Smart Grid Primer: Legal Issues
Energy Bar Association
December 4, 2009
Derek A. Dyson
Duncan, Weinberg, Genzer & Pembroke, P.C.
Agenda
I.
II.
III.
IV.
V.
VI.
Introduction
Grant Agreement
 Negotiate Terms
 Key Provisions
Reporting
Regulatory Requirements
Other Issues
Conclusions
2
I. Introduction: What Are Smart Grids?
Source: Electric Power Research Institute
3
II. Grant Agreement

Notification of Grant Award:



Awardees were notified on October 24, 2009
Notification triggers the start of negotiation with DOE
to finalize grant agreement
Finalize terms of any Cost Share commitments with
Sub-Recipients

Identify any modifications to the project plan, e.g.,
new project partners, revised cost share amount
4
Negotiate Terms



Negotiate Terms Applicable to Client
DOE’s schedule for SGIG is to have contracts in
place by 12/30/2009
Prime Recipients, Sub-recipients, and Vendors



Prime Recipient Agreements with Sub-recipients and
Vendors
Recipients should apply their standard procurement
policies
Flow-through provisions






Buy American (ARRA § 1605)
Wage Rate/Davis-Bacon Act (ARRA § 1606)
Whistleblower Protection (ARRA § 1553)
GAO/IG Access (ARRA §§ 902, 1514, 1515)
Reporting Requirements (ARRA § 1512)
Technical questions from DOE will need to be
addressed

Budget modifications/clarifications
5
Key Provisions - Issues




Applicability – prime recipients/subrecipients
Cost Accounting
Access to Records
Requirements may impose
substantial burdens





Project Execution Plan
Risk Management Plan
Cyber Security Plan
Intellectual Property
Closeout
6
Key Provisions, Cont’d.



DOE & client must finalize cost benefit analysis
methodology
Vendor and sub-recipient agreements entered into
prior to DOE acceptance may need to be modified
to comply with DOE terms & conditions
Client may seek clarification from DOE regarding
award requirements

E.g., equipment purchased within the Smart Grid
grant will be encumbered with an ownership interest
held by the Federal Government, how will that
impact utility mortgages. (10 CFR §§ 600.132 or
600.321)
7
Applicability

Grant recipients (primary applicant)



Sub-recipients (2 CFR § 176.30)



First-tier recipients
Agreement is with the primary Recipient
A non-Federal entity that expends Federal money
received through a pass-through entity to carry out
a Federal program, but does not include an
individual that is a beneficiary of such a program
i.e., if a utility cooperative applies for funding on
behalf of its members, the members may be Subrecipients
Vendors (limited information required)
8
Applicability, Cont’d.

Flow Down Requirements in
Agreements with Sub-Recipients

All Recipients must flow down the requirements of
applicable Federal, State and local laws, regulations, DOE
policy and guidance, and instructions in the Grant
Agreement to flow down recipients at any tier to the extent
necessary to ensure the Recipient’s compliance with the
Grant Agreement.
9
III. Reporting

Finalize terms of reporting relationship
with Sub-recipients once reporting
requirements are negotiated with DOE


Supervisory role over Sub-recipients:
Recipients can delegate but are
ultimately responsible for the data
reported
Reporting requirements for
Recovery Act (ARRA) and
Department of Energy
10
Flow of Reimbursement and Data
Reporting Example:
Grantor
Recipient*
Sub-Recipient
$
Department
of
Energy
Cooperative
Members
$
Vendor
$
Contractor,
Supplier,
Etc.
Electric
Cooperative
$
Report Jobs and Cost Data
at FederalReporting.gov
Contractor,
Supplier,
Etc.
Report on
VIPERS
*Recipient maintains duty of reporting
(can delegate to Sub-Recipient, but ultimately responsible for ALL data reported)
11
Reporting Requirements

Data quality




Goal is to avoid:
 Material omissions
 Significant reporting errors
 Double-counting
Additional Recovery Act goals:
 Transparency
 Accountability
Additional Department of Energy goals:
 Learn from the grants program
 Share data through Smart Grid Clearinghouse
for industry benefits
Prime Recipient is responsible for creating
processes to ensure data integrity
12
IV. Regulatory Requirements


Recovery Act
DOE Financial Assistance Rules (10
CFR Part 600)

Accounting and Audit Requirements
13
Recovery Act Requirements

Buy American (§ 1605)




Include in all Recovery Act-funded construction
contracts if governmental entity constructing “public
works” or “public buildings”
48 CFR § 52.225-21 - 24
Davis-Bacon Act (§ 1606)
Whistleblower Protection (§ 1553)


Include in all Recovery Act funded contracts
48 CFR § 52.203-15
14
Recovery Act Requirements, Cont’d.

GAO/IG Access (§§ 902, 1514, 1515)



Include in all Recovery Act funded solicitations,
contracts & orders, as applicable
48 CFR §§ 52.212-5, 52.214-26, 52.215-2
Reporting Requirements (§ 1512)


Include in all Recovery Act funded solicitation,
contracts & orders
48 CFR § 52.204-11
15
Buy American Provision

Prohibits use of Recovery Act funds
for:


A project for construction, alteration,
maintenance or repair of a public
building or public work unless all of the
iron, steel, and manufactured goods
used in the project are produced in the
United States.
Some exceptions
16
Davis-Bacon:



All persons employed by recipients & subrecipients on Recovery Act funded
construction, alteration or repair projects
shall be paid wages at rates not less than
prevailing rates on projects of similar
character in locality
Contractors & subcontractors on prime
contracts >$100k must pay 1.5 x basic
rate for all hours > 40hrs/wk
DOL compliance guide at:
http://www.dol.gov/compliance/guide/dbr
a.htm
17
Davis-Bacon Act: cont’d



Grant recipients & sub-recipients who
directly hire persons to perform
construction work funded by Recovery Act
must comply
May be applicable to cooperative
employee who is being paid with
Recovery Act funds, e.g., Grant
Administrator
Reporting requirements 29 CFR § 5.5:


Weekly copy of payroll
Statement of compliance
18
Financial Assistance Rules

10 CFR Part 600





Subpart A: general requirements applicable to
all
Subpart B: requirements applicable to nonprofits
Subpart D: requirements applicable to forprofits
Financial Assistance Rules revised
effective 9/28/09
Financial Assistance Rules available at:
http://ecfr.gpoaccess.gov/cgi/t/text/textidx?c=ecfr&tpl=/ecfrbrowse/Title10/10cfr600_mai
n_02.tpl
19
Provisions Required By Financial
Assistance Rules

All contracts awarded by recipient including
small purchases (<$100k) must include the
following, as applicable:




Equal Employment Opportunity
Copeland Anti-Kickback Act (>$2000 construction or
repair contract)
Davis-Bacon Act (>$2000 construction contract)
Contract Work Hours & Safety Standards Act
(>$2000 construction contract; >$2500 others)
20
Provisions Required By Financial Assistance
Rules, Cont’d.

All contracts awarded by recipient
including small purchases (<$100k) must
include the following, as applicable:




Rights to inventions made under contract (37
CFR Part 401)
Clean Air Act and Federal Water Pollution
Control Act (>$100,000 contracts & subgrants)
Byrd Anti-Lobbying Amendment Certification
(bid ≥$100k)
Debarment & Suspension (>$100k small
purchase threshold and certain other
contracts) www.epls.gov
21
Accounting & Audit Requirements




Recipients must maintain records
identifying source & application of
Recovery Act funds
FERC develops accounting guidance for
DOE
Neither FERC nor RUS Uniform System of
Accounts has issued Smart Grid
accounting guidance
Until guidance is issued segregate Smart
Grid assets in appropriate sub-accounts
22
V. Major Outstanding Issues

Does the project have external intellectual
property issues:




e.g., SIPCO
Utility mortgages on equipment versus
DOE’s ownership interest in equipment
(10 CFR §§ 600.132 or 600.321)
DOE Reporting requirements are still in
flux
Cyber-Security training available from
DOE within 4-6 weeks
23
VI. Conclusions






Prior and after award, requirements may change
Requirements may vary between applicants
Reporting requirements are extensive
DOE Financial Assistance Rules are extensive (10
CFR Part 600)
Accounting guidelines are incomplete, but keep
accounts separate
DOE intends to have hands off on project
management, but hands on regarding reporting
and data collection
24
Supplemental Slides
25
Recovery Act Smart Grid Awards

100 Awards of Smart Grid Investment
Grants


32 Awards of Smart Grid Demonstration
Grants


DOE issued Notice of Awards on October 27,
2009
DOE issued Notice of Awards on November 24,
2009
Awards are geographically dispersed
across the United States
26
Negotiate Terms, Cont’d.

