A Framework for Enhancing Collaboration Between Charles M. Davidson

R E P O RT S E R I E S
SUMMER 2011
Realizing the Smart Grid Imperative:
A Framework for Enhancing Collaboration Between
Energy Utilities and Broadband Service Providers
Charles M. Davidson
New York Law School
Michael J. Santorelli
New York Law School
www.twcresearchprogram.com
For more information:
Fernando Laguarda
901 F Street, NW
Suite 800
Washington, DC 20004
Phone: (202) 370-4245
www.twcresearchprogram.com
twitter.com/TWC_RP
Table of Contents
Foreword................................................................................................................................................... 3
By Fernando R. Laguarda, Time Warner Cable
I.
Introduction and Overview.......................................................................................................... 4
II. The Smart Grid Imperative: Using Broadband to Modernize the Electric Grid ............ 7
A. The Evolution of the Smart Grid Imperative at the Federal and State Levels ........................7
B. The Key Role of Broadband in Smart Grid Deployment...........................................................9
1. Why Broadband Matters to the Smart Grid.........................................................................10
2. Assessing the Impacts of a Broadband-Enabled Smart Grid ............................................11
C.Conclusions ....................................................................................................................................13
III. Understanding the Divides Separating Energy Utilities and Broadband Service
Providers ................................................................................................................................................ 14
A. Regulatory and Incentives Divide................................................................................................14
B. Network Divide..............................................................................................................................17
C. Consumer Divide...........................................................................................................................19
D.Conclusions ....................................................................................................................................22
IV. Bridging the Divides to Realize the Imperative: A Legal and Policy Framework
for the 21st Century Broadband-Enabled Smart Grid................................................................ 23
A. Bridging the Regulatory and Incentives Divide.........................................................................23
B. Bridging the Network Divide.......................................................................................................26
C. Bridging the Consumer Divide....................................................................................................27
V. Conclusion .........................................................................................................................................29
Endnotes................................................................................................................................................ 30
About the Authors............................................................................................................................... 48
Realizing the Smart Grid Imperative
11
Foreword
By Fernando R. Laguarda, Time Warner Cable
Whether your principal concern is national security, environmental stewardship, or economic welfare, no one doubts the need to modernize the
nation’s energy sector. This report, Revitalizing the Smart Grid Imperative:
A Framework for Enhancing Collaboration Between Energy Utilities and
Broadband Service Providers, by Charles M. Davidson and Michael J.
Santorelli, addresses the role that the “Smart Grid” can play in achieving
important national objectives. Despite the numerous steps being taken by
industry and government to work together in this area, progress toward this
goal seems agonizingly slow to many observers. This report explains the
policy impediments that need to be overcome to move that process forward.
According to the National Institute of Standards and Technology, the Smart Grid “utilizes
advanced information and communications technologies to replace the one-way flow of electricity and information in the current grid with a two-way flow of electricity and information.”
As Davidson and Santorelli make clear, bringing together information and energy in two-way
networks that are truly intelligent, automated, and widely distributed is a complex undertaking for
a number of reasons that divide energy utilities and broadband service providers in the ecosystem.
Those reasons come down to conflicting regulatory incentives, divergent views about information
networks, and different relationships with consumers. This report explains these “core divides”
and offers a legal and policy framework for tackling them in order to jump-start innovation in the
area of the Smart Grid.
This report contributes to the policy debate about the Smart Grid by emphasizing the importance
of collaboration and dialogue among stakeholders as a key component of innovation. For historic
and jurisdictional reasons, policy discussions on this topic have tended to focus on specific industries. Occasionally, an issue like the Smart Grid arises at the intersection of two industries (energy
and broadband).
Davidson and Santorelli address the need for innovation on the basis of greater understanding and
collaboration between and among participants in the ecosystem. This is a challenging and fruitful
exercise because it breaks free of the more traditional approach to policy, which tends to focus on
what one sector and its stakeholders can do “with” “to” or “for” each other. As a nation, we depend
on reliable and affordable access to energy. For broadband networks to play a constructive role in
meeting this critical need, the recommendations in this report are essential reading.
When we launched the Time Warner Cable Research Program on Digital Communications, we
hoped for reports like this one, to stimulate debate and encourage more thoughtful policy. We
look forward to your comments and feedback.
Realizing the Smart Grid Imperative
3
I. Introduction and Overview
Modernizing the provision of energy services in the United States has long been a priority of state
and federal policymakers. Over the last several decades, legislators and regulators have implemented a number of incremental changes to the traditional energy regulatory paradigm in an
attempt to spur grid modernization and innovation. These efforts have included several federal
legislative actions aimed at, among others, adjusting how rates are structured1 and realigning
incentives to support investments in certain types of demand management tools.2 Federal guidance on these issues has met varying levels of state resistance,3 but many see these laws as the
starting point for a more fundamental recalibration of how utilities make investments and earn
returns on those investments.4
Notwithstanding efforts to date, the transmission, distribution, and consumption of energy in the
U.S. remain inefficient5 and antiquated in many respects.6 The underlying physical energy infrastructure — the nation’s electric grid — has emerged as the primary focus for reform. A number
of wide-scale outages7 and reported cyber attacks8 have underscored the vulnerability of a national
infrastructure that supplies electricity to every resident and business in the United States. These
events prompted former President George W. Bush9 and President Barack Obama10 to refocus
energy policymaking on bolstering the nation’s electric grid and positioning it as an ecosystem for
innovation and a hub for economic growth.
Recent energy policymaking efforts have been animated by a desire to inject intelligence into the
U.S. electric grid. Using an array of advanced digital communications technologies to create a
“smart” grid, utilities and other innovators are poised to enhance efficiency and empower consumers with more control over their energy consumption.11 New devices like smart meters, wireless
sensors, and synchrophasors are poised to leverage robust communications networks to generate,
aggregate, transmit, and analyze a flood of new data, allowing utilities to streamline their operations and spur innovation.12 Broadband networks in particular are poised to play a key role in
realizing the many goals for the smart grid by undergirding the physical infrastructure of the nextgeneration grid and supporting the torrent of data traffic expected to be generated by a new class
of technologies aimed at curtailing energy consumption.13 In addition, the ubiquity and increasing
utilization of commercial broadband connections will hasten the extension of these benefits into
homes and buildings, enabling an array of innovations targeted at reducing carbon footprints and
costs for customers.14 Together, these innovations are expected to yield an interdependent smart
energy ecosystem, one where smart energy services thrive along the grid, in the home, and at
every other node through which energy passes.15
These initiatives and developments in the energy and high-tech sectors, coupled with the wide
availability of broadband networks throughout the country,16 place the United States on what
should be an inexorable path toward creating an environment within which a smart energy
The views expressed are those of the author(s) and not necessarily those of Time Warner Cable, the Time Warner Cable Research Program
on Digital Communications, or New York Law School.
4
Realizing the Smart Grid Imperative
ecosystem, supported by a modern, more intelligent electric grid, will flourish. But, for numerous
reasons discussed herein, stakeholders in the energy and broadband sectors — seemingly natural
partners in the smart grid context — remain more divided than united over many issues related to
the smart grid. This paper examines the issues dividing these stakeholders and proposes a new policy
framework for ensuring the rapid deployment of 21st century electric architecture.
Section II provides an overview of the prevailing vision for using new technologies to create a
smarter energy grid in the United States. Federal policymakers have spent much of the past decade
focused on modernizing the grid. In addition, policymakers at the state and federal levels have
debated new regulatory frameworks to encourage more innovation and experimentation in the
21st century energy sector. Taken together, these various efforts have laid a considerable amount of
groundwork necessary for smart grid deployment. Yet many key issues remain unresolved.17 How
policymakers address these technological and regulatory issues will directly impact whether the
divides between stakeholders in this space can be closed.18
Section III identifies and assesses three core issues dividing utilities and broadband service
providers in the smart grid space. The first divide is twofold. Disparate regulatory frameworks governing each sector create divergent incentives to invest and innovate.19 Indeed, the current energy
regulatory framework, which treats most utilities as local monopolies, has resulted in a sector
that is largely – and justifiably – risk-averse and conservative in its approach to innovation.20 This
paradigm does not reward utilities for implementing technologies that result in decreased energy
consumption.21 In contrast, a deregulatory approach to broadband has fostered a vibrantly competitive environment, which has in turn spurred the development of an interdependent ecosystem
of innovation that is largely driven by consumer demand.22 Broadband service providers have a
clear incentive to enter into new lines of business that pair high-speed Internet connections with
new consumer-oriented services, like those expected to be developed in the smart grid space.23
Harmonizing these two vastly different frameworks for the purposes of the smart grid would help
to ensure that an ecosystem of innovation is able to develop and evolve in a timelier manner.
A second divide stems from divergent views among utilities and broadband service providers over
the efficacy of using existing broadband networks to support various components of the smart
grid. Concerns generally center on the robustness and reliability of existing commercial broadband
networks. Many utilities have focused on deploying their own private communications networks
for smart grid purposes. However, as discussed throughout the paper, several experimental partnerships have been forged between utilities and broadband service providers to determine whether
and how existing commercial networks can support actual smart grid deployment.
Differing approaches to consumers and consumer demand represent the third divide between
stakeholders in the smart grid context. Since utilities tend to have an arms-length relationship with
consumers, one in which interactions between the two are often mediated by a regulatory body,
energy service providers craft their business models in a much different way from broadband
service providers. How service providers regard and engage with consumers directly impacts the
ways in which issues like consumer privacy are addressed. These issues take on additional salience
in light of the emerging importance of smart grid data access, privacy and security generally.
Combined, these three divides present a sizeable gap separating two key stakeholder groups in the
emerging smart grid space.
Section IV offers a legal and regulatory framework for bridging these divides and igniting innovation in the U.S. energy sector. This framework does not intend to pick winners and losers or
Realizing the Smart Grid Imperative
5
endorse a particular approach to deploying the smart grid in the United States. Rather, the framework proposes several updates to a regulatory paradigm that is as antiquated as the electric grid it
applies to. A unifying theme among these proposals is the importance of ongoing collaboration,
coordination, and discussion among stakeholders and policymakers in the energy and broadband
sectors. Such a comprehensive and inclusive approach is needed to achieve the many goals for the
smart grid.
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Realizing the Smart Grid Imperative
II.The Smart Grid Imperative: Using Broadband
to Modernize the Electric Grid .
In 2007, Congress passed the Energy Independence and Security Act (EISA), a comprehensive
reform package aimed at moving the United States “toward greater energy independence and
security…increas[ing] the production of clean renewable fuels [and]…increas[ing] the efficiency
of products, buildings, and vehicles.” 24 Title XIII of the Act set forth, for the first time, a national
policy for modernizing the nation’s electric grid by ensuring that sufficient levels of intelligence
were built into the transmission and distribution infrastructure.25 The Act identified 10 goals and
several benchmarks for devising a national smart grid policy to guide modernization efforts.26 At
the core of these goals is the notion of using an array of advanced digital communications and information technologies to “improve reliability, security, and efficiency of the electric grid.”27
Passage of EISA marked the culmination of several decades of inquiries into grid modernization.28
Initially, discussion and analysis at the federal level focused primarily on bolstering the existing
electric infrastructure to guard against wide-scale outages.29 In the early 2000s, the ability of emerging communications technologies like broadband to transform the energy sector remained largely
speculative.30 Since then, the view that a truly “smart” grid is possible has emerged in tandem with
the rapid maturation of the nation’s broadband sector.31 EISA, and the subsequent policy inquiries
called for by the Act, thus signaled the beginning of an official turn toward focusing modernization
efforts on leveraging new digital technologies to build intelligence into the electric grid.32
Subsection A briefly traces how recent grid modernization discussions have evolved at the state
and federal levels, and then provides a comprehensive assessment of the smart grid imperative announced in EISA and furthered in subsequent inquiries. At the heart of many ongoing
discussions by federal and state policymakers is an examination of how best to use new digital
technologies and high-speed data networks like broadband to support the smart grid and the
development of a pervasive smart energy ecosystem. Subsection B highlights the critical role that
broadband is poised to play in helping to modernize the electric grid and examines the array of
smart grid components and smart energy tools that it enables.
A. The Evolution of the Smart Grid Imperative at the Federal and State
Levels
A massive power outage in August 2003 caused extended blackouts throughout much of the
Northeast and parts of Canada, underscoring the extreme vulnerability of the U.S. energy grid.
The blackout impacted some 50 million people across eight states, resulting in several deaths
and billions of dollars in lost economic activity.33 In a report by a task force convened to study
the causes of the blackout, members compared and contrasted the scale and impact of the outage
with previous major grid failures. One common feature of each outage was “an inability of system
operators or coordinators to visualize events on the entire system.”34 Indeed, the amount and type
of data available to operators were extremely limited and not real-time in nature.35 As a result, the
local consequences of an overgrown tree touching a high-voltage power line in Ohio cascaded
across a significant portion of the U.S. in a matter of two hours.36 The August 2003 blackout was
largely an information failure, one that denied local operators the ability to see what was occurring
in other parts of the grid.
Realizing the Smart Grid Imperative
7
Utilities have long used information technology to monitor the provision of electricity in their
immediate service territory. For example, utilities began deploying Supervisory Control and Data
Acquisition (SCADA) systems in the 1980s and 1990s to monitor local infrastructure.37 A SCADA
system “gathers information (such as where a leak on a pipeline has occurred), transfers the information back to a central site, then alerts the home station that a leak has occurred, carrying out
necessary analysis and control, such as determining if the leak is critical.”38 Many of these systems
transmit information via telephone networks, often at the speed of a dial-up Internet connection.39
In more remote areas, wireless signals are used to relay information.40 Similarly, many utilities have
used information and communications technologies to enable Automatic Meter Reading (AMR)
systems, which transfer customer consumption data to the utility for billing purposes.41 Metering
advances like AMR were chiefly deployed to eliminate costly and time-consuming manual metering readings by technicians.42 Despite the value of these services to individual service providers,
the raw information generated by these tools is typically only useful to the utility collecting the
data.43 After many years of meeting increased demand for energy services, the balkanized nature
of these systems became evident in the August 2003 blackout.44 EISA sought to address many of
these problems with its smart grid provisions.
EISA itself, however, was just a first step. The Act launched a series of inquiries, studies, and
working groups, all of which were aimed at defining the contours of a national smart grid policy.
One of the first major reports to emerge after EISA was a 2008 study by the federal government’s
Electricity Advisory Committee, which identified the barriers facing smart grid deployment.45 Key
impediments identified in the report included cost concerns, regulatory challenges, and the lack of
a coordinated strategy for deploying a smart grid on a national scale.46 Interestingly, the assumption at that time was that utilities would be able to leverage existing proprietary communications
infrastructure — e.g., those developed and deployed for SCADA and advanced metering initiatives (e.g., AMR) — to support emerging smart grid devices.47 Formal recognition of the fact that
high-speed data networks could be used to support the smart grid did not occur until passage of the
American Recovery and Reinvestment Act (ARRA) in early 2009.
ARRA directed the Federal Communications Commission (FCC) to prepare a National Broadband
Plan that, among other things, examined how “broadband infrastructure and services” could be
used in “advancing…energy independence and efficiency.”48 Implicit in this directive was a call to
examine how existing commercial broadband networks could be used to facilitate rapid deployment of a national smart grid. ARRA also included specific monetary allocations to support not
only broadband expansion,49 but also smart grid pilot programs.50
Around the same time, several smart grid pilot projects were being launched in cities across the
country.51 These followed on a previous move toward deploying advanced metering infrastructures
(AMI) by utilities. AMI encompasses a range of technologies and services, such as “home network systems, including communicating thermostats and other in-home controls, smart meters,
communication networks from the meters to local data concentrators, back-haul communications
networks to corporate data centers, meter data management systems, and, finally, data integration
into existing and new software application platforms.”52 These systems are considered a necessary
precursor to supporting the development of a smart energy ecosystem and increasing acceptance
of advanced energy maintenance tools by consumers.53
Even though the federal government had identified AMI and the smart grid as keys to grid modernization efforts, the vast majority of these initiatives are vetted, approved, and monitored by regulators
at state public utility commissions (PUCs). Over the past few years, a growing number of states have
opened inquiries and rulemaking proceedings focused on speeding along AMI and establishing
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Realizing the Smart Grid Imperative
regulatory frameworks for the smart grid.54 The New York Public Service Commission, for
example, opened an inquiry in October 2007 to develop guidelines for use in the development of AMI
plans by utilities.55 California was one of the first states to open a formal smart grid rulemaking
proceeding in December 2008.56 PUCs in Colorado57 and Ohio,58 among other states, have also
opened dockets related to the smart grid. State-level smart grid efforts have focused on complying
with various regulatory obligations set forth in EISA and on adapting the federal mandate for grid
modernization to suit local market conditions.59 However, some states, like California, are beginning to adopt new rules to address specific issues like privacy.60
The potential for policy conflict and overlap at the state level is a significant concern.61 Some
argue that the development of a patchwork regulatory approach to the smart grid could slow its
deployment and potentially raise costs for device manufacturers and utilities operating in multiple
jurisdictions.62 These concerns stem primarily from the regulatory frameworks within which state
PUCs typically operate, many of which treat utilities as local monopolies.63 In addition to laws and
regulations that vary by state, these frameworks have generally created a narrow set of investment incentives for utilities, which has fostered a justifiably risk-averse and conservative approach
to innovation in the energy space.64 Many of these paradigms are grounded in state and federal
statutes and PUC precedent, all of which have developed over the last century in a market characterized by incremental technological change.65 As a result, there appears to be an inevitable tension
between how various stakeholders, including those in the energy sector, want the smart grid to
develop and the existing regulatory structure that will ultimately guide its deployment.66
Identifying broadband as a viable means of supporting a wide variety of smart grid technologies
and functionalities has generated additional regulatory and policy questions.67 These are addressed
in section III.A. Before analyzing those issues, section II.B examines the specific impacts that these
tools will have on the smart grid and provides context for better understanding the many issues
over which stakeholders in the smart grid space remain divided.
B. The Key Role of Broadband68 in Smart Grid Deployment
Bolstering the ability to generate, aggregate, transfer, and analyze information across various
points in the electric grid has been the primary animating feature of smart grid policy efforts in
recent years. Utilities have experimented with a number of information and communications technologies over the last few decades, often installing equipment like SCADA and AMR to automate
certain processes. Such tools operate mostly in a unidirectional manner, where information is
simply generated at a node (e.g., a meter) and sent back to the utility for analysis.69 Newer technologies like AMI, which rely in large part on the installation of smart meters,70 are being deployed in
greater numbers due to generous federal stimulus allocations. Indeed, it was estimated that only 14
percent of homes in the United States had smart meters installed in 2009; that number is expected
to increase to 43 percent by 2014.71 These more advanced technologies facilitate two-way communications between the utility and various nodes across the grid. Additional data can be generated
and sent upstream to the utility, but these technologies also allow data to be sent downstream to
customers, either directly from the meter, the utility, or through a third-party service provider.72
The shift from closed unidirectional communication to more open, two-way communication
distinguishes recent grid modernization efforts from previous attempts to bolster the nation’s
electricity infrastructure.73
The amount of data that could theoretically be generated and transmitted by the current generation of smart grid technologies is enormous.74 Some have estimated that “the amount of annual
data utilities must process will increase tenfold…when the [s]mart [g]rid is fully operational.”75
Realizing the Smart Grid Imperative
9
Although different technologies will be required to generate and send varying amounts of data at
any given time to an array of locations, many observers have concluded that utilities will require
an increasing amount of bandwidth through which this information can be reliably delivered.76
High-speed and high-bandwidth data networks will thus be a critical component of the communications infrastructure underlying smart grid deployments across the nation.
1. Why Broadband Matters to the Smart Grid
Broadband is emerging as an essential part of the smart grid for two primary reasons.
First, broadband has the ability to seamlessly connect a variety of information nodes and transfer
large amounts of data across a network using universally accepted protocols and standards. Utilities
have typically relied on an array of communications technologies to be the backbone for advanced
metering efforts and other attempts to increase the amount and type of information being
collected. These have included dial-up modems, local area networks, and a range of wireless technologies (e.g., radio frequency identification).77 Although adequate for accomplishing the tasks for
which they were originally designed, many of these communications systems will likely be overwhelmed with the information produced by newer, more advanced components of a smarter grid.
Moreover, these proprietary systems are typically incompatible across jurisdictions, precluding the
type of information sharing and visibility envisioned by federal policymakers.78
The data generated by the smart grid will vary in amount and in the intervals at which it is
collected, depending on where it originates and the task it is meant to support. For example, a residential smart meter can collect data in a near-real-time manner79 — i.e., in one-minute intervals80
— requiring upward of 100 kilobytes per second (kbps) of bandwidth.81 Currently, more than half
of utilities use proprietary communications networks — wired and wireless — to support data
generated by AMI.82 Individual customer data sets are typically collected at an aggregation point
and sent to the utility. The backhaul bandwidth needed to support these transfers could reach
upwards of 500 kbps.83 Whether and how bandwidth needs impact communications networks
depends on how those networks are designed and which technologies are used to transport the
data.84 Similarly, the bandwidth requirements and latency tolerance of demand response tools,85
which leverage smart meters and other smart grid tools to enhance grid and load management,
vary widely depending on their core function and whether they are deemed “mission critical.”86
Older technologies like SCADA require significantly less bandwidth, but are much less tolerant of
latency given their key role in monitoring critical infrastructure.87
Despite the best efforts of a number of entities to estimate the bandwidth and latency needs of
current-generation smart grid tools, the U.S. Department of Energy (DOE) admits that “future
communications needs may be difficult to quantify due to the pace of evolution in grid technologies. Smart Grid technologies continue to evolve, and future applications of Smart Grid
technologies may lead to both an increase and a qualitative change in communications requirements.”88 Moreover, the FCC has observed that “the amount of data moving across Smart Grid
networks is modest today but is expected to grow significantly because the number of devices,
frequency of communications and complexity of data transferred are all expected to increase.”89
Without a sufficiently modular90 communications infrastructure capable of supporting both
near term and long term uses of smart grid technologies, deployment efforts could be delayed or
thwarted.91
Second, and related, broadband is emerging as an essential component of the smart grid because
it helps to solve the problem of long term bandwidth planning. Broadband is a relatively flexible
communications technology adept at handling fluctuations in network traffic.92 To this end,
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Realizing the Smart Grid Imperative
next-generation commercial broadband networks continue to be deployed in order to ensure
that consumers have sufficient bandwidth to support more advanced — and bandwidth-intensive
— applications and services.93 In this context, commercial broadband service providers have
demonstrated the modularity of the underlying network infrastructure by ensuring that time- and
latency-sensitive applications are delivered without interruption.94
2. Assessing the Impacts of a Broadband-Enabled Smart Grid
Stakeholders widely agree that broadband will serve as the primary foundation for innovation in
the smart grid and smart energy spaces in both the near term and long term. The emerging class
of broadband-enabled innovations will profoundly impact consumers, utilities, third-party service
providers, and many other stakeholders across the energy sector. Taken together, the consequences
will fundamentally alter the energy delivery and consumption paradigm in the United States.
Many of these benefits will accrue over time as utilities begin to adapt established business models
to meet evolving consumer demand. In the near term, utilities and other stakeholders will begin to
integrate high-speed data networks into the existing model of energy distribution and consumption.95 To this end, broadband will initially serve as the communications backbone connecting
the millions of smart meters expected to be deployed across the country over the next few years
and as the conduit for connecting consumers to the services that will interpret and present the
data generated by these tools. Ultimately, the near term development of a robust advanced metering
infrastructure, undergirded by broadband, will be critical to the long term viability of the smart grid
for several reasons.
First, such an AMI will demonstrate the actual, rather than the hypothetical, value of broadband
to smart grid deployment. To date, much of the research and analysis surrounding the broadbandenabled smart grid has been speculative. The specific communications and data needs of the smart
electric grid envisioned by the federal government remain unclear.96 Moreover, many were skeptical of the role that advanced communications infrastructure like broadband might play in smart
grid deployment.97 In the near term, however, increased AMI deployment will assist in further
refining these estimates and obviate the need for more robust broadband connectivity. Successes
and failures stemming from major pilot programs in Boulder, Colorado98 and Austin, Texas,99
along with those supported by ARRA funding, will inform these estimates and subsequent policies
developed by state PUCs, FERC, and other regulatory entities.
Second, a successfully deployed broadband-enabled AMI will likely spur consumer demand for
smart energy services in the home.100 Multiple components of an AMI are consumer-facing and
are meant to enhance the “fundamental link between the consumer and the grid.”101 Thus far,
however, demand for the smart grid, including the various services enabled by smart meters,
remains low. A survey conducted by General Electric in early 2010 found that only four percent
of U.S. consumers had heard of the smart grid or understood what it could do for them.102 In
addition, concerns about the accuracy,103 data security, and health impacts104 of smart meters has
fostered skepticism among a significant number of consumers, even though independent reports
commissioned by state PUCs have found smart meter measurements to be extremely precise.105
Fortunately, surveys have found that consumers are usually very eager to learn about and use these
tools once they become aware of them.106 More widespread deployment of broadband-enabled
AMI, coupled with public outreach and education by stakeholders, could bolster consumer awareness of and demand for smart grid tools and services, thus helping to overcome a potentially
significant near term barrier to adoption of advanced energy efficiency tools and to the development of a smart energy ecosystem.107
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11
Third, broadband will also be used in the near term to drive smart energy innovation within
homes. High-speed Internet connections are beginning to form the core of home area networks
(HANs), which “connect the smart meter, smart appliances, electric vehicles, and on-site electricity generation or storage, both for in-home displaces, controls, and data uploads, and to allow for
automated modulation of energy loads during peak demand periods.”108 Several HAN components
already exist, including smart appliances and machine-to-machine (M2M) technologies that
allow appliances and other in-home devices to communicate energy consumption data and other
such metrics. Many of these communications occur via wireless networks (e.g., Wi-Fi or ZigBee),
although communications via wired connections (e.g., over existing electric wiring in homes) are
possible with tools like HomePlug.109 The ultimate goal for HANs is to serve as the locus of innovation for the smart home and to enable the development of “various consumer applications, such
as remote monitoring and control of a home’s thermostat or appliances via smart phone.”110 Given
the increasing prevalence and cost-effectiveness of these components, along with a rapidly growing M2M sector, there are numerous economic incentives for both consumers and third-party
innovators to continue adopting and developing HAN services.111
In addition to consumer-facing innovations, broadband will drive several key grid-level innovations in the long term. For example, utilities will begin to deploy advanced sensor technologies
to more precisely monitor the flow of electricity through systems. Foremost among new sensor
technologies will be synchrophasors, which will provide the foundation for wide area situational
awareness systems that enable utilities to “improve the monitoring of the power system across
large geographic areas[,] effectively providing grid operators with a broad and dynamic picture of
the functioning of the grid.”112 These advanced systems require significant amounts of bandwidth
since they tolerate less latency than other smart grid components do.113
A more comprehensive and accurate view of the electricity flowing through the grid will enable
utilities to recalibrate their fuel supply strategy, their pricing structure, and their distribution
model. Three key innovations are likely. First, a more granular view of grid dynamics will facilitate the “bi-directional flow of energy,” which will, in theory, allow customers to potentially sell
back unused energy to utilities during peak times.114 Second, additional data about energy flows
will enable dynamic or real time pricing, which will facilitate more accurate pricing of energy
consumption and foster more cost-efficient use. To date, demand response programs have not
been deployed at scale and, as a result, have largely failed to generate more than nominal cost savings.115 Third, the ability to generate and analyze load data in real time could eventually facilitate
the incorporation of additional fuel sources into a utility’s supply. In particular, the smart grid is
expected to enable the integration of renewable fuel sources (e.g., wind and solar) into the national
fuel supply.116
In the longer term, the smart grid will undergird a larger hub for smart energy innovation. One
of the core long-term goals is to use the smart grid as a way to encourage the development and
purchase of plug-in hybrid vehicles. President Obama has set a national goal of having one million
“advanced technology vehicles” on the road by 2015.117 The smart grid will play an essential role in
ensuring that these vehicles’ energy needs are met without straining the grid.118
In sum, these and other approaches to enhancing energy efficiency in the United States via a
national, broadband-enabled smart grid are expected to result in enormous cost savings,119 carbon
emission reductions,120 and many other consumer welfare gains.
12
Realizing the Smart Grid Imperative
C.Conclusions
The smart grid imperative in the United States is clear. Modernizing the electric grid by injecting
intelligence into it will spur job creation, economic development, consumer welfare gains, and
cutting-edge innovation focused on enhancing energy efficiency in every facet of transmission,
distribution, and consumption. High-speed data networks will serve as the primary vehicle for
enabling these gains and for encouraging innovation along nearly every node of the grid.
That broadband is positioned as the sine qua non of the smart grid envisioned by the President,
Congress, the FCC, and state PUCs is largely undisputed. After several years of uncertainty and
debate, there is now widespread agreement that the future of the nation’s energy sector will depend
in large part on the ability of high-speed data networks and the nearly infinite universe of energy
efficiency applications and devices that they enable. What is in dispute, however, is the best way to
realize the smart grid imperative. In a sector where annual retail revenues exceeded $310 billion in
2010, the economics of the smart grid are inviting a number of new stakeholders to the table.121 As
a result, the path forward is muddled with the competing interests and fundamental disagreements
between an array of companies and interest groups.
Realizing the Smart Grid Imperative
13
III. Understanding the Divides Separating
Energy Utilities and Broadband Service
Providers .
The emergence of broadband as a viable platform upon which to build the smart grid has introduced a new set of stakeholders into the debate regarding grid modernization and 21st century
energy policy: commercial broadband service providers. As owners of communications networks
that are available to over 95 percent of households in the United States,122 broadband service
providers have significant economic incentives to become partners in national smart grid deployment efforts.123 However, the more than 5,000 utilities and power producers in the United States
also have significant incentives to build proprietary data networks to support the smart grid and
to only partner with broadband service providers in limited instances.124
These two sets of stakeholders have become immersed in major policy discussions regarding
use of commercial broadband networks for smart grid deployment.125 In addition to competing
economic interests, numerous other divides have precluded them from forming more partnerships that could accelerate the deployment of this critical infrastructure at scale.126 In many cases,
these differences appear to be intractable because they stem from divergent regulatory paradigms
that have fostered fundamentally different approaches to issues of elementary importance to grid
modernization. These different approaches are not inherently good or bad. But they are different
and, as such, render policy reform that much more challenging. This section analyzes three broad
sets of issues that have divided otherwise natural partners in updating the nation’s electric grid and
fostering the development of a smart energy ecosystem.
A. Regulatory and Incentives Divide
Whether and how a particular sector is regulated depends on multiple factors, foremost among
which are the nature of the goods or services offered to consumers, the underlying economics of producing the good or providing the service, the number and type of firms competing in
the market, and how these various dynamics contribute to overall consumer welfare. Ultimately,
regulatory frameworks are developed by policymakers to ensure specific outcomes of value, either
to the public at large or to consumers in a particular market.127 Regulations often have the practical effect of creating a variety of incentives and disincentives for firms to invest, to innovate, or to
alter business models. The scale and scope of these incentives tend to vary from sector to sector,
depending on the resulting regulatory rubric and how those regulations are implemented and
enforced by policymakers.
The regulatory paradigms currently governing the energy and broadband sectors are almost diametrically opposed. Utilities are subject to a very exacting sort of regulation that largely insulates
local energy providers from many aspects of competition, thus decreasing market-based incentives to innovate.128 Conversely, the broadband sector has been lightly regulated since high-speed
Internet access first emerged as a commercially viable service more than a decade ago.129 This
regulatory paradigm has fostered the development of intermodal competition among a variety of
broadband platforms (e.g., cable modem and wireless), which in turn has created consumer-focused
economic incentives to invest in networks and support the emergence of a wider ecosystem of innovation. In sum, these divergent regulatory systems have resulted in the development of distinct sets
14
Realizing the Smart Grid Imperative
of norms for utilities and broadband service providers regarding innovation and investment in new
services and lines of business.
In the energy sector, the provision of electricity services to households in a given geographic area
is typically considered a natural monopoly. A firm possesses a natural monopoly if it is “able to
provide a good or service to a market at a lower average cost than two or more firms because of
economies of scale or other network economies.”130 In exchange for granting a local energy firm a
monopoly, regulators impose a rigid regulatory framework to ensure universal access to services
at a reasonable price. In general, U.S. public policy has long considered the provision of basic services like electricity as “clothed with a public interest” and the providers of these services as public
utilities subject to rigorous economic regulation.131
The immediate result of this regulatory quid pro quo is the establishment of a baseline economic
framework that remunerates a firm for providing consumers with a minimum level of service.
In the absence of such strictures, monopolists have an incentive to decrease supply and increase
prices.132 Artificial price constraints are thus meant to “yield the mix of price, output, and profits
approximating that which would be produced in a competitive market.”133 In the energy sector, regulators have formalized this dynamic by creating a complex system of cost-of-service or
rate-of-return regulation that seeks to assure utilities an adequate return on investment while also
providing consumers with affordable rates.134
State PUCs are tasked with reviewing and approving an energy company’s proposed rate structure
and many other aspects of its business before new rates are implemented. Rates are based on a
number of factors, including investment in new and existing infrastructure and the cost of inputs
(e.g., fuel sources). The value of many of these factors (e.g., property and infrastructure) constitutes the “rate base,” which is a benchmark that regulators use to determine a reasonable rate of
return for a particular company.135
This approach to regulating utilities creates a very narrow set of incentives — and opportunities
— for investing in new services and otherwise pursuing new lines of business. Indeed, in many
instances, PUCs set strict per-kilowatt-hour rates for utilities, which “encourages larger sales by
utilities and equivalently discourages their energy efficiency efforts.”136 Moreover, utilities will
typically invest in new services and infrastructure only if they are able to recoup a significant share
of their costs upfront via an approved rate-of-return schedule. The result is a highly risk-averse
utility sector that lacks market-based economic incentives to innovate and change how it delivers
basic electricity.137 Moreover, this regulatory approach creates a perverse set of incentives to tacitly
encourage more energy consumption and a larger rate base to support increased demand.138 As the
U.S. Department of Energy has astutely observed, “expanded peak demand has driven the need for
additional capital projects, which increase the rate base. As energy sales grow, revenues increase.
Both factors run counter to encouraging smart grid investments.”139
Another aspect of the energy regulatory framework that complicates more robust smart grid
deployment is its state-centric nature. Indeed, the vast majority of utilities are regulated by state
PUCs. According to the U.S. Department of Energy, “state [PUCs] have jurisdiction primarily over
the large, vertically integrated, investor-owned electric utilities that own more than 38 percent of
the Nation’s generating capacity and serve about 71 percent of ultimate consumers.”140 As a result
of this patchwork system of regulation, the pace of grid modernization at the national level will be
significantly impacted by individual state PUCs. Progress is likely to be fragmented and sporadic
given the different sets of laws, precedents, and regulatory review processes implemented by individual state regulatory entities. For example, even though ARRA allocated billions of dollars for
Realizing the Smart Grid Imperative
15
smart grid pilot programs in numerous states, these initiatives must still be reviewed and approved
by the appropriate state PUC before being deployed.141
The immediate result of this regulatory paradigm and the economic incentives it creates for utilities has been a rather insular approach to smart grid deployment. While utilities have partnered
with communications companies in the past to assist in deploying systems like SCADA, some
utilities remain hesitant to leverage commercial broadband networks for smart grid purposes.142
Although the vast majority of utilities cite security and reliability concerns as the primary reasons for not partnering with broadband service providers, the current regulatory framework also
provides economic incentives for utilities to build their own networks regardless of likely cost inefficiencies and rate increases.143
These dynamics run counter to the regulatory framework and incentives for investment and innovation currently evident in the broadband sector. For much of the past two decades, the United
States has implemented a deregulatory approach to broadband Internet access services. This stems
directly from Congress’s intent, articulated in 1996, to “preserve the vibrant and competitive free
market that presently exists for the Internet and other interactive computer services, unfettered by
Federal or State regulation.”144 Congress delegated oversight authority to the FCC, empowering the
agency to ensure that advanced communications services are available to all Americans.145
Over the past decade, the FCC has mostly succeeded in preserving the deregulatory approach to
broadband and has recognized that limited regulation of the sector is essential to encouraging
additional investment in next-generation networks and innovation throughout the broadband ecosystem.146 In response, broadband service providers have invested hundreds of billions of dollars
to upgrade existing commercial networks and deploy next-generation services to nearly every part
of the country.147 Much of this investment has been driven by a nearly insatiable demand among
consumers for additional bandwidth to accommodate more advanced uses (e.g., online video).
As a result, an ecosystem of innovation has flourished around the broadband network, driving
the rapid development and deployment of advanced devices to access high-speed networks and
the cutting-edge content that they deliver. This ecosystem has proven to be resilient in the face
of increasing consumer demand and has begun to target innovations at specific user groups.148
Unlike in the utility sector, the deregulatory approach to broadband has created incentives for
network owners and others in the ecosystem to experiment with new business models.149
Equally as important, service providers have the latitude and economic incentive to experiment
with new lines of business as the broadband adoption rate reaches a saturation point.150 To this
end, broadband service providers are already investigating the viability of additional revenue
streams to supplement revenues derived from consumer subscriptions, which are expected to
flatten over the next few years.151 These new partnerships and business models, however, are not
intended to be zero-sum arrangements. In other words, broadband service providers are not
attempting to become de facto healthcare and energy providers by delivering telemedicine and
smart grid services via existing broadband connections. On the contrary, broadband service
providers are seeking to diversify the number and type of services available to consumers and otherwise bolster the existing ecosystem in order to create additional revenue opportunities. Congress
echoed these goals in its directive to the FCC to articulate a strategy for using this technology to
realize an array of national purposes.152
As a result of prevailing regulatory dynamics and the myriad economic incentives they support,
broadband service providers view the smart grid as an opportunity to monetize existing core
competencies and expertise to facilitate the growth of an emerging service.153 Broadband service
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Realizing the Smart Grid Imperative
providers view partnerships with utilities as an obvious convergence that would bring together
essential components for the smart grid in an efficient and cost-effective manner.154 By seeking to
partner with utilities to establish a new class of specialized energy services for consumers, broadband service providers are attempting to further differentiate themselves in an already competitive
marketplace.155 To do so is a natural reaction to the economic signals emanating from the current regulatory framework. Moreover, these arrangements would be beneficial to all stakeholders:
broadband service providers would be able to offer customers a new suite of services; where
appropriate, utilities would gain access to modular, next-generation networks and proven network
management expertise; consumers would have a number of choices for smart grid-enabled services; and the nation would more swiftly realize the many goals for the smart grid articulated by
the President, Congress, the U.S. Department of Energy, and the FCC.
