California regulators are giving a first look at what amounts to the instruction manual that will be used by the state's three major electric utilities to create their smart grid deployment plans.

The proposed decision, which is being distributed by the California Public Utilities Commission for review and comment, would steer the adoption of capabilities, technologies, privacy standards, performance metrics and cost allocations necessary to upgrade almost 12 million customers of Pacific Gas and Electric, Southern California Edison and San Diego Gas & Electric to the smart grid by 2015.

The 150-page proposal, dated May 21 and authored by the CPUC's newest member, Nancy Ryan, is scheduled to be considered and finalized next month by the full commission.

Often, proposed decisions are ratified with only minor modifications by the CPUC. But the scope of Ryan's proposal -- and her short tenure on the panel -- may attract extraordinary scrutiny by prospective vendors, the regulated utilities, and the other four commissioners.

Once it's finalized next month, the ruling also will influence the smart-grid rollout to millions of other ratepayers served by large and small municipal and private utilities in California -- and, by example, to other states in the process of setting up regulatory frameworks for their own technology-enhanced power grids.

Despite resistance to state and regional standards-setting before the federal regulatory establishment finishes its own program, California is compelled to act by a state law, enacted on Jan. 1, 2010, directing the CPUC "to determine the requirements for a Smart Grid deployment plan consistent with the policies set forth in the bill and federal law" by July 1, 2010.

The utilities then will have 12 months to build and file their individual deployment plans for commission review.

Security Upgraded to Top Level

In previous comments and discussions about smart-grid deployment, the issues of grid security and cyber security were to have been addressed in the utilities' strategic planning efforts, but Ryan opted to make security a top-tier subject of the deployment plans.

"Although the issues of grid security and cyber-security could be addressed as part of the strategic planning section, this decision requires that deployment plans include a separate section on the topic of security," the proposed decision says. "The section on security will require the utility to discuss the security needed to ensure the operation of the grid and the security needed to prevent unauthorized access to consumer data."

The proposed decision requires that PG&E, SCE and SDG&E follow a common outline in preparing their Smart Grid deployment plans. The plan's eight must-haves are:

1. Smart Grid Vision Statement

2. Deployment Baseline

3. Smart Grid Strategy

4. Grid Security and Cyber Security Strategy

5. Smart Grid Roadmap

6. Cost Estimates

7. Benefits Estimates, and

8. Metrics.

No Waiting for National Standards

The three utilities, plus the California Independent System Operator, the CPUC's ratepayer advocate, and interested parties such as Cisco and Walmart, wanted the commission to wait for national adoption of tech standards by the National Institute of Standards and Technology. Tendril weighed in favoring "a phased approach" such as a performance standard.

The proposed order opts for moving ahead, at least on the issue of communications: "We will order utilities planning Smart Grid investments to recommend the adoption of a particular communications protocol as part of their Smart Grid deployment plans and to seek Commission approval of appropriate Smart Grid interoperability standards or guidelines identified by NIST."

On privacy, the outcome also is for immediate action. The proposed decision requires a "privacy impact assessment" that addresses these questions:

1. What data is the utility now collecting?

2.  For what purpose is the data being collected?

3.  With whom will the utility currently share the data?

4.  How long will the utility currently keep the data?

5.  What confidence does the utility have that the data will is accurate and reliable enough for the purposes for which the data will be used?

6.  How does the utility protect the data against loss or misuse?

7.  How do individuals have access to the data about themselves?

8.  What audit, oversight and enforcement mechanisms does the utility have in place to ensure that the utility is following their own rules?"

The proposal stops short of requiring similar reports from demand-response providers and other third parties that plan to access customers' usage data via the customer's meter: "The Commission is aware of the concerns of certain parties regarding the need to enforce privacy standards upon these third parties, but at this time the Commission requires more time to assess whether any rule, law or mandate authorizes the Commission to apply this section to third parties."

Demarcation of Utility vs. Non-Utility Investments

Rather than establishing a systemic "demarcation" line between smart grid investments by utilities and vendors -- a proxy for the division between ratepayer-paid costs and investor-borne costs -- the proposed decision opts for a case-by-case framework.

"The Commission declines to adopt a demarcation point at this time," it says. "The Commission is certainly aware of the concerns raised by parties advocating for a demarcation point, but this is not the proper vehicle to address those concerns. . . . The Commission will consider parties' arguments at the time the utility proposes investments in these devices" through a specific technology-adoption request or a general rate case.

It adds, "the Commission is fully supportive of a competitive and innovative market for customer-owned technology and devices. Should a utility request ratepayer funds for a device or technology that it anticipates owning and operating and that is placed inside a customer's home or establishment, we will expect the utility to fully explain and justify why such an investment is needed, and explain why such devices or technologies have failed to be adopted widely."

Still Ahead

"After the adoption of this decision, this proceeding will focus on information access and privacy protections needed to implement access to price and consumption data," Ryan's proposal states.

That sets the table to meet previously set deadlines of:

1. Year-end 2010 for providing California customers with access to retail and wholesale price information and access to usage data through an agreement with a third party, and

2. Year-end 2011 for providing access to usage information on a "near real-time" basis for California customers with an advanced meter.

Despite making "Metrics" a requirement in forthcoming deployment plans, the proposed decision concedes that "the limited record developed on this point is insufficient to adopt a full set of useful and informative metrics that are not unduly burdensome. Therefore, we decline to adopt an initial set of metrics at this time."

The proposal directs commission staff to use all available input to date to create a new list of proposed metrics, hold a public workshop on them, and then file them for commission consideration and adoption.