DOE may request additional information:
 Indirect cost information
 Other budget information
 Name & phone of Designated Responsible Employee
for complying with anti-discrimination policies
 Representation of Limited Rights Data & Restricted
Software, if applicable
 Commitment Letter from Third Parties Contributing
to Cost Sharing, if applicable
 Certification as to USA status of prime awardee or
national status of any subawardee
 EPAct Representation (EPAct 1992 has a
requirement that grantee must state that its
participation in the grant program is in the economic
interest of the U.S.)
27
Smart Grid Investment Grant Awardees:
AL
Southern Company Services
Georgia System Operations Corp.
AR
Woodruff Electric
Tri State Electric Membership Corp.
AZ
Salt River Project
GU
Guam Power Authority
Southwest Transmission Coop
HI
Hawaii Electric Co.
Navajo Tribal Utility Association
IA
Iowa Ass’n of Municipal Utilities
Sacramento Municipal Utility District
ID
Idaho Power Company
CA
Burbank Water and Power
M2M Communications
San Diego Gas and Electric
IL
City of Naperville, IL
City of Glendale
IN
Indianapolis Power and Light Company
City of Anaheim
Modesto Irrigation District
CO
City of Auburn, IN
KS
City of Fort Collins
Westar Energy, Inc.
Midwest Energy, Inc.
Black Hills/Colorado Electric
KY
South Kentucky Rural Electric Cooperative
CT
Connecticut Municipal Electric Energy Coop
LA
Cleco Power LLC
DC
PEPCO
Lafayette Consolidated Government
FL
Florida Power & Light
Entergy New Orleans, Inc.
Lakeland Electric
Entergy Services, Inc.
JEA
City of Ruston, LA
City of Leesburg, FL
GA
MA
Honeywell Int’l
City of Tallahassee
NSTAR Electric Co.
Talquin Electric Cooperative
Town of Danvers, MA
Intellon Corporation
ISO of New England
City of Quincy, FL
Marblehead Municipal Light Department
Cobb Electric Membership
Vineyard Energy Project
Municipal Electric Authority of GA
MD
BG&E
28
Smart Grid Investment Grant Awardees, Cont’d.:
ME
Central Maine Power Co.
PA
Wellsboro Electric
MI
Detroit Edison Company
SD
Black Hills Power, Inc.
Whirlpool Corp.
Sioux Valley Energy
MO
City of Fulton, Missouri
MS
South Mississippi Electric Power Ass’n
Memphis Light, Gas and Water
NC
Duke Energy (x2)
Knoxville Utilities Board
NE
TN
Electric Power Board of Chattanooga
Progress Energy
TX
CenterPoint Energy
Cuming County Public Power District
TX
Reliant Energy Retail Services
Stanton County Public Power District
Golden Spread Electric Cooperative
NH
New Hampshire Electric Cooperative
Denton County Electric Cooperative
NJ
Atlantic City Electric Co.
El Paso Electric
NV
NV Energy
UT
WECC
NY
ConEd
VA
Rappahannock Electric Cooperative
NYISO
OH
Northern Virginia Electric Cooperative
First Energy Service Company
VT
City of Wadsworth, OH
WA Avista Utilities
City of Westerville, OH
Vermont Transco
Snohomish County Public Utilities District
OK
Oklahoma Gas and Electric Co.
OR
Pacific Northwest Generating Cooperative
Madison Gas and Electric
Central Lincoln People’s Utility District
Wisconsin Power and Light
PA
PECO
PPL
PJM
WI
WY
American Transmission Company (x2)
Cheyenne Light, Fuel and Power Company
Powder River Energy Corporation
29
Smart Grid Demonstration Grant Awardees:
CA
LADWP
TX
SCE (x2)
Pecan Street Project
Primus Power Corporation
Seeo, Inc.
Amber Kinetics, Inc.
PG&E
MA
Center for the Commercialization of
Electric Technologies
Oncor Electric Delivery Company
VA
Nat’l Rural Electric Cooperative
Ass’n
NSTAR Electric & Gas (x2)
WA Battelle Memorial Institute, Pacific
Northwest Division
Premium Power Corporation
WI
Waukesha Electric Systems
Beacon Power Corporation
MI
Detroit Edison Company
MO
Kansas City Power & Light
Boeing Company
NC
Duke Energy
NH
SustainX, Inc.
NM
Ktech Corporation
PSCo. Of New Mexico
NY
ConEd
Long Island Power Authority
New York Power Authority
New York State Electric & Gas
OH
AEP Ohio
City of Painesville
PA
East Penn Manufacturing Co.
44 Tech Inc.
30
Cost Accounting



All Smart Grid grant funds received from
DOE must be separated from all other
funds in recipients’ books (this includes
sub-recipients)
Smart Grid grant funds can only be used
for costs allowable by the Grant
Agreement and the Recovery Act
Be on the lookout for accounting
guidance from FERC
31
Access to Records



Transparency is paramount
Audits anticipated
All of the Smart Grid grant-related
records of Grantee are subject to review
by the Federal Government



Inspector General
Comptroller General
Any officer, employee, contractor,
subcontractor, sub-recipient, etc is
subject to be interviewed by the Federal
Government – may visit facilities
32
Extensive Reporting

What will be reported will be
negotiated

Project Management/Execution Plan




Earned Value Approach (time vs. project
value) – may be reported monthly
Risk Management Plan
Cyber Security Plan
Required Plans may be submitted
after execution of the Agreement
33
Intellectual Property

Intellectual property


Patent rights: DOE waives its general
rule that title vests in the Federal
government for all inventions under
DOE awards
Rights in technical data: The Federal
government generally has unlimited
rights in technical data under the
grant Agreement except when
developed solely at private expense
34
Closeout




Inventory of government owned
equipment
Release of ownership from DOE for
government equipment
All final reports must be timely submitted
within 90 days after final project period
ends
All grant funds not spent will need to be
returned to the DOE
35
Reporting

DOE Reporting Checklist




Identifies reporting requirements
Identifies frequency for reporting
Identifies special instructions for
reporting
Available at:
http://www.cio.energy.gov/documents/46002.pdf
36
Additional Smart Grid Related Reporting to
DOE
Management Reporting
o
o
Earned Value Progress Reporting
Technical Reporting
o
o
Cost/Benefits Data Metrics
Financial Reporting
o
o
Financial Status Report (Long or Short Form)
Closeout Reporting
o
o
o
Patent Certification
Property Certification
Other Reporting
o
o
o
Annual Indirect Cost Proposal
Annual Inventory of Federally Owned Property, if any
37
Reporting Requirements: What?

Data elements include:




The total amount of Recovery Act covered
funds received from DOE;
The amount of Recovery Act covered funds
received that were expended or obligated to
projects or activities;
Detailed information on subcontracts or subgrants awarded by recipient
May be required to submit backup
documentation for expenditures
38
Audit Requirements



Financial Assistance Rules define “nonprofit” (10 CFR § 600.3)
DOE may presume all cooperatives are
“non-profits”
Cooperatives seeking to avoid burden of
non-profit status can negotiate with
Contracting Officer that “part of net
earnings [does] inure to the benefit of
any private shareholder or individual”
e.g., capital credits
39
Single Audit Information: OMB Circular A-133




Audits of States, Local Governments, & NonProfits, OMB Circular A-133
Schedule of Expenditures of Federal Awards
(SEFA)
 Data Collection Form (SF-FAC) submit online
at:
http://harvester.census.gov/fac/collect/formop
tions.html
Recipients must identify each sub-recipient &
document at the time of the sub award &
disbursement of funds:
 Federal award number
 Catalog of Federal Domestic Assistance (CFDA)
number
 Amount of Recovery Act funds
Recipients agree to require their sub-recipients to
include on their SEFA information to specifically
40
identify Recovery Act funding
Audit Requirements Generally

Non-Profits subject to:
 Subpart B (10 CFR §§ 600.101 et seq.)
 OMB Circular A-133 Single Audit Information
http://www.whitehouse.gov/omb/assets/omb/circulars/a133
/a133.pdf


Others subject to:
 Subpart D (10 CFR §§ 600.301 et seq.)
 Generally Acceptable Government Auditing
Standards (GAGAS) for RUS Borrowers may or may
not satisfy DOE independent audit requirements
RUS policy is to accept A-133 audit in lieu of
required RUS audit if cooperative agrees to A-133
audit at request of another agency
41
Key References





American Reinvestment & Recovery Act of
2009 www.recovery.gov
Department of Energy www.energy.gov
Office of Management & Budget (OMB)
http://www.whitehouse.gov/omb/
DOE Smart Grid Investment Grant (DEFOA-0000058) and Demonstration Grant
(DE-FOA-0000036) Funding Opportunity
Announcements
DOE Contracting Officers and Technical
Negotiators
42