Removing Regulatory Roadblocks: A Plan with Promise

One of the most promising ways to remove regulatory barriers to the deployment of Smart Grid technologies would be to formalize planning for the distribution system in a manner similar to what has occurred for generation and demand-side investments. 

Most states with traditionally regulated utilities require that those utilities prepare an Integrated Resource Plan (IRP) prior to investing in new generating capability or offering energy efficiency programs.  The IRP process is public and allows stakeholders the opportunity to ask questions and raise objections.  Investments that survive the scrutiny and appear in the Final IRP carry an implied finding that they are the best choices that could be made based on what was known or knowable at the time.  Assuming the utility successfully executes the investments, its prudence challenges should be minimal. 

Adapting this process to distribution investment is not only feasible but likely also necessary.

Why Plan for the Distribution System?

Many utilities currently plan additions to their distribution systems on a three-to-five year horizon, looking for places in the system that are experiencing stress or where the utility expects significant new development — residential or business. The underlying assumption of this approach is that the distribution system need not do anything differently from what it does today and will not face any new challenges.  It need only react to demand.

Over the next 20 years or so, the safety of this assumption is in doubt.  Among the trends that may converge to challenge the distribution system and expand what we require of it are the following:

·       Plug-in electric vehicles

·       Grid-enabled storage, whether in a vehicle or stationary

·       Widespread adoption of distributed generating technologies, both renewable (solar, wind) and fueled (fuel cells), and potential demand for microgrids so that clusters of structures can share combined heat and power plants

·       Urban crowding and the difficulty of obtaining new easements or expanding existing ones

·       Demands for high reliability beyond what is cost effective for the distribution systems as a whole

·       Attention to the inefficiency and costs caused by low system-load factors as regulators and customers seek any possible way to lower electricity prices

How Would We Do This?

These trends strongly suggest that it is time to “begin with the end in mind” for utility distribution systems.  In other words, just as in IRP, utilities need to look at what customers and stakeholders will require of the distribution system over a long-term time frame.  With the capabilities and characteristics of that future distribution system in mind, the utility can then assess the current state of its distribution system against the future state and identify the gap, much as it now identifies a gap between load and supply.  Then the utility would compile and compare options for filling that gap — many of which are likely to be Smart Grid technologies — and the timing by which it would make sense to deploy them.  If prepared in a regulatory-sanctioned public process, this plan, perhaps an Integrated System Plan, should ease the way for cost recovery of the resulting investments.

Pamela G. Lesh offers consulting in business and regulatory strategy and systems approaches to opportunity creation and problem solving through her company, Graceful Systems LLC.  She recently completed work as a Senior Advisor to the Natural Resources Defense Council (NRDC), on loan to that organization from Portland General Electric ( PGE), for which she was Vice President of Regulatory Affairs and Strategic Planning.

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