However, contrasting regulatory frameworks hinder rather than encourage the forging of partnerships. More precisely, the economic incentives created and fostered by these disparate regulatory
regimes have divided two sets of potential partners in the smart grid space. Several state and
federal entities have offered proposals for bridging these divides, but little progress has been made
toward aligning the incentives of both sectors to facilitate the rapid deployment of a national smart
electric grid.156 Until these misaligned incentives are addressed, utilities and broadband service
providers will likely be unable to collaborate fully in furthering the smart grid.
Moreover, the resolution of this fundamental divide could foster additional collaboration on other
vital aspects of smart grid deployment, including the viability of commercial broadband networks
for smart grid purposes and the need to develop consumer-focused smart energy strategies and
services.
B. Network Divide
Utilities and broadband service providers often have divergent views regarding the ability of commercial broadband networks to accommodate grid modernization efforts.
Given the essential nature of electricity and the proven fragility of the grid, the infrastructure
maintained by utilities is rightfully held to very high standards of reliability and security. Indeed,
electricity providers are required to adhere to multiple reporting requirements, all of which are
meant to prevent disruptive blackouts. At the state level, the vast majority of PUCs require utilities
to report “event information” regarding the duration and frequency of both momentary and sustained service interruptions.157 The U.S. Department of Energy and the North American Electric
Reliability Corporation (NERC) also “require reporting of major electricity system incidents and
disturbance events. Reporting to these national bodies is…mandatory, required in near-real time,
and includes incidents that sometimes result in no loss of electric service to customers.”158 Utilities
must also comply with numerous state and federal reliability standards, which seek to protect
against outages and mitigate damages resulting from service interruptions.159 FERC coordinates
with NERC on reliability investigations and enforcement as they relate to bulk power.160 Failure to
comply with these standards could result in a penalty.161
The rapid emergence and integration of numerous new smart grid components has introduced
uncertainty regarding the impact of new communications technologies on traditional notions of
reliability.162 These concerns have trickled down to individual utilities, creating somewhat widespread agreement that relying on non-proprietary communications networks to deploy the smart
grid will be inadequate to meet stringent reliability standards. During its investigation into the
communications requirements of the smart grid, the U.S. Department of Energy found that one
Realizing the Smart Grid Imperative
17
of the primary concerns of utilities vis-à-vis smart grid deployments was that they not pursue an
approach or suite of tools that “could potentially compromise reliability.”163 Collectively, these concerns form the basis for an industry-wide skepticism regarding the ability of existing commercial
broadband networks to support core elements of the smart grid.
During the DOE inquiry, “the most-discussed issues [with regard to the reliability of commercial
broadband networks] were backup power for communications services, priority of service in the
event of either an outage or congestion, and overall communications network design and management.”164 Backup power refers to the amount of emergency power utilities have on hand in case of
an outage. Many utilities have enough backup power for at least 72 hours.165 A number of broadband providers require similar amounts of backup power across their networks, but the DOE
has observed that “there is generally a gap between utilities’ and commercial service providers’
relative assessments of the sufficiency of the backup power capabilities in commercial networks.”166
Harmonizing these assessments is essential given the importance of real-time data and other functions to the value of the smart grid.167
Utilities also expressed concern about the ability of broadband service providers to guarantee
priority service during an emergency and during times of network congestion, both of which
could compromise the delivery of mission-critical, time-sensitive energy data.168 A range of contractual agreements and government programs already exist that would allow utilities to arrange
for priority service with network owners. These include Service Level Agreements, which assure
a minimum quality of broadband service for utilities,169 and several federal initiatives like the
Telecommunications Service Priority, which “enables certain telecommunications users to receive
priority treatment” for specific services.170 The DOE has observed that utilities have yet to fully
avail themselves of these options.171 Moreover, as broadband service providers continue to develop
specialized service agreements to deliver time-sensitive data for services like telemedicine, their
ability to guarantee priority of service for emerging smart energy applications will be tested and
honed. Ultimately, broadband service providers have a significant economic incentive to perfect
these agreements lest they foreclose a potentially lucrative new line of business.172
Despite the advances being made by broadband service providers with regard to assuaging reliability concerns, most utilities prefer deploying proprietary wired and wireless networks for
the smart grid.173 As a result, many utilities are foregoing the opportunity to explore whether a
particular broadband provider could effectively apply its expertise in building and maintaining
communications networks that support an array of mission-critical objectives.174 Indeed, concerns
about “creating additional interdependencies between different parts of the nation’s critical infrastructure” are mostly specious because proprietary networks built for smart grid purposes would
be no less critical than extant broadband network infrastructure.175 Since whichever broadband
network is used for the smart grid will be considered of overriding national importance, the ability to manage and maintain it becomes especially crucial. Thus, the proven ability of broadband
service providers to manage, maintain, and secure critical infrastructure, like aspects of the U.S.
Department of Defense’s communications system, should not be discounted.176
In general, the drive by some utilities to build proprietary communications networks for the smart
grid raises a number of issues. First and foremost are the underlying economic motivations. As
previously discussed, the prevailing regulatory structure for the energy sector has created a direct
correlation between investment and rates: increases in the former typically lead to increases in the
latter in order to ensure a guaranteed rate of return. By building proprietary networks, utilities would
not only be assured recoupment of their investments; they would also be guaranteed rate increases to
offset likely decreases in energy consumption. Conversely, collaborating with commercial broadband
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Realizing the Smart Grid Imperative
service providers for these purposes would likely be more cost-efficient in many instances, but would
not, under the prevailing paradigm, lead to the rate increases necessary to offset revenue decreases
resulting from more efficient energy consumption.177
Second, the deployment of proprietary communications networks underscores the importance of
network interoperability between networks used for smart grid purposes and the larger broadband ecosystem. Efforts to devise interoperability standards are currently underway at the federal
level, under the leadership of FERC in close coordination with the National Institute of Standards
and Technology (NIST).178 However, the proliferation of multiple proprietary networks designed
solely for the smart grid could impede interoperability with commercial broadband networks and
decrease potential consumer welfare gains.179 Indeed, the continued development of an “Internet of
things”180 and a smart energy ecosystem could be thwarted if smart grid networks fail to seamlessly interoperate with the broadband ecosystem.
Third, the potential for technological obsolescence impacts the long term efficacy of proprietary
communications networks. As many stakeholders have observed, the communications needs of
the smart grid are still in flux and will continue to change rapidly in the coming years.181 Under
the current regulatory framework, utilities typically lack the ability and incentive to update their
networks regularly. Indeed, the formal processes for reviewing investment and rate increase proposals by state PUCs — so-called rate cases — are time-intensive investigations that can last for
many months, a process that neither embraces nor facilitates the rapid pace of broadband-enabled
innovation.182 As a result, many utilities still use first-generation systems like SCADA and AMR,
which, in many cases, remain tethered to basic communications infrastructure (e.g., the copperbased, public switched telephone network).
Many of these network concerns are amplified by each sector’s business practices and technology
standards, which derive directly from prevailing regulatory paradigms and the economic incentives
that these frameworks generate. As a result, formidable barriers exist to more robust collaboration
between utilities and broadband service providers. Commercial broadband networks may not be the
solution in every instance, but such a determination is impossible to make without a fuller understanding of their many positive attributes and the ecosystem of innovation they have spawned.183
C. Consumer Divide
Regulation in both the energy and broadband sectors is guided by a similar social policy. In each
case, regulators have a mandate to develop policies to ensure that the public is able to receive
electricity and access advanced communications services. However, the nature of the service being
delivered alters the scope of this standard. For example, since electricity is “clothed with a public
interest,” local monopolies are obligated to deliver, and regulators are empowered to assure delivery of, this basic service to consumers at reasonable rates. As previously discussed, this dynamic
has necessitated an exacting regulatory scheme that has all but erased any incentive for the
monopoly utility to innovate or offer consumers anything more than basic service.184
In the broadband context, however, the interplay between oversight agencies like the FCC and
service providers is fundamentally different. With regard to broadband service, the FCC is only
empowered to ensure that it is made available to all Americans in a reasonable and timely manner.185
Additional policymaking efforts influence the deployment decisions of broadband service providers, but the FCC’s core mission vis-à-vis broadband is only to ensure that it is widely available.186
This light regulatory touch, along with the intermodal nature of broadband platforms, has fostered
the development of an interdependent ecosystem of innovation.
Realizing the Smart Grid Imperative
19
These divergent frameworks have also resulted in predictably different approaches toward
consumers, the ultimate beneficiaries of energy and broadband services. Consumer-facing innovations offer one measure of how utilities and broadband service providers respond to consumer
demand.
As regulated monopolies, utilities’ interactions with consumers are mostly determined by regulatory forces, not market forces. The prevailing energy regulatory paradigm has “disenfranchised”
the consumer from most aspects of product development.187 Utilities ultimately have little incentive to seek rate increases for unproven or experimental services that might enhance consumer
welfare.188 Thus, the consumer end of the electricity delivery and consumption model has
remained largely unchanged for decades.189 The vast majority of innovation has occurred on the
back end of the transmission and distribution model (e.g., the deployment of AMR). These systems have become somewhat more efficient and technologically complex, but consumers continue
to receive the same set of basic services. One of the primary consumer-facing changes has been
a rise in rates as utilities target investments at maintaining existing infrastructure, streamlining back-office operations, accommodating additional capacity, and absorbing the costs of more
expensive fuel supplies.190 Consumer demand, however, has slowed considerably over the last few
years and is expected to flatten over the coming decades.191
Consumer-facing technological innovation in the energy sector has largely centered on leveraging the Internet to make additional information and services available to customers. These range
widely in scope and complexity. For example, most utilities offer customers the ability to access
accounts and pay bills online. Some have also begun to use social media (e.g., blogs, Facebook,
and Twitter) to engage customers in initiatives and to raise awareness of particular issues.192 In
addition, several mid-size and large utility companies in the United States are beginning to deploy
energy efficiency tools (e.g., online energy calculators) and forge partnerships with third-party
applications developers in an effort to provide customers with additional energy consumption
tools. Eleven U.S. utilities, for example, partnered with Google to test PowerMeter, an application launched in 2009 that allowed consumers to monitor their energy use online regardless of
location.193 This service let customers track the costs of their energy consumption and provided a
range of tools to set and adhere to a budget.194 These efforts, though generally increasing as more
utilities experiment with online features, remain limited and have yet to have a disruptive impact
on the way most customers consume energy. Indeed, in June 2011 Google announced that it was
ending its PowerMeter initiative due to an inability to scale the program out.195
An illustrative example of the wariness with which utilities typically approach new technologies and innovative business methods can be seen in the debate over customer data privacy. Data
generated by smart meters and other components of the smart grid represent the primary input
that will drive innovation in the smart energy ecosystem over the long term. Generating, transmitting, and analyzing customer consumption data will help utilities and innovators enhance energy
efficiency and provide consumers with more control over their energy use.196 However, the generation and aggregation of large amounts of customer data has raised a host of privacy and security
concerns.
Whereas in the past utilities only released usage data to customers once per month — “after
the energy use occurs” and without any knowledge of “the price of electricity, the source of the
power or the amount of power need to run each of their appliances”197— a new class of smart
energy tools that operate in real time can produce an enormous amount of granular consumption data that, if skillfully manipulated, could reveal a “detailed picture of residential life.”198 This
information, however, is essential to enabling many of the smart energy innovations envisioned
20
Realizing the Smart Grid Imperative
by policymakers.199 Providing third-party innovators with access to this data, for example, would
likely ignite innovation in customer-facing smart home tools.200 Empowering customers with
ownership rights to this data would also likely drive demand for energy management tools and
other smart home innovations.201 But the nature and granularity of this data raise a host of novel
questions, in particular whether and how existing privacy laws apply to the smart grid.202
These concerns — and the potential for legal liability if data are compromised — underscore the
importance of determining who owns the data generated at the meter and which entities can
access it.203 Some argue that data generated by smart meters installed by utilities are likely owned,
in the first instance, by the utility.204 The extent to which customers and third-party innovators
have any access rights or ownership stakes in this data remains unclear.205 An inquiry by DOE in
2010 found that a significant number of utilities agreed that they should share access and ownership rights to this data with consumers.206 However, one survey of large utilities in 2009 found that
“of the almost 17 million [smart] meters being planned or deployed by [survey] respondents, there
were clear plans to provide customer access to the data only 35 [percent] of the time. Furthermore,
less than 1 [percent] of the respondent’s customers have real-time access to their energy data
today.”207 In addition, uncertainty remains among utilities regarding the type of data to which customers and third parties should have access.208 Further muddling these disagreements is the fact
that different states require different levels of data granularity and customer access.209 Ultimately,
utilities have a strong financial incentive to control customer usage data generated at the meter
and monetize third-party access to it.210 Doing so would allow utilities to moderate and control the
pace of innovation in consumer-facing smart grid tools.211 In lieu of widely accepted standards for
data ownership, access, and privacy, the fragmented nature of energy regulation could “straightjacket[] innovation” at the edge of the smart grid.212
The highly segmented nature of the energy sector — where utilities continue to play a significant
gatekeeper role vis-à-vis customer-facing smart grid innovation — is in sharp contrast to the
interdependent, consumer-driven ecosystem that has emerged in the broadband space. Broadband
is a platform that encourages innovation and experimentation. It serves as the basis upon which
innovators build new tools and services for use by consumers. An illustrative example of this
dynamic — and a potential template for the smart energy ecosystem — is the emergence of a
robust marketplace for wireless applications that are available for installation on an array of mobile
handsets.
Over the last several years, wireless network owners have invested tens of billions of dollars to
deploy next-generation mobile broadband infrastructure.213 Service providers have made these
investments mostly in an effort to keep up with insatiable consumer demand for more mobile
broadband capacity, which is being used to access the Internet and the growing universe of location-based services that it enables.214 Mobile handset makers have responded to these investments
and consumer demand by developing a new class of advanced smartphones, which are capable of
leveraging the full power of next-generation wireless broadband networks.215 These developments
have also spurred content makers to produce specially designed wireless applications that run on
smartphones and that are enabled by broadband. The market for these types of applications has
grown exponentially since first emerging in 2007. The global apps market is expected to grow to
a $25 billion per year industry by 2015,216 up from just $1 billion in 2009 and essentially zero in
2007.217 This type of interplay and consumer focus is simply lacking in the energy sector.
Since regulators tightly control investment and pricing in the energy sector, and since utilities are
guaranteed a predetermined rate of return on investments, policy does not encourage utilities to
respond to consumer demand for more innovative services. As a result, the delivery and consumption
Realizing the Smart Grid Imperative
21
of electricity has remained essentially unchanged for decades. Moreover, without ready access to
innovations, consumers will not develop a knowledge of or demand for cutting-edge smart grid
tools.218 In the absence of consumer demand for smart grid services, and in light of the prevailing
paradigm of utility-consumer interactions, utilities lack an incentive to stir demand for services
that will likely cut electricity consumption.
D.Conclusions
The regulatory frameworks governing utilities and broadband service providers have resulted in
substantial divides between two natural partners in the development and deployment of a nationwide smart energy grid. Stakeholders in each sector respond to unique economic incentives and
regulatory requirements when making investment decisions and responding to consumer demand.
Utilities remain skeptical of using commercial broadband networks to support the smart grid
and have concerns regarding the reliability, security, and overall robustness of existing broadband
infrastructure. Broadband service providers, on the other hand, view the smart grid as a compelling business opportunity that would provide them with another means of generating revenue
and providing end-users with access to new services. Regardless of how compelling partnership
between utilities and broadband firms may appear, the divides discussed in this section are real
and impede the swift realization of state and federal grid modernization imperatives.
22
Realizing the Smart Grid Imperative
IV. Bridging the Divides to Realize the
Imperative: A Legal and Policy Framework for
the 21st Century Broadband-Enabled Smart Grid
Realizing the smart grid imperative is a goal shared by policymakers at every level of government
and by stakeholders across the energy and broadband sectors. Billions of dollars have already been
invested in pilot programs, worker retraining efforts, and standard-setting processes in an effort
to more rapidly modernize the grid and develop an ecosystem of innovation for energy services.
However, fundamental questions remain unanswered, and potential partners in this space remain
divided over fundamental issues related to the smart grid. Broadband is not a panacea for the
many energy problems facing the nation, but it is widely agreed that it “will be an important part
of the solution.”219 Going forward, a critical component of realizing the smart grid imperative is
bringing utilities and broadband service providers together and creating an environment more
supportive of collaboration between these two groups of stakeholders.
This section articulates a framework for bridging these divides and facilitating more meaningful
interactions among natural partners in smart grid deployment. The single most important part
of this framework is rationally reforming the energy regulatory paradigm to leverage and adapt
the innovative spirit and consumer-driven responsiveness that characterize the broadband space.
Revising this paradigm will also help to align the economic incentives of stakeholders in both sectors. With properly aligned incentives, collaboration could quickly flourish and assuage concerns
among utilities regarding the robustness and reliability of existing commercial broadband networks. Finally, realigning incentives and modernizing regulatory frameworks could also enhance
the way in which utilities interact with consumers and could, in turn, help to drive demand for
innovative smart energy services.
A. Bridging the Regulatory and Incentives Divide
Even though individual states and their PUCs have long championed the development of new
approaches to electricity delivery and consumption, realizing the smart grid imperative is decidedly a national goal.220 Both President Bush and President Obama have trumpeted it; a significant
amount of funding was earmarked for the smart grid in the 2009 federal stimulus package; and,
more recently, federal entities including the DOE, FCC, FERC, NERC, and NIST have addressed
it from a variety of vantages. The states have participated in many of these deliberations and
processes, but their role is mostly consultative in nature.221 And yet, the prevailing regulatory
framework for the delivery of electricity to residential customers has positioned state PUCs as
the primary conduit through which smart grid innovations will be vetted and implemented. This
dynamic raises the possibility of disruptive jurisdictional clashes in the deployment of the smart
grid and the creation of a wider smart energy ecosystem.
To date, there has been a flurry of activity at the state level regarding smart grid deployment. Many
state PUCs have already opened smart grid dockets to examine the regulatory issues implicated by
this new system, and state legislatures are also increasingly addressing these issues.222 Indeed, as of
June 2011, 25 states had adopted legislation regarding aspects of the smart grid.223 However, there
have already been glimpses of tension between the national imperative for smart grid deployment
and existing regulatory structures at the state level.
Realizing the Smart Grid Imperative
23
For example, an ambitious smart metering proposal put forward by a large utility in Maryland in
2010 was initially rejected by the state’s PUC. The original proposal for the initiative, which was
to be funded, in part, by a federal stimulus grant, sought to place the vast majority of the financial burden on ratepayers by implementing a customer surcharge.224 In denying the proposal,
the PUC expressed doubt about whether the benefits of the smart grid, as detailed by the utility,
exceeded the costs, which were projected to reach $1 billion. In particular, the PUC stated that the
original proposal asked “ratepayers to take significant financial and technological risks and adapt
to categorical changes in rate design, all in exchange for savings that are largely indirect, highly
contingent and a long way off.”225 The PUC did, however, allow the utility to submit a revised proposal, which it eventually approved.226 Under the revised plan, the utility would “shoulder the early
costs to install smart meters in homes and businesses and wouldn’t be able to seek reimbursement
through rate increases until 2014 at the earliest.”227 Ultimately, the PUC forced the utility to conform its business plan to the prevailing regulatory standard in order to “match[] customer costs
and benefits more closely.”228 Even though this disagreement was eventually settled, it highlights
the likelihood for fragmented—and fractious—development of a national smart grid as state regulators channel smart grid innovation through the strictures of prevailing regulatory models.
In setting out a smart grid policy for the United States in 2007, EISA did not alter the “jurisdictional boundaries between federal and state regulation over the rates, terms, and conditions of
transmission service and sales of electricity.”229 This determination did little to change the current
model of cooperative federalism between federal and state regulatory entities in the energy sector.230 The immediate result has been the application of existing regulations and assumptions when
reviewing smart grid proposals. And even though a growing number of state PUCs are beginning
to examine the impact of smart grid deployments on these regulatory structures, progress in the
short term will likely be governed by existing frameworks. However, EISA did empower FERC
to adopt interoperability standards for the smart grid.231 FERC understands this Congressional
mandate to mean that it “has the authority to adopt a standard that will be applicable to all electric
power facilities and devices with smart grid features, including those at the local distribution
level and those used directly by retail customers.”232 In addition, the Obama administration has
argued that the development and adoption of such “open” standards for smart grid interoperability
would “catalyze innovation” by “demonstrat[ing] to entrepreneurs that a significant market will
exist for their work.”233 Thus, given the interstate nature of the smart grid envisioned by federal
policymakers, there appears to be an inherent tension in deferring to state PUCs for smart grid
implementation and realization of the U.S. smart grid imperative.234
So long as each state PUC has the unfettered ability to review and approve smart grid deployment
plans by local utilities, an overhaul of the prevailing energy regulatory framework and the economic incentives it creates will be extremely difficult. As such, Congress should update the smart
grid policy outlined in EISA to include a national regulatory framework to guide deployment efforts.
Doing so could reduce the likelihood of a patchwork system of smart grid policies from developing and would accelerate policy reforms that support new economic incentives for utilities to
embrace innovation.235
A similar approach was taken in the early 1990s to accommodate the rapid growth of the wireless
marketplace. Prior to the implementation of a national regulatory framework, wireless services
were largely regulated at the state level under existing telecommunications laws.236 The national
regulatory framework implemented by Congress explicitly acknowledged that the interstate nature
of wireless required a more streamlined approach to unburden the market of many inconsistent
state-level regulations.237 The new framework did carve out limited regulatory authority for the
states by winnowing jurisdiction to “other terms and conditions” of service; ratemaking authority
24
Realizing the Smart Grid Imperative
was explicitly preempted.238 The result of this policy reformulation was accelerated deployment
of wireless networks that were national in scope. Competition among different carriers emerged,
which drove down prices and spurred the development of new network technologies and services
(e.g., the emergence of mobile data).239 The efficacy of implementing a similar model to govern the
emerging smart grid space should be investigated by Congress.
This type of regulatory realignment, however, need not be construed or structured as federal preemption of state smart grid efforts. Indeed, a restructuring could be positioned as an update to the current
model of cooperative federalism. To this end, Congress could defer to the appropriate federal agency
(likely FERC) to develop regulatory and legal standards to guide the development and deployment
of the smart grid. These standards, which would identify the outer limits of appropriate state-level
action on the smart grid, would be considered both a “floor” and a “ceiling” for the purposes of
guiding state PUCs during implementation of various components of the smart grid.240 Federal
standards could encompass a range of issues, including: standards of review for smart grid project
applications; revising rate formulas for smart grid projects (e.g., by encouraging, among other
things, rate decoupling);241 creating economic incentives to spur customer-facing innovation; and
encouraging consideration of non-traditional methods of investment recovery by utilities.
In the alternative, federal entities like FERC and DOE, in close consultation with Congress, could
develop a program to encourage specific regulatory and legal reforms at the state level. In particular,
federal energy officials could adapt the “Race to the Top” model that proved effective in facilitating
policy change in the education sector at the state level. The Race to the Top program “rewarded
schools and states that modeled reforms on predetermined federal criteria.”242 Even though only
a small number of states ultimately received federal funding through this program, the mere
possibility of receiving a federal grant spurred nearly every state in the country to adopt a range
of reforms that many stakeholders consider essential to modernizing the country’s education
paradigm.243 By adapting this approach for smart grid purposes, leading states like California,
Colorado, and New York could become models for forward-looking regulatory reforms in the
smart grid space. Furthermore, the prospect of securing additional federal funding for state smart
grid projects could encourage policy and legal reforms that conform to model standards developed by DOE, FERC, and counterparts at the state level.244
Implementing a national regulatory framework would further clarify smart grid goals and outline
an actionable process for realizing them. Revising the prevailing regulatory framework would also
realign economic incentives for utilities wishing to pursue smart grid deployments. Such realignment should include incentives for partnering with commercial broadband service providers. For
example, national standards could encompass a set of incentives for reforming ratemaking at the
state level. These standards could be developed in partnership with the FCC, which has already
explored these dynamics and put forward recommendations focused on “reduc[ing] impediments
and financial disincentives [at the state level] to using commercial service providers for Smart
Grid communications.”245 Similarly, a program modeled on Race to the Top could create a funding mechanism through which smart grid investments made by utilities in partnership with a
commercial broadband service provider are matched, up to a certain percentage, by a grant from
DOE.246
This type of approach is preferable to the status quo, as most PUCs lack the ability to unilaterally
implement the legal changes necessary to facilitate rapid smart grid deployment. Ultimately, under
the prevailing regulatory framework, PUCs remain reactive to the actions of the utilities that operate in their jurisdictional orbit. Moreover, some argue that the “long-standing relationship between
utilities and [state] regulators presents a serious risk that regulators will adopt [a] utility-centric
Realizing the Smart Grid Imperative
25
vision of the smart grid.”247 As such, the present dynamic is constructed to produce sub-optimal
results in furtherance of realizing the smart grid imperative.
State PUCs should not be in a position where they are required, in effect, to anoint winners and
losers. A comprehensive overhaul of the energy regulatory paradigm could replace the narrow
set of incentives created by monopoly regulation with a broader array of economic incentives
produced by more organic market forces. Such a framework could encourage more collaboration
with commercial broadband service providers and could yield more cost-efficient solutions to the
timely deployment of a broadband-enabled smart grid that is national in scope.
B. Bridging the Network Divide
In order to assuage concerns and correct negative perceptions regarding the reliability and security
of using existing commercial broadband networks for smart grid purposes, policymakers at the
state and federal levels should work together to implement a multifaceted plan focused on closing
the network divide that separates utilities and commercial broadband service providers. Such a
plan should include at least four components.
First, policymakers must work together to ensure that these two groups of stakeholders better understand the capabilities and limitations of each other’s business models, technologies, and networks. As
DOE has noted, the evolving nature of the communications requirements of smart grid components has created uncertainty regarding the amount of bandwidth and the characteristics (e.g.,
reliability standards) of the network needed to support these systems.248 As a result, utilities are
generally skeptical of the reliability of commercial broadband networks and of the ability of service
providers to ensure priority delivery of data during times of emergency or network congestion.
However, as previously discussed, commercial broadband service providers have deep expertise
in network management and cybersecurity and are in the process of further honing these skills
for “specialized services” like telemedicine. Additional collaboration among regulatory entities
like the DOE, FERC, and FCC could facilitate better information sharing — and trust — among
utilities and broadband service providers. Recommendations by the FCC and DOE to these ends,
including the development of online information sharing tools, should be viewed as a first step
toward more robust collaboration in this space.249 In addition, utilities and commercial broadband
service providers should be encouraged to form exploratory partnerships to investigate how they
might leverage discrete core competencies and existing resources in the deployment of smart grid
components.250
Second, to facilitate more rapid smart grid deployments and potentially foster additional collaboration between utilities and commercial broadband service providers, federal authorities must issue
baseline smart grid network parameters as soon as possible. To this end, the FCC has called on
NERC to “revise its security requirements to provide utilities more explicit guidance about the use
of commercial and other shared networks for critical communications.”251 NERC has responded by
convening a smart grid task force to study the reliability and security aspects of U.S. grid modernization proposals.252 However, the recommendations included in its initial report were tentative
and have positioned the agency as reactive to smart grid market developments rather than as a
pro-active entity that could enhance innovation by clarifying its standards in the short term and
adjusting them over time.253 Establishing baseline requirements and inviting comment for future
adjustments could jumpstart a number of essential inquiries into the viability of using commercial
broadband networks for smart grid purposes.254 Indeed, the FCC has opened a “proceeding to
explore the reliability and resiliency” of these networks.255 But in the absence of baseline reliability
and security standards, any FCC inquiry will be incomplete.
26
Realizing the Smart Grid Imperative
Third, the interoperability standards being developed by NIST must ensure that every component of
the smart grid is able to seamlessly communicate with the existing broadband ecosystem. To date,
inquiries into the viability of using the Internet Protocol for the smart grid have mostly centered
on security concerns about connecting the smart grid to the “public Internet.”256 While crucial,
the narrowness of these inquiries could unintentionally foreclose more robust innovation across
the ecosystem of networks, devices, and content that has developed in the wider broadband
space. Plugging the smart grid into this ecosystem is a core national purpose of broadband and
would facilitate the emergence of a more expansive and interconnected smart energy ecosystem
that could radically change current notions of energy generation, transmission, delivery, and
consumption.257
Fourth, in addition to, or perhaps in lieu of, the exploratory partnerships described above, federal
and state policymakers could attempt to quell utility skepticism regarding commercial broadband
networks by supporting demonstration projects. These projects could be jointly administered by the
FCC and FERC or DOE and could be modeled on the FCC’s Rural Healthcare Pilot Program258 or
its proposed Health Care Broadband Infrastructure Fund.259 Both of these programs seek to spur
the deployment and adoption of broadband-enabled telemedicine solutions in rural, unserved,
and underserved areas of the country. Establishing such a program in the smart grid space could
bolster collaboration in the near term and could serve as a model for additional incentive-based
partnerships described in Section IV.A.260
Taken together, these four components could begin to address the issues raised by utilities regarding the viability of commercial broadband networks for smart grid deployment. Moreover, they
could encourage further collaboration and foster trust among stakeholders. Ultimately, the more
that these two stakeholder groups can work together on smart grid issues, the more likely it is that
they will begin to recognize a commonality and shared purpose regarding grid modernization.
C. Bridging the Consumer Divide
Consumers will play a key role in ensuring that the smart grid imperative is fully realized in the
United States. Indeed, without sufficient consumer participation in the development of these
services, stakeholders risk devising solutions that do not benefit those actually consuming electricity.261 This outcome appears all but assured under the current energy regulatory paradigm, which
has fostered an arms-length relationship between utilities and customers. In order to ensure that
smart grid innovation is geared toward enhancing consumer welfare as well as bolstering energy
efficiency, policymakers must address two core aspects related to consumers in this emerging
space.
First, policies related to managing and securing customer consumption data generated by the smart
grid must be clarified. This data will be a key input in the array of energy-management tools and
other services that will begin to emerge as smart grid deployment accelerates. However, as previously discussed, many unanswered questions remain regarding who owns this data, which entities
can access it, and what can be done with it once it has been accessed. Utilities have an economic
incentive to retain customer data and to act as the primary gatekeeper of it. Consumers also have
a compelling ownership interest because the data could reveal personal details about a particular
household. An immediate priority for state and federal policymakers is to determine parameters
for smart grid data ownership and access rights. To this end, the FCC has called on states to
“provide consumers access to, and control of, their own digital energy information, including
real-time information from smart meters and historical consumption, price and bill data over the
Internet.”262 To ensure that this data is kept secure and sufficiently private, the FCC recommends
Realizing the Smart Grid Imperative
27
including safeguards and accessibility standards in smart grid rate cases at the state level.263 DOE,
however, recommends that utilities maintain some level of ownership of this data for “utilityrelated business purposes.”264 Moreover, DOE has identified disagreement among stakeholders
regarding whether consumers should be entitled to own their data or merely have a right to access
it.265 In order to jumpstart innovation at the edge of the smart grid (e.g., smart home applications),
consumers should have ownership of their consumption data.266 Utilities should of course continue
to have access rights to this information for their own proprietary in-house business purposes.
Such an arrangement would ensure that third-party innovators and utilities “compete on a level
playing field” when it comes to developing consumer-facing smart energy tools.267
With regard to ensuring the privacy and security of this data, standards are being developed by
a number of entities.268 These standards and others related to the accessibility of consumer data
could serve as models for the states as they continue forward with smart grid project review.269
However, federal legislation may be needed to formalize how these standards are developed and
enforced.270 To this end, ongoing federal policymaking efforts around online privacy generally
should inform and potentially encompass standards related to the data generated by the smart
grid.271 In particular, these efforts should be modeled on the Federal Trade Commission’s “Fair
Information Practice Principles (FIPPs),”272 a framework developed to “provide consistent, comprehensible data privacy protection” for individuals in the Internet era.273 Self-regulatory models
for the development and enforcement of privacy standards should also be explored.274 Such an
approach would be in furtherance of a comprehensive federal vision for commercial data privacy
that is built upon an “expanded” yet flexible set of FIPPs and that seeks to provide consumers with
more control over their data.275 Addressing these issues in the near term would also likely bolster
consumer demand for smart grid services.276
The second consumer-related aspect that must be addressed by policymakers and stakeholders is an
overhaul of the current utility-customer dynamic. As previously discussed, the prevailing regulatory framework creates little incentive for utilities to treat customers as anything other than
passive ratepayers. This dynamic must change, however, in order to generate sufficient consumer
awareness of and demand for smart grid services.277 Part of this will be accomplished by clarifying consumption data ownership rights and by modernizing the prevailing regulatory framework.
However, a significant component of shifting this dynamic could stem from partnerships with
commercial broadband service providers.
These partnerships could yield a number of benefits. First, utilities could leverage the existing
goodwill that broadband service providers have with their customers to increase awareness of
the benefits enabled by the smart grid.278 Even though utility customer satisfaction is relatively
strong, these service providers could enhance customer education efforts regarding smart meter
and smart grid deployments.279 Lack of awareness of these efforts and the likely long term benefits
of the smart grid has contributed to tepid demand for these services. By forging these types of
partnerships, utilities could reverse these trends by, among other things, tapping into the proven
marketing and communications expertise of broadband service providers.280 Second, collaborating
more closely with broadband service providers could create a culture of innovation that has been
largely absent from the utility sector for decades.281 The broadband ecosystem has driven demand
for more innovative and robust services and continues to propel massive investments in the
network and at its edge. Linking these two sectors together could further bolster the development
of an ecosystem of innovation that responds to consumer demand by producing practical energy
efficiency tools and supporting the development of cutting-edge new services like plug-in hybrid
vehicles.
28
Realizing the Smart Grid Imperative
V. Conclusion
The smart grid and the array of innovations it is expected to enable lay at the heart of every major
energy goal outlined by policymakers in the United States over the last several decades. The development and proliferation of plug-in hybrid electric vehicles; enhanced energy efficiency; energy
independence; lower carbon emissions; and increased utilization of renewable fuel sources all,
to varying degrees, depend on a modern, intelligent, and more secure electric grid.282 Hence the
smart grid imperative articulated by the President and Congress and pursued by the DOE, FCC,
FERC, NIST, the National Association of Regulatory Utility Commissioners, and numerous other
stakeholders at the state and federal levels.
In furtherance of these goals, this paper has underscored the importance of high-speed data
networks to grid modernization efforts. Even though the communications needs of current-generation smart grid tools appear to be modest, the evolving nature of the sector requires a flexible,
adaptable, and modular infrastructure to support innovation going forward. Broadband networks
meet these specifications. However, the prevailing energy regulatory framework, skewed incentives, and entrenched interests have made utilities generally resistant to and skeptical of pursuing
potentially welfare-enhancing collaborations with commercial broadband network owners.283
The resulting divides over issues like economic incentives to innovate and competing perceptions regarding network reliability and consumer welfare have pitted natural partners in smart
grid deployment against each other. In this divisive environment, a new framework is necessary
to realize the U.S. smart grid imperative. This paper has outlined a way forward that will reform
the energy regulatory paradigm, realign economic incentives, and remind utilities that consumer
welfare and national energy efficiency goals are of paramount concern.
Achieving the many goals for the smart grid will be difficult. Hard, complex decisions will have
to be made. Established business models will have to be adjusted to embrace innovative, forwardlooking partnerships with broadband service providers and other stakeholders in the emerging
smart energy ecosystem. Momentum is building toward these ends, but the history of the energy
sector is littered with false starts and broken promises. Twenty-first century America requires a
21st century electric grid. Anything less should be considered unacceptable.
Realizing the Smart Grid Imperative
29
Endnotes
1.
Public Utility Regulatory Policies Act (PURPA) of 1978, 16 U.S.C. Sect. 2601-2645.
2.
Energy Policy Act (EPACT) of 1992, text available at http://thomas.loc.gov/cgi-bin/query/z?c102:H.R.776.ENR:.
For discussion of PURPA and EPACT, see Elias L. Quinn and Adam L. Reed, Envisioning the Smart Grid: Network
Architecture, Information Control, and the Public Policy Balancing Act, 81 U. Colo. L. Rev. 833, pp. 853-860 (2010)
(“Envisioning the Smart Grid”).
3.
These disputes have largely centered on accusations of regulatory overreach and differing notions of regulatory federalism. See, e.g., FERC v. Mississippi, 456 U.S. 742 (1982) (holding that PURPA’s provisions aimed at state regulatory
commissions did not violate state sovereignty and finding that “regulated activities” at the heart of the Act “have an
immediate effect on interstate commerce,” at 755). For further discussion of the federal-state regulatory approach to
energy services, see Michael J. Santorelli, Regulatory Federalism in the Age of Broadband: A U.S. Perspective, 2 Policy &
Internet 99, pp. 116-117 (2010) (“Regulatory Federalism in the Age of Broadband”).
4.
Envisioning the Smart Grid at pp. 856-858.
5.
For example, the U.S. Department of Energy observed “electricity losses in the transmission and distribution systems exceed 10 percent of total energy generated.” These losses cost ratepayers hundreds of millions of dollars each
year. See National Transmission Grid Study at p. 63, U.S. Department of Energy (May 2002), available at http://www.
pi.energy.gov/documents/TransmissionGrid.pdf.
6.
See, e.g., Press Release, Secretary Chu Presents Smart Grid Vision and Announces $144 Million in Recovery Act Funding
to Transition to the Smart Grid, Sept. 21, 2009, U.S. Department of Energy, available at http://www.energy.gov/8030.
htm (quoting U.S. Secretary Steven Chu as saying “America cannot build a 21st century energy economy with a mid20th century electricity system.”)
7.
See The Smart Grid: An Introduction, at p. 7, Prepared for the U.S. Department of Energy by Litos Strategic
Communication (2008), available at http://www.oe.energy.gov/DocumentsandMedia/DOE_SG_Book_Single_Pages.
pdf (discussing three massive blackouts that have occurred over the last decade) (“Smart Grid Introduction 2008”).
8.
See, e.g., Siobhan Gorman, Electricity Grid in U.S. Penetrated by Spies, April 8, 2009, Wall Street Journal.
9.
Over the course of President Bush’s two terms in office, his advisors and Department of Energy released an array
of studies, reports, and recommendations focused on modernizing the nation’s electric grid. A brief sampling of
these efforts include: National Energy Policy, Report of the National Energy Policy Development Group (May 2001),
available at http://www.pppl.gov/common_pics/national_energy_policy/national_energy_policy.pdf (including,
among many other items, 13 recommendations for strengthening the electric delivery system, at Appendix One);
The National Transmission Grid Study, U.S. Department of Energy (May 2002), available at http://www.oe.energy.
gov/DocumentsandMedia/ER_2-9-4.pdf (outlining some 50 recommendations for bolstering the transmission grid);
National Electric Delivery Technologies Roadmap: Transforming the Grid to Revolutionize Electric Power in North
America, U.S. Department of Energy (January 2004), available at http://www.oe.energy.gov/DocumentsandMedia/
ER_2-9-4.pdf (outlining a plan for “Grid 2030,” which was “envisioned to be a fully automated power delivery network that is able to monitor and control electricity flows to every customer and node, ensuring two-way flow of
electricity and real-time information between the power plant and appliance, and every point in between,” at p. 7)
(“Transforming the Grid”); and Advanced Metering Infrastructure, Report by National Energy Technology Laboratory
for the U.S. Department of Energy, Office of Electricity Delivery and Energy Reliability (February 2008), available
at http://www.netl.doe.gov/smartgrid/referenceshelf/whitepapers/AMI%20White%20paper%20final%20021108%20
%282%29%20APPROVED_2008_02_12.pdf (identifying advanced metering infrastructure as a “fundamental early
step to grid modernization,” at p. 2) (“AMI White Paper”).
10. See, e.g., White House, Issues: Energy and Environment, http://www.whitehouse.gov/issues/energy-and-environment;
Blueprint for a Secure Energy Future, The White House (March 30, 2011), available at http://www.whitehouse.gov/
30
Realizing the Smart Grid Imperative
sites/default/files/blueprint_secure_energy_future.pdf (outlining policy priorities for the entire energy sector); A
Policy Framework for the 21st Century Grid: Enabling Our Secure Energy Future, National Science and Technology
Council, Executive Office of the President (June 2011), available at http://www.whitehouse.gov/sites/default/files/
microsites/ostp/nstc-smart-grid-june2011.pdf (articulating a policy framework to bolster grid modernization in the
United States) (“Policy Framework for the 21st Century Grid”).
11. See, e.g., Charles M. Davidson and Michael J. Santorelli, Barriers to Broadband Adoption: A Report to the FCC, at pp.
51-55, ACLP at New York Law School (Oct. 2009), available at http://www.nyls.edu/user_files/1/3/4/30/83/ACLP%20
Report%20to%20the%20FCC%20-%20Barriers%20to%20BB%20Adoption.pdf (providing an overview of a broadband-enabled smart grid) (“Barriers to Broadband Adoption”).
12. See, e.g., Communications Requirements of Smart Grid Technologies, U.S. Department of Energy (Oct. 2010), available at http://www.gc.energy.gov/documents/Smart_Grid_Communications_Requirements_Report_10-05-2010.pdf
(detailing the various kinds of technologies that will comprise the smart grid and assessing their individual communications needs) (“Communications Requirements”).
13. Id.; see also Connecting America: The National Broadband Plan, at p. 247, FCC (March 2010), available at http://
download.broadband.gov/plan/national-broadband-plan.pdf (“National Broadband Plan”).
14. National Broadband Plan at pp. 249–251.
15. See, e.g., Jon Arnold and Larry Cochrane, Future Opportunities for the Energy Ecosystem, Power Engineering (July
2009), available at http://www.powergenworldwide.com/index/display/articledisplay/366583/articles/power-engineering/volume-113/issue-7/departments/peak-load/future-opportunities-for-the-energy-ecosystem.html.
16. National Broadband Plan at pp. 37–42 (noting that, as of 2009, only five percent of census tracts in the U.S. were without a wireline broadband provider and that less than two percent were without a 3G mobile provider); see also The
Broadband Availability Gap, at p. 17, FCC (July 2010) (finding that about 7 million out of 130 million housing units
in the U.S.—or a little more than five percent—lack access to service that meets the Commission’s speed standard for
broadband), available at http://download.broadband.gov/plan/the-broadband-availability-gap-obi-technical-paperno-1.pdf (“Broadband Availability Gap”).
17. See, e.g., Barriers to Broadband Adoption at pp. 55–67 (identifying a number of barriers impeding more robust
deployment of a broadband-enabled smart grid); Peter Fox-Penner, Smart Power: Climate Change, the Smart
Grid, and the Future of Electric Utilities 51–65 (Washington, D.C., 2010) (identifying several unanswered
questions facing regulators vis-à-vis the smart grid) (“Smart Power”).
18. Envisioning the Smart Grid at 868 (noting that the “technological and regulatory architectures of the smart grid are
inextricable intertwined” and that “their symbiotic development will be driven by policy decisions and will in turn
drive policy outcomes”).
19. See, e.g., Policy Framework for the 21st Century Grid at pp. 3–4.
20. Barriers to Broadband Adoption at pp. 58–60.
21. National Broadband Plan at p. 252; Policy Framework for the 21st Century Grid at pp. 19–20.
22. National Broadband Plan at pp. 15–16 (discussing the concept of an “ecosystem” in the broadband sector).
23. See, e.g., Charles M. Davidson and Bret T. Swanson, Net Neutrality, Investment & Jobs: Assessing the Potential
Impacts of the FCC’s Proposed Net Neutrality Rules on the Broadband Ecosystem, at pp. 7–23, New York Law School
(June 2010), available at http://www.nyls.edu/user_files/1/3/4/30/83/Davidson%20&%20Swanson%20-%20NN%20
Economic%20Impact%20Paper%20-%20FINAL.pdf (discussing the historical relationship between regulation, investment, and competition in the broadband sector) (“Net Neutrality, Investment & Jobs”).
24. Pub. Law 110–140 (2007); 121 Stat. 1492–1801, available at http://www.gpo.gov/fdsys/pkg/PLAW-110publ140/pdf/
PLAW-110publ140.pdf (“EISA”).
25. Id. at Sect. 1301-1309.
26. Id. at Sect. 1301.
27. Id.
28. Previous efforts and studies were undertaken in the 1970s and 1980s. Transforming the Grid at 2.
29. See, e.g., Grid 2030: A National Vision for Electricity’s Second 100 Years, at pp. iii-iv, U.S. Dept. of Energy (July 2003),
available at http://www.oe.energy.gov/DocumentsandMedia/Elec_Vision_2-9-4.pdf (“Grid 2030”).
Realizing the Smart Grid Imperative
31
30. This is likely due to the fact that the market for broadband services was still developing. For example, by June 2000,
only 4 million broadband lines were in service in the United States. See High-Speed Services for Internet Access:
Status as of June 30, 2006, at Table 1, FCC (January 2007), available at http://hraunfoss.fcc.gov/edocs_public/attachmatch/DOC-270128A1.pdf (“FCC Broadband Stats — as of June 30, 2006”). According to the federal government’s
National Telecommunications and Information Administration (NTIA), the home adoption rate of broadband was
only 9% in 2001. See Exploring the Digital Nation: Home Broadband Internet Adoption in the United States, at Table
23, NTIA (Nov. 2010), available at http://www.ntia.doc.gov/reports/2010/ESA_NTIA_US_Broadband_Adoption_
Report_11082010.pdf (“NTIA Broadband Adoption Report”). By June 2004, the number of broadband connections
had risen to nearly 32 million. FCC Broadband Stats — as of June 30, 2006 at Table 1. However, Pew reported that
the home broadband adoption rate in April 2004 was only 24%. See Aaron Smith, Home Broadband Adoption 2010,
at p. 6, Pew Internet and American Life Project (Aug. 2010), available at http://www.pewinternet.org/~/media//Files/
Reports/2010/Home%20broadband%202010.pdf (“Pew Broadband Adoption 2010”).
31. By June 2009, the number of broadband connections in service had risen to over 113 million. See Internet Access
Services: Status as of June 30, 2009, at Table 1, FCC (September 2010), available at http://hraunfoss.fcc.gov/edocs_
public/attachmatch/DOC-301294A1.pdf. In May 2010, Pew reported that two-thirds of American households had
adopted broadband. Pew Broadband Adoption 2010 at p. 6.
32. Conceptually, the smart grid can be thought of as an overlay of digital communications technologies atop the existing
electric grid. Wireless sensors and other such tools leverage communications networks to transfer new types of data to
and from utilities, consumers, and other stakeholders along the electricity value chain. A smarter grid is an essential
component of the larger smart energy ecosystem, which will be driven, in large part, by the data generated along various points of the grid. On the consumer end, the data of most importance are generated at the meter. See, e.g., Mae
Kowalke, University of Minnesota Professor: An Electrical Smart Grid is Critical for U.S. Security, March 18, 2011, TMC
Net, available at http://smart-grid.tmcnet.com/topics/smart-grid/articles/155465-university-minnesota-professor-anelectrical-smart-grid-critical.htm (quoting Professor Massoud Amin as saying “A smarter grid costs about $160-$170
billion for the whole system—an overlay of sensors, communication and control devices to increase reliability, security,
and overall system efficiency.”) See also Massoud Amin and Phillip F. Schewe, Preventing Blackouts, pp. 60–67, Scientific
American (May 2007), available at http://central.tli.umn.edu/Amin/SciAm_0507_pp60-67.pdf (“Preventing Blackouts”).
33. Transforming the Grid at p. 1.
34. See August 14th Blackout: Causes and Recommendations, at p. 107, Report of the U.S.-Canada Power System Outage
Task Force (April 2004), available at https://reports.energy.gov/BlackoutFinal-Web.pdf (“August 14th Blackout”).
35. National Broadband Plan at p. 249, Box 12-2.
36. Id.; see also August 14th Blackout at Ch. 5.
37. The technology underlying SCADA systems goes back at least 40 years. Preventing Blackouts at p.63.
38. See Technical Information Bulletin 04-1: Supervisory Control and Data Acquisition (SCADA) Systems, at p. 4, National
Communications System (Oct. 2004), available at http://www.ncs.gov/library/tech_bulletins/2004/tib_04-1.pdf.
39. Id. at 7.
40. Id.
41. See U.S. Energy Information Administration, Glossary: A, http://www.eia.doe.gov/glossary/index.cfm?id=A.
42. See G.P. Sullivan, R. Pugh and W. D. Hunt, Metering Best Practices: A Guide to Achieving Utility Resource Efficiency,
at pp. 6.1-6.4, Prepared by Pacific Northwest National Laboratory for the Federal Energy Management Program U.S.
Department of Energy (Oct. 2007), available at http://www1.eere.energy.gov/femp/pdfs/mbpg.pdf (providing an
overview of metering advances and discussing several different types of AMR networks) (“Metering Best Practices”).
43. Id. at Ch. 7 (noting that “At the outset of any metering activity, it should be made clear that meters provide data and
these data generally do not constitute information or knowledge. The reality of data analysis comes in the recognition
that data needs to be processed to create information (knowledge) before any proactive actions can be taken.” The
implicit point is that utilities will value data in different ways depending on how they process and analyze it. Thus,
identifying valuable bits of data across multiple utilities and jurisdictions is difficult.)
44. U.S. primary energy consumption increased steadily between 1980 and 2008. The economic downturn resulted in a
slight decrease in consumption in 2007 and 2008. See Annual Energy Outlook 2010 with Projections to 2035: Executive
32
Realizing the Smart Grid Imperative
Summary, Energy Information Administration, U.S. Dept. of Energy (May 2010), available at http://www.eia.doe.gov/
oiaf/aeo/execsummary.html.
45. See Smart Grid: Enabler of the New Energy Economy, A Report by the Electricity Advisory Committee (December
2008), available at http://www.oe.energy.gov/DocumentsandMedia/final-smart-grid-report.pdf (“Smart Grid:
Enabler”). According to the report, “the mission of the Electricity Advisory Committee is to provide advice to the
U.S. Department of Energy in implementing the Energy Policy Act of 2005, executing the Energy Independence and
Security Act of 2007, and modernizing the nation’s electricity delivery infrastructure.” Id.
46. Id. at pp. 13–15.
47. Id. at p. 4 (noting that “All of these [grid modernization] elements can take advantage of communications systems put
in place for automatic metering systems.’)
48. American Recovery and Reinvestment Act of 2009, Pub. L. No. 111–5, Sect. 6001(k)(2)(D), 123 Stat. 115, 516 (2009).
49. ARRA created a Broadband Technology Opportunities Program within the NTIA of the U.S. Department of
Commerce, which was responsible for distributing $4.7 billion in support of the deployment of broadband infrastructure to unserved and underserved areas in the country, and to help facilitate broadband use and adoption. An
additional $2.5 billion was administered by the Rural Utilities Service of the U.S. Department of Agriculture. See Bill
Summary: Energy and Commerce Provisions on Healthcare, Broadband and Energy, U.S. House of Representatives
Committee on Commerce, Feb. 12, 2009, available at http://energycommerce.house.gov/Press_111/20090212/economiceecoverysummary.pdf
50. Title IV of ARRA earmarked over $4 billion for smart grid deployment. By October 2010, the Department of Energy
had issued “100 awards totaling $3.4 billion to stimulate the development of the Smart Grid.” Communications
Requirements at p. 9. For a more detailed summary of these expenditures, see Policy Framework for the 21st Century
Grid at pp. 9-11.
51. Several examples of leading projects at the time are included in Smart Grid: Enabler at p. 4.
52. See Advanced Metering Infrastructure, at p. 5, A White Paper Prepared by the National Energy Technology Laboratory
for the U.S. Department of Energy (Feb. 2008), available at http://www.netl.doe.gov/smartgrid/referenceshelf/whitepapers/AMI%20White%20paper%20final%20021108%20%282%29%20APPROVED_2008_02_12.pdf.
53. Id. at 2.
54. For an overview of recent legislative and regulatory actions at the state level vis-à-vis the smart grid and energy policy
reform, see Angela Cifor and Sophia Lenz, Overview of State Activities and Select International Smart Grid Activities
in Smart Grid Deployment in Colorado: Challenges and Opportunities 16–32 (Doran, Barnes and Pasrich,
eds.) (U.C. Boulder, June 2010), available at http://cees.colorado.edu/sgreport.pdf.
55. In the Matter of Advanced Metering Infrastructure, Order Adopting Minimum Functional Requirements for Advanced
Metering Infrastructure Systems and Initiating an Inquiry into Benefit-Costs Methodologies, CASE 09-M-0074, New
York Public Service Commission (issued Feb. 13, 2009) (“NY PSC AMI Order—February 2009”).
56. See Order Instituting Rulemaking to Consider Smart Grid Technologies Pursuant to Federal Legislation and on the
Commission’s own Motion to Actively Guide Policy in California’s Development of a Smart Grid System, Rulemaking
08–12–009, California PUC (adopted Dec. 18, 2008), available at http://docs.cpuc.ca.gov/published/FINAL_
DECISION/95608.htm.
57. In the Matter of Proposed Rules Relating to Smart Grid Data Privacy for Electric Utilities, Notice of Proposed
Rulemaking, Docket No. 10R-799E, Colorado Public Utilities Commission (Nov. 3, 2010).
58. In the Matter of the Review of the Consumer Privacy Protection, Customer Data Access, and Cyber Security Issues,
Associated with Distribution Utility Advanced Metering and Smart Grid Programs, Case No, 11-277-GE-UNC, Ohio
Public Utilities Commission (Feb. 2, 2011).
59. For example, the California PUC declined to adopt several of the smart grid investment provisions included in EISA.
See Decision Adopting Policies and Findings Pursuant to the Smart Grid Policies Established by the Energy Information
and Security Act of 2007, Decision 09–12-046, California PUC (adopted December 17, 2009), available at http://docs.
cpuc.ca.gov/PUBLISHED/FINAL_DECISION/111856.htm.
60. See Mathew J. Schwartz, California Proposes Smart Grid Data Privacy Standards, May 18, 2011, Info. Week, available
at http://www.informationweek.com/news/government/state-local/229502439.
Realizing the Smart Grid Imperative
33
61. Smart Grid: Enabler at p. 13; Barriers to Broadband Adoption at p. 59.
62. Smart Grid: Enabler at p. 13.
63. Envisioning the Smart Grid at pp. 845–853.
64. See infra, Section III.A, for additional discussion.
65. Barriers to Broadband Adoption at pp. 58–60.
66. See, e.g., Peter Fox-Penner and Heidi Bishop, Missions, Structure, and Governance in Future Electric Markets: Some
Observations, 89 Oregon L. Rev. 1107, 1111 (2011) (“U.S. electricity regulation was designed a century ago to encourage a build-out of the grid for the purpose of establishing scale economies and therefore low-cost commodity
power. Today’s regulatory environment resembles a patchwork quilt that veers between parochial state politics and
the national interest, largely omitting the correct locus of planning and governance, which is the multistate region.
Current regulatory law, regulator core competencies, and many embedded incentives are all wrong for the industry’s
coming era.”).
67. For a unique perspective on the impact of broadband on regulatory federalism in the energy sector, see Regulatory
Federalism in the Age of Broadband at pp. 116–118.
68. In this section, broadband refers, in the abstract, to any data network that is high-speed and high-bandwidth and that
is built upon the Internet Protocol.
69. Metering Best Practices at Ch. 6 and 7.
70. According to the Federal Energy Regulatory Commission (FERC), “advanced metering is defined as a metering system that records customer consumption (and possibly other parameters) hourly or more frequently and provides for
daily or more frequent transmittal of measurements over a communication network to a central collection point.”
Assessment of Demand Response and Advanced Metering: A Staff Report, at p. 5, FERC (December 2008), available at
http://www.ferc.gov/legal/staff-reports/12-08-demand-response.pdf.
71. See Joseph Galante and Mark Chediak, Consumers Resist Smart Meters after $3.4 Billion Stimulus Push, Sept. 16, 2010,
Bloomberg, available at http://www.bloomberg.com/news/2010-09-16/utility-customers-shun-smart-meters-after3-4-billion-u-s-stimulus-push.html (citing a report by Parks Associates).
72. Empowering consumers with consumption information is a significant component of the federal vision for the smart
grid. See, e.g., Smart Grid System Report, at p. 10, U.S. Dept. of Energy (July 2009), available at http://www.smartgrid.
gov/sites/default/files/resources/systems_report.pdf (“Smart Grid System Report”).
73. “Openness” here refers to the ability of the smart grid to make available information to third-party smart energy
application developers and to other utilities in order to guard against cascading blackouts. To this end, FERC has
identified “the development of standards for communicating and coordinating across inter-system interfaces” as a
“key priority cross-cutting issue.” See Smart Grid Policy Statement, at para. 51, FERC (rel. July 16, 2009) (“FERC Smart
Grid Policy Statement”).
74. See, e.g., Elias Leake Quinn, Smart Metering & Privacy: Existing Law and Competing Policies, at pp. 1–11, A
Report to the Colorado Public Utilities Commission (Spring 2009), available at http://www.dora.state.co.us/puc/
DocketsDecisions/DocketFilings/09I-593EG/09I-593EG_Spring2009Report-SmartGridPrivacy.pdf (providing an
overview of the types of data generated and collected by smart meters and other smart grid technologies and highlighting several privacy concerns that have arisen as a result of the deployment of these new tools) (“Smart Metering
& Privacy”).
75. Smart Power 180 (quoting a study by the Electric Power Research Institute).
76. See A Study of Utility Communications Needs: Key Factors that Impact Utility Communications Networks, at p. 2,
A Report by the Utilities Telecommunications Council (Sept. 2010) (“Utility Communications Needs”); see also
Communications Requirements at pp. 11–12.
77. See, e.g., Metering Best Practices at Ch. 6.
78. Preventing Blackouts at 63 (noting that many older control systems were developed and implemented “before industry-wide standards for interoperability were established; hence, neighboring utilities often use incompatible control
protocols. Utilities are operating ever closer to the edge of the stability envelope using 1960s-era controls.”).
79. Communications Requirements at p. 12.
80. Smart Metering & Privacy at p. 2.
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Realizing the Smart Grid Imperative
81. Communications Requirements at p. 13.
82. Utility Communications Needs at pp. 32–33.
83. Communications Requirements at p. 19.
84. To date, many AMI networks use a variety of wireless technologies to transport data to and from smart meters. Some
AMI systems rely on existing 3G networks, while others rely on proprietary wireless mesh networks. Still others have
experimented with point-to-point microwave systems for AMI backhaul. This approach seeks to prevent against
straining less reliable mesh networks. Id. at p. 19, 35.
85. Demand response refers to “the reduction of the consumption of electric energy by customers in response to an
increase in the price of electricity or heavy burdens on the system.” Id. at p. 20.
86. Id. at pp. 20–23.
87. Id. at pp. 39–40.
88. Id. at p. 5.
89. National Broadband Plan at p. 251.
90. In this context, modularity refers to the relatively efficient process of updating and enhancing the capacity of most
modern broadband networks. For example, many wireless network upgrades are typically completed via software
updates. See, e.g., Charles M. Davidson & Michael J. Santorelli, Seizing the Mobile Moment: Spectrum Allocation Policy
for the Wireless Broadband Century, 19 CommLaw Conspectus 1, 69 (2011) (“Seizing the Mobile Moment”). Similarly,
many cable service providers have increased their capacity by upgrading networks to the DOCSIS 3.0 standard. This
is essentially a software upgrade since it does not require significant investments in bolstering the physical network.
See, e.g. Press Release, CableLabs Issues DOCSIS 3.0 Specifications Enabling 160 Mbps, Aug. 7, 2006, CableLabs, available at http://www.cablelabs.com/news/pr/2006/06_pr_docsis30_080706.html.
91. National Broadband Plan at p. 251.
92. For example, in the commercial broadband space, service providers have been able to accommodate explosive consumer demand for bandwidth-intensive applications like streaming video by upgrading their physical infrastructure
with both hardware and software. See, e.g., Robert W. Crandall and Hal J. Singer, The Economic Impact of Broadband
Investment, at p. 2 (Feb. 2010) (discussing recent investment levels by broadband service providers) (“The Economic
Impact of Broadband Investment)”.
93. Id. See also National Broadband Plan at pp. 18–22 (providing an overview of recent innovations in wireline and
wireless broadband network infrastructure).
94. See, e.g., Net Neutrality, Investment & Jobs at pp. 24–33 (describing the evolution of network management and the
regulatory response to it). The ability of service providers to manage networks was recently addressed by the FCC in
its net neutrality order. Although the new rules include an exception for “specialized” or “managed” services, which
might include the smart grid, whether and how these rules will impact the development of such services remains to
be seen. See In the Matter of Preserving the Open Internet, Report and Order, para. 112-114, GN Docket No. 09-191,
FCC 10-201 (rel. Dec. 23, 2010) (“FCC Net Neutrality Order”); see also James Speta, Supervising Managed Services 60
Duke L. J. 1715, 1748 (2011) (“Broadband providers might, therefore, offer energy monitoring and feedback systems
on a managed basis to provide an enhanced level of security as well as guaranteed up-time.”).
95. Whether broadband will be provided by existing service providers or by utility-owned proprietary networks will
likely be resolved on a case-by-case basis. See Section III, infra, for additional discussion.
96. National Broadband Plan at p. 251; Communications Requirements at p. 5.
97. See, e.g., Smart Grid System Report at pp. 1–3 (observing that, until 2009, stakeholders in the energy sector still
disagreed over the exact definition of the smart grid, including the components that this term should encompass).
98. For an overview of this project, see Xcel Energy, Smart Grid City, http://smartgridcity.xcelenergy.com.
99. See Austin Energy, About Us: Austin Energy Smart Grid Program, http://www.austinenergy.com/About%20Us/
Company%20Profile/smartGrid/index.htm.
100. See, e.g., Policy Framework for the 21st Century Grid at pp. 37–40 (highlighting the role that consumer education will
play in driving demand for new smart energy tools).
101. AMI White Paper at p. 3.
102. See Press Release, National Survey: Americans Feel a Smart Grid Will Help Reduce Power Outages, Personal Energy
Realizing the Smart Grid Imperative
35
Usage, March 23, 2010, GE, available at http://www.genewscenter.com/Press-Releases/National-Survey-AmericansFeel-a-Smart-Grid-Will-Help-Reduce-Power-Outages-Personal-Energy-Usage-26c9.aspx (”GE Smart Grid Survey
2010”).
103. See Tom Zeller Jr., ‘Smart’ Meters Draw Complaints of Inaccuracy, Nov. 12, 2010, New York Times (“Over the last year,
as utilities around the country have installed an estimated two million of the new digital meters, power companies
have received plenty of complaints—and in some states have been hit by class-action lawsuits—most of them from
consumers saying the smart meters are overstating their electrical usage.”)
104. See Felicity Barringer, New Electricity Meters Stir Fears, Jan. 30, 2011, New York Times (“The new wave of protests
comes from conservatives and individualists who view the monitoring of home appliances as a breach of privacy, as
well as from a cadre of environmental health campaigners who see the meters’ radio-frequency radiation — like emissions from cellphones and other common devices — as a health threat.”).
105. PUCs in Texas and California have both commissioned independent studies regarding the accuracy of smart meters
being deployed in their states. Both reports concluded that smart meters are extremely accurate. See, e.g., PG&E
Advanced Metering Assessment Report, Structure Consulting Group, Commissioned by the California PUC (Sept.
2010), available at http://docs.cpuc.ca.gov/EFILE/RULINGS/122935.PDF; Evaluation of Advanced Metering System
(AMS) Deployment in Texas, Navigant Consulting, Commissioned by the Texas PUC (July 2010), available at http://
www.puc.state.tx.us/electric/reports/ams/PUCT-Final-Report_073010.pdf.
106. GE Smart Grid Survey 2010 (“Of those that are familiar with the term “smart grid”…the majority (80 percent) are
ready and willing to learn more about what smart grid is, how it will benefit them and how they can even determine
if they are connected to a smart grid.”)
107. Barriers to Broadband Adoption at pp. 61–62.
108. Communications Requirements at p. 13.
109. Id. at p. 14.
110. Id. at p. 15.
111. One concern is that utilities might restrict or prohibit access to consumer consumption data. This would severely
restrict the ability of third parties to innovate and provide consumers with energy efficiency tools. See, e.g., Barriers
to Broadband Adoption at p. 67 (noting that “Utilities are generally unwilling to use customer consumption information for [purposes other than monthly billing], thus foreclosing opportunities for third-party innovators to access this
information and use it to enable “smart” services. If this practice continues, smart grid deployments and educating
consumers about energy use and energy savings will be hindered.” (internal citations omitted)). These concerns are
discussed, infra, in Sections III and IV.
112. Communications Requirements at p. 24.
113. Id. at pp. 26–28 and A-1.
114. Id. at pp. 29–30; see also Smart Grid System Report at p. 16.
115. See National Action Plan on Demand Response, at pp. 5–6, FERC (June 2010), available at www.ferc.gov/legal/staffreports/06-17-10-demand-response.pdf (noting that, in 40 of 50 states, “dynamic pricing currently has little to no
influence” and that, “[i]n 10 states, dynamic pricing is estimated to have an impact of one percent or less; in one state,
it has an impact of around two percent.”)
116. See, e.g., Wiser Wires, Oct. 8, 2009, The Economist (observing that “More intelligence in the grid would also help
integrate renewable sources of electricity, such as solar panels or wind turbines. As things stand, the trouble is that
their output, being hostage to the weather, is highly variable. A standard grid becomes hard to manage if too many of
them are connected to it; supply and demand on electricity-transmission systems must always be in balance. A smart
grid could turn on appliances should, for instance, the wind blow more strongly.”).
117. See Press Release, Vice President Biden Announces Plan to Put One Million Advanced Technology Vehicles on the Road
by 2015, Jan. 26, 2011, U.S. Dept. of Energy, available at http://www.energy.gov/news/10034.htm.
118. Pilot programs are already underway to measure the impact of these vehicles’ energy needs on the grid. See One
Million Electric Vehicles by 2015: February 2011 Status Report, at p. 5, U.S. Dept. of Energy (rel. Feb. 8, 2011), available
at http://www.energy.gov/news/documents/1_Million_Electric_Vehicle_Report_Final.pdf. See also Policy Framework
for the 21st Century Grid at pp. 13–14 (noting that “In the long run, [these vehicles] may also be able to offer energy
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Realizing the Smart Grid Imperative
storage and other grid services…through vehicle-to-grid interfaces. These systems conceivably could reduce the need
for extra generation at times of peak demand and aid the integration of variable renewable resources…”).
119. In combination with other “holistic” approaches “executed at scale,” widespread and coordinated energy efficiency
programs, which would include broadband-enabled smart grid services and devices, could result in over $1.2 trillion
in gross energy savings thru 2020. See Hannah Choi Granade et al., Unlocking Energy Efficiency in the U.S. Economy,
at p. iii, McKinsey Global Energy and Materials, McKinsey & Co. (2009), available at http://www.mckinsey.com/clientservice/electricpowernaturalgas/downloads/US_energy_efficiency_full_report.pdf.
120. Overall, these widespread and coordinated energy efficiency programs are expected to “reduce end-use energy consumption in 2020 by 9.1 quadrillion BTUs, roughly 23 percent of projected demand, potentially abating 1.1 gigatons
of greenhouse gases annually.”Id.
121. See Electric Power Monthly with Data for October 2010, EIA, U.S. Dept. of Energy (Jan. 14, 2011), available at http://
www.eia.gov/cneaf/electricity/epm/epm_sum.html.
122. Broadband Availability Gap at p. 17.
123. See, e.g., Net Neutrality, Investment & Jobs at p. 21 (observing that “as subscription levels reach saturation and as usage
levels continue to increase, broadband service providers will have to determine how to assure increased revenue
streams to support continued investment in infrastructure and new lines of business.”)
124. According to the U.S. Energy Information Administration (EIA), in 2007 there were 3,273 “traditional electric utilities in the United States.” These include “investor-owned, publicly-owned, cooperatives, and Federal utilities.” In
addition, EIA reported that there were “approximately 1,738 nonutility power producers in the United States” in 2007.
See Electric Power Industry Overview 2007, EIA, U.S. Dept. of Energy (2007), available at http://www.eia.doe.gov/
cneaf/electricity/page/prim2/toc2.html (“Electric Power Industry Overview 2007”).
125. These arguments have been advanced in a number of proceedings. See, e.g., National Broadband Plan at p. 251 (noting objections regarding the reliability and security of existing broadband networks); Communications Requirements
at pp. 43–51. Additional arguments have been advanced in comments made in response to a Request for Information
issued by the U.S. Department of Energy in late 2010. See Addressing Policy and Logistical Challenges to Smart Grid
Implementation: Request for Information, 75 Federal Register 57006-57011 (Sept. 17, 2010), available at http://www.
oe.energy.gov/DocumentsandMedia/9-22-10_Federal_Register-Smart_Grid_Implementation.pdf (“DOE RFI re Policy
and Logistical Challenges”). For example, the Edison Electric Institute commented that “electric utility companies…
must have the flexibility to effectively manage the implementation of...new [Smart Grid] technologies while maintaining the reliability and security of the grid.” See Smart Grid RFI: Addressing Policy and Logistical Challenges to Smart
Grid Implementation, Comments of the Edison Electric Institute, at p. 4 (submitted Nov. 1, 2010), available at http://
www.oe.energy.gov/DocumentsandMedia/EEI_-_DOE_SG_RFI.PDF.
126. For example, the FCC has recognized the value of leveraging existing commercial broadband networks and has put
forward a number of recommendations to facilitate additional partnerships between utilities and broadband service
providers. National Broadband Plan at pp. 251–253. The U.S. Department of Energy has also begun to address these
issues via Requests for Information on an array of topics. See, e.g., Communications Requirements; DOE RFI re Policy
and Logistical Challenges.
127. See, e.g., Matthew D. Adler, Regulatory Theory in A Companion to Philosophy of Law and Legal Theory 592
(D. Patterson, ed.) (2010) (defining regulation as “as nontax, noncriminal, public law: legal directives (of some sort)
that are issued by governmental bodies; that are enforced by governmental bodies, rather than by private litigants;
that are principally enforced through sanctions or incentives other than criminal penalties; and that are not taxes
(more specifically, not taxes principally designed to raise revenue, such as the income tax).”).
128. See, e.g., Herbert Hovenkamp, The Antitrust Enterprise: Principle and Execution 13–14 (2005) (discussing
the impact of monopoly regulation on innovation).
129. See, e.g., Regulatory Federalism in the Age of Broadband at pp. 106–108 (providing an overview of the regulatory
approach to broadband).
130. See Fred Bosselman et al., Energy, Economics and the Environment 53 (3rd Ed.) (2010) (“Energy,
Economics and the Environment”).
Realizing the Smart Grid Imperative
37
131. See, e.g., Munn v. Illinois, 94 U.S. 113, 126 (1877) (“Property does become clothed with a public interest when used in
a manner to make it of public consequence and affect the community at large. When, therefore, one devotes his property to a use in which the public has an interest, he, in effect, grants to the public an interest in that use, and must
submit to be controlled by the public for the common good, to the extent of the interest he has thus created. He may
withdraw his grant by discontinuing the use, but, so long as he maintains the use, he must submit to the control.”).
132. See, e.g., Stephen Breyer, Regulation and Its Reform 15 (1982) (“A monopolist, if left unregulated, curtails production in order to raise prices…”).
133. Energy, Economics and the Environment 58.
134. See, e.g., Smart Power 181 (“The core principle of cost-of-service regulation is that revenues earned should equal
prudently incurred actual costs for the service provided plus a fair return on prudently invested capital.”)
135. See, e.g. Lino Mendiola, The Erosion of Traditional Ratemaking Through the Use of Special Rates, Riders, and Other
Mechanisms, 10 Tex. Tech Admin. L.J. 173, 177–178 (2008) (“The value of the utility’s property, less depreciation,
constitutes the “rate base.” Tangible property includes plants and equipment that are “used and useful” in providing
service. Intangible property includes the value of working capital and may include other items like legal rights.” (citations omitted)).
136. Smart Power 181.
137. The U.S. Department of Energy has observed that the modern energy regulatory paradigm “can discourage [investments in] energy efficiency, demand reduction, demand response, distributed generation, and asset optimization.”
Smart Grid System Report at p. 28.
138. Policy Framework for the 21st Century Grid at p. 17 (“Under traditional rate-of-return regulation, it is more profitable
for utilities to invest more in infrastructure (including smart grid investments) and sell more electricity…than to help
their customers becomes significantly more energy efficient” (citations omitted)).”
139. Smart Grid System Report at p. 28.
140. Electric Power Industry Overview 2007.
141. Regulatory Federalism in the Age of Broadband at pp. 117–118.
142. Utility Communications Needs at pp. 33–34. Some partnerships have been forged over the last few years. For example,
Duke Energy has partnered with Verizon Wireless to leverage the latter’s wireless broadband network to undergird
a smart grid network that will “gather and aggregate energy usage data from about 70 participating buildings” in
Charlotte, North Carolina. See Press Release, Duke Energy Selects Verizon Wireless as Telecommunications Partner
for Envision, March 3, 2011, Duke Energy, available at http://www.duke-energy.com/news/releases/2011030301.
asp. Several other wireless service providers, including AT&T and T-Mobile, have forged similar partnerships
with utilities, wherein the utility uses a commercial mobile network to transport energy usage data. See, e.g., Katie
Fehrenbacher, Phone Companies Heart Smart Grid: SmartSynch, AT&T Sign up Texas Utility, April 16, 2009, GigaOm.
com, available at http://gigaom.com/cleantech/phone-companies-heart-smart-grid-smartsynch-att-sign-up-texas-utility/ (describing an arrangement where “AT&T’s wireless network will connect SmartSynch’s smart meter technology
back to the utility control stations.”); Marguerite Reardon, T-Mobile Goes for Smart Grids, April 23, 2009, CNET
News.com, available at http://news.cnet.com/8301-1035_3-10226418-94.html (announcing the rollout of a new
T-Mobile SIM card that is “ideal for providing wireless connectivity to smart electric meters, as the company tries to
expand its market opportunity beyond cell phones.”).
143. Utility Communications Needs at p. 36 (listing survey results regarding “Factors Against Using Outside Telecom
Providers”).
144. 47 U.S.C. 230 (b) (2).
145. See Appropriate Framework for Broadband Access to the Internet Over Wireline Facilities, 17 F.C.C.R. 3019, 3021
(2002) (stating that “it is the Commission’s primary policy goal to encourage the ubiquitous availability of broadband
to all Americans” and citing section 706 of the 1996 Telecommunications Act in support).
146. See, e.g., National Broadband Plan at p. 5 (noting that “While we must build on our strengths in innovation and inclusion, we need to recognize that government cannot predict the future. Many uncertainties will shape the evolution of
broadband, including the behavior of private companies and consumers, the economic environment and technological advances. As a result, the role of government is and should remain limited.”).
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Realizing the Smart Grid Imperative
147. The Economic Impact of Broadband Investment at p. 18 (estimating that all service providers — i.e., cable, traditional
telecom, wireless, and satellite companies — combined to invest nearly $200 billion in broadband networks between
2003 and 2009).
148. See, e.g., Charles M. Davidson, Losing the Forest for the Trees: Properly Contextualizing the Use of Early Termination
Fees in the Current Wireless Marketplace, ACLP Scholarship Series, New York Law School (June 2009), available at
http://www.nyls.edu/user_files/1/3/4/30/83/Early%20Termination%20Fees%20-%20June%202009.pdf (describing the
consumer-centric nature of the wireless marketplace) (“Losing the Forest for the Trees”).
149. For example, the FCC has observed that differentiated pricing will be a key component of future broadband service
provider business models as they attempt to more accurately price bandwidth consumption. FCC Net Neutrality
Order at para. 72; National Broadband Plan at p. 194.
150. See, e.g., Robert C. Atkinson and Ivy E. Schultz, Broadband in America: Where it is and Where it is Going, at pp.
29–30, Report to the FCC, Columbia Institute for Tele-Information (Nov. 2009) (predicting that average annual
increases in the broadband adoption rate will slow considerably over the next five years).
151. See, e.g., Internet Value Chain Economics, in The Economics of the Internet, at p. 14, Prepared by A.T. Kearney,
Vodafone Policy Paper Series, No. 11 (2010).
152. National Broadband Plan at p. 194 (“Integrating broadband into national purposes will not only change the way
things are done, but also the results that can be achieved for Americans.”)
153. See, e.g., 2009 Annual Report, at p. 4, Verizon, available at http://investor.verizon.com/financial/quarterly/pdf/09_
annual_report.pdf (“We are also putting our decades of network management experience to work by developing
our vertical capabilities in high-growth segments like healthcare, smart grids, financial services and security.”); In
the Matter of Addressing Policy and Logistical Challenges to Smart Grid Implementation, Comments of AT&T, at p. 2,
U.S. Dept. of Energy (“AT&T is an emerging leader in network and managed services for Smart Grid devices, and its
extensive assets and capabilities make it an ideal partner for other innovators that are working to advance Smart Grid
technologies.”); Implementing the National Broadband Plan by Studying the Communications Requirements of Electric
Utilities to Inform Federal Smart Grid Policy, Reply Comments of T-Mobile, U.S. Dept. of Energy (filed Aug. 9, 2010)
(detailing T-Mobile’s experience with and business interest in pursuing smart grid partnership opportunities).
154. See, e.g., National Broadband Plan at p. 252 (suggesting that “In certain situations, compared with private networks
[i.e., proprietary networks built by utilities], commercial networks may provide substantially similar network performance at an equal or lower total cost of ownership.”).
155. See, e.g., J. Gregory Sidak & David J. Teece, Innovation Spillovers and the “Dirt Road” Fallacy: The Intellectual
Bankruptcy of Banning Optional Transactions for Enhanced Delivery over the Internet, 6 J. on Competition Law &
Econ. 1, 17 (July 2010) (describing the types of agreements that might be made between broadband service providers
and third-parties like utilities and observing that these types of arrangements “unequivocally” make consumers better
off “as a result of greater choices in real-time applications of the Internet.”).
156. Indeed, many efforts to date have focused only on assessing the underlying requirements of the smart grid and have
yet to explore the feasibility of leveraging existing broadband network infrastructure for smart grid purposes. For
example, the U.S. Department of Energy has issued a report detailing the expected communications requirements of
various components related to the smart grid. This report briefly assessed the ability of commercial broadband networks to accommodate smart grid deployment, but stopped short of endorsing wider-scale collaboration between
utilities and broadband service providers. Communications Requirements. In addition, the DOE has sought comment
on the policy and logistical challenges to smart grid deployment. But its RFI did not include a specific request for
input regarding the impact that disparate regulatory paradigms in the energy and broadband sectors might have on
smart grid deployment. DOE RFI re Policy and Logistical Challenges. Similarly, the FCC, in its National Broadband
Plan, which was released in March 2010, recommended several inquiries into the viability of using existing broadband network infrastructure for smart grid purposes. The Obama administration has also outlined a proposed
framework for more swiftly realizing its smart energy goals. Policy Framework for the 21st Century Grid.
157. See, e.g., Joseph H. Eto and Kristina Hamachi LaCommare, Tracking the Reliability of the U.S. Electric Power System:
An Assessment of Publicly Available Information Reported to State Public Utility Commissions, at pp. xi-xiii, Ernest
Realizing the Smart Grid Imperative
39
Orlando Lawrence Berkeley National Laboratory (Oct. 2008), available at http://eetd.lbl.gov/ea/emp/reports/
lbnl1092e-puc-reliability-data.pdf (providing an overview of the type of reporting metrics collected by states).
158. Id. at 21.
159. Many of these standards are devised and enforced by NERC. See, e.g., Reliability Standards for the Bulk Electric
Systems of North America, NERC, available at http://www.nerc.com/files/Reliability_Standards_Complete_Set.pdf
(detailing over 1,000 pages of reliability standards, covering areas from cyber security to backup power requirements
to emergency preparations).
160. FERC has jurisdiction over the reliable operation of the bulk-power system in most of the nation under the Federal
Power Act, 16 U.S.C. 824, 824o.
161. See, e.g., FERC, Enforcement: Reliability, http://www.ferc.gov/enforcement/reliability.asp (“Under Commission
approved procedures, NERC files Notices of Penalty, which detail findings and resolution of violations or alleged violations by NERC or the Regional Entities. A Notice of Penalty may include a settlement agreement and also describes
mitigation efforts and factors considered by NERC or the Regional Entity in determining the appropriate remedy.”).
162. See, e.g., Reliability Considerations from the Integration of Smart Grid, at p. 12, Report of NERC Smart Grid Task
Force (Dec. 2010), available at http://www.nerc.com/files/SGTF_Report_Final_posted.pdf (“The main challenge for
the envisioned smart grid infrastructure is to integrate smart grid devices and systems while maintaining reliability.
Careful study is required to ensure that these characteristic changes do not cause unintended consequences, such as
introducing modes of instability and the need for additional coordination of controls.”) (“Reliability Considerations
from the Integration of Smart Grid”). At a higher level of abstraction, federal policymakers have focused on potential
security vulnerabilities that might be caused by the integration of information and communications technologies into
more points along the grid. See, e.g., Policy Framework for the 21st Century Grid at p. 49 (noting that “a smarter grid
also includes more devices and connections that may become avenues for intrusions, error-causes disruptions, malicious attacks, destruction, and other threats.” (citations omitted)).
163. Communications Requirements at p. 43.
164. Id. at p. 44.
165. Id. (citing comments of the American Public Power Association).
166. Id. at p. 46.
167. See, e.g., Reliability Considerations from the Integration of Smart Grid at p. 6.
168. Communications Requirements at p. 47.
169. See, e.g., J. Gregory Sidak, A Consumer-Welfare Approach to Network Neutrality Regulation of the Internet, 2 J. of
Comp. Law & Econ. 349, 365 (2006) (describing quality of service as a network management approach that “label[s]
some traffic as higher priority than other traffic.”).
170. Communications Requirements at pp. 48–49.
171. Id. at p. 49.
172. This emerging business practice — ensuring quality of service for specialized service providers — is a natural next
step in the evolution of the broadband sector. Indeed, it has been observed that, much like usage-based pricing,
assigning priority to certain types of content reflects the “increasing heterogeneity of end-user demand.” Daniel F.
Spulber and Christopher S. Yoo, Networks in Telecommunications 376 (2009).
173. According to the DOE, “many utilities assert that they require additional spectrum to meet smart grid communications requirements, either on an exclusive basis or shared with other users, for example public safety entities.”
Communications Requirements at p. 54. However, as discussed infra in Section IV, the complexity of building and
maintain proprietary wireless networks is likely beyond the existing core competencies of utilities. Moreover, the
mechanics of sharing spectrum are similarly complex and could harm, rather than benefit, the entities sharing a particular band of spectrum.
174. In some cases, collaboration between a utility and a broadband service provider might not be feasible. The network
divide and monopoly regulatory paradigm for utilities, however, often precludes even a cursory investigation of the
feasibility of such partnerships. See, e.g., Utility Communications Needs at pp. 21–22.
175. Communications Requirements at p. 50.
176. See, e.g., Verizon Business, Solutions, Government: Enable the DOD Network, http://www.verizonbusiness.com/
40
Realizing the Smart Grid Imperative
solutions/government/federal/defense/dod_network/.
177. There is a body of economic literature that describes a situation where increases in energy efficiency typically result
in increased energy consumption. This is widely known as the Jevons paradox and has been explored in numerous
contexts regarding the impact of energy efficiency initiatives (e.g., fuel economy standards) on energy consumption
by individual consumers. Simply stated, the Jevons paradox says that as the price of energy consumption decreases,
usually as a result of efficiency gains, consumers will increase their consumption. Whether and how this principle
applies to the smart grid remains to be seen. For an overview of this phenomenon and recent inquiries into its modern applicability, see David Owen, The Efficiency Dilemma, Dec. 20 and 27, 2010, The New Yorker.
178. See NIST Framework and Roadmap for Smart Grid Interoperability Standards, Release 1.0, at p. 7, Special Publication
1108, NIST (Jan. 2010), available at http://www.nist.gov/smartgrid/upload/FinalSGDoc2010019-corr010411-2.pdf
(“NIST Smart Grid Interoperability Roadmap 1.0”).
179. A key component of these gains is the realization of what the FCC labels a “high-performance America,” where
broadband drives innovation, economic creation, and sector-wide transformation. National Broadband Plan at p. 3.
180. See, e.g., Michael Chui, Markus Löffler, and Roger Roberts, The Internet of Things, McKinsey Quarterly (March 2010),
available at http://www.mckinseyquarterly.com/The_Internet_of_Things_2538.
181. Communications Requirements at pp. 4–5; National Broadband Plan at p. 251.
182. By one estimate, the average length of time it takes state PUCs to process a rate case is approximately 11 months. See
Undated Letter from Gary Kitts to J. Peter Lark et al. Michigan PSC, available at http://www.michigan.gov/documents/
toratecase_110030_7.pdf (citing data from Regulatory Research Associates, Inc.).
183. See, e.g., Utility Communications Needs at p. 22.
184. See supra, Section III.A.
185. 47 U.S.C. § 1302(b). See also In the Matter of Inquiry Concerning the Deployment of Advanced Telecommunications
Capability to All Americans in a Reasonable and Timely Fashion, and Possible Steps to Accelerate Such Deployment
Pursuant to Section 706 of the Telecommunications Act of 1996, as Amended by the Broadband Data Improvement Act,
Sixth Broadband Deployment Report, GN Docket No. 09-137 (rel. July 20, 2010), available at http://hraunfoss.fcc.
gov/edocs_public/attachmatch/FCC-10-129A1.pdf.
186. The scope of the FCC’s power to regulate broadband has been debated for over a decade. Some feel that the FCC
lacks any formal authority over broadband because it is an “information service,” which is subject only to the FCC’s
ancillary regulatory authority. Others feel that the FCC has broad regulatory authority over broadband. For an
overview of these various arguments, see Daniel F. Spulber and Christopher S. Yoo, Rethinking Broadband Internet
Access, 22 Harv. J. Law & Tech. 1 (2008); Susan Crawford, Transporting Communications, 89 B. U. L. Rev. 871 (2009);
Kevin Werbach, Off the Hook, 95 Cornell L. Rev. 535 (2010); James B. Speta, The Shaky Foundations of the Regulated
Internet, 8 J. on Telecomm. and High Tech. L. 101 (2010). See also FCC Net Neutrality Order at para. 115-150 (detailing the FCC’s analysis of its authority to adopt open Internet rules).
187. See Michael Moynihan, Electricity 2.0: Unlocking the Power of the Open Energy Network, at p. 45, NDN (Feb. 2010)
(“Electricity 2.0”).
188. Id. at p. 48
189. It has been observed that a lack of concern regarding the design of consumer-facing tools like thermostats has
impeded more robust energy efficiency by frustrating customers into complacency. For an overview of recent examples, see Policy Framework for the 21st Century Grid at pp. 43–45.
190. Electric Power Industry Overview 2007 (“Between 2004 and 2007, the National average price of electricity increased
19.7 percent from 7.6 cents per kilowatthour (kWh) in 2004 to 9.1 cents per kWh in 2007. Much of this increase is
attributable to the increase in fuel costs. However…the expiration of transitional rate caps in States that implemented
retail competition resulted in higher prices as utilities were able to adjust rates to recover higher distribution and
transmission costs, as well as higher wholesale power costs, particularly for customers purchasing standard offer
service. From the standpoint of industry structure, the response to higher rates resulted in a number of states suspending or modifying retail competition in an effort to contain retail price increases.”).
191. The DOE estimates that from “2000 to 2008, increases in electricity demand averaged 0.9% per year. Demand growth
is projected to continue at about 1% per year through 2035.” See U.S. Energy Information Administration, Use of
Realizing the Smart Grid Imperative
41
Electricity, http://www.eia.gov/energyexplained/index.cfm?page=electricity_use.
192. See, e.g., Nora Ganim Barnes, The 2010 Inc. 500 Update: Most Blog, Friend And Tweet But Some Industries Still Shun
Social Media, Center for Marketing Research, UMass Dartmouth (2010), available at http://www1.umassd.edu/cmr/
studiesresearch/2010inc500.pdf (observing that an increasing number of the largest utility companies in the United
States [i.e., those in the Inc. 500] are integrating social media into their corporate communications. However, more
than half have yet to do so.).
193. See Power to the people, Feb. 9, 2009, The Official Google Blog, available at http://googleblog.blogspot.com/2009/02/
power-to-people.html.
194. See Google, PowerMeter, Overview, http://www.google.com/powermeter/about/about.html.
195. See An Update on Google Health and Google PowerMeter, June 24, 2011, The Official Google Blog, available at http://
googleblog.blogspot.com/2011/06/update-on-google-health-and-google.html.
196. See, e.g., Smart Metering & Privacy at pp. 4–5 for an overview of how this data could be used.
197. National Broadband Plan at p. 253.
198. Smart Metering & Privacy at p. 9. See also Guidelines for Smart Grid Cyber Security: Vol. 2, Privacy and the Smart
Grid, at p. 11, The Smart Grid Interoperability Panel — Cyber Security Working Group, NIST, NISTIR 7628 (Aug.
2010), available at http://csrc.nist.gov/publications/nistir/ir7628/nistir-7628_vol2.pdf (“the Smart Grid significantly
expands the amount of data available in more granular form as related to the nature and frequency of energy consumption and creation, thereby opening up more opportunities for general invasion of privacy. Suddenly a much
more detailed picture can be obtained about activities within a given dwelling, building, or other property, and the
time patterns associated with those activities make it possible to detect the presence of specific types of energy consumption or generation equipment. Granular energy data may even indicate the number of individuals in a dwelling
unit, which could also reveal when the dwelling is empty or is occupied by more people than usual.”) (“Privacy and
the Smart Grid”).
199. National Broadband Plan at pp. 254–255 (providing an overview of how customer consumption data will drive energy
efficiency innovation).
200. Id. at p. 254; Policy Framework for the 21st Century Grid at p. 42.
201. Policy Framework for the 21st Century Grid at pp. 40–43 (recommending that “consumers receive timely access to,
and have control over, machine-readable information about their energy consumption” that they can then share with
“non-utility third-parties.”).
202. Privacy and the Smart Grid at pp. 7–12.
203. Although many utilities have privacy policies in place, it remains to be seen whether and how the enormous amount
of new data generated by the smart grid will alter the liability exposure of utilities. See, e.g., Cheryl Dancey Balough,
Privacy Implications of Smart Meters, 86 Chi.-Kent L. Rev. 161, 167-174 (2011) (describing the range of unresolved
issues regarding smart grid data privacy and security).
204. See, e.g., Envisioning the Smart Grid at p. 863.
205. Some argue that “If…[this] information is collected without touching the infrastructure of a regulated utility (perhaps
a measurement device purchased by a consumer and attached to her home’s circuit box), then the state PUC’s jurisdiction over the data [and thus utilities’ ownership claims]…would be somewhat more questionable, while the federal
government’s (assuming the device was sold in interstate commerce) would seem stronger.” Id. at pp. 863–864.
206. See Data Access and Privacy Issues Related to Smart Grid Technologies, at pp. 10–12 and 27, U.S. Dept. of Energy (Oct.
2010) (“Data Access and Privacy Issues”) (“At any given moment, many consumers are likely to have widely varying views about how they want to balance the privacy and efficiency implications of energy-usage data generated by
certain Smart Grid technologies, and their views may evolve significantly over time as real-world experience demonstrates added-value by revealing the relative advantages of differing sets of choices. Consequently, consumers should
have rights to protect the privacy of their own [consumption data] and control access to it.”).
207. National Broadband Plan at p. 255 (citing a survey by eMeter).
208. Data Access and Privacy Issues at pp. 51–53
209. For example, New York requires utilities to make available only hourly readings or readings on request even though it
also mandated that “AMI systems must have the ability to provide customers direct, real-time access to electric meter
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Realizing the Smart Grid Imperative
data” (emphasis added). NY PSC AMI Order – Feb. 2009.
210. See, e.g., Smart Metering & Privacy at pp. 13–14 (analyzing the various incentives attendant to various ownership
stakes in this data); Envisioning the Smart Grid at pp. 870–872.
211. The Obama administration has observed that this type of behavior verges on the anticompetitive and urges state
regulators to “be mindful of attempts by utilities to…make access to consumer usage information expensive or
impossible,” Policy Framework for the 21st Century Grid at p. 34.
212. Envisioning the Smart Grid at pp. 878–879.
213. CTIA – The Wireless Association estimates that wireless providers invested nearly $25 billion in network infrastructure in the year ending December 2010. See CTIA, Wireless Quick Facts: Mid Year Figures, http://www.ctia.org/
advocacy/research/index.cfm/AID/10323.
214. Seizing the Mobile Moment at pp. 13–14.
215. By the end of 2010, over 63 million people in the U.S. owned a smartphone. See Liz Jaques, US Smartphone
Penetration Soars in Q4 2010, Feb. 10, 2011, MediaTel, available at http://mediatel.co.uk/newsline/2011/02/10/
us-smartphone-penetration-soars-in-q4-2010/.
216. See Ryan Kim, The App Market Is Heading for an App Store Showdown, Jan. 18, 2011, GigaOm, available at http://
gigaom.com/2011/01/18/the-app-market-is-heading-for-an-app-store-showdown/.
217. See Douglas MacMillan, Peter Burrows and Spender E. Ante, Inside the App Economy, Oct. 22, 2009, Bloomberg
Business Week, available at http://www.businessweek.com/magazine/content/09_44/b4153044881892.htm.
218. Several studies have found that consumers are generally receptive to demand response and dynamic pricing programs
developed and deployed by their utilities. See, e.g., Karen Ehrhardt-Martinez et al., Advanced Metering Initiatives and
Residential Feedback Programs: A Meta-Review for Household Electricity-Saving Opportunities, American Council for
an Energy-Efficient Economy, Report No. E105 (June 2010); Ahmad Faruqui et al., The Impact of Dynamic Pricing on
Low Income Customers (Updated), IEEE Whitepaper (Sept. 2010). As previously discussed, however, overall consumer
demand for smart grid services remains tepid. GE Smart Grid Survey 2010. In addition, IBM in 2009 found that only
a very small percentage of utility customers are willing to pay more for energy efficiency products. See Lighting the
Way: Understanding the Smart Energy Consumer, at p. 4, IBM Global Business Services, Institute for Business Value,
available at http://www.ibm.com/common/ssi/fcgibin/ ssialias?infotype=PM&subtype=XB&appname=GBSE_GB_TI_
USEN&htmlfid=GBE03187USEN&attachment=GBE03187USEN.PDF.
219. National Broadband Plan at p. 247.
220. Policy Framework for the 21st Century Grid at p. 2 (reiterating that EISA “made it the policy of the United States to
modernize the Nation’s electricity transmission and distribution system.”).
221. See, e.g., National Association of Regulatory Utility Commissioners (NARUC), Smart Response Collaborative, http://
www.naruc.org/Ferc/default.cfm?c=3 (detailing a collaborative forum among state regulatory commissioners and
members of FERC).
222. The industry association for state PUC commissioners — NARUC — has also adopted guiding principles regarding various aspects of the smart grid. See, e.g., Id.; NARUC, Committee on Energy Resources and the Environment:
Resolutions, http://www.naruc.org/Resolutions.cfm (for an overview of the resolutions adopted by NARUC regarding
the smart grid).
223. See National Conference of State Legislatures, States Providing for Smart Metering, http://www.ncsl.org/?tabid=20672.
224. The surcharge was a way for the utility to recoup its investment upfront rather than over the long term via rate
increases and other traditional mechanisms. See Liz F. Kay and Hanah Cho, State Regulators Deny ‘Smart Grid’
Proposal, June 21, 2010, Baltimore Sun, available at http://articles.baltimoresun.com/2010-06-21/business/
bs-bz-bge-smart-grid-denied-20100621_1_smart-grid-proposal-month-for-electricity-customers-meter-readers.
225. Id. (quoting the PUC order).
226. See Hanah Cho, BGE to Move Ahead with ‘Smart Grid’ Plan, Aug. 16, 2010,
Baltimore Sun, available at http://articles.baltimoresun.com/2010-08-16/business/
bs-bz-bge-smart-grid-response-20100816_1_regular-rate-increase-requests-bge-estimates-smart-grid-plan.
227. Id.
228. Id. (quoting the PUC decision).
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229. FERC Smart Grid Policy Statement at para. 22.
230. See, e.g., Energy, Economics and the Environment 12–16 (providing an overview of the federal-state balance in
the energy sector); Regulatory Federalism in the Age of Broadband at pp. 116–118.
231. FERC Smart Grid Policy Statement at para. 22
232. Id.
233. Policy Framework for the 21st Century Grid at p. 27 (also noting that open standards can help to facilitate an international market for smart grid components).
234. Regulatory Federalism in the Age of Broadband at pp. 117–118.
235. Congress could ground such legislation in its power to regulate interstate commerce. For an overview of Congress’s
ability to do this in the energy space, see Energy, Economics and the Environment 16. More specifically, the
U.S. Supreme Court has upheld several attempts by Congress to regulate activities that occur mostly inside of states
but that have substantial economic impacts on interstate commerce. Moreover, the Court is generally supportive
of actions that seek to remove state-level obstacles to the “accomplishment of a federal objective.” See Robert A.
Schapiro, Polyphonic Federalism: Toward the Protection of Fundamental Rights 54–91 (2009) (providing
an overview of the evolution of Supreme Court decisions on federalism issues).
236. Seizing the Mobile Moment at p. 32.
237. See Omnibus Budget Reconciliation Act of 1993, Pub. L. No. 103-66, § 6002(b), 107 Stat. 312, 392 (codified in relevant part at 47 U.S.C. § 332 (2006)). For additional discussion, see Leonard J. Kennedy and Heather A. Purcell, \
Wandering Along the Road to Competition and Convergence—The Changing CMRS Roadmap, 56 Fed. Comm. L.J.
489, 498-99 (2004).
238. 47 U.S.C. § 332. Cf. FERC Smart Grid Policy Statement at para. 22 (explaining that state PUCs retain exclusive authority over the “the rates, terms, and conditions of transmission service and sales of electricity.”).
239. Seizing the Mobile Moment at pp. 32–35.
240. For a discussion of the interaction of regulatory “floors” and “ceilings” in the context of state regulation of interstate
services, see Tony Clark & Michael J. Santorelli, Federalism in Wireless Regulation: A New Model for a New World,
pp. 15–18, ACLP Scholarship Series, New York Law School (February 2009), available at http://www.nyls.edu/
user_files/1/3/4/30/83/Clark%20%20&%20Santorelli%20-%20Wireless%20Federalism%20-%20February%202009.pdf
(“Federalism in Wireless Regulation”).
241. See, e.g., Smart Power 182–184.
242. Regulatory Federalism in the Age of Broadband at p. 120.
243. See Arne Duncan, Race to the Top Has Unique Role to Play in Reforming Schools for the Future, Sept. 28, 2010, The
Hill, available at http://thehill.com/special-reports/education-september-2010/121461-race-to-the-top-has-uniquerole-to-play-in-reforming-schools-for-the-future (“The Race to the Top program has fundamentally redefined the
education landscape in America. With less than 1 percent of the annual K–12 education spending in our country,
the program has given states the incentive to lead reform in a comprehensive and collaborative way. Race to the Top
has helped advance reform more in the past 18 months than any other program in the history of the Department of
Education … Even before Race to the Top made its first grant, states showed their commitment to reform. Starting
early last year, 48 states worked together to create standards that prepare students for success in college and careers.
In a few short months since those standards were finalized, 35 states and the District of Columbia have adopted
them. Forty-four states have formed two consortia to create the next generation of assessments that will measure student progress toward those standards.”).
244. Perhaps via the NARUC-FERC Smart Grid Collaborative. These types of joint federal-state initiatives are of enormous value in informing model policies that adequately balance the needs of various states against overarching
federal goals. See, e.g., Federalism in Wireless Regulation at p. 18.
245. National Broadband Plan at Recommendation 12.2.
246. A similar mechanism already exists under EISA, but is limited only to the unilateral efforts of utilities. EISA at
Section 1306. This mechanism was funded via the 2009 stimulus and is set to sunset after fiscal year 2012. Id.
247. Envisioning the Smart Grid at p. 861.
248. Communications Requirements at p. 46.
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249. For example, DOE has called for the development of a “national online clearinghouse” that could store best practices,
lessons learned, and more refined measurements of the communications needs of the smart grid. Id. at pp. 60–61.
Similarly, the FCC has called for more collaboration with DOE on assessing the evolving communications needs of
the smart grid. National Broadband Plan at p. 253.
250. Collaborations like the one between Verizon and the Utilities Telecom Council, which yielded a survey and report
on the communications needs and perceptions of utilities vis-à-vis commercial broadband networks, could serve as
a model for these types of exploratory partnerships. Ultimately, these partnerships could yield useful information for
all stakeholders in this space. In some cases, proprietary networks built and maintained by utilities might be the most
practicable solution. In other cases, using existing commercial broadband infrastructure might yield more cost-effective business models for utilities. In still other cases, a hybrid middle-ground approach may be the most attractive to
both sets of stakeholders. However, these solutions will not present themselves without more robust collaboration and
discussion among utilities and commercial broadband service providers. See, e.g., Utility Communications Needs at pp.
21–22.
251. National Broadband Plan at p. 252.
252. Reliability Considerations from the Integration of Smart Grid at pp. I–III.
253. Id. at p. IV.
254. Policy Framework for the 21st Century Grid at pp. 49–50.
255. In the Matter of Reliability and Continuity of Networks, Including Broadband Technologies, Notice of Inquiry, PS
Docket 11–60, FCC 11–55 (rel. April 7, 2011). This type of initiative was first mentioned in the FCC’s National
Broadband Plan. National Broadband Plan at p. 251.
256. NIST Smart Grid Interoperability Roadmap 1.0 at pp. 39–40.
257. National Broadband Plan at p. 247 (“Broadband and advanced communications infrastructure will play an important
role in achieving national goals of energy independence and efficiency. Broadband-connected smart homes and businesses will be able to automatically manage lights, thermostats and appliances to simultaneously maximize comfort
and minimize customer bills. New companies will emerge to help manage energy use and environmental impact over
the Internet, creating industries and jobs. Televisions, computers and other devices in the home will consume just a
fraction of the power they use today, drawing energy only when needed. Large data centers, built and managed to
leading energy efficiency standards, will be located near affordable and clean energy sources. Finally, broadband connectivity in vehicles will power the next generation of navigation, safety, information and efficiency applications while
minimizing driver distraction. Next-generation safety systems will alert drivers to hazards, helping to avoid accidents
and saving lives. In the process, broadband and information and communication technologies can collectively prevent more than a billion metric tons of carbon emissions per year by 2020.”).
258. This program was launched to facilitate the creation of a nationwide broadband network dedicated to “healthcare, connecting public and private non-profit healthcare providers in rural and urban locations.” See FCC, Rural
Healthcare Pilot Program, http://www.fcc.gov/cgb/rural/rhcp.html.
259. National Broadband Plan at p. 215.
260. The U.S. Department of Agriculture’s Rural Utilities Service has committed to investing $250 million in rural
smart grid investments by the end of 2012. See Press Release, Agriculture Secretary Announces Goal for Smart Grid
Investments and Funding to Improve Electric Services to Customers in 10 States, June 13, 2011, U.S.D.A., available at
http://www.usda.gov/wps/portal/usda/usdahome?contentid=2011/06/0247.xml&contentidonly=true. Though laudable, limiting additional federal smart grid investments to rural areas could slow deployment efforts in other parts of
the country.
261. Electricity 2.0 at p. 48.
262. National Broadband Plan at p. 256.
263. Id.
264. Data Access and Privacy Issues at p. 10.
265. Id. at pp. 11–12.
266. The U.S. Department of Energy, in its inquiry into these issues, largely defers to the states to determine the appropriate framework for regulating data access. Data Access and Privacy Issues at pp. 14–23. As noted above several
Realizing the Smart Grid Imperative
45
states are grappling with the issue of data ownership and access. Indeed, it remains to be seen whether state PUCs
have or should have jurisdiction over third-parties that access this data. Individual state PUCs are beginning to
investigate the limits of their jurisdiction over non-utility firms engaged in this space. See, e.g., Order Instituting
Rulemaking to Consider Smart Grid Technologies Pursuant to Federal Legislation and on the Commission’s own Motion
to Actively Guide Policy in California’s Development of a Smart Grid System, ALJ’s Ruling Extending Deadline for
Reply Comments and Establishing a Briefing Cycle Concerning the Commission’s Authority over Entities Receiving
Data on a Customer’s Electricity Usage, Rulemaking 08-12-009, California PUC (October 29, 2010), available at
http://docs.cpuc.ca.gov/efile/RULINGS/125778.pdf. The Obama administration also defers to the states to solve these
issues, though it does echo the FCC in urging the states to provide customers with robust and timely access to their
usage data. Policy Framework for the 21st Century Grid at pp. 40–42. However, as discussed supra, the fragmented
nature of a state-by-state approach to core elements of the smart grid augurs in favor a national framework to more
efficiently address these issues.
267. National Broadband Plan at p. 256.
268. These include previously cited federal proceedings at DOE and NIST and state proceedings in individual states like
California and within NARUC, the industry organization for state PUCs. More generally, the U.S. Department of
Commerce has addressed privacy issues in the context of the wider Internet economy. See Commercial Data Privacy
and Innovation in the Internet Economy: A Dynamic Policy Framework, Internet Policy Task Force Green Paper,
U.S. Department of Commerce (December 2010), available at http://www.commerce.gov/sites/default/files/documents/2010/december/iptf-privacy-green-paper.pdf (“Commercial Data Privacy and Innovation”).
269. See, e.g., National Broadband Plan at pp. 256–257 (recommending that “FERC…adopt consumer digital data accessibility and control standards as a model for the states” and “DOE should…develop best practices guidance for the
states” vis-à-vis consumer data accessibility policies.”).
270. Outdated privacy and security standards are a barrier to more robust adoption of broadband-enabled telemedicine
services. Barriers to Broadband Adoption at pp. 38–41. To this end, the FCC has called on Congress and other federal
entities to modernize existing health data privacy and security laws in order to facilitate more robust deployment and
adoption of these services. National Broadband Plan at pp. 208–209.
271. See, e.g., Commercial Data Privacy and Innovation; Commercial Privacy Bill of Rights, Office of U.S. Sen. John Kerry
(April 12, 2011) (“Senator Kerry and Senator McCain introduced a Commercial Privacy Bill of Rights to establish a
baseline code of conduct for how personally identifiable information and information that can uniquely identify an
individual or networked device are used, stored, and distributed. This legislation would go a long way to increasing consumer trust in the market and generating additional activity as a result as well as protecting people from unscrupulous
actors in the market by creating a set of basic rights to which all Americans are entitled.”) (“Kerry-McCain Privacy Bill”)
272. For an overview of this framework, see Federal Trade Commission, Fair Information Practice Principles, http://www.
ftc.gov/reports/privacy3/fairinfo.shtm.
273. Commercial Data Privacy and Innovation at p. 4.
274. See generally id. See also Policy Framework for the 21st Century Grid at p. 47 (endorsing a self-regulatory approach to
“develop enforceable codes of conduct for different smart grid deployment contexts.”).
275. Commercial Data Privacy and Innovation at p. 23. Empowering consumers with more control over their data and
more information about how that data is collected, stored, and used is at the heart of several other recent federal privacy initiatives. See, e.g., Kerry-McCain Privacy Bill.
276. See, e.g., The Need for Essential Consumer Protections: Smart Metering Proposals and the Move to Time-Based Pricing,
at pp. 19–20, AARP et al. (Au. 2010), available at http://www.nasuca.org/archive/White%20Paper-Final.pdf.
277. See, e.g., Data Access and Privacy Issues at pp. 7–9; Barriers to Broadband Adoption at pp. 61–62.
278. A survey conducted by the FCC in 2010 found that approximately 90 percent of broadband consumers are satisfied
with their service. See, e.g., Joel Gurin, More on Speed: Just How Satisfied are Consumers? FCC, Blogband, June 2,
2010, available at http://blog.broadband.gov/?entryId=477720; Broadband Satisfaction: What Consumers Report About
their Broadband Internet Provider, at p. 2, FCC Working Paper (Dec. 2010), available at http://www.fcc.gov/Daily_
Releases/Daily_Business/2010/db1206/DOC-303263A1.pdf (finding that the vast majority of consumers surveyed by
the FCC were satisfied with their broadband service) (“Broadband Satisfaction”).
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Realizing the Smart Grid Imperative
279. See Press Release, Overall Satisfaction among Residential Electric Utility Customers Increases Due to Perceptions of
Fewer Outages and Lower Bill Amounts, July 14, 2010, JD Power and Associates, available at http://businesscenter.
jdpower.com/news/pressrelease.aspx?ID=2010120 (reporting that “fewer than one in six residential customers say
they are aware of actions taken by their utility to implement smart grid and smart meter technology”).
280. See, e.g., Broadband Satisfaction (describing current levels of customer satisfaction with the various aspects of broadband service provider billing practices); Losing the Forest for the Trees (discussing the many consumer-focused
business models developed in the wireless marketplace over the last few years); National Broadband Plan at p. 29.
281. Barriers to Broadband Adoption at p. 58 (noting that the energy sector lacks an “innovative ecosystem”).
282. See, e.g., National Broadband Plan at p. 11 (Goal number 6 of the Plan: “To ensure that America leads in the clean energy
economy, every American should be able to use broadband to track and manage their real-time energy consumption.”).
283. In addition to the discussion supra, see also Charles Weiss and William B. Bonvillian, Structuring an Energy
Technology Revolution 28 (2009) (observing that the “vast and complex array of [energy] technologies” are
“deeply entrenched, having evolved under the influence of a long-standing economic and policy environment that
has given rise to huge and politically powerful companies, produced pervasive subsidies, motivated sunk investments
in infrastructure, and contributed to a political culture that takes it for granted that fossil fuels are the basis of the
economy—the whole underpinned by deeply felt public expectations that cheap and readily available energy is part of
the American birthright.”).
Realizing the Smart Grid Imperative
47
About the Authors
Charles M. Davidson and Michael J. Santorelli are Directors of the Advanced Communications
Law & Policy Institute (ACLP) at New York Law School. The authors write widely on broadband,
telecommunications, wireless, and Internet law and public policy issues.
The ACLP’s mission is to promote robust and solution-focused dialogues among state and federal
policymakers, academe, service providers, the financial community, and consumers concerning
changes to the state and federal legal, policy and regulatory regimes. The ACLP has published a
number of papers and has hosted an array of interdisciplinary public policy events on key public
policy issues, with a particular emphasis on examining the impacts of broadband on the healthcare, education, and energy sectors.
Davidson previously served as a Commissioner on the Florida Public Service Commission (PSC),
the regulatory agency that oversees the state’s telecommunications, energy, and water industries. His government work included serving as the Executive Director of Florida’s Information
Technology Taskforce and as the Staff Director of the state’s Committee on Information
Technology. He previously served as a Special Professor at Hofstra University School of Law. His
research interests include the antitrust implications of a changing communications marketplace
and policy reforms needed to spur enhanced broadband adoption and utilization across key
demographics and sectors of the economy. Davidson holds a Masters of Law in Trade Regulation
from New York University, a Masters in International Business from Columbia University, and his
B.A. and J.D. degrees from the University of Florida, where he served as a fellowship instructor at
the College of Law.
Santorelli previously served as the Policy Director for the New York City Council’s Committee on
Technology. As its lead staffer, he was responsible for organizing hearings and preparing policy
papers on a diverse array of topics. Other duties included drafting legislation and consulting with
local stakeholders in the private and nonprofit sectors to develop strategies for spurring use of
emerging technologies among underserved populations. His research interests include examining
the interplay of regulation and innovation and how to recalibrate legal and regulatory frameworks
to accommodate disruptive technologies and business models. Santorelli received his B.A., cum
laude, from Tufts University, and his J.D., cum laude, from New York Law School.
Contact Information
Charles M. Davidson
Director
Advanced Communications Law &
Policy Institute
New York Law School
185 West Broadway
New York, NY 10013
Phone: (212) 431-2163
Email: [email protected]
48
Realizing the Smart Grid Imperative
Michael J. Santorelli
Director
Advanced Communications Law &
Policy Institute
New York Law School
185 West Broadway
New York, NY 10013
Phone: (212) 431-2163
Email: [email protected]
About the Time Warner Cable Research Program on
Digital Communications
The Time Warner Cable Research Program on Digital Communications will be
dedicated to increasing public understanding of the benefits and challenges facing
the future of digital technologies in the home, office, classroom, and community.
The Research Program will focus on the following areas:
•
•
•
•
Increasing knowledge about the marketplace and the consumer
Increasing knowledge about digital technologies
Increasing knowledge about communications policy
Increasing knowledge about innovation in digital communications
About the Research Stipends
Individuals receiving a stipend should produce a 25- to 35-page report. The report
should be submitted no later than six months after the start of the project.
Proposals from any discipline with research interest in digital communications will be
considered. Multidisciplinary research teams, consisting of two or more authors from
different fields, are encouraged.
Size of Stipend: $20,000
Application Deadlines for 2010–2011 Awards: November 1, 2011 and April 1, 2012
Submitting Applications: Applications should be submitted online at
www.twcresearchprogram.com. Applicants should submit:
• A three-page description of the proposed project
• A resumé (no more than three pages per author)
Applicants will be notified when their application is received and when the proposal
review process is completed.
About Time Warner Cable
Time Warner Cable is the second-largest cable operator in the U.S. and a major provider
of communications and entertainment services to homes and businesses. Our technologically advanced, well-clustered operations serve about 14.6 million customers in
28 states, with our largest operations located primarily in five geographic areas: New
York State (including New York City), Texas, Ohio, the Carolinas, and Southern California
(including Los Angeles). Time Warner Cable is built on a foundation of technological
innovation and commitment to the communities we serve.
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Washington, DC 20004
www.twcresearchprogram.com
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