More than any other group, state regulators will determine how fast the Smart Grid moves forward, how it builds out, and how it will be funded. To help its members make those decisions, the National Association of Regulatory Utility Commissioners (NARUC) has launched a Smart Grid Collaborative to provide a central source for objective information and best practices.

So what better way to kick off the new year than with than a dialog with NARUC's new Chairman and President?  Fred Butler was first appointed to the New Jersey Board of Public Utilities in 1999. He also serves on the Board of Directors of the National Regulatory Research Institute and also the public utilities institutes at Michigan State, New Mexico State, and the University of Florida.

In a wide-ranging conversation, Butler told SGN that far too many utilities and vendors are overlooking the essential task of educating consumers about the Smart Grid and its benefits. He also cited a need for better demonstration projects and open standards, while warning that smart meters are not always the best place to start. His comments reflect his personal opinions, not the official position of NARUC.

Historic Changes Ahead

Butler began our conversation by talking of the changes ahead, especially the need to pay close and careful attention to issues that weren't on the radar before. "Before, we only worried about the grid if it broke," he explained. Regulators were busy with the nuts and bolts – keeping bills within reason and assuring adequate supply.

Today, regulators must pay close attention to the grid – its opportunities and its pitfalls. And they must do so even while "slogging through the mud" of distracting day-to-day issues that make it difficult to take the long view. With state budgets contracting, regulators must do it all that with less resources.

All the more reason that state commissions should pool their knowledge. Hence the Smart Grid Collaborative, which meets in person at each of NARUC's three annual meetings and conducts working groups in the intervals. The group is already at work mapping out a roadmap to answer questions such as:

·         What do we want the Smart Grid to do?

·         How do we accomplish that without saddling ratepayers with huge increases?

·         What are the key components?

·         What is the right order to do things?

As important as it is to get the technical issues right, Butler believes the biggest challenge going forward is educational.

First We Need Better Consumer Education

"Consumers have a right to know how the Smart Grid will benefit them and why it justifies an increase in rates," Butler explained. "Especially today. Fuel, construction, and carbon costs are all rising… and now here comes the Smart Grid on top of all of that."

The educational task begins with explaining the true cost of electricity. "Consumers don't under that it costs more to produce energy during a peak period," Butler said. "They used to understand peak pricing with phones – many of us had phone plans where the rates went down after 9pm. And some of us in urban areas understand this about freeways. Some cities now have HOV lanes whose tolls increase during rush hours. But with energy we're used to paying the same amount 24x7."

A second component of better consumer education is talking about bills instead of rates. "We need to make consumers realize that electric bills have two components," said Butler, "the rate and the number of units. Even if rates go up, your bill can go down if you reduce the units you use."

Then We Need Better Demonstrations

Despite the growing number of Smart Grid pilots, Butler says the country needs demonstrations that are broader and better designed. "I see pilots with a select group, but what about the rest of society?" he complained. Butler wants to see demos with a broad cross-section of users to identify and demonstrate the benefits that will flow to all ratepayers. He lists Boulder's well-publicized Smart Grid City initiative as an example of a pilot that isn't broad enough. "Boulder has a green, middle-class population that is tech savvy and liberal. If you can't do it there, you can't do it anywhere." But Butler wants to see demonstrations in places with more representative populations.

Then We Need Standards

Even if we get better education and better demonstrations, the Smart Grid has potential pitfalls regulators must guard against. One is "Buying a Betamax" – deploying equipment that will be obsolete soon, and then spending more to bring it up to par. Butler cited recent AMR systems as an example. Many of them don't have two-way communications and can't be upgraded in the field. They are already obsolete even though some have only been in place a few years.

What's the solution to instant obsolescence? "The Smart Grid must be based on open standards, so you can switch out the components without replacing the whole system," Butler said.

We Also Need Careful Attention to Potential Problems

Butler cited several other pitfalls regulators must steer around:

• Security: There will be many more portals where someone can cause mischief or worse.
  
• Privacy: The system will be collecting massive amounts of data about private citizens. We must safeguard their privacy.
  
• Interoperability: We must be able to flow power and trade information across regions.
  
• Pilotis: Utilities often pilot things to death and use that as an excuse. One of the reasons NARUC set up the Smart Grid Collaborative was to act as a clearinghouse, so every utility doesn't have to reinvent the wheel.

And We Need the Right Starting Point

Butler also warned that some utilities might be putting the cart before the horse. "Smart meters are not necessarily the best starting point" he warned. "They are an expensive and disruptive technology. Butler suggested that some utilities should first build out communications for the distribution system for applications such as outage management. They could get that in place at less cost and begin creating immediate benefits while doing small tests of meters in preparation for a widespread roll out.

Butler concluded our conversation with a plea to regulators and policymakers. "The Smart Grid is not a fad. It's not going away in two years. It is a fundamental change in the way the nation's electricity grid operates. If you fail to educate yourself you are putting yourself and your constituents at risk."

He also had a request for utilities and vendors. He wants them to do a better job preparing consumers for AMI (Advanced Metering Infrastructure) and Smart Grid. They must demonstrate why ratepayers should pay more and show the immediate benefits." "Regulators are not dinosaurs who just say no, no, no. But before we can say yes, we need to have demonstrated benefits."