Policy Overview Dan Delurey

1. Policy OverviewDan Delurey National Town Meeting on Demand Response and Smart Grid Washington, DC July 13-14, 2009

2. Policy Developments 2005 -2008 www.demandresponsecommittee.org

3. DR/SG Policy Report • Prepared for National Council on Electricity Policy, an umbrella group for: • National Assn. Reg. Utility Comm. (NARUC) • National Governors Association (NGA) • National Council of State Legislatures (NCSL) • National Assn. of State Energy Officials (NASEO) • National Assn. of Clean Air Agencies (NACAA) • Covers • EPACT 2005 • EISA 2007 • FERC • DOE • State-by-State Action

4. DR/SG Policy Report • Quick Synopsis • EPACT 2005 • States took it seriously (if you look at the forest and not the trees…..) • EISA 2007 • Smart Grid language being used for definitional purposes elsewhere • Interoperability provision is being seriously implemented • Smart Grid grants serving as the vehicle necessary to use stimulus funds • DR Potential Assessment and Action Plan

5. State Activity 2005-2008 • 35 did regulatory policy on DR • 22 did legislative policy on DR • 18 did regulatory policy on SG/SM • 10 did legislative policy on SG/SM • 38 initiated action on EPACT 1252 • 32 completed action on EPACT 1252

6. TARP • Accelerated Depreciation for Smart Meters and some Smart Grid technologies • But only moved down to 10 years – not 5, which was the target to make it like other high tech items purposes • Took five years from introduction to passage

7. ARRA • EISA Smart Grid Grants provided the vehicle • Changes made to let them work for stimulus purposes • Language from EISA Smart Grid Title used for eligibility and screening purposes • $4.4 Billion for General Smart Grid Investment Grants • $3+ Billion in money actually going out the door • Significant sums for “energy efficiency” to states

8. HR 2454 – House Energy and Climate Change Bill (a.k.a. the American Clean Energy and Security Act – ACES) • Energy and Climate in One Bill • Passed House by Slim Margin • Smart Grid Subtitle • Smart Grid and Energy Star • Smart Grid and Peak Reduction • Smart Grid and Energy Efficiency Education and Communications

9. HR 2454 - The Smart Grid Subtitle Sec 141: Definitions Sec 142: Smart Grid in Energy Star Sec 143: Smart Grid on Energy Guide Labels Sec 144: Peak Demand Reduction Goals Sec 145: Energy Efficiency Public Information Program to include Smart Grid Sec 146: Inclusion of Smart Grid in Appliance Rebate Program Mgr’s Amt.: Best in Class Appliance ranking

10. HR 2454 – Energy Star • Section 142 • Assess Cost-effectiveness of integration of smart grid into products (benefits vs cost of smart grid increment) • Scenario assessment of “what if” smart grid technology were embedded and utilized • Section 143 • FTC Rulemaking on smart grid info on EnergyGuide label • Section 145 • Smart Appliances qualify under efficiency rebate programs • Manager’s amendment • Best of the best, graded A-F

11. HR 2454 – Sec. 144 Peak Reduction • Establishes a process for load-serving entities to establish “goals” • Two stages of goals, with specific percentages and baselines to be worked out • Use FERC DR Assessment as a resource • Compliance through empirical measurement or demonstration of DR capability and testing

12. Senate Energy Bill • Reported out of Senate Energy Committee • Energy-only • Climate Bill is responsibility of Environment Committee • Bills expected to be merged on floor. • Peak Reduction Goals • Similar to House, but focus in Senate is on improvement of system load factor

13. Senate - The American Clean Energy and Leadership Act of 2009 (ACELA) • Subtitle D—Electric Grid • Sec. 295. National electric system efficiency and peak demand reduction goal. Similar to House only specific focus on system load factor • Sec. 296. Uniform national standards for interconnection of certain small power production facilities.

14. State Peak Reduction Standards Pennsylvania: 4.5% by 2013 Maine: 100MW of peak demand by 2020 Maryland 5% by 2011 - 10% by 2013 - 15% by 2015 Ohio 1% in 2009, plus 0.75% per year to 2018 Delaware, Virginia, California, Texas

15. Interoperability • National Institute of Standards and Technology (NIST) has the ball for now – then it goes to FERC • Framework and protocols • Data/Information interface vs devices • NIST effort • Sees existing standards as low-hanging fruit to adopt • Not your usual standard process in terms of time and effort • White House call to action • Workshops pulling in 4-600 parties to roll up sleeves • Smart Grid Grants proceeding ahead of NIST but with a heavy nod to the NIST process and interoperability in general

16. Smart Grid Grants • Not $30+, Not $11B, it is $3B+ for general smart grid investment grants • Heavy Reliance on EISA 07 language and direction • Incorporation of interoperability and cybersecurity • Diverse eligibility • Applicants • Kind of Projects • Funding Opportunity Notice (FOA) issued • Notice of Intent Due • Grant Applications Due • Oversubscribed?

17. Cybersecurity • Wolf Blitzer in the Situation Room? • NERC in May approves eight Revised Cybersecurity Standards • consisting of 40 “good housekeeping” requirements • House and Senate Hearings and Bills • Primarily dealing with jurisdiction • Agencies beef up • Smart Grid Grants incorporates

18. Federal Activity • FERC Smart Grid Policy Statement • FERC DR Potential Assessment • DOE Advisory Council includes DR in Resource Adequacy Report • DOE Smart Grid Grants • DOE funds to State Commissions • NIST • EPA EE Action Plan Vision Statement included DR

19. State Activity • CA DR Programs and Smart Grid OIR • MD DR Programs and RFP • Illinois Smart Grid Initiative • VA Peak Demand Reduction • ME Peak Demand Reduction • NM Smart Grid Statewide Plan • Action in multiple states to prepare for federal Smart Grid Grants

20. Thank You www.demandresponsecommittee.org

21. FERC Issues 2008 Assessment of Demand Response and Advanced Metering FERC issued, on 12/29/08, its Staff’s third annual report on demand response and smart metering in compliance with EPACT 2005. The report, “2008 Assessment of Demand Response and Advanced Metering,” was based on a survey of utilities and demand response companies that led to the following findings: • “Advanced metering penetration (i.e., the ratio of advanced meters to all installed meters) has reached about 4.7 percent for the United States. This is a significant increase from 2006, when advanced metering penetration was less than one percent.” [Note: this and other numbers from the Report are not directly comparable to the data from FERC’s 2006 Report, which was based on a prior survey. As FERC explains in the Report, it adjusted its definition of advanced metering to only include such metering that was “in use”] • “Eight percent of customers in the United States are in some kind of demand response program.” • “There have also been large increases in customer enrollment and the number of entities that offer demand response programs; for example, the number of entities offering real-time pricing increased significantly since 2006.” Update 08.12.31

22. Congress Chamber of Commerce Issues Energy-Policy Transition Plan for President-Elect Obama and 111th On 11/17/08, the US Chamber of Commerce's Institute for 21 Century Energy released its “Transition Plan for Securing America’s Energy Future,” an “energy policy roadmap” based on the September 2008 blueprint that details 88 “concrete” policy-action recommendations for President- elect Barack Obama and the 111th Congress. In particular, the “Transition Plan for Securing America’s Energy Future” proposes a timeline for realizing each proposed policy action and organizes the recommendations around two criteria: Including: “The Secretary of Energy should place high priority on the implementation of the smart power grid requirements of the Energy Independence and Security Act of 2007. This may include specific recommendations for state and federal policies and other actions necessary to facilitate the transition to a smart power grid.” 08.11.29 update

23. Connecticut Energy Advisory Board Issues RFP for Demand Response to Offset Proposed Transmission Projects On 11/4/08, the Connecticut Energy Advisory Board (CEAB) issued an RFP for projects that could supplant the two transmission projects proposed by Connecticut Light & Power (CL&P). Both supply- and demand-side resources may be proposed in response to the RFP, including: • Grid-based Distributed Resources Distributed generation Load response resources Emergency generators New central station power plants Customer-based Distributed Resources Distributed generation Combined heat & power/cogeneration Load response resources Emergency generators Energy efficiency resources/conservation. 08.11.29 Update

24. ISO New England and New England Power Pool Petition FERC for Tariff Modifications Related to Demand Resources In a 10/31/08 filing, ISO New England and the New England Power Pool (NEPOOL) petitioned FERC to accept tariff revisions that would eliminate the reserve margin gross-up used to “determine the Capacity Value of Demand Resources under the existing rules of the Forward Capacity Market.” ISO New England and NEPOOL would like FERC to eliminate the reserve margin gross-up by 12/31/08, in time for the 2012/2013 Capacity Commitment Period associated with the upcoming third Forward Capacity Auction. Update 08.11.29

25. Kansas Commission Establishes Efficiency Guidelines, Opens Door for Demand Response Programs On 11/14/08, the Kansas Corporation Commission issued a Final Order that establishes a “comprehensive energy efficiency framework” (Docket 08-GIMX-441-GIV). Specifically, it sets the following: • “The Commission's policy shall be to consider proposals from utilities for riders to recover costs for energy efficiency programs, as discussed above.” • “The Commission's policy shall be to consider proposals from utilities for the decoupling method of addressing the throughput incentive issue, made in connection with energy efficiency programs, as discussed above.” • “The Commission's policy shall be to consider proposals for shared savings performance incentive plans where tied to specific energy efficiency programs the Commission believes most desirable, as discussed above.” Furthermore, the Final Order contains language that implies that the Commission would is including demand response programs proposed by utilities as part of efficiency efforts, while also recognizing a difference in such programs. Update 08.11.29

26. Maryland Commission Orders IOUs to File RFPs for DR to Meet Capacity Shortfall As previously reported, the Maryland Public Service Commission commenced a proceeding in August 2008 to “investigate the process and criteria” for having IOUs issue “gap” RFPs to secure additional resources in effort to “avoid potential capacity shortfalls in Maryland if certain transmission line projects are not competed as currently contemplated by 2011 and 2012” (Case 9149). The Commission received comments in September 2008 and held legislative-style hearings in October 2008. On 11/6/08, the Commission issued an Order in which it concluded that the Mid-Atlantic region faces a reliability gap of about 2,600 – 3,000 MW for 2011 – 2012. (Of the total gap predicted, 600 – 690 MW is attributable to Maryland.) Furthermore, the Commission not only determined that demand response and distributed generation should be the primary resources used to ensure reliability Update 08.11.29

27. National Action Plan for Energy Efficiency “Vision Document” Includes Demand Response and Smart Metering As previously reported, in November 2007 the leadership group of the National Action Plan on Energy Efficiency (NAPEE) released a “vision document” for realizing the five policy objectives of the plan. This vision identified demand response and the smart grid as areas of focus for the NAPEE. On 11/18/08, the NAPEE leadership group released an updated vision document—“National Action Plan for Energy Efficiency Vision for 2025: A Framework for Change”—in which demand response, smart metering, and the smart grid remain prominent. The revised vision document lists ten implementation goals of the NAPEE as well means for measuring progress in achieving them. Three goals support, directly or indirectly, demand response, smart metering, and the smart grid: Update 08.11.29

28. New Jersey Governor Signs Bill Outlining How Schools May Contract for Demand Response Governor Corzine signed legislation in September 2008 that outlines how the state’s boards of education and county colleges may contract for demand response and other services to conserve electricity. Read the text of the legislation (A844) on the New Jersey Legislature’s website. Update 08.11.29

29. New Jersey Commission Approves Utility Program that Includes Programmable Thermostats and Automated Lighting Control On 11/21/08, Public Service Electric & Gas Company (PSE&G) announced that the New Jersey Board of Public Utilities had approved its proposed $46 million, four-year project to reduce energy consumption and CO2 emissions (Docket EO08060426). The project has four components that will focus, respectively, on residential customers, small businesses, large businesses, and hospitals. Two of the components include measures conducive to demand response. First, through the residential component, PSE&G will provide customers with programmable thermostats. Second, the utility will provide large businesses with integrated lighting systems that include light-fixture monitoring and automated controls of lighting equipment. Update 08.11.29

30. Virginia Special Commission Issues Draft Recommendations, Including Demand Response and Utility Investment Incentives In December 2007, Governor Kaine established the Governor’s Commission on Climate Change. On 11/13/08, the Governor’s Commission on Climate Change held its ninth meeting anddiscussed its draft recommendations for Governor Kaine. Among the roughly 100 draft recommendations are two that address demand response: • “Electric utilities should pilot voluntary real-time rates to residential and commercial customers to understand the effect such rates would have on their cost structure and ensure costs are not shifted between time-of-use and other customers. After testing in pilots, these rates should be made available to all residential and commercial customers.” Update 08.11.29

31. California Commission Opens Proceeding to Consider Smart Grid Standards Relative to EISA 2007 and State Policy The California Public Utilities Commission issued an Order Instituting Rulemaking (OIR) on 12/22/08 in which it initiated a proceeding to consider the smart grid (Rulemaking 08-12-009). Specifically, the Commission will consider the state’s policies for the smart grid as well as the question of whether to adopt the two smart grid PURPA Standards established by the Energy Independence & Security Act of 2007. According to the Commission’s summary of its intent for the proceeding: Update 08.12.31

32. Maryland Peak-Demand Reduction Law Update: December 2008 There has been some recent activity in the Maryland Public Service Commission’s five proceedings to ensure utility compliance with the 15%-by-2015 peak-demand reduction target set by the EmPOWER Maryland Energy Efficiency Act of 2008. (While there is a separate proceeding for Allegheny Power, BG&E, Pepco, Delmarva Power & Light, and Southern Maryland Electric Cooperative Update 08.12.31

33. New Jersey Legislature Considering AMI Standard The New Jersey State Assembly is considering new legislation that would establish AMI standards in addition to standards for energy efficiency, renewable energy, and reducing GHG emissions. The bill, “An Act Concerning Advanced Metering Infrastructure Standards” (A3333), was introduced on 10/23/08 and was passed by the Telecommunications and Utilities Committee on 12/8/08. Update 08.12.31

34. Oklahoma Commission Adopts Rules for Demand Programs As previously reported, in October 2007 the Oklahoma Corporation Commission issued a Notice of Proposed Rulemaking to amend the Oklahoma Administrative Code by adding a subchapter, “Demand Programs,” that would establish rules for utilities deploying energy efficiency and demand response programs (Case RM 200700007; ID: 4010862). As also previously reported, in September 2008 the Commission issued a revised set of proposed rules after receiving comments about its initial set of proposed rules. On 11/24/08, the Commission adopted the proposed rules before sending them, on 12/4/08, to Governor Henry and the state legislature for final approval. Update 08.12.31

35. Virginia Commission Initiates Proceeding to Consider PURPA Standards in EISA 2007 The Virginia Corporation Commission initiated a proceeding on 12/11/08 to consider whether to adopt the four PURPA Standards created by the Energy Independence & Security Act of 2007 (Docket PUE-2008-00112). Two of the four PURPA Standards under consideration address the smart grid, while one of them is about demand response: “Consideration of Smart Grid Investments” “Smart Grid Information” “Integrated Resource Planning “Rate Design Modifications to Promote Energy Efficiency Investments” Update 08.12.31

36. Connecticut DPUC Declines Demand Response Resources in 2008 IRP In a 1/16/09 Draft Decision, the Connecticut Department of Public Utility Control (DPUC) approved the 2008 integrated resource plan (IRP) filed by the state’s electric distribution companies (EDCs) and the Connecticut Energy Advisory Board (CEAB) (Docket 08-07-01). In so doing, however, the DPUC declined the EDCs’ and CEAB’s recommendation to “procure hundreds of millions of dollars worth of new conservation and demand response resources over the next ten years.” The Draft Decision, furthermore, reports that the DPUC “finds a surplus of resources and concludes that there is no need for additional resources at this time or during the relevant planning horizon.”

37. DOE’s Electricity Advisory Council Issues Resource Adequacy Report, Calls for More Demand Response On 1/15/09, the DOE’s Electricity Advisory Committee (EAC) issued a report on maintaining adequate electricity supply. Through the report, “Keeping the Lights On in aNew World,” the EAC addresses the trends for, drivers of, and barriers to building generation/transmission capacity and deploying DSM resources. It also discusses the country’s future electricity needs. Finally, it recommends policies for the DOE to “ensure reliable supplies of electricity in the future at a reasonable cost and with due regard for the environment.” Regarding demand response and energy efficiency, the report suggests: