Jesse Berst's Global Smart Energy and Michael Butler's Cascadia Capital have assembled this multi-part series where business leaders share their opinions on the future of the smart grid. This second installment features the National Association of Regulatory Utility (NARUC)'s President Frederick Butler.

NARUC represents the state public service commissioners who regulate essential utility services, such as electricity, gas, telecommunications, water, and transportation throughout the country.

Q: What is the most important next step in the development of the smart grid?

A: The most important next step is to be deliberate and focus on the back-end of the transmission system. This will help utilities and vendors prove that the smart-grid technology works before we start delivering smart meters to consumers, along with the associated higher costs to pay for them.

Moving deliberately will also give regulators a chance to implement new rate models and policy incentives that will spur the innovations and necessary consumer behaviors.

I want to be clear on the important role regulators play in all this. We are required by law to ensure that any new energy programs result in just, reasonable and affordable rates. We all recognize the potential of the smart grid, but this isn't something that can be done overnight. If we start rolling out this new technology along with higher rates to pay for it, we better be sure this stuff works. That's our message.

Consumers' bills are going up right now without this, and they will only go higher as the country tackles climate change, expanded transmission and other energy priorities. We just have to remember that while all this technology sounds great, someone, at the end of the day, has to pay for it. So let's make sure it works on the back-end of the transmission system, have the utilities pay for it, and if we see the efficiencies we anticipate, let's move to the next level.

Additionally, we need new rate structures so we don't have a smart grid with dumb rates. Smart meters will do nothing but sit on the walls if we don't give consumers the power and incentive to change their energy consumption.

We've got a lot of groundwork to do, but we are doing it.

Q: What kind of "shovel-ready" jobs can the smart grid produce?

A: Well, ideally under a "smart grid" we won't need as many "shovel-ready" projects, as part of the reason for modernizing the grid is to put less steel in the ground.

But that said, as you may infer from my earlier response, there are plenty of jobs we can create, and work we can do, on the back-end of the transmission and distribution system. We can install phasor measurement and backscatter sensors on the transmission grid, along with video sagometers and wireless mesh sensors, and we can use radio-frequency identification (RFID) technology to give utilities real-time information on the status of specific lines. These sensors can detect problems on the grid as they develop, and the problems can be relayed back to the utility for resolution before they escalate into a massive blackout. Instead of relying on costly and time-consuming manual visits from work crews, utilities will have up-to-date information on their system and can act accordingly.

These jobs can be done right now. We don't need to go into consumers’ homes yet; let's prove this stuff can work, and then we can roll it out on a more commercial scale. As a commissioner, my consumers are not beating down my door and asking for their smart meters. In fact, in the states that have moved aggressively with smart-grid pilots, most consumer groups actually opposed these projects. They don't see the need or value in it yet. We haven't convinced the public that this is worth the investment, and that burden falls on all of us.

This is why, as I've said above and elsewhere, if the utilities and vendors can prove how effective these technologies are on the back-end of their systems, if they can show the savings and efficiencies, then we can move to the next level. And remember, these back-end updates are all a part of the smart grid anyway, and we can't get the omnidirectional communications until this work is complete. So it just makes more sense to start here first.

Q: What role should the federal government play in this transformation? What role should the states play?

A: The federal government should continue its partnership with state regulators so we can learn how best to implement pilot and demonstration projects. We've got a very strong working relationship with the Federal Energy Regulatory Commission, and through the FERC-NARUC Smart Grid Collaborative, we are exploring this very issue.

Modernizing the grid and empowering consumers cuts along state and federal jurisdictions. Instead of working at cross purposes, the FERC-NARUC Collaborative, which I co-chair with FERC Commissioner Suedeen Kelly, lets us find a common group and develop a true partnership.

Our collaborative consists of about 20 state regulators, along with Commissioner Kelly and myself, and we meet about three times a year. We hear from commissioners, vendors, utilities, consumers and other stakeholders on the best ways of implementing and developing smart-grid programs.

We clearly need this collaboration to continue. In the best interest of our country and consumers, states and our federal colleagues must work together to make the smart grid a reality.

In terms of specifics, states should look into the existing pilot and demonstration projects and determine what works best. Personally, I think any program needs a grassroots element that spreads a "buzz" about the smart grid, not a ratepayer revolt. As I stated above, many consumers remain unconvinced about the smart grid's potential, so outreach and education is key.

The federal government can use its bully pulpit and espouse the virtues of the smart grid, and the states can go in and design their own programs to ensure that consumers are on board. At the end of the day, we are all here to serve ratepayers, so let's keep that in mind.

(Pictured above Frederick Butler, President of NARUC.)

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