2)  the Director shall also solicit input and cooperation from 
private entities interested in such protocols and standards, including 
but not limited to the Gridwise Architecture Council, the International 
Electrical and Electronics Engineers, the National Electric Reliability 
Organization recognized by the Federal Energy Regulatory Commission, 
and National Electrical Manufacturers Association.

Standards and the Role of the Federal Government
    Before I go on to describe the work that has been done as a result 
of EISA, I would like to address a few more basic questions. What are 
standards, why do we need them, and why is it important that the 
federal government be involved?
    The interoperable, or smart, electrical grid consists of many 
different products, woven into a complex ``system of systems'' that 
must seamlessly provide sufficient and cost-effective electrical energy 
to power our homes, offices, schools, and businesses.
    The scale, complexity, and interconnectedness of the electrical 
grid require that everyone and everything involved in developing and 
managing it are ``playing from the same sheet of music.'' The Smart 
Grid is managed and coordinated by modern communications and control 
software which, in order to work optimally together, must share a 
common language and common understanding of the operational details of 
the many interconnected elements of the power grid. Reliable and 
effective interoperability requires a foundation of standards.
    Now, why is it beneficial to have the federal government involved? 
While only a handful of areas in the U.S. were electrified in 1900, by 
the time we reached the 21st Century, electricity had become the 
cornerstone of the American way of life. Without electricity today, we 
could not pump our water, feed our citizens, charge our electronic 
devices, operate our military, or provide almost any of the vast 
variety of vital government services. The electric grid is clearly the 
most critical piece of our national infrastructure.
    In the U.S., standards are typically developed by the private 
sector with varying degrees of participation by the government. EISA 
has opened the door to a more active government role providing an 
``umbrella'' under which the private sector defines standards for Smart 
Grid products and systems.
    A successful Smart Grid implementation mandates interoperability 
between utility operators which will transcend current jurisdictional 
boundaries. For as long as utility companies have been regulated 
entities, tensions have existed between state and federal regulators. 
Now, as Smart Grid applications like demand response can reach from the 
meter of a homeowner in one state to the hydroelectric dam operator in 
another, there are a number of new challenges which will rise to the 
federal level. One issue that is already gaining attention at the 
federal level is cyber security of the Smart Grid as utilities wrestle 
with the prospect of securing their operations across state boundaries 
and varied utility commission service areas.
Implementation of the Energy Independence and Security Act of 2007 
        (EISA)
    NIST's leadership in the development of a Smart Grid has been 
exemplary and NEMA has been extremely pleased with the way in which the 
provisions in EISA have been carried out.
    Once NIST received its initial funding, the agency spent time 
evaluating the Smart Grid environment and inventorying available Smart 
Grid-related standards as directed by EISA. NIST then established the 
Smart Grid Interoperability Panel (SGIP) in November 2009. According to 
its charter, the mission of the SGIP is to ``provide an open process 
for stakeholders to participate in providing input and cooperating with 
NIST in the ongoing coordination, acceleration and harmonization of 
standards development for the Smart Grid.''
    The SGIP serves as an unparalleled forum where private industry can 
gather to discuss the future of the Smart Grid.
    Participation of so many stakeholders across the Smart Grid 
spectrum in the SGIP is a testament to its importance. The SGIP 
comprises 22 stakeholder categories representing the breadth of the 
electrical industry and includes over 600 organizations and more than 
1,800 individual participants. Current membership in the SGIP includes 
a variety of international interests from several countries across the 
globe, but most importantly from our trading partners in Canada and 
Mexico, both of whom sell electricity to U.S. utilities. In addition, 
the SGIP has a governing board structure elected from the stakeholders 
plus three at-large members. The SGIP is organized through a charter 
and bylaws to cover operating policy and provides membership 
opportunities for domestic and international interests. Indeed, the 
SGIP has also functioned as a conduit to its international peers for 
Smart Grid activity across the globe.
    NEMA has been fully engaged in the progression of the SGIP. 
Representatives from NEMA-member companies as well as NEMA staff have 
served in numerous elected positions of the SGIP. NEMA's objective for 
the future of Smart Grid is to continue to provide quality leadership 
and make sure that the human capital required to run the SGIP is well 
supported by both NEMA staff and member companies.
    While the first few months of the SGIP were devoted to getting the 
organization up and running, its members are now addressing critical 
issues around cyber security, smart metering, home area networks, in-
home communication standards, etc. By identifying a consolidated list 
of technology gaps, referred to as ``Priority Actions Plans'' or PAPs, 
some of the most pressing needs have already been address through new 
standards developed by the SDOs participating in the SGIP. This will 
continue to be an ongoing process with a lot of this work completed in 
the remaining months of 2011 and into 2012.
    It was, and continues to be, NEMA's belief that the federal 
government can serve as a partner with industry in the effort to 
establish Smart Grid standards. As the convener of the SGIP, NIST-
funded resources have provided a valuable administrative role, allowing 
free public access to the proceedings and enabling the industry to 
focus their resources on the work of identifying and developing 
standards. Relative to the subtleties of the NIST-SGIP relationship, it 
is important to note that these are NOT government contractors simply 
executing NIST's vision for the Smart Grid. Instead, NIST's funding 
provides a democratic forum in which the industry's vision for the grid 
can be developed and mature on its own with the NIST staff getting a 
front-row seat to the process and immediate access to the results.
    At the same time, the NIST Framework and Roadmap for the 
Development of Smart Grid Interoperability Standards (NIST Special 
Publication 1108, dated January 2010) provides a playbook that any 
interested party can use to get involved with Smart Grid. Over the last 
two years, as part of a program with the U.S. Department of Commerce 
the NEMA staff has had an opportunity to meet with several trade 
delegations from other countries about their Smart Grid efforts.
    NEMA encouraged the formation of the International Electrotechnical 
Commission (IEC) Strategy Group on Smart Grid in 2008, which brought 
Smart Grid experts together from 14 different nations to develop a 
framework for international smart grid protocols and model standards to 
achieve interoperability of Smart Grid devices and systems. A roadmap 
has now been released based on existing international standards that 
can be used consistently for today's utility projects in many parts of 
the world. The NIST effort is coordinating with IEC to encourage 
adoption of global standards that reflect U.S. practices wherever it 
makes sense.
    Smart Grid standards are a particular challenge. They will require 
an evolution from simple physical standards, such as defining the key 
features of an everyday 120-volt plug, to very complicated 
communication and protocol standards that may offer hundreds or 
possibly thousands of future features. Further complicating this effort 
is that any given utility may choose to implement a different subset of 
those features. This issue radically changes the meaning of 
``compliance'' and our understanding of the concepts of 
``interoperability'' and ``plug and play.''
Meter Upgradeability Standard
    With all the general discussion thus far, it may be beneficial to 
highlight a specific example of the type of standards accomplished 
under NIST and the SGIP.
    One of the critical issues facing electric utilities and regulators 
is the need to guarantee that technologies or solutions that are 
selected and installed by utility companies today will be interoperable 
and in compliance with future national standards-in other words, 
``future-proof.'' In order to preserve their investments, utilities 
want to be sure that the systems they select will allow for evolution 
and growth as Smart Grid standards evolve.
    One of the first and largest Smart Grid investments being made by 
many utilities is deployment of advanced metering infrastructure (AMI), 
with smart meters being the main component, as the primary connection 
between the consumer and the utility which will allow for greater 
participation in energy management by the ratepayer.
    As a result, NIST identified the need for a meter upgradeability 
standard as a high priority requiring immediate attention. The 
objective was to define requirements for smart meter firmware 
upgradeability in the context of an AMI system for industry 
stakeholders, such as regulators, utilities, and vendors.
    As noted earlier, EISA requested that NEMA support NIST in the 
Smart Grid effort. Even before the SGIP was created, NIST called on 
NEMA to develop a standard to address meter upgradeability. The NEMA SG 
AMI-1 smart meter upgradeability standard was developed and approved 
through an ANSI-accredited development process within 90 days of when 
NEMA's assistance was requested. This could not have been accomplished 
without the cooperation and work of the five major U.S. meter 
manufacturers, the utilities, the DOE and NIST. The success of NEMA SG 
AMI-1 demonstrates that standards development can be far more 
responsive than has historically been the case where it has often taken 
many years.
Promoting Exports through Standardization
    The efforts made by NEMA in Smart Grid are also aimed at 
strengthening the export market for U.S. manufactured products. As 
referenced earlier in my testimony, NEMA has taken the lead, with 
assistance from the Department of Commerce, to promote the U.S. Smart 
Grid roadmap in Mexico and Canada. NEMA is also working through the 
U.S. Trade and Development Agency on a Smart Grid roadmap with China. 
As these countries adopt the U.S. Smart Grid architecture and 
standards, it opens the market for U.S.-manufactured products and 
technologies.
    Consensus One issue that recently surfaced within the SGIP, NIST, 
and FERC relates to the definition of consensus. And this definition 
has implications on whether and how any given standard derived through 
the NIST process is made mandatory by regulators, as authorized in 
EISA. NEMA has been vocal about our contention that any standard coming 
out of an accredited standards development organization should satisfy 
the ``sufficient consensus'' clause in EISA. The procedures that NEMA 
must follow in order to maintain our ANSI accreditation ensure that 
consensus is built into every standard we publish.
    Consensus is defined in many different ways. Many people, including 
myself, define consensus as a product or policy that ``everyone can 
live with.'' Others feel that consensus is just a super majority, such 
as 75%. Still others may define consensus as unanimity.

    EISA states:
         At any time after the Institute's work has led to sufficient 
consensus in the Commission's judgment, the Commission shall institute 
a rulemaking proceeding to adopt such standards and protocols as may be 
necessary to insure smart-grid functionality and interoperability in 
interstate transmission of electric power, and regional and wholesale 
electricity markets.

    As stated above, in the fall of 2010, NIST sent the first five 
families of standards to FERC for its consideration, as directed by 
EISA. While the five families of standards, which dealt largely with 
cybersecurity, that were sent to FERC were not sanctioned by SGIP, they 
had been considered by NIST with significant input from stakeholders. 
In January 2011, FERC held a technical conference to receive feedback 
on these standards.
    It is NEMA's view that most if not all of the Smart Grid community 
felt that these five families of standards were a very good starting 
point. During FERC's Technical Conference, the question of whether 
these standards represented the consensus of the industry was responded 
to with skepticism by witnesses.
    I believe some clarification is in order. Some may interpret the 
testimony presented at the Technical Conference as evidence that NIST 
had not fulfilled its responsibilities vis-a-vis consensus under EISA. 
Nothing could be further from the truth. No panelist said that the five 
families of standards under consideration should not be part of the 
Smart Grid. Further, no panelist suggested that the five families of 
standards did not achieve certain Smart Grid functionality. Instead, it 
is my view that the mere fact that it was FERC--a regulatory agency--
asking the question about whether or not these standards represented 
consensus raised witnesses' concerns that FERC was leaning toward 
mandating these standards in some form.
    Now, let me be clear. NEMA does not believe inclusion of a standard 
in the NIST Catalog of Standards should make that standard mandatory. 
And at least in this case, FERC agreed; in July 2011, FERC concluded it 
would not take action on the first five families of standards. But, 
NEMA does believe a standard in the Catalog is something that FERC, as 
well as state utility commissions, can point to as a repository of good 
ideas for grid operators looking for Smart Grid solutions. Indeed, the 
SGIP Governing Board believes the Catalog of Standards is a source, but 
not necessarily the sole source, for Smart Grid implementers.
What's Next?
    The next area of focus for NIST and the SGIP is to establish a 
Roadmap for standards activities for 2012-2014. Now that the work on 
the first set of critical standards is under control, we need to 
develop a roadmap for the next three years. This has proven to be much 
more difficult than expected because technologies, regulations, 
consumer participation really occur in stages. We need to develop an 
organized plan to create standards to support that staged evolution.
    For example, electric vehicles represent a new and unique set of 
challenges to grid operators. For the first time in our electricity 
history, utility companies have to deal with a mobile component to the 
nation's electricity load. The same EV that charges in a homeowner 
garage overnight, could, in all likelihood, appear as a load element in 
an office garage or retail parking lot in a completely different part 
of the grid at some point later in the day. Additionally, during peak 
demand periods or emergencies that same vehicle could be used to return 
power to the grid. This kind of variability, introduced at the fringes 
of the grid (the utility to consumer connection) may require new 
standards and regulations to be seamlessly integrated with existing 
grid operations.
    NIST's greatest role in this respect is as a resource for 
regulators. Given their mission and history in metrology, NIST is 
uniquely situated and qualified to define metrics that work for 
regulators and utilities and enable them to tie incentives for Smart 
Grid to well-defined parameters. If our objective is to promote the 
adoption of Smart Grid, we first have to admit that in a regulatory 
setting it would be virtually impossible to define the concept of 
``smartness;'' other metrics clearly need to be defined. NEMA also 
encourages NIST to continue to refine its guidance in the Interagency 
Report on Cybersecurity. Further, NIST can work with utilities to 
create implementable cybersecurity plans. And NIST can work with 
regulators to define functional cybersecurity regulation.
Summary
    Standards development for the Smart Grid is a unique and massive 
effort. NEMA supports the continued collaboration between the Federal 
government and industry to address the many standards challenges that 
lie ahead, including the evolution from straightforward physical 
standards to those requiring communications protocols and information 
technology.
    NEMA believes NIST has responded appropriately and impressively to 
its responsibilities under the Energy Independence and Security Act of 
2007. It has become the key facilitator for the development of Smart 
Grid standards.
    NIST and the SGIP should continue to serve as a credible source of 
model standards for industry as well as the federal and state 
governments.
    While consensus can be defined in numerous ways, NEMA believes 
regulatory agencies must exercise extreme caution in making the leap 
from a consensus standard to mandatory application of such standard.
    The efforts to establish Smart Grid standards, both domestically 
and internationally, will create certainty, interoperability, 
upgradeability, and as a result will drive adoption of Smart Grid 
technologies, generating economic growth and creating jobs.
    NEMA looks forward to working with NIST and the SGIP to develop a 
roadmap that will guide our standards work over the next three years.

    Chairman Quayle. Thank you, Mr. Caskey.
    The Chair now recognizes our final witness, Mr. Drummond, 
for five minutes.

  STATEMENT OF MR. RIK DRUMMOND, CHIEF EXECUTIVE OFFICER AND 
              CHIEF SCIENTIST, THE DRUMMOND GROUP

    Mr. Drummond. Chairman Quayle, Congressman Sarbanes and 
other Committee Members, I am Rik Drummond, CEO of Drummond 
Group Inc., a GridWise Architecture Council member, a board 
member of SGIP and the chair of SGIP Testing and certification 
Committee. Drummond Group has been heavily involved in the 
smart grid since 2004 when I became the initial chair of the 
DOE-sponsored Smart Grid Architecture Council in 2005-2006. 
Smart Grid Architecture Council was the initial group that 
started socializing the need for general interoperability among 
software and hardware to solve the known and projected problems 
of the United States power grid. The interoperability 
requirement is in EISA 2007 legislation and is the basis for 
the Smart Grid Interoperability Panel's objectives.
    The challenges the SGIP Testing and Certification Committee 
faces in working together to develop an interoperability 
framework for testing and certification are best elucidated by 
discussing the key components of the SGIP interoperability 
testing framework, which we call the interoperability Process 
Reference Manual, or IPRM. The first version of this was 
released in January 2011, about nine months after the start of 
SGIP, and I'll go through the four sections very briefly here.
    The first section is, how do we enhance testing lab 
processes for quality and repeatability. We chose to base these 
on the ISO international standards 17025, which talks about 
quality for test labs. Our challenge here is that I expect that 
this will probably increase testing costs by about 25 percent, 
and we are working that within the committee.
    The second section defines requirements for certifying test 
lab results by trusted third parties. This section is again 
based on the ISO 65 guide. The challenge is that many product 
vendors and associations question the need for additional costs 
associated with paying for third parties to certify test lab 
results. These first two sections, by the way, parallel the 
efforts going on in Health and Human Services' testing and 
certification endeavor for implementing EHR meaningful use 
across Medicaid and Medicare.
    Section three provides guidance for testing for 
cybersecurity mechanisms within a software product. Security 
testing of cybersecurity mechanisms and interoperability 
testing are normally at odds philosophically. Security attempts 
to restrict available functionality depending on the 
authorization while interoperability attempts to remove the 
restrictions so information flows between entities. Testing for 
both of these at the same time, where we can, will save cost 
and money.
    The last section provides guidance on how to achieve 
interoperability in testing. Currently, many test labs do not 
verify interoperability. They only verify conformance of a 
product to a standard and assume that conformance includes 
interoperability. Frequently, conformance does not ensure 
interoperability. Interoperability must be verified during 
testing, and this has been a challenging point to get across. 
As you can see, our challenges are many but they are being 
solved through negotiation and collaboration.
    A question you asked me, Chairman Quayle, in the invitation 
letter was, what can the Federal Government do to help 
facilitate interoperability in cybersecurity and the smart 
grid, and after much thought, I am going to suggest one thing 
here. The Federal Government could ensure that wide 
availability of conformant interoperable products are in the 
marketplace by requiring all products purchased by the Federal 
Government have been verified through testing and certification 
procedures much like that in the interoperability process 
reference manual. Since the Federal Government is about 25 
percent of GDP, this would have a sizable impact on the smart 
grid and other industries.
    In summary, the Smart Grid Interoperability Panel and 
Testing and Certification Committee is making significant 
progress in achieving the wide availability of high-quality 
conformant and interoperable products in the smart grid 
marketplace as specified in EISA 2007. The frameworks, the 
testing framework, the IPRM, and full implementation within the 
industry will take years to accomplish. That is as it should. 
As the power grid industry segment moves to better 
understanding of interoperability solutions, the 
interoperability testing framework and its purpose and 
benefits. Thank you.
    [The prepared statement of Mr. Drummond follows:]

 Prepared Statement of Rik Drummond, Chief Executive Officer and Chief 
                  Scientist, The Drummond Group, Inc.
Introduction
    Chairman Quayle and Members of the Subcommittee, I am Rik Drummond, 
CEO of Drummond Group Inc, a testing and certification server provider. 
I am a board member of the NIST sponsored Smart Grid Interoperability 
Panel and the Chairperson of the Smart Grid Interoperability Panel's 
Testing and Certification Committee.
    Thank you for the invitation and opportunity to appear before you 
today to discuss Drummond Group's involvement in Smart Grid testing and 
certification as well as the Smart Grid Interoperability Panel (SGIP) 
Testing and Certification Committee's (SGTCC) endeavors to solve 
Interoperability issues in Smart Grid products and services. I will 
focus on our accomplishments, our direction, and some of the key items 
needed to ensure protection of consumer privacy and the maintenance of 
cost/benefit for current services, while driving innovation within 
Smart Grid development.
1. Drummond Group Activities, Testing Challenges
A _ Describe Drummond Group activities related to testing and 
certification of smart grid technologies and modernization of the 
electric grid.

    Drummond Group has been heavily involved in the Smart Grid since 
2004, when I became the initial Chair of the DoE sponsored Smart Grid 
Architectural Council in 2005-2006. Smart Grid Architectural Council 
was the initial group to start socializing the need for general 
Interoperability among software and hardware to solve the known and 
projected problems on the USA Power Grid as we moved to the Smart Grid.
    In 2009 Drummond Group was selected as the Interoperability 
Specialist subcontractor to the Center for Commercialization of 
Electric Technology (CCET) on ``Discovery Across Texas: Technology 
Solutions for Wind Integration in ERCOT DE-OE0000194.''
    Drummond Group continues to work with CCET on this endeavor. We are 
currently focused on the third party privacy issue for shared 
information for the purpose of enhancing the consumer experience in the 
Smart Grid. The focus is on third party providers that help the 
consumer manage their electrical power consumptions more effectively 
and efficiently while ensuring existing privacy rules and regulations 
are implemented.
    I am on my second term as chairman of the NIST sponsored Smart Grid 
Interoperability Panel Testing and Certification Committee (SGTCC). I 
am also on my second term as a board member of the Smart Grid 
Interoperability Panel. Our focus this year in SGTCC is: 1) Speeding 
the off-the-shelf productization of standards based interoperable 
products in the market place, 2) increasing the consistency of 
interoperability testing and certification services across all products 
implementing the 100+ technical standards used to integrate the Smart 
Grid systems, and 3) decreasing the cost to service providers and 
consumers in implementing and integrating products within their 
portions of the Smart Grid network.
    SGTCC released the initial voluntary interoperability policies and 
procedures in December 2010, nine months after the kick-off working 
meeting of the SGIP in March 2010. These voluntary, predominantly 
ISO9001 based policies and procedures are enshrined in the SGIP's 
``Interoperability Process Reference Manual'' version 1 (IPRM). We are 
currently working on the release of version 2. This second version will 
increase clarity, fill in gaps identified by the six initial users of 
the Manual and streamline the implementation process by the testing and 
certification community. Version 2's anticipated released date is 
January 2012 for general use by the Smart Grid culture. While the focus 
of the IPRM is to enhance interoperability in products based on a 
single standard, there are interoperability issues the IPRM will not 
solve. It will not solve those issues of integrating multiple products, 
based on multiple standards in support of a service provider's workflow 
or technical or business process. An SGIP workgroup exists to solve 
these issues which are currently called internally, for lack of a 
better name, End-2-End Testing Workgroup.
    End-2-End Testing normally takes place in the pre-production roll-
out of Smart Grid infrastructure by the Transmission and Distribution 
Service Providers (TDSP). Many suppliers of electricity, Transmission 
and Distribution Service Providers, generally, repeat in a large 
degree, the end-2-end testing and integration verification that was 
previously accomplished at other service providers. Of course, there 
are differences in the configuration of products between service 
providers, but SGTCC believes that commonalities far out weigh the 
differences. The focus of our End-2-End Testing Work Group is to 
facilitate the sharing of these test data results and techniques to 
speed the implementation of new technologies and services across the 
Smart Grid. The thinking is: since another Service Provider has already 
accomplished it, why not leverage their findings to facilitate 
integration in one's own network area?

B _ What are the greatest technical challenges of testing and 
certifying Smart Grid technologies in the market with few standards in 
place to support interoperability?

Article by Drummond: ``How the GridWise Interoperability Framework Can 
                         Save Time and Money''
Coming to Grips with a Definition
    Smart Grid interoperability means different things to different 
people. Some view it as a low-level technical topic. Others view it as 
a standard with an obscure name. Both are components of 
interoperability, but there are many other aspects.
    The GridWise Interoperability Framework aids the discussion of 
those many aspects by breaking the problem into bite-sized pieces. This 
article is the first in a series that will explore each aspect in more 
detail. The goal is to clarify interoperability and to determine what 
needs to be agreed upon so that systems can play together with the 
least amount of effort and cost.
    Wikipedia's definition of interoperability is: ``the ability of 
diverse systems and organizations to work together (inter-operate).'' 
It further states that ``the IEEE defines interoperability as: the 
ability of two or more systems or components to exchange information 
and to use the information that has been exchanged.'' It is interesting 
to note that Wikipedia says the term can be used technically or broadly 
in a way that takes into account ``social, political, and 
organizational factors that impact system to system performance.''
    Anyone that has observed interoperability efforts in other 
industries can confirm that social, political and organizational 
factors have at least as much impact as purely technical issues! Past 
decades have witnessed interoperability conflicts over things such as 
Betamax vs. VHS, HD vs. Blu-Ray, systems-oriented architecture (SOA) 
and (just now beginning) iPhone vs. the Google mobile phone standard. 
For every battle that shows up in the headlines, there are dozens of 
others known only to insiders, but with similar consequences: delay, 
confusion, higher costs and higher risks for end users.
The Expanded GridWise Definition
    The GridWise Interoperability Framework exists to minimize that 
kind of pain and delay. It adds to previous definitions of 
interoperability with the following characteristics:

      An exchange of meaningful, actionable information between 
two or more systems across organizational boundaries.

      A shared understanding of the exchanged information.

      An agreed expectation for the response to the information 
exchange.

      A requisite quality of service: reliability, fidelity, 
and security.

    There are many paths to interoperability. They range from 
expensive, custom integration projects to plug-and-play architectures. 
Scott Neumann describes this variability as the ``distance to 
integrate.'' (See drawing.)



    As an illustration, the flash drive in your pocket is a plug-and-
play device. It conforms to the USB specification as a specific type of 
USB device, which is recognized by the operating system to have 
specific properties and behavior. If the flash drive does not conform 
to these specifications (or if the correct device driver is not 
installed in the operating system) then plug-and-play becomes plug-and-
pray or plug-and-slay (as in urge to kill).
The Four Levels of Interoperability
    Plug-and-play (at the bottom of the drawing) is usually reserved 
for interfaces in wide-spread, commodity use. Product 
interchangeability is supported by rigorous specifications and 
strenuous testing. The high cost of achieving this level of integration 
requires a large market to apportion the costs.
    The next level (second from bottom) involves systems that use a 
common information model but with differing technical transports, 
transaction sequences and data encoding. Integrating such systems 
requires time and effort--but at least they are talking the same 
language. System design, software development and testing at the 
information level are still needed, as they are for the underlying 
technical transports and data encoding. As the GridWise 
Interoperability Framework reminds us, interoperability means all 
layers must work together from technical to informational to 
organizational.
    At the next level up, some interfaces use different information 
models and the data must be mapped or translated before it can be used. 
Think about currency and exchange rate. If you know the exchange rate 
between the US and France then it's easy to map dollars to francs.
    If such translations are not available, then you are at the top-
most level and it's time to pull out the checkbook. The old adage 
applies: ``Anything is possible with software, given enough time and 
money.'' There is a thriving systems integration market for providing 
custom (and costly) interoperability solutions. Money can either be 
spent each time an end-user attempts to integrate or on a one-time 
interoperability/conformance test at the product level. It typically 
costs much less to do a one-time interoperability/ conformance test at 
the product level.
    Now that we understand the definition of interoperability and the 
distance to integrate, we can start implementing specifics for the 
Smart Grid.

2. SGIP -- Represents Testing and Certification Vendors
A _ Describe the process of testing for conformance and Interop.

  Article by Drummond: ``Six Steps to Achieve Interoperable Networks, 
        Systems, and Devices in the Smart Grid on any Standard''
Conformance is not Interoperability
    The program must clearly convey the different meanings between 
conformance of an implementation to a standard, and interoperability 
between two or more implementations of the standard. Confusion 
regarding this aspect is currently a major hindrance to the success of 
conformance and interoperability programs. This misunderstanding of the 
differences between conformance and interoperability in the 
marketplace, testing, and at times, the program authors themselves, 
results in confusion as to what is meant by successfully passing the 
testing program. Conformance means that an implementation adheres to 
the dictates of the standard.

(I will not discuss profiling of standards at this time)

    While one might think that all programs that completely adhere to a 
standard (conformant) would be interoperable, in practice they often 
are not. Interoperability means that implementations adhere to the 
dictates of the standard and intercommunicate appropriately with other 
implementations that adhere to that same standard. (I will forgo the 
discussion of gateway standards at this time.) Interoperability adds 
one more requirement over and above conformance.
    The problem is that many testing programs test only for conformance 
and then unceremoniously presume and declare it interoperable. 
Stakeholders in the marketplace believe they are receiving 
interoperable implementations because they have been told so, but they 
are getting only conformant products. Conformant implementations may 
not be interoperable among themselves. This is especially the case in 
more complex software and hardware systems. This leads to the first 
aspect discussed above in which ``certified'' implementations now 
require debugging when they are installed by the end-user, thus 
damaging the credibility of the test program. And they slow ongoing 
Smart Grid implementation. Once the compromising of the testing 
program's credibility starts, it can take a few of years to correct the 
perception by the marketplace of end-users. This is why the test 
program must be thought of as a stakeholder in the process early on.

B _ What is the importance of testing and certification in the 
implementation of standards of Smart Grid devices, systems, and 
processes?

Interoperability Verified not presumed
    The program must verify, not just assume, interoperability among 
the various product implementations of a standard. There are many 
different types of standards. Some are device oriented. Some are 
business-to-business. Some are written from the ground-up, detailing 
all the software and firmware with dependencies on other standards to 
achieve their purpose. Other standards are focused on communication 
protocols, while others are focused on the semantic meaning of the 
data. Only testing the conformance of any of these standards may 
achieve different levels of 'near' or 'actual' interoperability. 
Depending on a number of factors, including the standard, the testing 
regime, the software/firmware under test, and others, conformance 
testing may produce interoperable implementations. Such a result is 
good in that no additional testing steps are required to achieve 
interoperability. However, there remains a problem. It is rarely known 
that a conformance test has produced interoperable product 
implementations unless verification is performed with an additional 
test step to prove that the implementations are indeed interoperable. 
There are only two points in the timeline as a standard evolves from 
formation to product implementation where implementations can be 
verified as actually interoperable:

    1.  The product implementations may verify interoperability in 
concert with conformance testing; or

    2.  When the end-user is attempting to deploy the product 
implementation in the field.

    The first case represents the testing program and the stamp of 
approval of `certified' by the program and demonstrates that products 
are both conformant and interoperable. In the second case, the 
conformant and presumed interoperable implementations are released to 
the marketplace where the end-user is expected to validate 
interoperability and correct any shortcomings in the testing program. 
It is well known from studies over the past 20 years that errors found 
in software products after field deployment may cost as much as 40 
times the amount to correct than if those errors are found before the 
implementation is released to the marketplace. This additional cost 
does not include the original cost, frustrations and loss of good will 
by the end-users.
    Not verifying that conformant implementations are interoperable 
when they are given a 'certified' grade in a conformance and 
interoperability testing program often cause the program to become 
irrelevant as we have seen in other industries. When this happens, 
interoperability often stalls for that standard in the industry--
sometimes for years.

Summary
    Success of a conformance and interoperability program is about 
methodologies, market positioning and securing success for all the 
stakeholders. The program must be focused on supporting the 
implementations in the field for not only the product lifecycle, but 
also the lifecycle of the standard. The program must clearly identify 
what it is offering to the all the stakeholders as it identifies 
certified implementations. Are the products verified conformant or are 
the products verified conformant and interoperable? The program 
designers must anticipate its growth and demise as conformance and 
interoperability become institutionalized in the implementations over 
their lifetimes. All of these issues should be anticipated for a 
successful testing program irrespective of the standard. Not doing so 
may greatly reduce the introduction of conformant and interoperable 
implementations of the standard into the industry--stalling 
interoperability.

C _ What challenges has the SGIP faced in working together to develop a 
framework to ensure interoperability of Smart Grid products?

    The first versions of the IPRM went into place in January 2011 for 
SGIP members. The framework covered 4 broad area:

    1.  Enhancing Testing Lab process quality and repeatability. These 
processes are based on ISO 9001 requirements and are elucidated in the 
ISO 17025:2005 guide. Currently only a portion of the test labs used in 
the Smart Grid use these guides as the basis for their internal testing 
processes. Many others do not. Quality of the test results from labs is 
currently spotty. Interoperability is a 100% endeavor. Test Lab 
producing quality a 99% causes problems. Getting everyone in the Smart 
Grid to understand the need for consistent quality output for tested 
products has been problematic. The main inhibitor to solving this 
problem is the added cost for the implementation of ISO 17025 for 
product vendors to test products. I personally estimate a cost increase 
of 25 to 40% over pre ISO 17025 testing.

    2.  Requirements for Certifying Test Lab results by a trusted third 
party. These certification processes are currently being modified to 
fit ISO 9001. They will be elucidated in the forth coming ISO 17065 
guide. Currently, the working guide is ISO 65. Currently, many product 
vendors question the need for the additional cost associated with 
paying for a third party to certify test lab results produce 
interoperable products.

    3.  Guidance on testing of cyber security mechanisms within a 
software product. Security testing of cyber security mechanisms and 
interoperability testing are normally at odds philosophically. Security 
attempts to restrict available functionality depending on authorization 
while interoperability attempts to remove restrictions so that 
information flows between entities appropriately. Conducting cyber 
security testing distinct from interoperability testing does and will 
cause problems. Tightening cyber security may make the product non-
interoperable. And the converse, ensuring interoperability may 
inadvertently break cyber security mechanism. Conducting a single test 
of products, covering both cyber security mechanisms and 
interoperability requirement will allow these clashes to be resolved 
during the test. Thus a product or products will be released from the 
test lab that meets both the cyber security and the interoperability 
requirements at an anticipated lower cost.

    4.  Guidance on how to achieve interoperability in testing. 
Currently may test labs do not test for interoperability. They only 
test for conformance of a product to a standard and assume that 
conformance includes interoperability. A conformant product may not be 
completely interoperable with other conformant products. The 
introduction of conformant products in the market place which are only 
assumed to be interoperable moves the burden of getting products to 
intercommunicate to the persons installing the products in the field. 
They may have to fix non-interoperability problems that should have 
been fixed before the products were released to the market place. This 
greatly slows the introduction of new capabilities and products 
installed in the Smart Grid. Many test labs and service providers do 
not understand that conformance does not ensure interoperability within 
a set of products.

3. Federal Government Role

    What do you believe are the most important actions for the Federal 
Government to take to ensure the protection of consumer interest, 
including cost and privacy while driving innovation within the smart 
grid development?

    Since the United States is a federation of states, with attributed 
states rights, unlike just about any other country, what the Federal 
Government may do versus what would be helpful to do are not always the 
same. States differ in their regulations as to privacy of consumer 
data, security, allowable charges to the consumer and et cetera.

    1.  Ensure Cyber Security on the smart grid is a top down approach. 
Piece meal implementation across the Smart Grid will make the 
verification of security problematic for the USA power Grid.

    2.  Ensure the population in the USA understands the cost/benefits 
of the Smart Grid implementation. Increased Consumer cost for power is 
going to be problematic. Cost is going up significantly because of new 
EPA regulations on coal-fired plants and less significantly because of 
the implementations of smart grid technologies. I predict the 
consumers, especially those within one of the largest voting blocks, 
baby boomers on a fixed income, will react negatively to even minor 
cost increases caused by various regulations and technical enhancements 
to the power grid.

    3.  Ensure the implementation of the logic or verbatim use by the 
Federal Government of the Interoperability Process Reference Manual 
(IPRM v2) by including it within new versions of the FIPS. This would 
mean approximately 25% of the GDP would be required to increase 
software and hardware product quality, consistency, reproducibility and 
interoperability within the IT markets, thus partially, yet 
significantly, funding the efforts of Test Labs, Certification Bodies 
and product vendors to implement quality and consistency for 
Interoperability across all sectors of the economy including Smart 
Grid. Health and Human Services is implementing the Test Lab and 
Certification body quality requirements as part of the EHR Meaningful 
Use requirements for Medicaid and Medicare providers. While these 
currently do not focus on Interoperability as such they are 
implementing the quality framework to support Interoperable products 
within the market place. I would use the FIPS to prime the pump not new 
regulations on the private sector. The uncertain regulatory environment 
is slowing growth of the private sector.

    Chairman Quayle. Thank you, Mr. Drummond, and I would like 
to thank all the witnesses for their testimony. I just want to 
remind Members that the Committee rules limit questioning to 
five minutes, and the Chair will at this point open the round 
of questions. I recognize myself for five minutes.
    Mr. Caskey, the Energy Independence and Security Act of 
2007 required that FERC initiate a formal rulemaking process to 
adopt interoperability standards when it was satisfied that a 
consensus was actually met. Do you believe that a formal 
rulemaking process is necessary or do you think that a 
consensus could be achieved without that formal rulemaking 
process?
    Mr. Caskey. I think that they are two different things. I 
think reaching a consensus on the standards that need to be 
applied for smart grid is one thing, and we are working towards 
that and I think we are meeting those requirements within the 
SGIP and the Governing Board of the SGIP. In terms of a 
rulemaking process, I personally do not think that it is 
necessary at this time and really doesn't benefit the 
development and the innovation going on in smart grid at this 
point. At some point in the future it may be more appropriate.
    Chairman Quayle. So do you think that within the rulemaking 
process that those standards that could have been achieved, 
that there could be potentially harmful for innovation going 
forward? Is that----
    Mr. Caskey. I am sorry. Say that one more time.
    Chairman Quayle. You said that possibly the rulemaking 
process could have a detrimental effect on innovation going 
forward. Is that what you're saying?
    Mr. Caskey. Yes. I don't think we are to the point yet of 
locking in any particular standards and making those standards 
mandatory. We are still growing those standards and modifying 
those standards, and at some point in the future having 
mandatory standards or rulemaking on those standards makes 
sense, but not right now from my perspective.
    Chairman Quayle. Okay. Thank you.
    Chairman Nelson, in your testimony you described all the 
progress that Texas has made, and you mentioned you had put 
forward about 4 million smart meters onto the marketplace. 
Texas is obviously a unique state in that it produces most of 
its own energy. Do you think that putting out these types of 
smart meters prior to the standards being set is putting the 
cart before the horse, or do you think it is a push to spur 
that process going forward?
    Chairman Nelson. Well, I do recognize that it is a delicate 
balance. I think that if a state were to implement a smart grid 
program like Texas did and it were to do it in a way where you 
have open architecture and you made sure that whatever--however 
you implemented it would be in conformance with things moving 
forward, I think that you could do it, but it is difficult. It 
is difficult to do it without standards.
    Chairman Quayle. Dr. Arnold, in January of 2011, the GAO 
noted that the federal--that FERC doesn't have the authority to 
enforce standards and recognized that a regulatory divide 
exists between federal, state and local entities on various 
aspects of smart grid interoperability and cybersecurity. The 
GAO further stated that such standards remain voluntary unless 
regulators use other authorities to enforce compliance. What 
really distinguishes the process of developing voluntary 
consensus standards from developing standards likely to be 
mandated and enforceable?
    Dr. Arnold. Well, I think it is instructive to look at some 
other examples in other infrastructure such as the 
telecommunications network, and there, as I noted, the vast 
majority of standards are voluntary consensus standards which 
are used by industry because there is a benefit to industry in 
doing that. One example where it made sense to mandate a 
functionality or a standard was number portability, where to 
promote competition in the local exchange market, the FCC 
mandated the ability for consumers to take their telephone 
numbers when they switched carriers. There was no incentive for 
the service providers to implement that capability because it 
was costly, and why would they want to promote competition. So 
there was a case where in order to have that policy objective 
implemented, it made sense to mandate it. I think at this 
point, in my opinion, it is too early to tell whether there are 
such analogs in the smart grid but if there are, then it may 
make sense in selective cases like that.
    Chairman Quayle. Thank you very much.
    The Chair now recognizes Mr. Sarbanes for five minutes.
    Mr. Sarbanes. Thank you, Mr. Chairman. Thank you all for 
your testimony.
    I am trying to get my head around the notion that there are 
parts of the grid that are already smart. I mean, we talk about 
a smart grid but Chairman Nelson, you sort of alluded to in 
your testimony the fact that there are parts of our national 
grid that you would view as being smart, and I don't know if 
anybody is in a position to quantify that somehow but maybe you 
could try and tell me. What percentage, knowing what you know 
and knowing what kind of aspirational standards you are working 
on, what percentage of the grid now is smart, or is that not a 
helpful way to at least get a baseline perspective on this? 
Anybody?
    Chairman Nelson. I guess I would say it is very hard to 
quantify. In Texas, the way we started is, we started out with 
a rollout of the advance meters to the customers because we 
felt to have--if you are going to be spending money, you want 
to have customer acceptance and you want them to see the 
benefits. So we have that, and we are slowly making the rest of 
the grid smart and also that you can have things like self-
healing distribution lines and transmission lines. So I would 
say at this point it is hard to quantify just because I don't 
know if you give the meters more of a percentage than the 
lines. It would just be difficult to quantify it.
    Mr. Sarbanes. Dr. Arnold, do you have a perspective on 
that?
    Dr. Arnold. Well, there are so many different technologies 
that apply in an end-to-end system that I think the fact that 
we have 50 states that each can in their unique environments 
apply these technologies allows us to benefit from those 
experiences and roll them out nationally based on best 
practices. Certainly, the automation that is now being deployed 
in the transmission network with phasor measurement units, 
which will provide wide area visibility, will have tremendous 
benefits in reliability of the bulk power system, and that is 
well underway with Recovery Act funding. The application of 
smart meters in addition to the benefit in terms of energy 
savings that consumers can have through access to information 
also provides that visibility to the utilities for restoration 
after power outages. So I think it would be a mistake to try to 
deploy everything at once because these are new technologies 
that need to be proven in and the approach that we are taking 
of having nationally the ability to benefit from the different 
state deployments as well as the deployments in the bulk power 
system is a very good way forward.
    Mr. Sarbanes. One of the themes that we have heard already 
in your testimony and the questions that Chairman Quayle just 
asked is this notion of kind of a mandatory versus voluntary 
approach over time, and it sounds, Mr. Drummond, like you 
believe that the biggest nut to crack, the toughest problem is 
the interoperability issue, and we see that across the board. I 
mean the 9/11 Commission just came back, the chairmen, to talk 
about the remaining challenges of interoperability there, even 
though that was the number 1 priority years ago in the wake of 
that disaster to try to cure those problems. And maybe humans 
are innately inoperable, non-interoperable, if that is a word. 
But that would seem like an area where mandating some things 
would be called for, and I just would like to get your reaction 
to that.
    Mr. Drummond. Interoperability has a lot of meanings. The 
way we focused on it in SGIP testing and certification is, is 
that we see it as a need to be market-driven. Businesses who 
buy products need to understand the cost-benefit tradeoffs from 
buying interoperably verified certified products versus buying 
those which have not been that way. An example, I have been 
doing this for a long time and I remember back eight or nine 
years ago in a different standard, we were doing 
interoperability testing and people who would those which had 
been certified would be able to install it within two or three 
days and make it work. Those who didn't might spend 6 months 
trying to get the product to work interoperably with someone 
else. So the key here is, is we need to put products in the 
marketplace that people can be assured are interoperable 
easily--that is why I keep saying the word ``certified,'' by 
certified third parties--so the marketplace can see the cost-
benefit and start putting those in place. We can make anything 
computer-wise interoperable. It is when you have hundreds of 
things happening over and over again, you do not want to keep 
repeating the same development cycle of integration. You want 
to make it much easier because it has done before because it 
has already been testified and certified.
    I really think the market can drive this well, and the 
suggestion I had before was not so much going into regulations 
or anything else, it was thinking about if the Federal 
Government has so much buying clout out there and if you all 
saw it was beneficial to start buying certified interoperable 
products using testing, as we are recommending, that would push 
multiple industries, not just this one, into a more 
interoperable, more cost-efficient model than we have right now 
as we put things in place.
    The last point is, if I buy interoperable products, I 
reduce my perceived risk as a manager and executive in a 
corporation if I know they are interoperable and I will move 
faster to implement new things in the network if that risk is 
reduced. When I still do not know my risk because I don't have 
certified products out there, I take much longer to move to the 
next phase of the network, the more intelligent network, 
because the risk is too high for me to move very quickly 
without doing a lot of due diligence. Does that answer your 
question?
    Mr. Sarbanes. Thank you very much.
    Chairman Quayle. Thank you, Mr. Sarbanes.
    The Chair now recognizes the gentlelady from Illinois, Mrs. 
Biggert, for five minutes.
    Mrs. Biggert. Thank you, Mr. Chairman, and thank you for 
holding this hearing today, and I commend the witnesses for all 
the collaborative work that you are doing on this issue.
    My question is related to the type of technology that the 
standards development process will eventually allow, and do you 
see room for variable types of smart grid technologies? The 
reason for this is that some of my constituents have raised 
privacy or health concerns with the smart grid devices, 
especially the wireless technologies, and this is from a 
community that has been working on this since 2005 and to 
develop the smart grid and the smart meters, and so this has 
come up from some of the constituents, and what happened here 
is actually that they did a survey and everyone agreed to have 
mandatory technology. So do you see that there is a mix of 
technologies being deployed that can address their concerns and 
still meet the goals of an interoperable smart grid? Mainly it 
is the two issues. One is the health concerns and also privacy 
when they have the meters in their homes. I would like all of 
you to address this.
    Dr. Arnold. Well, there are two aspects to that. In terms 
of privacy, this is a very important issue in the smart grid, 
and we are paying very strong attention to it. In fact, in our 
700 page cybersecurity guidelines, we have a whole volume that 
is devoted to privacy issues and that volume includes an 
analysis of data privacy issues in the smart grid, a summary of 
applicable laws and regulations at the federal and state level, 
and provides guidance on how to apply business practices and 
technology to ensure data privacy. There are also some specific 
business practice standards consistent with those guidelines 
that are now under development by the North American Energy 
Standards Board, so this is an area that we are actively 
addressing.
    On the health aspects of wireless communications, I would 
say that is a little bit outside of our jurisdiction because 
the FCC sets requirements on emission levels for wireless 
devices. To the best of my knowledge, the devices that are 
being used in smart grid applications, they have to comply with 
the FCC requirements, so----
    Mrs. Biggert. Well, this community is having 15 gigawatts 
of energy, and it is a lot stronger than what they are doing 
right now as far as they put this into effect. They are worried 
about that, so maybe Chairman Nelson, could you address that 
since you are also putting these in?
    Chairman Nelson. Well, let me just start out by talking 
about the privacy aspect. In Texas, our legislature made that 
determination by saying customers own their own data, and so in 
Texas now, the commission is in the process of fleshing that 
out because one of the things that we found most critical as 
you go forward in installing smart meters is that customers 
understand what is happening, and so we want to make sure that 
the process where third parties come in and contact them is a 
fair process.
    In terms of the safety issue, I think there is a lot of 
evidence that the systems are safe. In terms of whether you can 
use--whether one system should be mandated, that is not the way 
that Texas went. We went with an option of letting the 
companies choose the technology, the transmission and 
distribution utilities.
    Mrs. Biggert. Mr. Caskey?
    Mr. Caskey. Yes, a couple different points. One is dealing 
with technology, I think that the connection with the consumer 
is often at the meter, so often consumers are first concerned 
about that. I have read various studies by the Electric Power 
Research Institute and other organizations, and at least so far 
they have not found any evidence between any health concerns 
and the radio-type receivers and transmitters used in the smart 
grid and the smart meter deployment. Certainly, if there are 
issues associated with that or there are perceived issues 
associated with that, you can potentially take that out but 
then you lose some of the features and the benefits of those 
meters so the may not be very cost-effective once you take away 
that two-way communication aspect of those smart meters. Also 
in terms of technologies, there is a wide variety of 
technologies including at the generation of power that Dr. 
Arnold had referenced and the transmission and distribution 
grid. There are lots of different technologies that make up the 
smart grid. There are literally hundreds of various 
technologies that will be applied to get the whole smart grid 
to work effectively together.
    Mrs. Biggert. Thank you.
    Mr. Drummond?
    Mr. Drummond. I am of the opinion generally that we in the 
architecture realm, which is what we are talking about now, the 
smart grid is an architecture or framework, need to put in 
place the philosophical principles behind it and what should 
work together, what shouldn't--that would be for privacy and 
technology--and let the lower levels, those who are dealing 
with the implementation and those sort of things, start making 
decisions in more detail, and if you do it in that manner, that 
means you can change over time easily as new standards happen. 
You can use slightly different standards for exactly the same 
reason in different areas because they would work best in those 
areas. So I think in answer to your initial question, there is 
a lot of variety out there you can go do. There is always this 
tradeoff about how much you mandate specific standard to go 
this which will actually reduce risk a whole lot, from my risk 
thing earlier, but it also squashes innovation. So you have 
this--you are kind of sitting on the head of a pin here trying 
to avoid both of those sort of things at once, and I think we 
are doing that well in SGIP right now, by the way.
    Mrs. Biggert. Thank you very much.
    Mr. Chairman, I yield back.
    Chairman Quayle. Thank you, Mrs. Biggert.
    The Chair now recognizes the gentleman from New Mexico, Mr. 
Lujan, for five minutes.
    Mr. Lujan. Thank you very much, Mr. Chairman.
    Dr. Arnold, I want to talk a little bit about distributed 
generation and what that means to a nationwide interoperable 
grid. Distributed generation can reduce pollution. It can 
increase energy efficiency, promote the use of renewable 
generation and power homeowners and business owners. It has 
been suggested that when we have had blackouts or brownouts in 
some of the most urban metro areas of the country, that if 
there would have been a more elaborate distributed generation 
system, that we could have alleviated some of that load.
    One of the principal barriers to the deployment of 
distributed generation is the process of connecting to the 
utility grid, the interconnection or the interoperability, if 
you will. We need common standards for interconnecting DG 
devices into the grid system. This year I have introduced a 
bill promoting net metering and establishing interconnection 
standards for net metering.
    Like Chairman Nelson, I once chaired the New Mexico Public 
Regulation Commission, which is the equivalent of the public 
utility commissions around the country, and it was an honor to 
serve there. Everything that I learned there was that you 
needed to have those interconnection standards in order to push 
distributed generation and make it a reality so that one thing 
could talk to another, making it smart, I guess. Can you 
discuss efforts to develop common standards that support 
distributed generation that help empower consumers?
    Dr. Arnold. Certainly. Well, first I can tell you that 
supporting distributed generation in the smart grid is one of 
the key requirements from the beginning in our effort, and we 
have a number of standards in our framework that provide 
technical capability for this including the metering standards, 
which have to support two-way measurement, and the electrical 
information connection standards. There is a standard known as 
IEEE 1547 that has been enhanced to support this, and I would 
also note that we have been successful in getting the IEC to 
adopt that as an international standard so that we are leading 
the global approach on this.
    There is a lot more that needs to be done, though, because 
as the growth of these resources increases, the ability for 
utilities to know how much distributed generation is feeding 
into the grid and be able to forecast that becomes critical to 
maintain the reliability of the grid, and so to address the 
information management standards to support this, the SGIP is 
in the process of forming a new working group specifically 
looking at this whole suite of standards for distributed 
generation and storage, and I believe the official approval of 
this working group is going to take place this afternoon at the 
Governing Board meeting, so this has been a major area of focus 
and will continue to be.
    Mr. Lujan. That is encouraging, Dr. Arnold, that those 
conversations are taking place, again, working with an industry 
group, with IEEE, associated with seeing how you can establish 
some of these interconnection standards so that way there is 
more certainty out there. Many states have adopted net metering 
standards. It is one that I hope we can continue to see more 
states do and maybe some formal recognition by the government 
or encouraging them. I think that that is the way to go.
    You know, truly as talk about minimum standards, I don't 
think that what is being suggested is pushing one technology or 
one software platform above another. When we talk about cloud 
computing now, something that just a few years ago no one 
imagined that would be part of a smart grid conversation, 
hardware and software. I think what is key is that we find a 
way where you can plug something in to something else and that 
they can talk to one another and that those software apparatus, 
whether we talk about Mac or we talk about PCs, Microsoft, 
Apple, it is amazing how software that is written today, how it 
doesn't matter what system you are on, you can work with one 
another. I think that is all that we are suggesting. And if 
there is a way to encourage what I am hearing today through the 
testimony that we can find a way to have interconnection 
standards, we can have a way to have interoperable standards 
associated with making these things talk to one another but 
then the gamut runs as it may and the market is going to 
develop the most efficient and effective tools to allow this to 
happen, to empower consumers, to make sure utilities know the 
certainty of what is happening with loads, to prevent power 
outages, and hopefully like in New Mexico we prevent natural 
gas outages as we saw in Texas with rolling blackouts recently, 
and it gives those tools more so that the commissions are 
working closely with the utility companies, the utility 
companies are working closely with the businesses, and we are 
saving money in the end. This is going to put more money in 
people's pockets. It is going to put more money in small 
businesses' pockets and it is going to save money associated 
with the impact that dramatically happens in a community when 
we have these power outages.
    So I am encouraged by this hearing and I think there is a 
lot of promise here, and I think there is actually a lot of 
common ground between all of our colleagues here in the 
Congress with wanting to do the right here, so I appreciate it 
again, Mr. Chairman. Thank you very much for my time.
    Chairman Hall. [Presiding] Thank you. The gentleman's time 
is expired. I will recognize myself for five minutes but I 
won't take five minutes because I know Chairman Quayle has 
already recognized all of you, and thanks you, but I would feel 
bad if I didn't thank the Texans out there. Rik Drummond, small 
business leader, thank you, and of course, I always save the 
best for last. Chairman Nelson, I really came down here to see 
if she is as attractive and intelligent as everybody always 
says she is, and we are glad to have each of you. Thank you for 
what you are doing. Don't judge our interest in you by the 
empty seats because everybody has two or three committees, and 
this goes into a permanent record and they will all have 
copies, and thank you very much.
    I yield the balance of my time to Mr. Rohrabacher. For 
those who are present today, he is my favorite in the entire 
Committee that are Republicans. The Chair recognizes Mr. 
Rohrabacher.
    Mr. Rohrabacher. How do I follow that?
    You know, I have been hearing about the smart grid and the 
grid, and we have to do something about the grid for so long. I 
mean, it just--over the years it just--and quite frankly, I am 
not an engineer and I don't understand all of the aspects of 
some of these things you have been talking about today. Some of 
them are a little bit above my pay grade. But there are some 
things that we do have to know here, and that is about the 
spending of government money and how it is being utilized to 
accomplish goals in the various departments and agencies.
    When will the smart grid be available and be actually being 
utilized by the public? Whoever wants to answer that.
    Mr. Caskey. I will attempt to answer that. When you picture 
the entire smart grid working effectively and interoperating, 
We are literally talking about an evolution that is going to 
take 20 years or more. But we see parts of that today as you 
see various substations automated, you see the transmission 
grid automated, you see----
    Mr. Rohrabacher. Tell me, how far in the evolution have we 
come? Would you say we are year at 15, I mean, outside 15? Are 
we 15 years in or one year in? What are we in?
    Mr. Caskey. I think we discussed that a little bit earlier; 
is there a percentage on how smart the grid is today? I think 
the answer to that really depends on the individual utilities 
and those utilities know how much automation and how much 
smartness they have added to their localized grid, if you will, 
but in terms of a nation, I have not heard a figure thrown out 
there to say whether we are 20 percent smart today or 25 
percent or what that is. So I don't know that.
    Mr. Rohrabacher. Smart as compared to what we were, let us 
say, 20 years ago, so--and the smart grid will save us energy, 
the smart grid will ensure more security, et cetera, and how 
much will in the end the smart grid cost us to have in place as 
compared to what we were spending ten years ago?
    Mr. Caskey. I don't have the answer to that question.
    Chairman Nelson. Let me just state in Texas what we have 
done is, the customers who get the advanced meters are the ones 
who pay for it, so it is not through a tax. It is a fee on 
their bill. And even with that fee, our rates are lower in 
Texas than they were in 2001.
    I view smart grid ultimately as a cost-savings tool 
because, one, it gives customers the ability to reduce their 
usage and under the current technology, you get your electric 
bill 45 days and sometimes after you----
    Mr. Rohrabacher. I understand. When you succeed--I can't 
tell you how many times we have heard that when this program is 
in place, it is actually going to pay for itself so there is 
really no cost at all involved, and so absent that mindset, 
which I understand and it is not just smart grid that believes 
that stuff, but a lot of other people who come before us.
    Let us then look, how much money--Dr. Arnold, the American 
Recovery and Reinvestment Act invested how much money in this 
effort and how much has been spent?
    Dr. Arnold. The Recovery Act funds totaled $17 million and 
all of that will have been spent by the end of this fiscal 
year.
    Mr. Rohrabacher. Seventeen million?
    Dr. Arnold. I am sorry -- yes, $17 million in terms of the 
NIST work on the interoperability standards, so that is just 
the Recovery Act funds and that represents about half of the 
total funds. The rest was from the NIST normal STRS 
appropriations.
    Mr. Rohrabacher. So $17 million were spent in the last 
year, you're saying?
    Dr. Arnold. Since about mid-2009.
    Mr. Rohrabacher. And that money was matched of course by 
the money that was already allocated for this project. Is that 
right?
    Dr. Arnold. Well, approximately the same, a little bit 
less. I believe it is about $15 million will have been spent 
through the end of this fiscal year out of NIST's STRS normal 
funding.
    Mr. Rohrabacher. And once the recovery, the ARRA money is 
all gone, and it sounds like it is, the budget goes down back 
to what it was normally. Is that what is happening?
    Dr. Arnold. Well, to sustain the effort at the current 
pace, we would have to increase the STRS component. If we 
continue with flat funding on the STRS, it is going to imply a 
significant reduction in the level of activity.
    Mr. Rohrabacher. And so when we were trying to figure out 
the total amount that NIST is spending, it is not 17, it is 35 
million?
    Dr. Arnold. Well, through the end of fiscal year 2011, it 
is about 17 plus 15--you can do the math--over that period.
    Mr. Rohrabacher. Okay. So that is $32 million. And that 
level, that $32 million level then will be cut back to what--
basically in half. Is that correct? Is that what we are 
hearing?
    Dr. Arnold. Well, the President's budget request for fiscal 
year 2012 included an increase in the STRS component to 
maintain a level of effort that is at a level that we need to 
sustain progress, but if those funds are not available, there 
will be a significant reduction and probably a slowdown in our 
effort.
    Mr. Rohrabacher. Thank you, Mr. Chairman. I will wait to 
see if there is a second round to see if this money is being 
spent in the most efficient way. Thank you.
    Chairman Hall. Your 10 minutes is expired.
    Mr. Rohrabacher. Thank you.
    Chairman Hall. The gentleman always asks good questions, 
and we will come back to you if we--Mr. Lipinski, the gentleman 
from Maryland, is recognized for five minutes or whatever you 
really need. You are a good man to work with this on this 
Committee.
    Mr. Lipinski. Thank you, Mr. Chairman. I am not from 
Maryland, but Illinois, it is close.
    Chairman Hall. Your hometown is Maryland, Illinois, right?
    Mr. Lipinski. You know, if you want that to be--if you want 
me to say that, yes, it is, as long as I get my five minutes of 
question time.
    Dr. Arnold, I am pleased to see your section in your 
testimony about protecting consumer interest. Now, Mr. 
Rohrabacher had just said he is not an engineer. He started out 
his questions with that. Well, I am trained as an engineer, 
although I won't try to claim that I know everything about the 
smart grid, but what I do know, I am excited about the 
potential benefits. You know, we can have a more robust, 
resilient power system. We can diminish peak usage. We can give 
consumers more control. These are all great things that we can 
get from a smart grid.
    But right now in my home state of Illinois, there is a 
tough legislative fight going on over who is going to pay for 
the new technology and who gets the benefit. AARP is strongly 
opposing the Illinois Infrastructure Modernization Act because 
of the potential for automatic rate increases. The Governor of 
Illinois, Governor Quinn, the Attorney General, Lisa Madigan, 
have also expressed concerns about this bill. Now, I share some 
of these concerns, and I think it is my job to make sure that 
the seniors in my district, you know, someone living on a fixed 
income is protected, and I worry that the push for a smart grid 
could just mean installing smart meters at consumer expense so 
utilities can then go ahead and lay off their meter readers. So 
as I said, I know the potential is there for great benefits.
    What can you tell me, Dr. Arnold, about what elements of 
NIST standards will help consumers control their energy usage 
and save money and what can we do--and I don't know if--this 
probably isn't for NIST to make the determination on this but 
my concern is, how do we make sure that this information is 
going to be used by consumers to save money or how do we make 
that as likely as possible? We can't guarantee anything. We 
can't guarantee anyone does anything but we have to make that 
likely. But first, Dr. Arnold, what will help consumers control 
their energy usage and save money with the smart grid?
    Dr. Arnold. So in terms of saving money and controlling 
usage, there are two elements of that. One is wasting less 
energy, so reducing your overall usage, and the other element 
is reducing your usage during peak periods when it is very 
expensive for the system to generate that energy. In terms of 
consumers wasting less energy, the fact that consumers have no 
knowledge today about how much they are consuming, is an issue, 
and with the smart grid, consumers will be able to,as they do 
in cases like in Texas, see how much they are using on a near-
real-time basis.
    Mr. Lipinski. That is one thing I was wondering. Will I--if 
I have a smart meter hooked up in my home, will I be able to 
hook that up to my computer and see in real time my usage or 
will I have to wait for the utility company to get me the 
information?
    Dr. Arnold. The technical capability is there to transit 
that data to either the utility where you can get it on the Web 
or locally so it can be broadcast to a display within your home 
so you can see that in real time. I have such a meter, which 
enables me to do that in my home.
    The other aspect in terms of reducing usage during peak 
periods, which benefits everyone because you need to provide 
less generation capacity and transmission capacity, my 
expectation is that technology will allow this to be done 
automatically where you will be able to push a green button on 
your appliance to tell it you want to run in eco mode, and it 
will automatically figure out the best time to run. Obviously a 
consumer will always be able to override that if they need to 
have something done at a certain time but the technology will 
be there to allow this to be automated so the consumer can set 
it and then forget it.
    Mr. Lipinski. Very quickly, Chairman Nelson, how do you 
believe in Texas you were able to institute this and have the 
consumers save money with it? Were there specific provisions 
that you put into the law that helped this to occur?
    Chairman Nelson. Yes, sir. The Texas legislature passed 
legislation in 2005 and 2007 encouraging the deployment of 
smart meters and they set up a system for how it would be paid 
for which as you indicated it was a controversial issue and 
continues to be but they addressed that.
    Mr. Lipinski. But how do you get people to--if the Chairman 
will allow me, how do you--you can give people information. How 
do you maximize the likelihood that they will use this 
information to help save electricity and money?
    Chairman Nelson. Well, there is a big customer education 
component of this where customers have to be aware of what they 
are doing, so we rolled it out. We are in the process right now 
of doing a test where CenterPoint and Oncor, our two biggest 
utilities in Houston and Dallas, are doing a pilot with 500 in-
home devices and educating customers about it. We have retail 
providers in the Texas market, and that market is competitive 
and so they want to get customers and so they are trying to 
give a value-added thing and so they are working with customers 
to provide them information. Like some of them send out a once-
a-week note to their customers by email and say this is how you 
are spending, this is what you have spent, if you continue 
using at the same level, your bill will be this, or some 
customers use every day but when we have a hot summer like we 
had this summer where in Austin our August temperature average 
was 105, in spite of the fact that we have got low rates, those 
bills are big and I think the larger the bill gets, the more 
the customer has an incentive to shave some of that off if they 
can.
    Mr. Lipinski. I thank you very much, and I thank the 
Chairman for your indulgence here.
    Chairman Hall. The gentleman's time has expired. The 
Ranking Member has indicated he has no objection to Mr. 
Rohrabacher asking one more question. The Chairman recognizes--
--
    Mr. Rohrabacher. Thank you very much, Mr. Chairman.
    In talking about standards and, again, I plead guilty of 
not having the expertise of having the in-depth questions that 
you probably deserve, but let me just ask, when you have new 
standards, and that is what we are talking about with NIST, and 
it is a major part of this whole operation's success is the 
standards of what you are going to be required to have to have 
a smart grid, that means, of course, there is going to have to 
be new technologies. Now, I note that the Department of Energy 
where you are spending $35 million, they are spending $3.4 
billion on smart grid technology development. Are you confident 
that we are going to be able to have the technology necessary, 
number one, to meet the standards, and will this equipment be 
available, do you believe, by American manufacturers rather 
than having us being dependent on overseas sources?
    Dr. Arnold. So I would like to address that. The 
stakeholders in our process involve industry. They are really 
the biggest part of the process and they are at the table 
because they want the standards so that they can build the 
products and the utilities can use them. We have tried where we 
can, rather than reinventing the wheel, to pick up standards 
that have been used in other applications and modify them for 
the smart grid to allow these things to get deployed most 
quickly. In areas where there is entirely new functionality, 
you have to do something new, and we are always looking for the 
best way to do that. We have placed major emphasis on being in 
a leadership posture with respect to the international 
standards so rather than our picking standards that others are 
developing, we are developing them here, bringing them to the 
international standards organizations and we are having a great 
deal of success in getting the standards adopted 
internationally. I can tell you that in other parts of the 
world that are behind us in developing their frameworks for the 
smart grid, they recognize our leadership and are using the 
results of our standards work as the basis for their efforts. 
We are doing that specifically to maximize the export 
opportunities for U.S. suppliers.
    Mr. Rohrabacher. So you are confident that what you are 
doing is going to actually be a boon to American manufacturers 
and American technology corporations and not--is that something 
that you have in mind or is this something that you are just 
confident of?
    Dr. Arnold. We have that very much in mind. I would point 
to the International Energy Agency, which estimates over the 
next 20 years, $10 trillion will be spent globally on 
modernization and build-out of electrical grids. The estimate 
as far as I can tell for the United States is about $2 
trillion, so the market opportunity outside of the United 
States is much greater than it is in the United States and so 
we have very much in mind creating a standards framework that 
will allow U.S. manufacturers to not only build the U.S. grid 
but also export that technology to other parts of the world.
    Mr. Rohrabacher. Well, thank you very much.
    Mr. Chairman, that does answer my question and I appreciate 
you giving me that last chance.
    Chairman Hall. Thank you. The gentleman's time has expired.
    I want to thank the witnesses for their very valuable 
testimony and the Members for their questions. The Members of 
the Subcommittee might have additional questions for the 
witnesses, and we will ask you to respond to these in writing. 
The record will remain open for two weeks for additional 
comments and statements from Members. The witnesses are now 
excused. We are adjourned.
    [Whereupon, at 11:25 a.m., the Subcommittee was adjourned.]
                              Appendix I:

                              ----------                              


                   Answers to Post-Hearing Questions




                   Answers to Post-Hearing Questions
Responses by Dr. George Arnold, National Coordinator for Smart Grid,
National Institute of Standards and Technology

Questions submitted by Chairman Ben Quayle

Q1.  What is the future smart grid standards development plan for both 
the National Institute of Standards and Technology (NIST) and the Smart 
Grid Interoperability Panel? How many additional standards need to be 
developed? Can NIST maintain the necessary pace for standards 
development to keep up with smart grid implementation into the future? 
How much funding is NIST requesting annually to continue these 
activities?

A1. NIST continues to execute its three-phase plan for leading and 
sustaining the accelerated pace of smart grid interoperability and 
security standards development. Phase I is completed (initial NIST 
roadmap and identification of standards) and Phase II (Smart Grid 
Interoperability Panel) and III (Smart Grid Testing and Certification 
Framework, developed as part of SGIP) are ongoing, including 
international outreach and coordination efforts. While much progress 
has been made to date (see www.nist.gov/smartgrid for NIST and SGIP 
programmatic highlights and accomplishments), significant work 
continues to be needed to develop new standards, evaluate and revise 
existing standards, coordinate and map different standards to each 
other within a common architectural and cybersecurity framework, and to 
help drive these standards into implementation supported by 
interoperability testing and certification support and incorporation of 
``lessons learned'' back into the standards development process. This 
work is being undertaken through NIST and SGIP structured activities, 
including new and existing Priority Action Plans focused on 
requirements for standards development and Working Groups that are 
evaluating standards and framework elements, identifying new needs, and 
leading dialog with stakeholders including the regulatory community. 
While it is difficult to estimate the number of new and revised 
standards that will be needed to support the future smart grid with new 
functionalities, based on our experience to date, at a minimum it will 
be several times greater than the initial 75 standards identified by 
NIST in its Framework Release 1.0--that is, in the hundreds.
    The pace of progress in coordinating development of smart grid 
standards has been accelerated in part due to ability to jump-start 
NIST's smart grid program using approximately $17 million of ARRA 
funding over the past two years; $12 million from the Department of 
Energy, and $5 million from the Department of Commerce. In addition, 
NIST spent $8.5 million of its annual STRS appropriation in FY11. The 
$17 million ARRA funding has been exhausted. NIST requested $17.6 
million in the FY 2012 President's Budget to maintain the current 
accelerated pace for standards development.

Q2.  NIST identified 75 existing standards, in January of 2010, as 
likely immediately applicable to an interoperable grid. NIST submitted 
five of these standards to the Federal Energy Regulatory Commission in 
October 2010. Why does this process take so long? When will NIST's 
responsibilities per the Energy Independence and Security Act of 2007 
(EISA) be completed? Do you think EISA should be amended to possibly 
clarify that a formal rulemaking process is not always necessary?

A2. Of the 75 standards identified in the NIST Framework Release 1.0, 
25 standards were identified for initial implementation and 50 
standards were identified as needing further review. NIST and the SGIP 
have been developing additional guidelines and procedures for standards 
review and evaluation, including development of the NISTIR 7628 
Guidelines for Smart Grid Cyber Security and establishment of SGIP 
Cyber Security Working Group (CSWG) and Smart Grid Architecture 
Committee (SGAC) review processes. With the availability of the NISTIR 
7628 published in August 2010, the volunteer-based CSWG standards 
review team was able to use NISTIR 7628 requirements as the basis for 
its standards review process, including for its evaluation of the 5 
standards identified in October 2010 as ready for consideration by 
regulators. This team has continued to make steady progress towards 
evaluating the 25 standards identified for initial implementation, plus 
many additional standards or requirements that have been developed or 
evaluated as part of Priority Action Plans. In parallel to the CSWG 
cyber security review process, NIST engaged in numerous collaborative 
discussions with FERC staff to revise standards review templates to 
help support regulatory interest and understanding of smart grid 
interoperability standards. This constructive dialog resulted in a more 
comprehensive review process, and contributed to the increased timeline 
for the initial standards review. In addition, utilities and others 
have requested that additional standards reviews be established with 
respect to implementability and reliability issues, and work is 
underway to incorporate such reviews within the SGIP and its Catalog of 
Standards process.
    NIST is actively engaged in leading the acceleration of the smart 
grid standardization process to meet its EISA responsibilities. In the 
long term, NIST envisions that the SGIP will mature into a permanent 
organization to evolve and maintain the Smart Grid standards framework 
and that NIST will reduce its active standards coordination role. 
However this will require that the SGIP develop a business model and 
funding sources that are self-sustaining. Continued NIST funding at the 
level requested in the President's Fiscal Year 2012 budget will allow 
NIST to complete and implement the NIST smart grid standards framework 
and develop a robust testing and certification infrastructure. With 
this foundation in place, NIST will then be in a position to continue 
to engage in the SGIP at a lower level while transitioning some of its 
resources and staff to address key smart grid measurement and research 
needs, also part of NIST's mission. NIST established a Smart Grid 
Federal Advisory Committee in late 2010 to provide advice and input to 
NIST on such issues, including input to help guide Smart Grid 
Interoperability Panel activities and also assist NIST with its smart 
grid research and standards activities. The Committee's initial report 
is expected to be completed in November 2011.
    With respect to clarifying the role of formal rulemaking in EISA, 
the language ``as may be necessary to insure smart-grid functionality 
and interoperability in interstate transmission of electric power, and 
regional and wholesale electricity markets'' is already included in 
EISA under FERC's responsibilities, and may provide sufficient 
flexibility to FERC to address evolving needs without need for 
amendment.

Q3.  A January 2011 Government Accountability Office (GAO) report 
assessing the progress of NIST smart grid cybersecurity guidelines 
identified remaining challenges regarding cybersecurity and physical 
threats to the smart grid. What steps are being taken to ensure that 
the standards upon which smart grid architecture is based do not lead 
to a greater cybersecurity risk on the national transmission grid?

A3. A multi-pronged approach is being taken to support enhanced 
cybersecurity for the Smart Grid. The NIST-led Cyber Security Working 
Group (CSWG) is providing foundational cybersecurity guidance, first 
through the issuance of NISTIR 7628, ``Guidelines for Smart Grid Cyber 
Security'' which was published in August 2010 and most recently in 
collaboration with DOE and NERC, NIST assisted in the development of 
the newly issued DOE Draft ``Electricity Sector Cybersecurity Risk 
Management Process Guideline.'' This document is the result of a 
public-private collaboration to develop a foundational cybersecurity 
risk management guideline that provides a consistent, repeatable, and 
adaptable process for the electricity sector. Now the CSWG is 
developing an assessment guide that contains criteria for testing and 
examining the implementation of the NISTIR 7628 high level security 
requirements. The high level security requirements are also being 
augmented with specific security requirements for the advanced metering 
infrastructure. NIST, through the CSWG is facilitating security 
functionality in existing Smart Grid standards and for those standards 
under development. To date, over twenty-five standards or requirements 
have been assessed against the high level security requirements. The 
CSWG will be hosting a cyber-physical security workshop in April 2012 
to review recent work and developments that have occurred in the cyber-
physical areas across multiple industries. The goal of the workshop is 
to determine if there are security requirements that are unique to 
cyber-physical systems.
    While NIST has the federal responsibility for developing the 
standards framework, DOE is responsible for grid modernization. Through 
the Advanced Security Acceleration Project for the Smart Grid (ASAP-
SG), DOE is partnering with several utilities to accelerate the 
development of Smart Grid cybersecurity requirements. These profiles 
provide asset owners, operators, and vendors with detailed requirements 
for the secure design, deployment and operation of resilient Smart Grid 
systems. Four security profiles have been completed--advanced metering 
infrastructure (AMI), third-party data access, distribution management 
systems and most recently, wide-area monitoring, protection, and 
control applications, (i.e., synchrophasors). The AMI security profile 
is being used by the CSWG and the Advanced Metering Infrastructure 
Security (AMI-SEC) Task Force within the Utility Communications 
Architecture International Users Group (UCAIug). In FY12, ASAP-SG plans 
to develop a profile for the home area network.
    In another joint effort to improve smart grid security, DOE formed 
the National Electric Sector Cybersecurity Organization Resource 
(NESCOR). NESCOR is focusing on the testing and development of secure 
technologies for the smart grid. NESCOR is currently working with the 
CSWG to develop guidelines that will address the security gaps and 
potential vulnerabilities of the SEP 1.x and provide recommendations on 
how the SEP 1.x profile should be implemented in deployments.
    DOE has also partnered with the private sector to broadly enhance 
cybersecurity in the electric sector through the development of the 
2011 Roadmap To Achieve Energy Delivery Systems Cybersecurity, an 
update of the 2006 Roadmap. Both industry-led Roadmaps were developed 
through a public-private collaboration of energy sector stakeholders. 
DOE facilitated the Roadmap development through the private-sector 
Energy Sector Cybersecurity Working Group (ESCSWG). The U.S. Energy 
Secretary Steven Chu, White House Cybersecurity Coordinator Howard A. 
Schmidt, and the North American Electric Reliability Corporation 
President and Chief Executive Officer Gerry Cauley all publicly 
recognized this public-private collaborative Roadmap effort focused on 
ensuring the security and reliability of energy delivery systems.

Questions Submitted by the Represenative John Sarbanes


Q1.  Can you please clarify how much funding NIST has requested in the 
Fiscal Year 2012 budget for continuing its smart grid standards work? 
How does this requested funding level compare to the levels of funding 
NIST has provided to these smart grid standards efforts over the last 
several years?

A1. The President's budget request for Fiscal Year 2012 includes an 
initiative for Interoperability Standards for Emerging Technologies, 
which would provide an additional $9.1 million to support the NIST 
smart grid program, for a total of $17.6 million. NIST contributed $1.6 
million from the STRS appropriation and $5 million from the NIST ARRA 
funding on smart grid in FY 2009 and another $5 million in FY 2010, 
which was the first direct appropriation for the smart grid program. In 
the FY 2011 spend plan, NIST's budget for smart grid was $8.5 million. 
The external component of NIST's smart grid program, including the 
contracted administration of the Smart Grid Interoperability Panel, was 
supported by ARRA funding totaling $17 million; $12 million provided 
through DOE and the $5 million from NIST's own ARRA appropriation as 
described above. Thus more than half of NIST's work through the end of 
Fiscal Year 2011 was supported by the ARRA funding, which have now been 
completely expended.
Responses by The Honorable Donna Nelson, Chairman, Public Utility 
        Commission
of Texas







Responses by Mr. John Caskey, National Electrical Manufacturers 
        Association

Questions submitted by Chairman Ben Quayle

Q1.  You mention in your testimony that U.S. standards are typically 
developed by the private sector with varying degrees of participation 
by the government. The Energy Independence and Security Act of 2007 
(EISA) opened the door to a more active government role, providing an 
``umbrella'' under which the private sector defines standards for Smart 
Grid products and systems. From a standards developing organization 
perspective, how has this process, with the National Institute of 
Standards and Technology acting as a leader, versus its usual convener 
role, been managed? Do you feel that the National Electrical 
Manufacturers Association's participation on the Smart Grid 
Interoperability Panel has been sufficient?

A1. NIST (National Institute of Standards & Technology) is named in 
EISA ``to coordinate the development of a framework that includes 
protocols and model standards for information management to achieve 
interoperability of smart grid devices and systems.'' NIST has used 
this authority to form the Smart Grid Interoperability Panel (SGIP), a 
public-private partnership, to do the real work of standards 
development. NIST's leadership in establishing the policies and 
procedures of SGIP--designing it for inclusion of all stakeholders, 
funding the National Coordinator for Smart Grid Interoperability, and 
identifying initial priorities for the SGIP to consider--has been 
instrumental to the progress made thus far.
    NIST's leadership in this area should not be construed to mean that 
NIST is ``sitting at the head of the table,'' steering the standards 
development process. To its credit, through the establishment of the 
SGIP, NIST is promoting private sector-driven outcomes. Also, the 
National Technology Transfer and Advancement Act of 1995 (NTTAA, PL 
104-113) and its implementation via the Office of Management and Budget 
Circular A-119 requires standards that are endorsed or adopted by the 
U.S. Government to be developed by formally accredited standards 
developing organizations (SDOs) like NEMA, IEEE, and others. In that 
respect, the greatest function that NIST and the government can perform 
is to continue to provide forums and foster an environment where the 
various SDOs and stakeholder entities can come together and maintain 
progress toward the performance objectives for Smart Grid that were 
established in EISA.
    NEMA staff and its member companies continue to have sufficient and 
appropriate levels of involvement across several of the stakeholder 
groups and the various priority action plans. NEMA staff has held a 
number of leadership positions within the SGIP and the manufacturers' 
perspectives around the table have been an integral part of the 
decision-making process.

Q2.  In your testimony, you highlight the National Electrical 
Manufacturers Association's view that most, if not all of the Smart 
Grid community felt that the five families of standards considered 
during the Federal Energy Regulatory Commission's (FERC) Technical 
Conference were a very good starting point. However, you state that 
because it was a regulatory agency asking the question about whether or 
not these standards represented consensus, witnesses were concerned 
that FERC was leaning toward mandating these standards in some form. 
Based on your experience with the suite of standards submitted, what is 
the difference in the way that industry interfaces with the National 
Institute of Standards and Technology, versus how it interacts with 
FERC?

A2. NEMA maintains good relationships with both NIST and FERC. 
Congressionally-imposed mandates of the agencies themselves, however, 
create different dynamics between these two agencies and the private 
sector. The key difference is that NIST is not a regulatory agency 
while FERC is.
    As a science-based organization with no regulatory mandate, NIST 
has earned the confidence of industry. NIST serves a partner with the 
private sector as the private sector drives the standards discussion. 
For all of its various definitions, ``consensus,'' as discussed within 
the SGIP and the standards development community in general, means 
agreement on a standard that works for most everyone-and on a voluntary 
basis.
On the other hand, EISA gave FERC the authority to mandate consensus 
standards.

      ``At any time after the Institute's work has led to sufficient 
consensus in the Commission's judgment, the Commission shall institute 
a rulemaking proceeding to adopt such standards and protocols as may be 
necessary to insure smart-grid functionality and interoperability in 
interstate transmission of electric power, and regional and wholesale 
electricity markets.''
    EISA gives FERC the ability to determine for itself what 
``sufficient consensus'' means and if it has been achieved. And with 
its definition, it can move a voluntary industry standard into a 
government mandate. This authority is certainly one way in which the 
interface with the two agencies can differ.

Q3.  What do you see as the most important actions to ensure that the 
transformation of the American electric delivery system to a Smart Grid 
is a process that empowers and protects consumers? Can the equipment 
needs of the Smart Grid be met by U.S. manufacturers? How will existing 
technologies and equipment fit in with the standards being developed 
for the Smart Grid? Do you envision any additional costs to the private 
sector or consumers in conforming with the standards?

A3. As far as standards are concerned, the most important action that 
can be taken to ensure the successful transformation of the electric 
grid into a Smart Grid is to allow industry to continue to drive 
standards development. That is, exercise great caution in the federal 
agencies before making a given standard mandatory. The standards 
development process is one that must be given the time and freedom to 
work its will, to ensure the standard leads to the best result for 
manufacturers, consumers, and every American who depends on a reliable 
source of electricity.
    Policies that provide support for manufacturing innovation will 
promote the development of products that make the grid smarter. A 
smarter grid, with its two-way communication protocol designed to 
improve reliability, cost-effectiveness, energy efficiency, and 
consumer engagement and control, empowers consumers and gives them the 
information to make wise decisions about their electricity usage and 
take charge of their electric bill.
    U.S. manufacturers are ready. In 2009, according to the Census, 
manufacturers in the United States shipped $6 billion of transformers 
and other power equipment, $10.6 billion of switchgear and switchboard 
equipment, $5.5 billion of storage batteries, and $10.1 billion of wire 
and cable, totaling more than $30 billion in equipment that is being 
used to modernize the electric utility grid.
    Development of the Smart Grid is a gradual process which is already 
underway. It is not a wholesale swap of the old grid for the Smart 
Grid. The electric grid is a complex web of equipment and control 
systems that requires varying degrees of change for conversion into a 
Smart Grid.
    Part of this answer also ties in to the previous question about the 
difference between the way the industry interacts with FERC and NIST. 
If, through the regulatory process some form of standard becomes 
mandatory, the utility interests would have no choice but to implement 
the requirements of that regulation. In certain instances, that may 
mean they have to replace devices on the grid in order to comply. In 
the end, the only true mechanism that utility companies have to replace 
equipment in the grid is the rate case which directly affects consumers 
of all stripes; residential, industrial, and commercial.
    Many utilities have incorporated transmission and distribution 
equipment into their systems which conform to current standards. From 
smart meters to substation automation to gathering greater intelligence 
of the loads on power lines through phasor measurement units, utilities 
are deploying Smart Grid technologies today. They are doing so by 
layering on new technologies to existing equipment, upgrading to Smart 
Grid technologies as part of the natural cycling out of old equipment, 
or by proactively replacing functioning equipment with more modern 
technologies.
    Through the SGIP, we are refining existing standards and helping 
utilities convert to new standards, bearing in mind the characteristics 
of the equipment already in the field. The Smart Meter Upgradeability 
standard is a prime example of the SGIP being responsive to the most 
critical needs of the industry. As many utilities have demanded smart 
meters, they also want the confidence of knowing that if they buy smart 
meters today, new smart meters standards will not result in stranded 
investments. Indeed, utilities are more likely to invest in those 
aspects of the Smart Grid for which the applicable standards are 
interoperable and upgradeable--the essential mission of the SGIP.
    The cost-benefit picture for the Smart Grid is complex, but the 
benefits of the Smart Grid--increased reliability, more efficient 
operation, energy savings through greater intelligence and consumer 
control, and the reduced need for more generation capacity--
significantly outweigh its costs by any measure.
    For instance, as consumers replace older goods with newer ones, 
such as home area networks or appliances, they are acquiring new 
``smarter'' features compliant with existing standards. In the case of 
smart meters, utilities provide a business case for the investment by 
analyzing return on investment. Two-way communication enables outage 
reporting, remote turn on and turn off, fewer truck rolls to visually 
inspect and monitor the grid, power quality monitoring, and the 
consumer's engagement. In high-population areas, utilities will invest 
in automation of transmission and distribution systems due to benefits 
it gives ratepayers. The Smart Grid in general provides improved 
reliability and a positive economic impact through fewer and shorter 
outages.

Questions Submitted by the Represenative John Sarbanes

Q1.  As a representative of a private sector standards development 
organization that has been very active and involved in the NIST 
process, you are very complimentary of how NIST has carried out its 
Smart Grid standards responsibilities. In your opinion, why has this 
been such a successful endeavor between NIST and standards development 
organizations? What lessons have been learned and what best practices 
have been gleaned through this effort that we ought to keep in mind 
should we decide to replicate this public-private model in the future 
in other areas?

A1. First, the quality of the organization in this case has led to many 
early successes. NIST, as an independent, objective, science-based 
agency, enjoys credibility with industry for its expertise and 
performance. As a result, industry is eager to participate in the NIST 
and SGIP activities.
    Second, the people involved in this particular effort are of a high 
quality and have demonstrated the character and seriousness of purpose 
needed for this to be a successful partnership.
    Third, the nature of the Smart Grid and the need for standards at 
this point in time make a partnership such as this timely, as evidenced 
by the participation of over 600 organizations and over 1,800 
individuals.
    We have learned what a successful approach to this sort of 
partnership looks like and now have some tangible results that can 
serve as a model for similar future efforts. NIST's decision to include 
a broad base of stakeholders has been essential to the SGIP's success. 
The work of NIST and the SGIP in establishing many of the procedures 
and policies before the partnership began, such as committee structure 
and ground rules, facilitated the process moving forward quickly. And 
once the bylaws and procedures were established, they have been 
enforced which has strengthened the relationship. Since that point, 
NIST's role has been one of facilitation and service--they are now the 
main interface between the SGIP and rest of the federal government. The 
greatest value they now bring is to help the SGIP set priorities that 
are consistent with those of other federal agencies and the 
Administration.
Responses by Mr. Rik Drummond, Chief Executive Officer and Chief 
        Scientist,
The Drummond Group, Inc.

Questions Submitted by Chairman Ben Quayle

Q1.  From the perspective of a small business, how has the smart grid 
standards development process been managed?

A1. It is a totally volunteer effort with both small and large business 
participating equally. With respect to federal funding to small and 
large business participating in the FOA 36 projects the interface to 
the government is burdensome and has significant overhead. Larger 
organizations often have the internal legal and procedural expertise to 
fully understand all of the federal regulations and contractual issues. 
Small businesses often do not have the upfront moneys for initial 
investment in this expertise. Additionally, I expect from experience, 
the procedural overhead to interface the federal contracts adds 10-25% 
to the costs on some contracts.

Q2.  With so many organizations participating, do you feel that the 
small business concerns have been sufficiently incorporated?

A2. I would say that most small businesses that do not specialize in 
interfacing to the federal government, will find incorporation into 
these contracts very burdensome and problematic. They will need to work 
through larger firms as subcontractors and will not bid directly to the 
federal government in many cases. Generally, doing business for 
significant amounts of moneys ($100,000s+) with the federal government 
is a real hassle. Most of the business experiences used to service 
clients in the private sector do not apply to servicing federal 
contracts.

Questions Submitted by Represenative Randy Neugebauer

Q1.  In your testimony, you mention the consistency of interoperability 
testing and certification across all products implementing the 100+ 
technical standards used to integrate smart grid systems:

       a.   What certainty do we have that the existing technologies 
perform as claimed?

A1. The Smart Grid Interoperability Panel's Testing and Certification 
Committee, which I am the Chairperson, is implementing an 
``Interoperability Process Reference Manual.'' The manual specifies 
that for a smart grid standard to be ``SGIP approved'' it must have 
followed international Guidelines for standards-based product testing 
and certifying the test results. These two standards are named ISO/IEC 
17025 and ISO/IEC 65 (forthcoming new version is ISO/IEC 17065.
    These two Guidelines help ensure that products, as tested, 
``perform as claimed.'' At this time the buying market place does no 
know if products ``perform as claimed.''
    As part of this effort Smart Grid Interoperability Panel's Testing 
and Certification Committee is working with Amerian National Standards 
Institute (ANSI) to accredit the testing labs and the certification 
authorities used to do all products in the SGIP related smart grid.

Q2.  How can the failure of a product to be interoperable slow ongoing 
smart grid implementation?

A2. The smart grid standards support information flow in a secure 
manner. The user sees the information flow as the implementation of 
technical (managing devices) or business (bidding for electricity for 
tomorrow) processes necessary to execute the business' objectives. Two 
cases of products failing to interoperate:

      Case 1: standards based products are purchased and assumed to be 
interoperate with other products based on that standard and they do not 
`initially' work or they are implemented and show failures later, this 
breaks the business or technical process they support. Fixes take time 
and slow overall implementation within the Smart Grid.

      Case 2: The buyer of the standard based product assumes, as is 
the case normally currently, they have to test the product with other 
products to ensure that it works ``as advertised.'' This internal 
testing takes days, weeks, months, or years. This delays the 
implementation of the process in the business and among business and 
slows interoperability across parts of the smart grid.

Q3.  What is the status of the work the National Institute of Standards 
and Technology is undertaking to further the testing and evaluation 
framework for smart grid technology to ensure that products sold 
perform as intended?

A3. See the first question for the answer. It is all focused on the 
output of the Testing and Certification Committee, the Architecture 
committee and the Cyber Security Work Group. These three together chose 
the appropriate standards, test and certify products based on those 
standards and ensure the implementations meet the cyber security 
requirements.

Q4.  From your experience, is NIST adequately focused on supporting 
conformance and interoperability testing on the smart grid technologies 
that are being used already?

A4. Yes, the best they can. Unlike HHS' mandate, that gives them the 
power to ensure conformance and interoperability within EHR products 
(via moneys from Center of Medicaid and Medicare) NIST was not given 
this ability within the EISA 2007 act. Because of that implementers of 
interoperable smart grid products must fund the effort themselves.

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