Kentucky PSC directs utilities to develop internal policies, procedures involving smart grid efforts

The Kentucky Public Service Commission (PSC), in an April 13 order involving the implementation of smart grid and smart meter technologies, directed all of the state’s jurisdictional electric utilities and the five largest jurisdictional gas utilities (gas LDCs) – collectively, the joint utilities – to develop internal policies and procedures governing customer privacy, customer education and cybersecurity.

As noted in the order, the PSC in October 2012 initiated an administrative proceeding to consider the implementation of smart grid and smart meter technologies, and time-of-use, or dynamic, pricing.

That October 2012 order provided that the administrative proceeding would also include a determination as to whether the Smart Grid Investment Standard and the Smart Grid Information Standard as set forth in the Energy Independence and Security Act (EISA) of 2007 should be adopted. In particular, the PSC added, the instant administrative matter would address all aspects of a smart grid system from hardware and software issues to reliability improvement, cost recovery issues and dynamic pricing.

The joint utilities in June 2014 filed a report containing findings and recommendations on nine issues, including customer privacy, cybersecurity and customer education.

The joint utilities said in the report that they continue to believe that “[e]ach utility’s unique circumstances and the pace of technological change make it unnecessary, and likely counterproductive, to impose uniform, one-size-fits-all standards, such as the EISA 2007 Smart Grid Information and Investment Standards.”

The PSC noted that the EISA 2007 Smart Grid Information Standard for electric utilities requires that electric suppliers provide to purchasers of electricity direct access to time-based wholesale and retail price information, purchaser usage information, updates of price and usage information, day-ahead projections, and information concerning sources of generation, including associated greenhouse gas emissions.

The joint utilities recommended that the PSC not adopt the EISA 2007 Smart Grid Information Standard, stating that adoption of the standard would require utilities to make uneconomical investments to provide customers direct access to a wide array of information, including price and usage information, without considering the costs or benefits of the provision of the information.

The joint utilities recommended that the PSC continue to use its existing review processes and authority to ensure that utilities are providing customers with the information they need in economical ways. The joint utilities, the PSC added, believed that this would allow the PSC to continue to have oversight over the information provided to customers, yet still recognize each utility’s individual characteristics, including the utility’s unique costs and benefits of providing various information in certain ways to each utility’s customers.

The PSC said that while it will not require adoption of the EISA 2007 Smart Grid Information Standard or a similar standard, it will require the utilities to provide certain basic information to their customers. At a minimum, the PSC said, customers should be able to access historical information regarding their electricity or natural gas usage, expressed in each utility’s respective billing units, as well as the customers’ current applicable tariff rate.

The PSC noted that the EISA 2007 Smart Grid Investment Standard for electric utilities provides that each state consider requiring electric utilities to demonstrate that certain factors with regard to investing in a smart grid system were considered before the utilities invested in non-advanced grid technologies. The standard also requires each state to consider rate recovery of smart grid capital expenditures, operating expenses and other costs related to the deployment of smart grid technology, including a reasonable return on the capital expenditures.

The joint utilities do not support the adoption of the EISA Smart Grid Investment Standard, and believe that the PSC should exercise its existing authority to review smart grid investments. The joint utilities noted that they have all deployed smart grid technologies, but in different ways and degrees. While not stated directly in the report, the joint utilities imply that adoption of the EISA 2007 Smart Grid Investment Standard would require them to seek a certificate of public convenience and necessity (CPCN) for smart grid investments.

The PSC also noted that while it supports the intent of the EISA 2007 Smart Grid Investment Standard, it will not require its adoption. The PSC said that it does not find it practical for each jurisdictional utility to be required to obtain a CPCN for every smart grid or meter investment decision. Also, the PSC said that it finds that each of the joint utilities should develop internal procedures and policies regarding smart grid investments, including a description of their systems, their planning goals, and explanations of how such investments will be considered.

Regarding CPCNs, the PSC said that it finds it appropriate for jurisdictional electric utilities to obtain CPCNs for major automated meter reading (AMR) or advanced metering infrastructure (AMI) investments and distribution grid investments for distribution automation (DA), supervisory control and data acquisition (SCADA) or volt/var resources.

On customer privacy, the PSC said that while it will not mandate the adoption of a particular standard, it finds that each utility should formalize its customer privacy policy and include it as part of its internal procedures.

The PSC also said that due to the potential negative impact on the operational benefits of a smart grid, it does not support meter opt-outs, whether they be from digital, AMR or AMI meters. However, nearly all of the public comments submitted in the proceeding address concerns with smart meters from either a health or privacy perspective, the PSC said. Therefore, the PSC said it accepts the joint utilities’ recommendations to consider opt-out on a case-by-case basis, or more precisely, on a utility-by-utility basis. Each utility will be able to determine the need for an opt-out provision and petition the PSC for consideration. The PSC also said that it finds that any opt-out provision should require those customers that opt out to bear the cost related to that decision – through a one-time fee and/or a monthly charge, as appropriate.

On customer education, the PSC determined that each utility should formalize its customer-education policy with regard to smart grid and smart meters as part of its internal procedures manual.

Regarding dynamic pricing – which, as defined in the report, refers to pricing that varies according to the time at which the energy is consumed – the PSC said that it believes that a strong economic argument cannot currently be made for mandatory dynamic pricing tariffs in Kentucky, and there is uncertainty what impact dynamic pricing tariffs may have on energy consumed or on utility revenues.

The PSC said that while it will not require that a broad array of dynamic pricing proposals be developed, it encourages the jurisdictional electric utilities to develop some pilot programs for consideration.

Discussing cybersecurity, the PSC said that it agrees with the joint utilities that a mature, effective cybersecurity process is one that is continuously evolving to address new cyber threats, but it believes that each utility should have some form of cybersecurity in place beyond the FERC or NERC mandatory standards. Therefore, the PSC said that it will require that the joint utilities develop internal procedures addressing cybersecurity.

The PSC said that it will not require each utility’s actual internal procedure be filed; rather, each utility will be required to certify the development of cybersecurity procedures. The utilities will then have to present their procedures to the PSC, and to the attorney general, should the attorney general wish to attend, the PSC said. All utilities are advised to develop, maintain and enforce a management approved written cybersecurity policy that addresses known and reasonably foreseeable cybersecurity risks, the PSC said.

On cost recovery, the PSC said that it is sensitive to the joint utilities’ concern regarding the cost recovery of reasonable smart technology investment and recovery of the remaining cost of replaced facilities and equipment. The PSC said that except for the development of an internal smart grid investment policy, it will not impose any additional review of such investments, and smart grid investments will be treated like any other investment or expense.

Among other things, the PSC said that the joint utilities are to file with the PSC, within 60 days of the order’s date, their internal procedures governing customer privacy and customer education, as well as their internal procedures regarding smart grid investments. Also, within 60 days of the order’s date, the joint utilities are to certify to the PSC that they have developed internal cybersecurity procedures, the PSC said.

About Corina Rivera-Linares 3286 Articles
Corina Rivera-Linares was TransmissionHub’s chief editor until August 2021, as well as part of the team that established TransmissionHub in 2011. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial from 2005 to 2011. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines.