Smart Grid Investments and Information
March 2009
The Standards
(16) CONSIDERATION OF SMART GRID INVESTMENTS-
(A) IN GENERAL- Each State shall consider requiring that, prior to undertaking investments in non-advanced grid technologies, an electric utility of the State demonstrate to the State that the electric utility considered an investment in a qualified smart grid system based on appropriate factors, including:
(i) total costs;
(ii) cost-effectiveness;
(iii) improved reliability;
(iv) security;
(v) system performance; and
(vi) societal benefit.
(B) RATE RECOVERY- Each State shall consider authorizing each electric utility of the State to recover from ratepayers any capital, operating expenditure, or other costs of the electric utility relating to the deployment of a qualified smart grid system, including a reasonable rate of return on the capital expenditures of the electric utility for the deployment of the qualified smart grid system.
(C) OBSOLETE EQUIPMENT- Each State shall consider authorizing any electric utility or other party of the State to deploy a qualified smart grid system to recover in a timely manner the remaining book-value costs of any equipment rendered obsolete by the deployment of the qualified smart grid system, based on the remaining depreciable life of the obsolete equipment.
(17) SMART GRID INFORMATION-
(A) STANDARD- All electricity purchasers shall be provided direct access, in written or electronic machine-readable form as appropriate, to information from their electricity provider as provided in subparagraph (B).
Smart Grid Investments and Information
3/20/2009 p. 1 of 5

(B) INFORMATION- Information provided under this section, to the extent practicable, shall include:
(i) PRICES- Purchasers and other interested persons shall be provided with information on—
(I) time-based electricity prices in the wholesale electricity market; and
(II) time-based electricity retail prices or rates that are available to the purchasers.
(ii) USAGE- Purchasers shall be provided with the number of electricity units, expressed in kwh, purchased by them.
(iii) INTERVALS AND PROJECTIONS- Updates of information on prices and usage shall be offered on not less than a daily basis, shall include hourly price and use information, where available, and shall include a day ahead projection of such price information to the extent available.
(iv) SOURCES- Purchasers and other interested persons shall be provided annually with written information on the sources of the power provided by the utility, to the extent it can be determined, by type of generation, including greenhouse gas emissions associated with each type of generation, for intervals during which such information is available on a cost-effective basis.
(C) ACCESS- Purchasers shall be able to access their own information at any time through the Internet and on other means of communication elected by that utility for smart grid applications. Other interested persons shall be able to access information not specific to any purchaser through the Internet. Information specific to any purchaser shall be provided solely to that purchaser.
Background to the Standards
Although widely quoted in the media today, the term smart grid is actually undefined and means different things to customers, utilities, manufacturers and generators in the utility industry. One definition includes:
Convergence of information technology and operational technology applied to the electric grid allowing sustainable options for customers and improved security reliability and efficiency for the utility.
Smart grid deployments are generally perceived to have benefits of reliability and may provide a means to avoid certain new generation and grid investments while
Smart Grid Investments and Information
3/20/2009 p. 2 of 5

allowing connection of renewable resources and increasing efficiency of existing operations and generation.
It is important to note that smart grid systems nationwide are generally in the conceptual or pilot project stage. There are no national or regional standards or even common industry practices yet developed for implementation of Smart Grid systems.
Standard 16 as proposed requires that a smart grid type alternative be identified and evaluated prior to making traditional grid investments. A typical smart grid scenario assumes that a new generation resource is needed. If sufficient customer demand and usage were to be reduced or controlled that resource might be deferred or avoided at the cost of the smart grid alternative. Customer reductions might come from a price signal tied to the cost of the added resources or peak system resources such that customers may chose to pay a higher peak cost or avoid usage by programming appliances to turn off during the peak period. These type scenarios suppose time based rates for customers and communications infrastructure in place to inform customers and allow for control of a so called “demand response” from the price signal.
The remainder of Standard 16 concerns how the costs of smart grid systems are to be included in the rate base and allow for the cost of obsolete equipment to be recovered.
The Smart Grid Information Standard 17 supports the smart grid concept by installing metering, communication systems to the meter and information and data management systems to provide near real time tracking of hourly electrical energy usage and pricing information to each customer. The information is to include wholesale prices and retail price plans that may be available to the customer. The concept being when combined with a home network, smart appliances or utility controlled appliances, the hourly usage and price information would inform customer decisions on when and how to use electrical power.
Generic usage information would be made available to non-customers.
Standard with Regard to the District
The District has a unique power supply situation with the availability of power from the Priest Rapids Project, a green hydro resource. The project provides the
District and project participants a low cost resource compared to national power cost averages. Northwest wholesale power markets reflect value in peak period power production. However, the marginal cost amounts are unlikely to be sufficient to fund smart grid alternatives geared toward managing high national peak power costs according to the criteria outlined in Standard 16. In the future, as wholesale costs rise, generation peaking capacity investments are
Smart Grid Investments and Information
3/20/2009 p. 3 of 5

contemplated or markets develop, the applicability of smart grid type investments should be reviewed and judged for cost effectiveness.
In addition to cost effectiveness criteria, the District perceives that many smart grid concepts and tools including both grid improvements and metering information systems are in their infancy. Without national standards and practices in place, non standard deployments or pilot project investments made now will likely have to be revisited and systems potentially replaced in a short time frame as the national practice evolves and new standards and systems become available. This will likely lead to lost benefits from shortened life spans for this equipment. In time, consistency and standardization will develop in the industry allowing the District to gain the full benefits of long lived smart grid installations and systems.
The District is in the process of deploying an internet based bill pay and bill presentation system for customers. Although lacking hourly or daily detail, customers will have unrestricted access to current and historical monthly electrical usage information, costs and pricing plans for service. As such, this system will meet many of the Standard 17 goals of informing and enabling customer electrical use choices. If the District were to adopt time of use or demand response rates in the future, this system could be expanded to include the hourly information needed to manage those types of rates.
In regard to cost recovery, the District’s Commission has the full authority to approve and allow District investments, and to determine how the costs of that investment are to be recovered in revenues. That authority would continue to apply to smart grid investments as deemed appropriate by the Commission and may include acknowledgement of equipment made obsolete due to the smart grid investment.
In regard to sources of supply and green house gas emission information, the
Washington State 2008 Legislative session approved HB2815 which requires the reporting of green house emissions for entities over a certain threshold. The
District will report green house information according to the State requirements along with our sources of generation. The specific requirements and implementation of the House Bill are being developed by Washington State staff in early 2009. The District is tracking the implementation and definition of the rules for this reporting function as they are developed.
Recommendation on Implementation of the Standard
For Standard 16, the District should not adopt Standard 16, Smart Grid investments. Until the systems mature and national or regional standards are adopted, the District should continue to monitor smart grid developments. This will avoid lost or wasted District investments in immature technologies and allow
Smart Grid Investments and Information
3/20/2009 p. 4 of 5

the cost of smart grid alternatives to drop as the nation adopts implementation standards. The District should continue to monitor the need for capacity improvements and the smart grid alternatives such as time of use and smart grid demand response systems into the future to determine when those systems may become cost effective for the District.
For Standard 17, the District should not implement this Standard. We recommend that the District continue with a monthly electronic bill pay and presentment system deployment. The District should consider expanding such a system in the future for real time monitoring and hourly metering if generation peaking, time of use metering or demand response systems are found to be a cost effective. The District should report greenhouse gas emission information according to State law rather than as part of a PURPA Standard.
Smart Grid Investments and Information
3/20/2009 p. 5 of 5