A Different Way of Doing Business - EEI - Home...NOVEMBER/DECEMBER 2014 SOUTHERN COMPANY’S TOM FANNING: A Different Way of Doing Business 30 43 SPECIAL SECTION: CYBER AND PHYSICAL

NOVEMBER/DECEMBER 2014

SOUTHERN COMPANY’S TOM FANNING:

A Different Way of Doing Business30

43

SPECIAL SECTION: CYBER AND PHYSICAL SECURITY

EEI’S FINANCIAL CONFERENCEPREVIEW

Navigant’s energy industry expertise delivers insightful guidance to assist utilities in overcoming obstacles, maximizing strengths, and creating innovative solutions.We assist utilities with:

» Transmission and electricity markets

»

» Smart grid and data analytics

» Resource procurement

» Gas markets, modeling, and price forecasting

» Reliability and storm hardening

» Performance improvement

» Asset and capital program management

» Rate and regulatory issues

Contact »

Kevin Cooney [email protected] Kleinschmidt [email protected]

Lee Laviolette [email protected] Rutkowski [email protected]

NOVEMBER | DECEMBER 2014 3

www.eei.org

features NOVEMBER/D ECEMB ER 2 014 • VOLUME 39 , N UMB ER 6

20 A Different Way of Doing BusinessThe industry must shape its own future by developing options that will make it successful in a changing environment.

B Y TH O M A S A . FA N N I N G

30 A Targeted Approach to SecurityDaniel Poneman discusses how the industry is cooperating and coordinating with the federal government to protect the grid. Michael Chertoff gives insights on how companies should prepare and respond to today’s persistent and constantly evolving cybersecurity threats. Finally, Rick Shumard and Steve Schneider outline the six key requirements of the North American Electric Reliability Corporation’s most recently proposed critical infrastructure protection standard, CIP-014.

43 EEI’s Financial Conference PreviewAn electric utility CEO, an investment banker, and a ratings analyst share their perspectives and insights on the “utility of the future.”

20

30

43

4 E L E C T R I C P E R S P E C T I V E S | www.eei.org/ep

connect with us

facebook.com/EdisonElectricInstitute

twitter.com/Edison_Electric

youtube.com/user/EEITV

On the cover: Tom Fanning, chairman, president, and CEO of Southern Company, and a vice chairman of the Edison Electric Institute, discusses how the long-term success of the electric utility industry will depend on its ability to make accurate predictions about what lies ahead and create viable options for continuing to provide value to its customers. (Photo courtesy: Southern Company)

6 powering changeThe future starts now.

8news + trendsPG&E’s Earley receives EEI’s Distinguished Leadership Award…and more.

19 energycareers@workConnecting veterans to rewarding careers.

46 distributionThe evolving 21st-century grid.

50 plugging innovationMichigan’s largest solar array is underway.

52 the edgeThe benefi ts of utility-provided distributed energy resources.

departmentsNOVEMBER/DECEMBER 2 014 • VOLUME 39, NUMBER 6

E L E C T R I CP E R S P E C T I V E S

STAFFClare James Johnson

DIRECTOR OF STAKEHOLDER [email protected]

Bruce Cannon ASSOCIATE [email protected]

Nhu Mai LeSENIOR GRAPHIC DESIGNER

[email protected]

Suzett e HerchigSUBSCRIPTION COORDINATOR

[email protected]

EDITORIAL BOARD

Edward ComerVICE PRESIDENT, GENERAL COUNSEL,

AND CORPORATE SECRETARY

Richard McMahonVICE PRESIDENT, ENERGY SUPPLY

AND FINANCE

Jim OwenEXECUTIVE DIRECTOR, MEMBER RELATIONS

AND MEETING SERVICES

David OwensEXECUTIVE VICE PRESIDENT, BUSINESS OPERATIONS AND

REGULATORY AFFAIRS

Quin SheaVICE PRESIDENT, ENVIRONMENT

Stephanie VoydaMANAGING DIRECTOR,

COMMUNICATIONS

Brian Wolff EXECUTIVE VICE PRESIDENT, PUBLIC POLICY

AND EXTERNAL AFFAIRS

CIRCULATION

Suzett e Herchig202.508.5607

[email protected]

Subscriptions are $100 per calendar year; however, the cost is prorated

throughout the year. Please contact Ms. Herchig for the current

prorated amount.

ADVERTISING SALES

Marshall BoomerTHE YGS GROUP

[email protected]

Justin WolfeTHE YGS GROUP

[email protected]

Mailing label corrections:

send old label and correct title and

address to Subscription Coordinator,

Electric Perspectives at EEI.

Allow 12 weeks.

Postmaster: send address changes to

Subscription Coordinator,

Electric Perspectives, EEI,

701 Pennsylvania Avenue, N.W.,

Washington, DC 20004-2696.

Periodicals postage paid at Washington, DC,

and additional mailing office.

Electric Perspectives (ISSN 0364-474X)

is published bimonthly by

Edison Electric Institute, Inc.

701 Pennsylvania Avenue, N.W.,

Washington, DC 20004-2696.

www.eei.org

The title is a registered trademark of

Edison Electric Institute.

Statements of fact and opinion are the

responsibility of the author(s) alone

and do not imply an opinion on the part of EEI,

its employees, or members.

Each advertiser and advertising agency

assumes full liability for all contents

of advertisements printed. Copyright © 2014 by

Edison Electric Institute, Inc.

EEI Publication No. 43-14-06.

For more content, visiteei.org/epRead the digital interactive edition

Download apps for iPhone/ iPad andAndroid phone/tablet

SAFER, SMARTER, GREENER

EXPERIENCE MATTERS

DNV GL delivers a unique customer experience by uniting the strengths of DNV, KEMA, GL and PWR Solutions. Our energy experts around the world take a broad view to support your business, and toenable a safe, reliable, effi cient and sustainable energy supply. From KEMA Type Test Certifi cation to power systems planning, operational excellence, renewables integration and sustainable use, we have you covered.

Experience matters, trust DNV GL’s 150-year heritage of integrity, impartiality and innovation in T&D.

Contact us at + 1 781 273 5700 or [email protected]. www.dnvgl.com/energy

View our Energy Video here.


Alot of discussions are taking place these days about what the power industry will look like in the future. The reality is that the future is happening now.

The electric power industry is in the midst of a rapid transformation. Our companies are creating valuable partnerships, innovating through techno-

logical advances, and enhancing relationships with customers. As an industry, the opportunities for us to grow and evolve are endless, and we’re leading the charge.

Today’s electricity customers are changing and innovating, too. They have more choices and more expectations than ever. They want more options, more services, and more fl exibility. Our companies have an incredible opportunity to serve customers better and offer new services. And the industry is using technology to respond to cus-tomers’ evolving needs.

The grid is the evolving platform for new technologies and innovation. Companies are making major investments in the grid to enhance outage detection and restoration,

improve distribution system monitoring, increase operational effi ciency, and integrate new resources onto the grid. And, with the expected growth in distributed energy resources, companies are investing to ensure that both electricity and information fl ow two ways: from the utility to the customer and from the customer back to the utility.

Across the grid, new technologies and innovations—including more distributed energy resources such as distributed generation, storage, and microgrids; growth in renewable energy resources; and a larger market share for electric transportation—are lead-ing the transition to a 21st-century power sector. Electrifying the transportation sector is a win-win. For example, it provides eco-nomic and environmental benefi ts, builds customer satisfaction, reduces operating costs, and enhances national security.

Smart meters are playing a critical role in helping to integrate these new resources and new energy services for customers. To date, more than 50 million digital smart meters have been de-ployed nationwide in more than 43 percent of U.S. homes.

Utilities, in collaboration with technology partners, are already identifying cutting-edge solutions for customers and the power grid. This serves everyone’s interest. In addition, it makes sense for utilities to go “behind the meter,” and provide a full assortment of distributed energy resources and a range of service options to their customers.

We talk a lot more about the evolving energy landscape in this issue of Electric Perspectives. In our feature beginning on page 43, an electric company CEO, an investment banker, and a ratings analyst discuss their views on what the future power sector looks

like and how utilities are evolving today. On page 20, Southern Company Chairman, President, and CEO Tom Fanning outlines a vision for the industry’s long-term success.

In the end, the future power sector will be about collaboration, investment, price transparency for customers, and innovative thinking. This means working together with technology companies, policy makers, and customers as partners in driving innovation.

While none of us can predict the future, we must be prepared for it. How our industry adapts and leads while continuing to provide value to customers will defi ne its long-term success. That means thinking about the future of our industry today.

Across the grid, new technologies and innovations—including more distributed energy resources such as distributed generation, storage, and microgrids; growth in renewable energy resources; and a larger market share for electric transportation—are leading the transition to a 21st-century power sector.

The Future Starts Now By Brian L. Wolff, executive vice president, public policy and external affairs, Edison Electric Institute.

powering change THO UGHTS O N THE EVO LVI NG ELECTRI CITY

LANDSCAPE.

Electricity powers our everyday lives. It’s the power behind the

“smart” in our smart phones, smart appliances, and smart homes and

businesses—and we need smart energy solutions to power us forward.

Working together, we can help ensure electricity remains reliable, affordable,

and increasingly clean for everyone. The Edison Electric Institute is proud to

sponsor this national program.

We Stand For Energy will work to ensure our nation’s energy policies:

• Are fair and protect all electricity customers

• Create local electric power-related jobs

• Strengthen local communities and economies

• Spur development of innovative technologies

• Enable us to use a diverse supply of domestic energy sources to meet the demand for electricity

• Provide a secure energy future for all Americans

Why ‘We Stand For Energy’

Join us today!www.WeStandForEnergy.com


news + trends

Tony Earley, PG&E Corporation chairman, CEO, and president, received the Edison

Electric Institute’s (EEI’s) Distinguished Lead-ership Award at EEI’s fall board of directors meeting in Colorado Springs in September. The Award was given by Earley’s industry peers in acknowledgment of his contributions and commitment to the electric power industry.

“It is an honor to present this award to Tony Earley in recognition of his unprecedented leader-ship and his devotion to the electric power industry,” said EEI President Tom Kuhn in Colorado. “Tony is a leader of the highest character, and his steadfast commitment is invaluable as we address the many challenges facing the industry.”

Earley is the seventh industry CEO to receive EEI’s Distinguished Leadership Award. He joined PG&E in September 2011, and served as EEI chairman in 2009 and 2010. He currently sits on EEI’s executive committee.

“Tony’s leadership and determined efforts to form consensus have built the foun-dation for many industry-wide accomplishments, helping create an approach that still serves us well today as we address new challenges and regulations,” said EEI Chairman and Edison International Chairman, President, and CEO Ted Craver. “We are grateful to Tony for his hard work and service as past chairman of EEI, and for his continued involvement in our organization.”

THE LATEST UPDATES AND EVENTS I MPACTI NG

TO DAY ’S ELECTRI C POWER I NDUSTRY.

PG&E’s Earley Receives Distinguished Leadership Award

SOLAR SHINES IN CAPACITY ADDITIONS

Sluggish capacity additions and fewer new project announcements could

contribute to a shrinking generation fl eet in 2014, according to EEI’s January-July “Generation Status Update.”

New capacity additions for 2014 so far are below what they were in 2013, which was a record low. Solar power has rapidly increased its share of new capacity additions and should exceed the capacity added in 2013. In the fi rst seven months of 2014, more than 2,300 megawatts (MW) of solar were added. Meanwhile, no coal capacity (new build, extension, or re-rate) has been added to the grid since May 2013, and no new coal projects are under con-struction. The coal fl eet has lost 15,000 MW since 2010, dropping to 330 gigawatts at the end of July 2014—its lowest level since 1990.

Along with these moderate capacity additions, the industry has retired around 3,500 MW so far in 2014 and plans to retire an additional 4,200 MW by the end of the year. This is far less than the 17,000 MW retired in 2013 and 14,000 MW retired in 2012. However, a new record could be reached in 2015—with announced plans to retire 18,500 MW of coal, 3,500 MW of natural gas, and 1,500 MW of oil-fi red capacity.

For the fi rst seven months of the year, the industry announced new projects at an average rate of 2,619 MW per month, compared to 4,883 MW per month in 2013. New announcements continue to be dominated by natural gas, with 47 percent of capacity addi-tions. Solar follows with 32 percent, and wind accounts for 17 percent.

Cancellations are being led by renew-able projects (85 percent), particularly wind (52 percent). Solar follows with 29 percent of cancellations/postponements, and natural gas with 12 percent. No signifi cant nuclear cancellations have occurred in 2014, and the nuclear pipe-line includes 30,000 MW of new build, expansions, and re-rates, in addition to 6,000 MW already under construction.

(left to right) EEI President Tom Kuhn; PG&E Corporation Chairman, CEO, and President Tony Earley; and EEI Chairman Ted Craver.


CONDOR POPULATION TAKES OFF IN CALIFORNIA

Southern California Edison’s (SCE’s) work with the U.S. Fish and Wildlife Service (FWS) is helping to save the endangered California

condor from extinction. In the 1980s, the California condor population had plummeted to just 22.

With its partners, FWS launched a recovery program to save the majestic creatures, which are the largest fl ying birds in North America. A key element of its success has been the power pole aversion training that began in 1994 after FWS started to reintroduce captive-bred condors into the wild. Perching on active power poles is one of the leading threats to condors. Aversion training involves placing a replica of a power pole in the birds’ fl ight pen. The replica pole delivers a mild, uncomfortable electric shock when a condor lands on the crossarm, training the bird to associate power poles with danger and avoid them.

FWS, along with SCE’s avian protection program and transmission and distribution unit, recently took the training to the next level by installing 30-foot aversion poles near fl ight pens at Bitter Creek National Wildlife Refuge and Hopper Mountain National Wildlife Refuge. In the past, the poles installed in the wild were much smaller.

Utilities also have helped by sometimes relocating power lines under-ground and encasing overhead lines in insulated tree wire, which improves visibility to condors.

Today, there are 437 condors in North America, including 232 condors in the wild—131 in California (68 condors and three chicks fl y free in Southern California), 72 in Arizona and Utah, and 29 in Baja California, Mexico—and 205 still in captivity in the program.

“California condors are both biologically and socially important,” said Kara Donohue, a senior biologist at SCE. “Condors came close to extinction because of human activities, so we have a responsibility to try to help them recover.”

For more information, please call 1-800-879-9862

website: na.prysmiangroup.com/telecomemail: [email protected]

CladCore™ Aluminum-Clad

Stainless-Steel Central Tube OPGW

StrandCore™ Stranded Stainless Steel Tube OPGW

PureCore™ Aluminum Central Tube OPGW

Prysmian Group is the world’s leading supplier

of both Power Cable and Optical Cable; allowing

us to bring unique expertise to the OPGW

marketplace. We have over 31 years’ experience

in OPGW cable design and production excellence.

This expertise, combined with our industry

leading manufacturing efficiencies, can provide

you the highest quality and the most cost

competitive solution available.

Announcing the Production of OPGW Cable in the USA

Manufacturing all aluminum and stainless steel OPGW designs.

U.S. Fish and Wildlife Service

All California condors, including these perched on a tree snag at the Hopper Mountain fl ight pen, are descended from 14 founders.

news + trends


8,300 MW

FPL INVESTS IN NATURAL GAS

Florida Power & Light Company (FPL) has an innovative plan to save

customers millions of dollars and keep fuel costs lower well into the future. By investing in natural gas production at the source rather than paying full market prices, the utility anticipates that custom-ers could save up to $107 million over the life of the fi rst project.

“With a growing fl eet of cleaner, fuel-effi cient natural gas-fi red power plants and contracts for reliable and diverse gas transportation in place, we believe this to be the next logical step in providing clean electricity for our customers at affordable prices,” said Eric Silagy, FPL’s president and CEO.

FPL is partnering with PetroQuest Energy on a new venture to develop up to 38 natural-gas production wells in southeastern Oklahoma. FPL will receive a portion of the natural gas produced from each well for its use. Investing in gas production at the source will enable FPL to secure gas at a relatively low and stable cost to customers.

Over the last fi ve years, FPL has replaced three 1960s-era oil-burning power plants with ultra-modern, fuel-effi cient clean energy centers that run on American-produced natural gas. In addition to cutting carbon dioxide emissions in half and reducing other air emissions by more than 90 percent, the new clean energy centers use up to 35 percent less fuel. Since 2001, FPL’s investments in the effi ciency of its power plants have saved customers more than $6.5 billion on fossil fuel costs and avoided more than 60 million tons of carbon dioxide emissions.

FINDING VALUE IN WIND POWER

Affordable, homegrown wind power is helping to save consumers money in many regions of the country. Construction has begun on more than 14,000 MW so far this year.

According to the American Wind Energy Association’s (AWEA’s) Second Quarter Market report, 15 wind energy projects have been completed and brought online since the start of the year—adding 217 MW in the fi rst quarter and 619 MW in the second quarter. Installed U.S. wind generating capacity stood at 61,946 MW at the end of June. Another 109 projects were underway at mid-year, representing up to 14,600 MW of additional capacity.

“The economic benefi ts of all these projects are signifi cant,” said Emily Williams, AWEA’s manager of industry data and analysis. “They include U.S. manufacturing jobs, with many factories hiring new workers to meet demand, and all the local benefi ts from the capital investment of billions of dollars in rural America.”

Texas has by far the most wind energy under construction, with approximately 8,300 MW of the total. Another 6,200 MW are being built in 20 other states, primarily in the Midwest and Plains. New activity began in the second quarter in California, Colorado, Illinois, Indiana, Kansas, Maryland, Michigan, New Mexico, North Dakota, Oklahoma, and Texas.

At the end of June, the states with the most installed wind generation capacity were Texas (12,753 MW), California (5,829 MW), Iowa (5,177 MW), Illinois (3,568 MW), Oregon (3,153 MW), and Oklahoma (3,134 MW).

TEXAS has by far the most wind energy under construction.

Doug Murray/NextEra Energy

FPL’s Riviera Beach Next Generation Clean Energy Center.


AN APP FOR EMPOWERING KIDS

Consumers Energy is providing Michigan students and their par-

ents with a new, engaging way to learn how energy is generated and travels to their homes through a new smartphone app and classroom program called EmPOWERed Kids.

“We want to provide kids with a fun, interactive experience when it comes to learning about energy,” said Mary Palkov-ich, Consumers Energy’s vice president of energy delivery. “EmPOWERed Kids will serve as the backbone for the hundreds of classroom presentations our education team will make this school year, and stu-dents can take these lessons home.”

The EmPOWERed Kids app is free and available for all smartphone devices and tablets. It guides elementary school students and their parents through ideas that touch on their everyday lives and includes games and exercises to keep them connected.

Kids can learn:how electricity is made from coal, wind, water, and even cow manure;how to recognize danger signs involving electricity and natural gas; andwhat natural gas smells like and what to do to stay safe.

Consumers Energy teams up with schools throughout Michigan each school year to deliver important lessons about electricity and natural gas, renewable energy, and safety. Last year, education teams visited hundreds of elementary school classrooms and reached thou-sands of students. Consumers Energy also produces “Power Up,” a quarterly educational newsletter.

“We’re excited to connect to students in new ways every day, and we hope parents and teachers will use EmPOWERed Kids to help Michigan’s next generation learn while having fun,” Palkovich said The free app is available for download to a smartphone or tablet under “Empowered Kids.”

Consumers Energy

Safety and production are inseparable

at Asplundh. is how we

operate – day in and day out. The safest

crews are our most productive crews.

Equipped with proper tools, training

and supervision, our people are always

prepared to do the job in a safe, efficient

manner. at Asplundh is

the only way to get the job done.

ASPLUNDH.COM • 1-800-248-TREE

news + trends


SMART METER DEPLOYMENTS ON THE RISE

More than 50 million smart meters have been installed in the United

States (43 percent of homes) as of July 2014, according to a new report from The Edison Foundation Institute for Electric Innovation. This is up from 46 million smart meters that had been installed across the country a year ago.

Smart meters are playing a critical role in shaping the electric grid of tomorrow, enabling the integration of new technol-ogies and innovations across the grid. In addition, the data collected by smart meters allow for greater integration of new resources and new energy services for customers.

According to “Utility-Scale Smart Meter Deployments: Building Block of the Evolving Grid,” Pacifi c Gas & Electric Company (PG&E) has deployed the most smart meters to date (5.14 million). PG&E customers with smart meters can participate in the utility’s voluntary critical peak pricing rate plan that helps manage system load during hot summer days and receive energy alerts when they are mov-ing into higher-priced electricity tiers.

The report highlights how utilities are leveraging the benefi ts of smart meters, including:

new services for customers, such as automated budget assistance and bill management tools, energy use notifi cations, and “smart pricing” and demand response programs;smart meter integration with outage management systems and distribu-tion management systems that pro-vide enhanced outage restoration and improved distribution system performance;operational savings from improved deployment of utility restoration crews, automated meter readings, and reduced energy theft; andpositioning the grid as a platform for the integration of distributed generation, community solar, electric vehicles, electricity storage, and microgrids.

For energy users, prices matter. Investing in transmission delivers economic benefits to utilities,

allowing them to buy and sell power when it’s economically beneficial to do so, and to pass those

savings on to end-use customers.

When taken together, Duke-American Transmission Co. partners have invested in more new

transmission infrastructure in the last 10 years than anyone in the industry — more than $6 billion.

Partner with DATC to achieve your transmission goals.

www.datcllc.com

news + trends


Southern California Edison

SCE Engineer Grant Davis examines components in one of the 604 racks of battery modules.

LARGEST BATTERY ENERGY STORAGE PROJECT OPENS

For Southern California Edison (SCE), building a smarter grid started many years ago with smart meters and upgrades in distribution equipment. The company

took another leap forward in late September with the opening of the largest battery energy storage system in North America—the Tehachapi Energy Storage Project—to enhance the grid and integrate more clean energy.

The demonstration project is funded by SCE and federal stimulus money awarded by the Department of Energy (DOE) as part of the American Recovery and Reinvestment Act of 2009.

The 32 megawatt-hour battery energy storage system features lithium-ion batteries housed inside a 6,300 square-foot facility at SCE’s Monolith substation in Tehachapi, CA. The project is strategically located in the Tehachapi Wind Resource Area that is projected to generate up to 4,500 MW of wind energy by 2016.

“This installation will allow us to take a serious look at the technological capabilities of energy storage on the electric grid,” said Dr. Imre Gyuk, energy storage program manager in DOE’s Offi ce of Electricity Delivery and Energy Reliability. “It will also help us to gain a better understanding of the value and benefi t of battery energy storage.”

The project, which will cost about $50 million with matching funds from SCE and DOE, will demonstrate over a two-year period the performance of the lithium-ion bat-teries in actual system conditions and the capability to automate the operations of the battery energy storage system and integrate its use into the utility grid.

“The Tehachapi Energy Storage Project is a signifi cant milestone for SCE and for energy storage in California,” said Doug Kim, director of advanced technology at SCE. “Grid-scale energy storage is an integral part of our company’s Storage Portfolio Devel-opment Framework that will contribute to optimizing grid performance and integrating more renewable energy resources. This demonstration project will give us a signifi cant amount of insight into the operational capabilities of large-scale, lithium-ion battery storage.”

The battery system supplied by LG Chem is comprised of 604 battery racks, 10,872 battery modules, and 608,832 individual battery cells—the same lithium-ion cells installed in battery packs for the Chevrolet Volt.

UTILITIES LEAD ON COMMUNITY SOLAR

A new study from the Solar Elec-tric Power Association (SEPA)

fi nds that the number of community solar projects in the United States has jumped 64 percent in the past 18 months, and the overwhelming majority of programs now online—87 percent—were initiated by electric utilities.

According to “Expanding Solar Access Through Utility-led Community Solar,” utilities across the country are taking a leading role in the spread of community solar projects aimed at expanding access to clean power for customers who, for a variety of reasons, may not want or be able to install solar panels on their roofs.

The community solar projects tracked in the SEPA study are all programs that allow utility customers to buy either ca-pacity—a specifi c number of panels—or a proportionate share of the electricity from a nearby solar installation. The report also contains case studies of three community solar programs developed either entirely by utilities or by third-party groups working with utilities.

Community solar projects

64%IN THE PAST 18 MONTHS

JUMPED


March 15-18, 2015 Hyatt Regency New Orleans

New Orleans, LA

EEI SpringNational Key

Accounts Workshop

Visit www.eei.org/meetings

and register today!

Check out the digital interactive edition!NOVEMBER/DECEMBER 2014

SOUTHERN COMPANY’S TOM FANNING:

A Different Way of Doing Business30

43

SPECIAL SECTION: CYBER AND PHYSICAL SECURITY

EEI’S FINANCIAL CONFERENCE PREVIEW

MAY/JUNE 2014

NV ENERGY’S MICHAEL YACKIRA:

The Value of Electricity30

44

BUILDING A RESILIENT POWER GRID

SUPPLIER DIVERSITY: NEW OPPORTUNITIES FOR GROWTH

JULY/AUGUST 2014

NEXTERA ENERGY’S JIM ROBO

New Opportunities For Innovation28

32

EEI 2014 ANNUAL CONVENTION HIGHLIGHTS

SAFETY IN NUMBERS

SEPTEMBER/OCTOBER 2014

FIRSTENERGY’S TONY ALEXANDER:

Reaching New Heights32

54

BUILDING A STRONGER GRID

STREAMLINING THE RESTORATION PROCESS

Visit eei.org/ep

ADVERTISE IN ELECTRIC PERSPECTIVES AND GAIN EXPOSURE TO MORE THAN 15,000 KEY DECISION MAKERS IN THE ELECTRIC UTILITY INDUSTRY.

theYGSgroup.com

TARGETED REACH,EFFECTIVE RESULTS.

JUSTIN WOLFE Senior Account Executive 717.430.2238 [email protected]

MARSHALL BOOMER Account Executive 717.430.2223 [email protected]


The Industry’s #1 Magazine


Save the Date!

“Powering Change—Connected Everywhere, All The Time”

32nd Annual EEI Supplier Diversity Conference

June 2-5, 2015 • Albuquerque Marriott Pyramid North • Albuquerque, New Mexico

CUSTOM VIDEOS ASSIST ENERGY-EFFICIENCY EFFORTS

There’s a new tool for PPL Electric Utilities’ residential customers looking to save energy and money. Personalized videos provide a unique view into customers’ electricity use—how it

compares to the prior season, and how it compares to the average use for all customers.“The videos join our energy-effi ciency programs and shopping for electricity supply as primary ways

customers can stretch their energy dollar,” said Pete Cleff, manager of the utility’s energy-effi ciency programs. “We encourage everyone to take advantage of all these tools to get the best results.”

Since two-thirds of the average residential bill is for electricity supply, PPL Electric Utilities urges all of its customers to shop for the deal that’s best for them. More than 650,000 customers are already doing so. The new videos can help residential customers see how much power they are using during a particular season, and the utility’s energy-effi ciency programs can help them use that electricity wisely.

The information in the video serves as a prompt to customers so they can determine if their elec-tricity use for that season is reasonable for their situation. It also reminds customers of the many tools PPL Electric Utilities has on its website to help them monitor and reduce their electricity use and manage their electric account.

The energy use videos come at an opportune time. “Last winter’s extreme cold won’t be easily forgotten. Those frigid conditions alone caused electricity use to spike,” Cleff noted. “But for some customers on variable-price electricity supply contracts, the effects were multiplied because of spiking power prices that resulted in extremely high bills.”

Host Utility:

PPL Electric Utilities

November 11 is Veterans Day. To honor our nation’s veterans, the electric power sector is working to provide them with the training and support they need to transition successfully to civilian life and

rewarding careers in the energy sector.Our electric power industry depends on a smart,

skilled, and diverse and talented workforce, and energy jobs offer promising opportunities to both experienced workers and those starting their careers. These jobs are active, hands-on, rewarding, and available in every state.

The Edison Electric Institute (EEI) and the Center for Energy Workforce Devel-opment (CEWD) launched Troops to Energy Jobs to create a pathway between the military and the energy industry. Many natural gas and electric utility work-ers will leave their jobs in the next five years as they reach retirement age or de-part due to attrition. Utility companies will need thou-sands of engineers, tech-nicians, lineworkers, plant operators, and other work-ers in traditional as well as innovative jobs.

Electric utilities understand that our nation’s veterans have the traits and skills that translate well into a second career in the energy industry. Troops to Energy Jobs helps veterans identify education and credentials they may need, and supports them in their successful transition to a highly skilled career within the energy sector. By hiring veterans, these companies ensure that they can continue to deliver safe, reliable, and increasingly clean energy that powers American homes and businesses.

Arizona Public Service (APS) is using Troops to Energy Jobs as a model to develop a formal pathway to recruit qualified veterans who are interested in pursuing specific engineering disciplines that APS needs. Marine Corps veteran Robert J. “RJ” Mitchell, Jr. joined the team at APS in August. Mitchell is working part-time at the company’s Ocotillo, AZ, power plant while attending Arizona State University’s Engineering School as a full-time student.

In 2006, Mitchell was awarded the Navy Cross, the nation’s second highest military decoration, for the valor he displayed during the November 2004 battle for Fallujah, Iraq. Since then, Mitchell had been working full-time as a technician at an aeronautical equipment repair facility while taking one course per semester

CREATI NG THE NEXT

GENERATION OF ENERGY

WORKERS.energycareers@work


Connecting Veterans to Rewarding Careers By Thomas H. Graham, CEWD chair and vice president, people strategy and human resources, Pepco Holdings, Inc.

Formed in March 2006, the Center for Energy Workforce Development (CEWD) is a non-profit consortium of electric, natural gas and nuclear utilities and their

associations: the Edison Electric Institute (EEI), American Gas Association (AGA), Nuclear Energy Institute (NEI), and National Rural Electric Cooperative Association (NRECA).

toward an engineering degree. APS worked with Mitchell to design a f lexible schedule to allow him to work at Ocotillo and attend ASU’s Engineering School full-time.

In addition, APS is one of 15 recipients of the 2014 Secretary of Defense Employer Support Freedom Award. The Freedom Award is the Department of Defense’s highest recognition given to employers for exceptional support of employees who serve in the National Guard or Reserve.

The award was instituted in 1996. Since then, 205 employers have received this prestigious award in three

categories: large business, small business, and public sector.

Sout her n Compa ny, which received the award in 2010, believes that mil-itar y service members’ commitment to safety, teamwork, and excellence in their work aligns well with the core values of the utility industry. Ten per-cent of Southern Compa-ny’s 26,000 employees are veterans or serve in the National Guard or Reserve. Veterans account for 14

percent of the system’s new hires this year. Southern Company recently congratulated the first

graduates of its Troops to Energy Jobs transmission line and substation construction apprentice training program at Fort Stewart, near Savannah, GA. A founding member of Troops to Energy Jobs, Southern Company partnered with the U.S. Army to develop the program that provides specialized training to service members stationed at the military base. All 10 soldiers who completed the three-week training course received job offers from Southern Company subsidiary Georgia Power.

In 2013, 11 EEI member companies were among Amer-ica’s Top 100 Military Friendly Employers, as recognized by G.I. Jobs magazine. Ameren Corporation; American Electric Power; Arizona Public Service Company; Domin-ion; Exelon Corporation; FirstEnergy Corporation; Mid-American Energy Holdings Company; PG&E Corporation; Public Service Enterprise Group, Inc.; Southern Company; and Xcel Energy Inc. each demonstrated their support of military service through their employment of veterans. As Americans honor the men and women who have served our country, what better way for utility companies to do their part than creating opportunities for veterans.

Graduates of the Troops to Energy Jobs program offered by Georgia Power.

Georgia Power


Different Way A

of Doing Business


THE INDUSTRY MUST SHAPE ITS OWN FUTURE BY DEVELOPING OPTIONS THAT WILL MAKE IT SUCCESSFUL IN A CHANGING ENVIRONMENT.

By Thomas A. Fanning

An essential characteristic of leadership is having the vision and courage to look around the corners of the future and set a course of action toward success tomorrow. We all know that new technologies, shifts in public policy, and evolving customer expectations are driving electric util-

ities to begin adapting to a different way of doing business. I believe that the long-term success of the electric utility industry will depend on our ability to make accurate predictions about what lies ahead and cre-ate viable options for continuing to provide value to our customers, as Southern Company has been doing for more than 100 years.

Our century of success has given us a wonderful foundation, but that’s not enough. One of the greatest harbingers of future failure in corporate America is past success. At Southern Company, we honor the past, understand the values that carried us forward, and respect those who crafted the groundwork from which we will build our future. Like other utilities, we are not immune to a fast-changing world.

We’re having a vigorous dialogue about what our business will look like fi ve to 10 years from now and what actions we should take to help invent that future. My role as CEO is to invest in our future success. I decided earlier this year that, as a leadership team, we cannot do it alone. We need the collective wisdom of our employees, who are engaged with technology, customers, and policy every day.

continue



Thomas A. Fanning is chairman, president, and CEO of Southern Company and a vice chairman of the Edison Electric Institute.

We want to empower all 26,000 of our employees to drive innovation and collaboration. So we developed an innovation competition, called SO Prize, and invited employees to submit ideas. The response was enor-mous.

Innovation, of course, plays a huge role in our commitment to a full generation portfolio. We’re using the newest nuclear technology in the world today in subsidiary Georgia Power’s construction of two units at Plant Vogtle. Subsidiary Mississippi Power is developing a 21st-century coal plant, the Kemper County en-ergy facility, which will use Transport Integrated Gasifi cation (TRIGTM), pro-prietary technology developed at a research facility in Alabama that we manage and operate for the Depart-ment of Energy.

Southern Company has had a deep commitment to robust, proprietary research and development (R&D) for more than 40 years, but most of our R&D is focused on today’s challenges. We must push innovation throughout our company and focus not just on the here and now, but what may be. We must innovate in order to solve current issues as well as future ones.

An Innovation CompetitionIn announcing the SO Prize competi-tion, we asked employees to critically evaluate Southern Company’s view of the future and provide their own take on it. Then we asked them to of-fer ideas and strategies that would enable us to be successful, whatever the future may be.

This allowed us to leverage our em-ployees’ creativity and tap into their revolutionary thinking. We wanted them thinking about how we could “play offense.” Our goal was to un-lock the knowledge and experience of our workforce, which is a reservoir of insight that may go untapped in too many corporations. It turns out that our employees were ready to respond.

SO Prize was a very exciting pro-cess. To encourage optimum engage-ment by the entire workforce, the competition was administered via a web portal that enabled employees to submit their proposals and allowed all employees to view the submissions, provide feedback, and help select the winners through online voting.

In all, 976 ideas were submitted—fi ve times more than we anticipated. The level of employee collabora-tion was amazing—more than 5,200

WHAT WILL THE FUTURE LOOK LIKE? NO ONE KNOWS FOR SURE, BUT WHATEVER IS ON THE HORIZON IS PROBABLY FAR MORE DYNAMIC THAN WE EVEN REALIZE.

Southern Company

The Kemper County energy facility in Mississippi will be a state-of-the-art electric power plant that converts coal to natural gas and reduces emissions.

comments and more than 14,000 votes for the first round. We also expected about 2,000 employ-ees to visit the website, but more than 10,000 did. Of the first-round winners, one half was chosen by a panel of company leaders; the other half was determined by employee voting.

We wanted—and received—some impactful ideas. The top five ideas, determined by employee voting and panel selection, received the oppor-tunity to move on to the pilot phase. We are looking forward to seeing how those projects play out. Regardless of the outcome, the level of partici-pation tells me that we have tapped

into a vital component of our cor-porate culture—the desire to work together and create solutions that will proactively shape the future of our business.

A Changing WorldWe know the world is changing. We know the competition is ready to disrupt our markets. Companies in fast-changing markets are generally better at adapting to changing busi-ness conditions. But even compa-nies that have been successful in a fairly stable environment for a long time must remain focused on the fundamentals to stay competitive. A real opportunity for leadership is to embrace change and engender the support of others, even when change may mean facing diffi cult challenges. We aim to anticipate changes before they occur and take action before it is required.

What will the future look like? No one knows for sure, but what-ever is on the horizon is probably far more dynamic than we even re-alize. While changes to the industry can seem more gradual to those of us addressing them every day, others may perceive the same changes as disruptions to our traditional busi-ness model. For example, several major banks and investment firms have called distributed generation a major threat and issued downgrade warnings for our industry. Some ana-lysts believe that energy storage com-bined with rooftop solar power could forever change our traditional rela-tionship with customers, with some suggesting the combination of solar and storage could be cost effective for millions nationally by 2024. Others anticipate that upcoming changes to our industry could reconfi gure the or-ganization and regulation of utilities within the next 10 years.

Some of the anticipated changes are already playing out to varying degrees. For instance, in terms of customer expectations, advances in technology have made real-time interaction, access, and service the

Southern Company

Rep. John Barrow (D-GA) (far left) and Energy Secretary Ernest Moniz (second from right) visited the Plant Vogtle site in Georgia in February 2014.


Southern Company employees look out at the Kemper County energy facility.

Southern Company


norm in other industries. Naturally, customers will come to want the same things from their electric com-panies. We have the opportunity to meet and exceed these expectations within the broader responsibility of providing clean, safe, reliable, and af-fordable electricity.

Consider smart meters—we’ve de-ployed about 4.4 million within the Southern Company system. These were seen at fi rst as the gateway to the “smart home.” Right off the bat, they have transformed what once was a very hands-on exercise into a digital one, and they are already providing great benefi ts. They have made our response to outages more effi cient, helped us to reduce vehicle emissions by taking meter-reading trucks off the road, and achieved more accurate and predictable billing. Through smart meters, we are offering customers a product they can use to view their energy use online 24/7, see the costs, and project monthly bills.

At the same time, we need to be cautious and thoughtful about the security implications of opening the door to the electric network in an un-fettered way through smart meters. (See the sidebar, “The Electricity Sub-sector Coordinating Council.”) This is a good illustration of how the promise and challenge of new technologies live side by side when we operate in a busi-ness that has such a direct and mean-ingful impact on our customers’ lives.

Full Generation PortfolioThe generation portfolio is another area where significant change is already happening. In addition to the new Vogtle nuclear units and the Kemper coal gasifi cation facility, we’ve accelerated the diversifi cation

of our fuel portfolio in other ways. In six years, the Southern Company

system nearly tripled its use of natu-ral gas. While not a panacea, natural gas, with its growing abundance and current attractive prices, is clearly a dominant solution. Through subsid-iary Southern Power, we’ve acquired, in partnership with Turner Renew-able Energy, seven solar photovoltaic plants across the country, while our Georgia Power subsidiary embarked on the largest voluntary solar initia-tive in the United States. We continue to build on our commitment to re-newables and considerable energy-effi ciency programs.

All in all, we’re committing $20 bil-lion to develop the full portfolio of en-ergy resources. One thing is certain:

the need to develop the full portfolio for the benefi t of America’s energy fu-ture. Southern Company is preparing for the opportunities that lie ahead by drawing on our innovative culture.

Strategy DevelopmentIn strategy development, we should engage the broadest practical level of participation, so that when it’s time to act, people support the effort. Seeking long-term results requires dedication and courage. With any comprehen-sive change, we must communicate relentlessly, even after the fact. The re-sult is a clear strategic vision and the ability to take action before being com-pelled to do so.

Innovation, by its nature, is disrup-tive. Sometimes it appears in a long,

SEEKING LONG-TERM RESULTS REQUIRES DEDICATION AND COURAGE. WITH ANY COMPREHENSIVE CHANGE, WE MUST COMMUNICATE RELENTLESSLY, EVEN AFTER THE FACT.

CCA

Southern Company’s Georgia Power subsidiary embarked on the largest voluntary solar initiative in the United States.Southern Company

sustaining manner, allowing everyone to adapt. Occasionally the disruption changes the game—it changes the “whats” and the “hows” and even the market or the way people think about and use your product. In corporate exercises we did 15-20 years ago, we actually predicted the develop-ment of something like today’s smart phones. Although we imagined a very versatile device, we did not anticipate the importance, variety, and inter-relationship of the apps.

I’m fascinated with the possible apps in the energy space. What will they be? I think we’ll be able to predict pretty clearly, with some variance, the “whats.” But it’s the “hows” that are really transformational and poten-tially game changing.

Consider how evolving technologies

are helping customers better man-age their energy use. I think Google’s Nest is a disruptor that is around the corner. It may be a subsequent ver-sion of the Nest, but it’s going to be a sensing technology. Sensors are de-veloping so quickly that our experts anticipate that any signifi cant asset in your house will have its own sensor in the not-too-distant future, meaning it will manage its performance based on our behavior.

A Founder’s LegacyWhenever I think about the game-changing potential of innovation, I think about James Mitchell, who was the founder of Southern Company and a fascinating study in leadership, vision, and courage.

When Mitchell came to Alabama

in 1911 searching for hydro sites, the idea of transmitting electricity over long distances was still a new con-cept—although Westinghouse had demonstrated its possibility in 1896. Throughout most of America, power generation was still a local affair. Isolated cities and towns were served by local power sources, with few of them having the ability to inter-connect grids with neighboring com-munities.

Mitchell’s idea was to transmit power to major cities within 200-mile concentric circles of the ma-jor power sources in Alabama. This included markets in Kentucky, Arkansas, southern Illinois, south-east Missouri, and eventually New Orleans—more than 300 miles away from the dams in Alabama. That size



Too hot. Too cold. Too dry. Too windy. The volatility of the weather can impact the fortunes of a whole range of industries from food production to tourism. And none more so than the power and gas sector. At Swiss Re Corporate Solutions, we combine our fi nancial strength and expertise with your industry know-how to create tailor-made insurance and derivative-based solutions that will help protect your earnings. Whatever your business. Whatever the weather. We’re smarter together.

swissre.com/corporatesolutions

Keepingcool

Ourtailored

solutions

Yourenergy


market had never been developed before. It had not even been envi-sioned.

Mitchell’s plan was a game changer for both the South and the electric utility industry. He sketched out his grid a full decade before the era of “superpower” or “giant power,” as it was called, when large intercon-nected grids became a national craze. It would take the next generation of utility leaders to actually develop markets even approaching the size Mitchell envisioned.

This was the seed that germinated the forerunner holding companies that became Southern Company in 1947 and is the foundation of the com-pany’s transmission network today.

Mitchell was one of the great inno-vators of our business. His vision was transformative for our industry. Just think about the vision it took to create an electric network in the agrarian

IN THE ELECTRIC UTILITY INDUSTRY, THE VISION AND COURAGE TO BE STEADFAST IN SUPPORT OF ENERGY INNOVATION ARE ABSOLUTELY ESSENTIAL.

South; the courage to make the bet to build the assets and then create a market for them to serve. James Mitchell embraced the future.

The future may not look exactly as we have imagined. If innovation threatens our business model or current way of thinking, we’ve got to adapt and develop a different way of doing business. We cannot keep the waves off the beach, and we know those waves are coming.

At Southern Company, we plan to

Georgia Power Company

The Vogtle Unit 3 nuclear island, with Unit 3 cooling tower in background.

be ready for the future, and we want to help shape it by developing options to make us successful in a changing environment.

In the electric utility industry, the vision and courage to be steadfast in support of energy innovation are absolutely essential. Because of in-novation’s potential, we, as leaders of the enterprise, must move together constructively for the benefi t of our customers and our nation. We can do this. It’s an exciting time.

T homas A. Fanning chairs the Electricity Sub-sector Coordinating Council (ESCC), a group of 30 executives that interacts with federal intelli-gence and energy agencies to protect against, prepare for, and respond to threats to the nation’s power grid.

“The ESCC reports to the Department of Homeland Security through the Department of Energy,” said the Southern Company chairman, president, and CEO. “Because of our legacy of industry cooperation, we have terrific CEO participation on the council. Electricity is the only sector with direct CEO leadership and involvement in national security and business assurance through a sector coordinating council.”

Sector coordinating councils were created to fill the critical need for improved information sharing among government agencies and industries responsible for critical infrastructure. The ESCC brings senior administration offi cials and utility executives together to facilitate and support public affairs and policy-related activities and initiatives designed to enhance the reliability and resilience of the electric grid.

“Our coordinating council focuses on the electric utility industry’s efforts to address cybersecurity, physical terrorism, and disaster response, and develops tools to assess and respond to cyber threats,” said Fanning.

The council includes investor-owned utilities, cooperatives, and municipal utilities, as well as representatives of the nuclear industry, independent power producers, independent system operators, Edison Electric Institute, and other electricity trade associations.

“We try to stay ahead of the game as an industry,” Fanning said. “The idea that we can prevent every threat is outdated. Utilities should anticipate cyber threats, and be proactive and adaptive. After a security breach, the entire industry should share that information immediately, batten down the hatches, and close its exposure.”

An example, according to Fanning, was the industry’s response to the Heartbleed code security threat earlier this year. “The ESCC had every CEO in the industry,

or their representative, on the phone within hours,” he said. “Together, we were able to take effective action.”

Fanning likens preventing and responding to cyber threats to being “almost like football—someone is running an offense and you are the defense. You are always thinking, ‘I can see the

patterns of the offense. I have to adapt.’” “ESCC member companies generally know how many

cyber attacks occur every day, and they often know who’s doing it because the protection regime includes identifying the bad guys,” he said. “You want to try to fi nd out what they are doing.”

The ESCC has three focus areas: tools and technology, information fl ow, and incident response. It has selected a single framework to analyze, identify, and react to unusual activity in cyberspace.

“The value of a single cyber protection regime for the U.S. electric utility industry is that we have a much more comprehensive approach to identify unusual activity, characterize it, and then deal with it,” Fanning said. “The government has tools that can improve the industry’s situational awareness and allows utilities to incorporate those tools on our systems.”


Electricity SubsectorThe

Coordinating Council

“Our coordinating council focuses on the electric utility industry’s efforts to address cybersecurity, physical terrorism, and disaster response, and develops tools to assess and respond to cyber threats.”

30 E L E C T R I C P E R S P E C T I V E S | www.eei.org/ep30 E L E C T R I C P E R S P E C T I V E S | www.eei.org/ep

The Value of Partnership

Managing Cyber Risk

Understanding NERC’s Newest Standard

to SECURITY

A TARGETED Approach


SPECIAL SECTION

CYBER AND PHYSICAL SECURITY

Protecting the nation’s electric grid and ensuring a reliable supply of energy are top priorities for the electric power industry.

The power grid is a complex, interconnected network of generation, transmission, distribution, control, and communication technologies, which can be threatened by natural events—such as severe storms—and by mali-cious events, such as cyber and physical attacks.

The electric power industry is forging ahead with a series of initiatives to safeguard the electric grid and is partnering with federal agencies to improve sector-wide resilience to cyber and physical threats.

In this special section, Daniel Poneman, former deputy secretary of the Department of Energy, discusses how the industry is cooperating and coordinating with the federal gov-ernment to protect the grid. Michael Chertoff, former secretary of the Department of Homeland Security and executive chair-man of The Chertoff Group, gives insights on how companies should prepare and respond to today’s persistent and con-stantly evolving cybersecurity threats. Finally, Rick Shumard and Steve Schneider of Leidos outline the six key requirements of the North American Electric Reliability Corporation’s most recently proposed critical infrastructure protection standard, CIP-014.

continue

The Value of Partnership: Enhancing Resilience and Response By Daniel B. Poneman


We live in an open society. Free markets and individual liberty have driven American prosperity since our nation’s founding. The national infrastruc-ture that underpins our economy refl ects this arrangement—more than

75 percent of the nameplate capacity connected to the electric grid is privately owned, as are the majority of our natural gas and oil pipelines. At the same time, 47 million Americans in 49 states still draw their power from publicly owned utilities. The power marketing administrations that report to the Department of Energy (DOE) are responsible for more than 33,600 miles of transmission lines, serving 100 million Americans in 33 states.

Consequently, the responsibility to protect our electric infrastructure against a dynamic and evolving threat environment—cyber, physical, and weather-related—must be shared between government and industry.

Indeed, as these natural and unnatural threats continue to mount, it has be-come even more important to strengthen government-industry partnership in cooperating on emergency preparedness and incident management at DOE.

These efforts are not new. The need for coordination became immediately clear after the September 11 attacks and, following the creation of the Department of Homeland Security (DHS), the federal government launched a strategy based on the sector-specifi c agency model described in Presidential Policy Directive-21 (PPD-21), “Critical Infrastructure Security and Resilience.”

Since October 2001, the National Infrastructure Advisory Council has advised the President and has made recommendations for enhancing cooperation be-tween the public and private sectors. Its 2010 report, “A Framework for Establish-ing Critical Infrastructure Resilience Goals,” made an important recommendation that the government should initiate an executive-level dialogue with electric-power-sector CEOs.

DOE agreed and started meeting with an ad-hoc group of industry CEOs to address issues related to the security and resilience of the electric subsector. The CEOs then decided to increase their direct involvement in the Electricity Subsec-tor Coordinating Council (ESCC), whose purpose is to provide an effective liaison between the federal government and the electric power sector. (See the sidebar on page 29, “The Electricity Subsector Coordinating Council.”)

In practice, the ESCC has become a strategic CEO-level body that has demon-strated the ability to galvanize action across the entire industry, which includes the investor-owned utilities, municipally-owned utilities, and electric coopera-tives. Over the past two years, the ESCC has met six times with federal government executives and Canadian partners, and continues to make progress in the areas of information sharing, cybersecurity protections, communication strategies, and incident management processes. The ESCC also is working with DOE on a strategy to work with the industry as it develops its thinking about the next generation of spare equipment and how to maximize the use of the current inventory.

Daniel Poneman served as deputy secretary of the Department of Energy from May 2009 until October 2014. He is a senior fellow at the

Harvard Kennedy School’s Belfer Center for Science and International Affairs.

The responsibility to protect our electric infrastructure against a dynamic and evolving threat environment—cyber, physical, and weather-related—must be shared between government and industry.

PPD-21 underlines the need for cross-sector coordination:

“U.S. efforts shall address the secu-rity and resilience of critical infra-structure in an integrated, holistic manner to refl ect this infrastruc-ture’s interconnectedness and in-terdependency. This directive also identifi es energy and communica-tions systems as uniquely critical due to the enabling functions they provide across all critical infra-structure sectors.” Now that the ESCC has developed

into a solid forum for electric power sector cooperation, it has the oppor-tunity to fulfi ll the PPD-21 mandate by formalizing partnerships with other critical infrastructures with which it has significant interdependencies, such as telecommunications, trans-portation, and oil and natural gas. This effort could strengthen our abil-ity to share best practices and to avoid wasting time by reinventing the wheel on security and resilience issues that other sectors may have successfully addressed.

The Impact of Superstorm SandyIf there were any doubts that a co-ordinating council at the CEO level could play a pivotal role in develop-ing sector-wide responses, our ex-perience during Superstorm Sandy put those doubts to rest. Once Sandy made landfall on October 29, 2012, it was clear that substantial fl ooding in dense population centers would cause signifi cant problems for elec-tric power.

The week before the storm made landfall, Edison Electric Institute (EEI) President Tom Kuhn and I spoke by phone, ironically, to defer a meeting of the ESCC in light of our expected preoccupation with what already was predicted to be a storm of historic proportions. During that call, Tom explained that the industry was orga-nizing its long-established mutual as-sistance network but that, due to the expected dimensions of the storm, he was for the first time bringing CEOs into the day-to-day operational

planning of the response effort. He further suggested that I might want to participate in that CEO-level call of the ESCC, both to hear the concerns and planned responses from industry, and to communicate any governmen-tal views or actions that could bear on the situation.

Since DOE is responsible for coor-dinating efforts to respond to energy emergencies for the federal govern-ment, through what is called Emer-gency Support Function-12 (ESF-12) in the National Response Framework, Tom’s suggestion made sense. When industry set up a daily 5:00 p.m. ESCC call with the CEOs, Energy Secre-tary Steven Chu and I participated from the federal side. After an update on the situation on the ground, we asked the CEOs to identify any im-pediments to their recovery and res-toration efforts, and we all discussed possible solutions to overcome those impediments.

As concerns escalated over the next 36 hours or so, the White House advised DOE that President Obama would join the next call. The Presi-dent listened and engaged actively in the discussion. He also emphasized two points in that and subsequent conversations. First, after preserva-tion of life and limb, his fi rst priority was the restoration of power. (He re-alized, of course, that the restoration of power was itself essential to the preservation of life and limb in many instances.) Second, he would have zero tolerance for red tape.

With that clear presidential di-rective, action quickly followed. The combined forces of government and the private sector focused sharply on overcoming obstacles and getting relief where it was most needed. In wide-ranging and unprecedented cooperation, recovery teams and bucket trucks were brought in not just from the Southeast and Mid-Atlantic, but from the West Coast and Canada. In addition, for the fi rst time the power marketing administrations contributed people and assets to the recovery effort. Also for the fi rst time,

industry trade associations embed-ded around-the-clock in our ESF-12 operations center at the Federal Emergency Management Center in Washington, DC. EEI Executive Vice President of Business Operations and Regulatory Affairs David Owens was at FEMA for days and was pivotal to the industry-government response to Sandy.

The days and weeks following Sandy represented a model of can-do cooperation. People rolled up their sleeves, bureaucratic silos gave way to seamless teamwork, and day-by-day operations marked continued prog-ress in restoring power to the millions of American families and communi-ties across the affected area.

Though the innovations and can-do efforts of the Sandy response were admirable, the fact that they were needed to such a degree served as a wake-up call. It was reassuring that offi cials were able to improvise but was also concerning that impro-visation was needed to such a degree. The storm revealed an astonishing lack of real-time situational aware-ness for much of the nation’s critical infrastructure. We did not know which gas stations had power but no fuel, fuel but no power, both, or neither. It also revealed the deep and complex interdependence between the elec-tric and oil and gas sectors. Further, the experience demonstrated the im-portance of relationships built before emergencies—so that authorities and infrastructure operators know whom to talk to and how to reach them.

Sandy gave an ominous sense that the nation will face more and stronger storms and greater storm surges in the future, and they could happen anywhere. To prepare for the effects of future natural disasters, industry and government need to continue to de-velop relationships and institutional-ize the roles and responsibilities that worked so well during Sandy.

Three Broad Areas of CooperationCooperation and coordination are es-sential to protecting the electric grid



to develop an effective, timely, and coordinated cyber incident manage-ment capability. In collaboration with DHS, the Federal Energy Regulatory Commission, Electricity Sector In-formation Sharing and Analysis Cen-ter, and industry, DOE is writing the playbooks, blueprints, and a five-year roadmap to ensure that industry and government continue to cooperate and coordinate before, during, and after a cyber incident.

While some may think that exer-cises divert important time and ef-fort away from other responsibilities, experience has shown that when it comes to emergency response, you do not want to be forced to make ma-jor, complex operational decisions for the first time under enormous duress in a real-life situation. Instead, you want to have had the benefit of un-derstanding those decisions and the inevitable mistakes that go with them during an exercise. It is far better for that experience to occur under sim-ulated conditions than when lives are at stake.

Last year, the North American Elec-tric Reliability Corporation organized GridEx II, an exercise that simulated a combined physical and cyber attack on the U.S. electric grid. The exercise brought together senior officials from the government and electric sector, and worked through how to respond to unfolding events, as transmission centers were destroyed under the scenario and 34 million people from Washington and New York to Dallas and Toronto were suddenly without power.

Working through exercises, such as GridEx II, brings these challenges home, and underlines how difficult they are to overcome. How soon should you send personnel to loca-tions that may be under attack? How will you know what damage has oc-curred? How would law-enforcement authorities distinguish between at-tackers and restoration workers? And one of the earliest and most difficult questions: How should industry and government communicate to

and its most critical assets from all hazards. That is why DOE has been working with DHS, other federal and state partners, and the industry in three broad areas to improve the se-curity, preparation, and response co-ordination between the electric sector and the government.

First, in order to enhance situa-tional awareness by accelerating in-formation sharing, DOE launched the Cybersecurity Risk Information Shar-ing Program—a collaborative effort with private electric sector partners to provide a near-real-time capability for critical infrastructure owners and operators to share cyber threat data voluntarily, analyze that data, and re-ceive machine-to-machine mitigation measures.

In coordination with DHS and other federal agencies, DOE also has conducted several cyber threat infor-mation-sharing workshops to analyze threat information, determine the im-pact to the sector, and develop mitiga-tion measures specifically designed to work in the electric sector.

Second, federal agencies are work-ing to provide the industry with tools and technology to improve security and resilience. For example, DOE worked with DHS, the National Institute of Standards and Technology, and industry to develop the Electric-ity Subsector Cybersecurity Capability Maturity Model (C2M2). C2M2 is a self-assessment tool that enables an organization to look at its cybersecu-rity status, and use that assessment to inform cybersecurity investment decisions. In the time since DOE fa-cilitated assessments for the first 17 organizations using the C2M2 as part of a pilot project, more than 300 orga-nizations have requested the electric subsector model, including more than 100 utilities.

The third area of work is practice. It is essential for all relevant stake-holders to strengthen and exercise the electric sector’s cyber incident response capabilities. That is why DOE is spearheading an effort, in partnership with DHS and others,

a public that is anxiously sitting in the dark (literally and figuratively) and coping with widespread uncertainty and possibly devastating damage?

These are challenging scenarios even when all key stakeholders are assembled around a single confer-ence table. However, exercises do allow stakeholders to identify areas for improvement and enable lessons learned to be implemented ahead of a crisis. For example, potential bottle-necks can be identified and matched against the priorities and capabilities of all relevant stakeholders—foster-ing more efficient response and res-toration during a real crisis.

The Importance of Industry LeadershipWorking together, industry and gov-ernment have already started to coordinate their efforts to protect America’s infrastructure. Still, much remains to be done, and industry leadership will be essential. These challenges are larger than any one agency or any one company can manage. That is why the kind of sus-tained, focused leadership that EEI has shown over the years will con-tinue to be so important to our efforts to work with government in driving emergency response. Citizens from coast to coast are counting on us all to stay the course in our quest toward continuous improvement.

That kind of government-industry partnership can build a future in which robust cooperation and resilient physical and virtual in-frastructure can withstand more extreme weather events or the evolv-ing cyber and physical security threats we face. This partnership can mitigate attacks from achieving their aims and can deter others by demonstrating that even successful attacks have a negligible impact on electricity delivery. Together, we can lay the foundation to increase our nation’s prosperity and strengthen its underlying infrastructure for years to come.

Hard hats to black hats, Leidos knows utility security.

leidos.com/utility-security©Leidos. All rights reserved.

Michael Chertoff served as secretary of the Department of Homeland Security from 2005 to 2009. He is currently executive chairman

and co-founder of The Chertoff Group, a premier global advisory firm focused exclusively on the security and risk management sector.

Q:

Q:

Q:

Managing Cyber Risk in Today’s Security LandscapeAn Interview with Michael Chertoff

Based on your experience working with companies on their security issues, are they prepared for today’s cyber threat?

Some companies are better than others at their overall ability to manage risk, including today’s cyber threats. The good thing is that more and more members of the C-suite are becoming active in addressing these issues and no longer view cybersecurity as simply a technical matter best left to the chief information officer.

The key is to identify an effective risk management framework that will help a company intelligently examine the threats it faces; identify, assess, and where possible, eliminate security gaps or vulnerabilities; and ensure a robust plan for consequence management. A company needs to be prepared to respond when a crisis does occur. A risk management framework is an effective instrument to better inform decision making when it comes to prioritizing security investments, detecting new threats, and managing future security concerns and changes in the risk environment.

What is the best solution to prevent persistent cybersecurity threats?

There is a saying that there are two types of enterprises: ones that know they have been hacked and ones that do not know they have been hacked. The reality is that no enterprise can eliminate cyber risk completely. It is not about avoiding it altogether; it is about managing and minimizing the risk.

At The Chertoff Group, we believe that in order for an organization to be effec-tive at combatting cyber threats, it requires planning and design anchored in a solid understanding of security risk. Once this process is in place, an organization must be fully invested, from the C-suite level down to the individual employees. Companies should be working to further protect critical enterprise assets by preventing or reducing vulnerabilities where they can, as well as mitigating the consequences if an incident does occur. Applying proper risk assessment, mitiga-tion, and ongoing risk-monitoring action before an additional event occurs tends to be far less costly than doing nothing, and could prevent a crisis from arising in the first place.

How can we better explain our need to manage risk and not the constant effort needed to eliminate it?

An easy analogy is to compare it to one of the best-designed defense mechanisms in the world—the human body. We know our bodies do not prevent each and every bacterium and virus from entering our system. What our bodies do well is monitor and assess, as we take certain precautions to prevent the most harmful elements from entering. Those that do get in are detected, assessed, and combat-ted by our white blood cells.

In a way, this is a similar model to consider for cybersecurity. A company must identify what is critical for the enterprise to operate and perform well, mitigate possible threats, and defend against those that will get through while not trying


In order for an organization to be effective at combatting cyber threats, it requires planning and design anchored in a solid understanding of security risk.

Q:

Q:

Q:

Q:

Q:

Q:

to eliminate every potential threat. If we tried to prevent ourselves from interacting with any element of risk, we would never go outside or interact with others.

Are you surprised by some of the recent breaches at large fi nancial institutions and retailers, which spend hundreds of millions of dollars each year protecting their data?

Every institution is going to face the possibility of hack-ing. The only institution that will not face this risk is one that has nothing of value. It is about having a realistic, resilience-based approach to cybersecurity. Some of the issues to consider are: For how long does the breach go on? How damaging is the information that is obtained or the destruction that occurs? How resilient is the company?

How can security managers keep up if the threat is constantly evolving?

The fast-paced nature of the threat will change the way risk is monitored. Automated functionality that can con-tinuously monitor and score the health of key IT security controls will play an increasingly important role in assur-ance programs both in the private sector and in govern-ment. Think of it as the cyber equivalent of a home smoke detector.

Are some companies more susceptible to threats than others?

Some companies are of interest to criminals because they have fi nancial data; certain types of critical infrastructure could be of interest to a nation-state because it could be used in war. A particular cybersecurity approach must be tailored to the valuable assets of a particular enterprise. There is no one-size-fi ts-all plan.

Who is more prepared among the private sector?

The fi nancial community is one example of a sector that has made signifi cant investments in cybersecurity and demonstrated advanced capabilities. However, the electric power industry is spending a signifi cant amount of time and investment as well. One area that can be modeled by others is the level of coordination that occurs among electric companies and the government when preparing for and responding to a crisis or emergency situation. It is important to audit a company’s preparedness to deal with an incident, as well as its capabilities to prevent one. The key is to recognize multiple layers of defense. There is not one solution to get out of the target zone; it is about constantly evaluating vulnerabilities and dealing with them. (See Figure 1.)

Is America not spending enough money on this yet?

There are multiple costs to a company as a result of a cyber intrusion or network breach. It is not just the cost of the remediation as a result of a breach; there is the reputational and brand damage and a break in trust and confi dence among all stakeholders involved. Corporate leaders must understand how much is enough and what one ‘should do’ rather than being overwhelmed by the infi nite possibility of things one ‘might do’.

Today’s global environment presents a broad array of risk. What concerns should be at the top of a CEO’s risk dashboard?

Today’s challenges are complex: dealing with known nation-states, as well as adversaries not clearly defi ned by a flag or set of principles. These are challenges in both the physical and the virtual world, and they are not going away.

Global security remains important when it comes to defending against terrorist and like-minded groups. U.S. efforts have helped greatly to minimize their reach and presence in the world. However, today these groups pres-ent the United States and its allies with a wider and more diverse array of challenges across a larger geographic area, which can impact the safety and security of industry and government assets, as well as citizens around the world and here at home.

Cyber attacks are certainly a top concern. Breaches among our critical cyber infrastructure systems can in-tentionally corrupt information, deny access to or delay information, destroy or overwhelm networks, undermine their integrity, and steal sensitive information. It is also critical that companies consider their supply chains when applying a risk-management framework. Understanding one’s suppliers or vendors, their origin, the opportunities for risk, existing vulnerabilities, and the company’s abil-ity to mitigate those threats, vulnerabilities, or possible interruptions to the supply chain can help inform the level of security investment needed and where it should be applied.



Q:

Q:Is there enough information-sharing between the private sector and government? If not, what is standing in the way?

Much of the information necessary to defend against today’s cyber threats remains classified. The government needs to help declassify and share actionable information with cleared personnel, particularly among critical infra-structure owners and operators, so they have access to information about today’s threat actors, tactics, and tools.

One area where the electric power industry is actively working to strengthen cybersecurity involves enhanced infor-mation sharing. An information-sharing platform—whether through an Information Sharing and Analysis Center or other industry mechanism—can provide power companies with access to information on cybersecurity threats identified by companies themselves and other partners.

This type of capability helps companies detect, iden-tify, and classify cybersecurity threats and vulnerabilities, and respond to and recover from cybersecurity incidents more effectively. Companies can establish relationships, protocols, and procedures before an incident and can implement courses of action to mitigate cybersecurity threats and identified vulnerabilities.

What is the biggest misconception about cybersecurity threats?

The biggest misconception is that cybersecurity is a prob-lem of hardware or software. The reality is that it is a peo-ple problem—and the solution lies in understanding the strategy of potential adversaries, then adapting a security architecture and policies that not only address technical vulnerabilities, but human vulnerabilities as well.

One area that can be modeled by others is the level of coordination that occurs among electric companies and the government when preparing for and responding to a crisis or emergency situation.

F I G U R E 1ADDRESSING DYNAMIC THREATS TO THE ELECTRIC POWER GRID THROUGH RESILIENCE

Source: The Chertoff Group

Managing Risk Planning & Prevention

Identifying vulnerabilities•computers•terminals•power grid transformers

Anticipating threats•nation-states•terrorism•hacker/cyber criminals

Understanding consequences•data theft•power failure•monetary loss

• sharing information• setting industry standards• responding to incidents• recruiting, training, education• monitoring & assessing technology & information

hdrinc.com

Empowering the BakkenThe oil boom brought 30,000 new

workers to the Bakken, but we didn’t

blink. We’ve streamlined the rapid

expansion of the area’s electrical

infrastructure to meet 50 percent

increases in electrical loads annually,

well above the typical 1 to 2 percent

growth. This is where great begins.

Understanding NERC’s Proposed Critical Infrastructure Protection Standard By Rick Shumard and Steve Schneider


Ensuring the security of critical in-frastructure requires an approach that integrates security system

engineering, network and cyberse-curity solutions, facility hardening, construction, and power grid archi-tecture design and retrofi ts. Three key focus areas enable utilities to develop a strong security plan. The fi rst area considers event correlation and situ-ational awareness. Utilities must rec-ognize increased threats—internal and external—and develop responses that can be coordinated across the organization. Sources of external harm could include physical and cy-ber attacks, including spyware and other forms of malicious software. Threats don’t always come from out-side an organization, however, as in-ternal threats can include disgruntled staff, sabotage, or data manipulation.

The second area of focus for utility security is to review the point of con-vergence for information technology (IT), operational technology (OT), and other security systems. As information systems are increasingly deployed for utility management and grid opera-tions, there is a growing need for these sometimes disparate systems to inter-connect to protect against the grow-ing threat matrix. Utilities must fi eld robust network systems and install the cyber tools necessary to be able to detect and respond to threats before damage is done.

Rick Shumard is vice president for utility services at Leidos. Prior to joining Leidos, he spent more than 28 years with the Electric Power Research Institute in advanced technology sales and

applications. Steve Schneider is chief solutions architect and director of technology integration at Leidos. He previously spent nearly two decades with Constellation Energy/Baltimore Gas & Electric.

The views expressed herein are those of the authors.

The North American Electric Reliability Corporation fi led the proposed CIP-014 Physical Security Reliability Standard with the Federal Energy Regulatory Commission (FERC) in May. FERC approval is expected prior to the end of 2014.

Finally, physical hardening of crit-ical infrastructure is fundamental for a strong utility security plan. As with cyber attacks, threats to physi-cal security continue to evolve. While public safety was the initial intention for creating a secure facility, utilities now face the more foreboding threats of vandalism, theft, or outright grid attacks. As a result, utilities protect against planned and coordinated physical and cyber attacks. Simply building bigger walls is not the an-swer. The best protection comes from an appropriate blend of grid design, security technology implementation, and facility and system hardening—all working together to secure critical infrastructure without compromising operations.

Critical Infrastructure Protection StandardsMandated by Congress, the North American Electric Reliability Corpo-ration (NERC) Critical Infrastructure Protection (CIP) standards are man-datory and enforceable cybersecurity standards that support the reliable operation of the bulk electric sys-tem. The CIP standards are currently focused on cybersecurity and have evolved over time.

With physical security gaining more attention in recent years, the Federal Energy Regulatory Commis-sion ordered NERC to add physical

security requirements to the CIP standards. The recently proposed CIP-014 physical security standard requires transmission owners to identify critical transmission facili-ties through risk assessment, which must be verifi ed by an independent third party. The standard also re-quires utilities to perform a thorough evaluation of potential threats and the associated vulnerabilities related to each identifi ed critical facility. Fi-nally, the utility must develop and implement a physical security plan to protect those identifi ed facilities and have the plan verifi ed by an in-dependent third party. The proposed CIP-014 standard has six key require-ments.

Requirement OneUnder this requirement, transmis-sion owners must identify critical transmission facilities, which are “the transmission station(s) and transmis-sion substation(s) that if rendered in-operable or damaged could result in widespread instability, uncontrolled separation, or cascading within an interconnection.” Transmission own-ers must identify their critical facili-ties through risk assessments on each of the applicable facilities.

The standard applies to transmis-sion facilities with particular oper-ational characteristics, for example, transmission facilities operated at or

Energy Storage

4 MW (8MW range) Ohio Energy Storage Project

Today’s complex grid system creates numerous challenges. RES Americas’ safe, reliable, and economic energy storage systems can provide grid owners and operators unique solutions to these challenges with precise, fast-responding resources.

Safe, Reliable, Economical Storage Systems

Energy Storage Experience

PJM Frequency Regulation: 4 MW constructed

IESO Frequency Regulation: 4 MW constructed

CAES: Integrated grid scale wind to Compressed Air Energy Storage facility

DEVELOPMENT | ENGINEERING CONSTRUCTION | OPERATIONS

_____________

Committed to everyone going home safe, every day.

Renewable Energy Systems Americas Inc.11101 W. 120th Ave. | Suite 400

| 303.439.4200res-americas.com [email protected]

4 MW (8 MW range) Ontario Energy Storage Project

facilities identified under Require-ment One). The evaluation should consider unique characteristics of the facility, prior history of attack or past physical security events on similar facilities, and intelligence or threat warnings received from sources such as law enforcement, NERC, the Elec-tricity Sector Information Sharing and Analysis Center, or federal and/or Canadian government agencies.

Requirement FiveTransmission owners and operators of critical facilities must develop and implement documented physical se-curity plans for these facilities under this requirement. The plan should address “resiliency or security mea-sures designed collectively to deter, detect, delay, assess, communicate, and respond to the potential physical threats and vulnerabilities identifi ed” during the Requirement Four evalua-tion. The plan also should include law enforcement contact and coordina-tion information, as well as a timeline for executing physical security en-hancements. Finally, the plan should incorporate “provisions to evaluate evolving physical threats, and their corresponding security measures.”

Requirement SixSimilar to Requirement Two in that it requires an unaffi liated third party to verify the utility’s information and activities, the validation in this step is for the threat and vulnerability evaluation and subsequent security action plan. Each transmission owner and operator shall select an unaffi l-iated third-party reviewer from the

above 500 kilovolts (kV). However, not all of the requirements in the standard will apply to these applicable facilities.

Transmission owners also must identify “the primary control cen-ter that operationally controls each transmission station or transmission substation identifi ed” in the risk as-sessments. Finally, the requirement demands ongoing risk assessments of the applicable transmission facilities.

Requirement TwoTransmission owners must have an unaffi liated third party verify the risk assessments performed under Re-quirement One (either concurrently or after the risk assessment is per-formed under Requirement One). Each transmission owner must select an unaffi liated verifying entity that is either “a registered planning coordi-nator, transmission planner, or reli-ability coordinator; or an entity that has transmission planning or analysis experience.”

Requirement ThreeThis requirement is intended to en-sure that a transmission operator that has operational control of a primary control center identifi ed in Require-ment One receives notice. The trans-mission operator must then fulfill the rest of the obligations stated in Requirements Four through Six for this control center.

Requirement FourTransmission owners and operators must evaluate the potential threats and vulnerabilities of a physical at-tack for each critical facility (such as

following: “an entity or organization with electric industry physical se-curity experience and whose review staff has at least one member who holds either a certified protection professional or physical security pro-fessional certification; an entity or organization approved by the elec-tric reliability organization [NERC]; a governmental agency with physi-cal security expertise; or an entity or organization with demonstrated law enforcement, government, or military physical security expertise.”

Striking the Right BalanceAn integrated approach to utility security recognizes and protects against both physical and cyber threats and fi ne-tunes response capa-bilities for when events do occur. Util-ities will continue to be confronted with new challenges and, likely, new or changing regulations. The dynamic nature of these requirements suggests utilities take a fl exible, long-term view to utility security and position them-selves to meet both anticipated and evolving threats.

Long-term utility security planning focuses on having all the tools needed to anticipate the evolution of an already complex real-time network; understanding historical patterns of theft and vandalism, including the types and locations of assets and their importance to reliability; and the integration of appropriate cyber-security system technologies and ap-plications. The CIP standards will play an important role as utilities continue to execute their plans to secure the grid.

For more information on CIP-014, visit www.nerc.com.

The dynamic nature of these requirements suggests utilities take a fl exible, long-term view to utility security and position themselves to meet both anticipated and evolving threats.


NOVEMBER | DECEMBER 2014 43 NOVEMBER | DECEMBER 2014 43

More than 1,200 industry thought leaders are converging in Dallas in mid-November for the Edison Electric Institute’s 49th Financial Conference. One issue that is sure to be top-of-mind for many utility executives, as well as the investment community, is the utility of the future.

What will it look like? How will it impact the energy industry? We invited an electric utility CEO, an investment banker, and a ratings analyst to share their perspectives and insights on the changing energy landscape and how utilities must evolve to remain successful. For more information on the conference, including a preliminary agenda and presentations, visit www.eei.org.

Connie Lau, president and CEO, Hawaiian Electric Industries

the platform to enable and deliver all of these benefi ts to customers.

Community solar, electric vehicle programs, microgrids—these options and more will be offered to customers, providing more choices and value to individual customer segments.

It’s been said before and it bears repeating: What’s happening in Hawaii is a postcard from the future for the rest of the industry.

HEI recently proposed extensive plans for Hawaii’s energy future that will lower electric bills, give customers more service options, and nearly triple the amount of distributed solar on your system. What aspects of the plan do you fi nd most exciting?The economic and environmen-tal future of our islands hinges on eliminating Hawaii’s dependency on expensive imported oil. These are not just company business plans; they were developed with a focus on what’s best for Hawaii. We take satis-faction in knowing that principle is what anchors our plans.

In four short months, we de-veloped very comprehensive and aggressive energy plans, with goals

What does the term “utility of the future” mean to Hawaiian Electric Industries (HEI), and what does this concept portend for the industry as a whole?To the Hawaiian Electric Companies, the concept of “utility of the future” means we’re in a fundamentally dif-ferent business. We’re no longer in the business of providing a commodity. Our job is to deliver value to our cus-tomers. It may sound like a cliché, but here in Hawaii, with electricity prices higher than almost anywhere else in the United States, if we don’t deliver value, customers will fi nd other options.

To provide that value, we need to cut the 70 percent of a typical bill that’s due to fuel prices and related costs.

The utility of the future in Hawaii has a diverse clean energy portfolio that lowers and stabilizes customer bills. It anticipates and offers ex-panded services and options tailored to meet customers’ needs and pref-erences. It supports an increasing amount of distributed generation, such as rooftop solar, under programs that are fair and sustainable for all customers. It’s a technology innovator using a state-of-the-art electric grid as

that far exceed those of any other state in the nation. We’re committed to attaining more than 65 percent re-newable energy and nearly tripling the amount of customer-sited solar, while reducing customer bills by 20 percent from today through 2030.

There are many paths to achieving these ambitious but very reachable goals. We need and want to part-ner with others, and we welcome the input.

Lastly, one of the most exciting aspects is probably also the most challenging. We are fundamentally changing what business we’re in. To provide the services and options our customers want and need, we must move a whole lot quicker than we have in the past. We need to get better at anticipating our customers’ needs, not just reacting to them. We won’t have the luxury of studying everything to the degree of engineering preci-sion we have in the past. That may make some people uncomfortable. But there’s also something very vitalizing about taking these opportu-nities and making them a reality.

EEI’S FINANCIAL CONFERENCE PREVIEW:

Envisioning the Utility of the Future

44 E L E C T R I C P E R S P E C T I V E S | www.eei.org/ep44 E L E C T R I C P E R S P E C T I V E S | www.eei.org/ep

Ian C. Connor, managing director, head of North American Power and Utility Group, J.P. Morgan

transmission and distribution, and regulatory constructs may evolve to protect against the economic conse-quences of distributed generation—particularly for the middle class, but the operational characteristics and role of the utility of the future will be very similar to that of today: the core generation and distribution nexus of the nation’s electricity.

In addition to delivering reliable, afford-able, safe, and increasingly clean energy, what else should electric utility CEOs be focusing on?Going forward, utilities have an op-portunity to play an even more robust role in managing the inputs and out-puts at each end of the utility supply chain. For example, in respect to fuel supply, as the generation base shifts increasingly to natural gas and util-ities become more significant con-sumers thereof, utilities increasingly will focus not only on ensuring their supply but in controlling, at a mini-mum, the transport and delivery of natural gas in their service territo-ries to their generation assets. This focus already has manifested itself in several recently announced utility-led natural gas pipeline projects in re-spective service territories, and a few utilities having added gas reserves to rate base.

At the other end, technology is empowering utilities to provide their customers with a far more compre-hensive service experience. Utilities

What does the term “utility of the future” mean to you, and what does this concept portend for the industry as a whole?The “utility of the future” is funda-mentally the utility of today. This may read as close-minded or anti-futurist, so what does this statement mean? The essential function of utilities is to provide affordable, safe, and reliable energy to their customers. The mo-dalities by which utilities continue to execute this vital role will evolve in the future, but this evolution will be more adaptive than transformative in the absence of a disruptive technological shift. Such a fundamentally disrup-tive event is not visible at present. The laws of physics are stubborn things.

This is not to minimize the poten-tially meaningful impacts of industry-shifting factors such as distributed generation or the advent of customer-disintermediation technologies. Nor is it to advocate that utilities should remain static. Just the opposite. The utility of the future will be the one that is open and adaptive to such changes, transforming them where possible into opportunities. Where such changes present risks to current operating models, utilities will need to recalibrate regulatory paradigms to sustain the historic economic compact between all stakeholders and, where necessary, strategically rebalance asset profiles through investment and/or mergers and acquisitions. Generation-asset-heavy utility models may shift more toward

will be able to better understand con-sumption patterns and requirements, as well as to provide customers with a greater menu of service options to manage their energy needs. These op-tions and services include: tailored pricing plans; predictive services that can monitor and detect ineffi-ciencies and/or failures in in-home electrical systems and provide sug-gested solutions; and notification and control services, among others. Ultimately, utilities will become the energy experts on behalf of custom-ers, using technology to transform demand-side-management objec-tives into expanded revenue stream opportunities. And by more closely partnering with the consumer and enhancing the overall service expe-rience, utilities also will benefit as greater consumer satisfaction trans-lates into more constructive regula-tory treatment and support.

NOVEMBER | DECEMBER 2014 45 NOVEMBER | DECEMBER 2014 45

Ryan Wobbrock, assistant vice president, Global Infrastructure Finance Group, Moody’s Investors Service

that utilities will face in an evolving marketplace. These discussions are already well underway.

California is a prime example of an evolving marketplace, as the state continues to promote energy effi ciency, solar generation, and dis-tributed generation initiatives—all of which are highly effective and grow-ing. California utilities have imple-mented these efforts successfully, thanks to an engaged regulatory com-mission focused on public education, regulatory reform, and the fi nancial strength of its utilities.

Another example of cooperative and proactive planning is taking place in New York. Under the state’s Reforming Energy Vision program, all stakeholders are reviewing the function of the regulatory frame-work. The purpose of the program, similar to California, is to promote energy effi ciency, fuel diversity, and clean resources. The broad policy effort outlines six core policies but also emphasizes the development of a rate structure that will fi nancially support the incumbent utilities, while enhancing information and options for customers.

In addition to delivering reliable, afford-able, safe, and increasingly clean energy, what else should CEOs be focusing on?Maintaining a strong regulatory re-lationship is a core competency that Moody’s believes is fundamental to managing a utility business. As the

What does the term “utility of the future” mean to you, and what does this concept portend for the industry as a whole?The term “utility of the future” is a hypothetical construct that assumes a number of major technological ad-vances that have both direct and in-direct implications for today’s utility structure. The utility of the future will incorporate a more environmentally friendly mix of generation (such as less carbon production and greater use of renewables), champion con-servation and efficiency (such as managing stagnant demand growth while increasing operating effective-ness), and empower customers with greater degrees of decision making (such as distributed generation). These developments can impact a utility’s traditional suite of cost-recovery mechanisms and shift the funda-mental value proposition of a utility’s business plan.

Going forward, Moody’s sees cus-tomer preferences driving the indus-try response, as utilities work with state regulatory commissions to fi nd creative solutions for specific cus-tomer desires. Some of the varied responses will require the utility not only to build infrastructure, but also to manage market preferences. Such a transformation will necessitate proac-tive rate-making and collaborative ef-forts on the part of utility companies, state regulators, and consumer advo-cates in order to counterbalance the added execution and fi nancial risks

energy marketplace continues to transform and the need for cooper-ation among utility companies and market stakeholders increases, we believe focusing on this core utility tenet makes the most sense from a credit perspective. Along these lines, Moody’s has observed a noticeable improvement in the credit support-iveness of the regulatory compact over the past several years, as utilities have implemented enhanced cost-recovery mechanisms and have largely received credit-supportive general rate case de-cisions in a timely manner.

However, the sector’s financial profile remains substantially more levered than its industrial peers. Util-ities’ cash fl ow from operations/debt averaged around 23 percent (based upon 70 U.S. vertically integrated operating companies) since 2010, compared with 77 percent for a se-lect group of 35 global integrated oil and gas companies, another capital-intensive energy-based industry. Consequently, the sector requires a predictable, reliable, and supportive regulatory compact in order to main-tain its investment-grade credit char-acteristics. If the focus of utility CEOs and their boards deviates from this competency and becomes distracted by non-core activities, there is the potential for regulatory relationships to weaken and the credit profi les of some utilities to deteriorate.

economics


operational and maintenance cost savings.

Implementing this project resulted in some lessons learned that required ad-ditional planning and process improve-ment. For example, Con Edison had to manage the data set being generated, which proved too large to be reviewed manually. This required the develop-ment of algorithms to flag and prioritize alarms, which were then visually dis-played in the data analytics so operators could easily use them.

In an effort to optimize the efficiency of the distribution grid, a large portion of Con Edison’s 4-kilovolt system was enhanced by equipping many of the feeders with pole-mounted switch-able capacitor banks

and automated controls. The additional capacitors help reduce line losses and improve management of reactive power, ultimately supplying power more efficiently to customers. Additionally, the deployment of automated capaci-tors provides local sources of reactive support, which increases power quality for customers and boosts the efficiency

The Evolving 21st-Century GridBY TOM MAGEE

distribution

Consolidated Edison Company of New York (Con Edison) deployed a series of projects

over the last four years that are helping the utility provide system and customer benefits. Con Edison’s Smart Grid Investment Grant projects focused on the modernization of the electric distribution grid through the deployment of both underground and overhead system-wide distribution automation initiatives. These projects included the addition of remote-controlled switches to minimize outages, expansion of remote monitoring capabilities, ad-vanced supervisory controls and data acquisition (SCADA) systems, and sensing and measurement technologies. The total budget for these projects was approximately $300 million, with Con Edison contributing 50 percent of the total project costs.

One key innovative deployment included establishing the first under-ground sectionalizing loop in Queens, NY. While automatic and remote sec-tionalizing technology were prevalent in the overhead system, this technology had yet to be deployed on underground equipment. The company worked closely with suppliers to specify the functionality and designs of these new switches, while also working with internal subject matter experts to implement the appro-priate communication platform.

Prior to summer 2012, Con Edison successfully energized 30 smart underground switches and four new underground feeders to create two underground loops in Queens. This new design established a network with ex-panded feeder sectionalizing capability and improved feeder restoration time, while providing for increased flexibility

and quicker restoration of outage equipment. The company has future plans to expand the functionality of the underground loop through automation, but additional work and testing are still required. The suc-cess of this $55- million investment required working closely with manu-facturers to develop multi-way switch designs to increase reliability and lower construction costs—and has resulted in a significant improvement in network reliability.

Managing Smarter Systems Using Advanced AnalyticsThe deployment of more than 9,300 sensors and 7,700 transmitters for monitoring network trans-formers not only has increased system reliability, but also allows the company to take proactive mea-sures to inspect equipment based on real-time ana-lytics and subse-quently optimized maintenance cycles. This type of condition-based monitoring pro-vides for remote inspections that translate to

Tom Magee is general manager of the Smart Grid Implementation Group for Consolidated Edison.

The total budget for these projects was approximately

$300 million, with Con Edison contributing 50 percent of

the total project costs.

The visualization platform facilitates the integration of distributed energy resources and customers’ building management systems.

Con E

dison


One of the highlights is a visualization platform—displaying available resources within a network that can be utilized to relieve specific grid load constraints—to provide distribution control center operators with a wide-area situational view of the interconnected smart grid distributed resources. The visualization platform was integrated with third- party control center network operations centers that have the ability to manage specified customer equipment and facil-itate load reduction using existing build-ing management systems or starting customer-sited distributed generation to relieve localized system needs.

With this platform, system operators can visualize near-real-time customer load information and curtailment capac-ity available from customer-sited distrib-uted and demand response resources. The platform was developed with an integrated decision aid tool that can rec-ommend which demand resources can meet the need of a specific constraint, and the capability for the distribution control center operator to see the near-real-time impact of a demand response resource once it has been activated. The integration of the decision aid tools and auto demand response capabilities of the platform enables distribution control center operators to alleviate a particular distribution feeder overload condition by calling upon only the distributed

of substations and feeders while deferring future capital investments. As part of the project, an automated volt-age control strategy was implemented to ensure voltages were maintained within specified ranges.

Another important project was the high tension monitoring data acquisi-tion system, a remote communication system deployed to collect real-time load flow and power-quality data at ap-proximately 150 ex-isting high-voltage customer locations. For the most part, these high-voltage services supply large commercial customers with critical load, such as the New York City subway facilities.

This initiative presented some unique challenges and lessons learned because establishing the communica-tions nodes (which can deliver upstream and downstream high-speed data communications) required suppliers to provide customized solutions. Neverthe-less, the system enables Con Edison to better understand customer load cycles and operational needs. And by using data analytics, the company is able to make decisions on optimal system

configuration, while maintaining reliable service to customers.

Enhanced Monitoring and Control Con Edison has been developing smart grid technology that can improve the management of the distribution grid through a combination of enhanced monitoring and control capabilities, as well as intelligent analytical tools. In the company’s Smart Grid Demonstration

Project, which is be-ing partly funded by the Department of Energy, Con Edison has established that it can integrate a number of existing legacy control and data systems along with new smart grid applications in a common, cyber- secure, interoper-

able control platform. This has enabled the company to demonstrate seamless integration and control of renewable en-ergy resources and smart grid technol-ogies, such as electric vehicle charging stations, distributed generation, and building management systems. In fact, Con Edison and its technology partners have proven the successful integration of the underlying technologies through a series of live demonstrations.

Con Edison and its technology partners have

proven the successful integration of the underlying technologies

through a series of live demonstrations.

This smart controller enables wireless monitoring and control of underground switches by the grid operator.

Con Edison


distribution

reduction of carbon emissions. The PSC is examining fundamental

changes in utilities’ provision of service in which DER are a primary tool for planning and operating electric systems. The utilities, operating the DSP, would manage DER and provide a market for customers.

Con Edison has established a team dedicated to laying the foundation for the evolving 21st-century utility. The smart grid projects have provided a plat-form to test and advance new technol-ogies, and to focus them on providing

benefits to customers. The benefits will be realized by manag-ing the system in new ways, providing cutting-edge tools to operators, tap-ping into the diverse set of resources that customers are using and installing, and allowing those

same assets to continue to benefit all customers by enabling more flexibility in management of the grid. Con Edison has only begun to scratch the surface in building the evolving 21st-century grid, but the company is excited about the potential opportunities for a smarter, more efficient, and customer-centric grid.

industry. This new model would create market-based, sustainable products and services that drive an increasingly efficient, clean, reliable, and customer- oriented industry. In this model, utilities will plan and operate the distribution grid, integrate distributed energy resources (DER), and provide a market where consumers can optimize their energy generation, management, and delivery options. Utilities will operate a distributed system platform (DSP), act-ing as the interface between customers and the bulk power system.

In April 2014, the PSC issued an “Order Instituting a Proceed-ing” with a Depart-ment of Public Service staff report and proposal to “consider how our regulatory paradigm and retail and wholesale market designs effectuate policy objectives and our regulation of electric distribution utilities.” The policy objectives are:

enhanced customer knowledge and tools; market animation and leverage of ratepayer contributions;system-wide efficiency;fuel and resource diversity;system reliability and resiliency; and

resources that can effectively reduce the overload, leaving resources that will not reduce the overload unaffected. This improves the reliability of the distribution grid in the most efficient manner and increases customer satisfaction by reducing the number of demand response calls.

In addition to the visualization plat-form, Con Edison is implementing a demand response management system (DRMS) as part of the project to more efficiently manage the enrollment, event notification, settlement, and reporting processes associated with Con Edison’s demand response programs. The DRMS will automate many of these processes— enabling them to be completed more efficiently and at lower cost. In addition, the DRMS has a number of advanced features that can be deployed in the future, such as creating demand response markets, economic dispatch, and ‘open’ automated demand response for demand response reduction. These features will enable the development of more advanced demand response pro-grams in the company’s service territory in the future.

The Evolution of a Smarter Grid The New York State Public Service Commission (PSC) has articulated a vision that proposes a new compre-hensive model for New York’s electric

The PSC is examining fundamental changes in

utilities’ provision of service in which DER are a primary

tool for planning and operating electric systems.

The smart grid projects have provided a platform to test and advance new technologies, and to focus them on providing benefits to customers.

A new multi-way switch design enables the isolation and restoration of key energy delivery circuits during emergency operations.

Con Edison


Save the Date for These Upcoming

Meetings November 16-19, 2014

EEI and AGA Accounting Committee Fall Meetings

San Francisco, CA

December 3-4, 2014Retail Energy Services

Executive Advisory Committee Meeting

Alexandria, VA

March 15-18, 2015Spring National Key Accounts

WorkshopNew Orleans, LA

April 6-9, 2015EEI/AGA Customer Service

Conference & ExpoWashington, DC

April 26-29, 2015Spring Occupational Safety

and Health Committee Conference

Gulf Breeze, FL

For a more detailed list of EEI meetings,

visit www.eei.org/meetings

Publication title: Electric Perspectives. 2. Publication number: 0364-474X. 3. Filing date: October 27, 2014. 4. Issue frequency: bimonthly. 5. Number of issues published annually: six. 6. Annual subscription price: $100. 7. Complete mailing address of known offi ce of publication: 701 Pennsylvania Ave., NW, Washington, DC, 20004-2696; contact, Clare James Johnson; telephone, 202-508-5714. 8. Complete mailing address of general business offi ce of publisher: 701 Pennsylvania Ave., NW, Washington, DC, 20004-2696. 9. Full name and complete mailing address of publisher, editor, and managing editor: Director of Stakeholder Communications, Clare James Johnson, Edison Electric Institute, 701 Pennsylvania Ave., NW, Washington, DC, 20004-2696; Associate Editor, Bruce Cannon, Edison Electric Institute, 701 Pennsylvania Ave, NW, Washington, DC, 20004-2696. 10. Owner: Edison Electric Institute, 701 Pennsylvania Ave., NW, Washington, DC, 20004-2696. 11. Known bondholders, mortgages, and other security holders: none. 12. Tax status: N/A. 13. Publication title: Electric Perspectives. 14. Issue date for circulation data below: September/October 2014. 15. Extent and nature of circulation, average number of copies each issue during preceding 12 months: total number of copies, 9,710; b.(1) paid/requested outside-county mail subscriptions, 7,856; b.(2) paid/requested in-county subscriptions, 0; b.(3) sales through dealers and carriers, street vendors, counter sales, and other non-USPS paid distribution, 0; b.(4) requested copies distributed by other mail classes through the USPS, 0; c. total paid and/or requested circulation, 7,856; d.(1) nonrequested copies by mail, outside-county, 0; d.(2) nonrequested copies, in-county, 0; d.(3) nonrequested copies distributed through the USPS by other classes of mail, 0; d.(4) nonrequested copies distributed outside the mail, 1,617; e. total nonrequested distribution, 1,617; f. total distribution, 9,473; g. copies not distributed, 237; h. total, 9,710; i. percent paid and/or requested circulation, 82.93. Extent and nature of circulation, number of copies of single issue published nearest to fi ling date, 9,825; b.(1) outside county paid/requested mail subscriptions, 7,739; b.(2) in-county paid/requested subscriptions, 0; b.(3) sales through dealers and carriers, street vendors, counter sales, and other non-USPS paid distribution, 0; b.(4) requested copies distributed by other mail classes through the USPS, 0; c. total paid and/or requested circulation, 7,739; d.(1) outside county nonrequested copies, 0; d.(2) in-county nonrequested copies, 0; d.(3) nonrequested copies distributed through USPS by other classes of mail, 0; d.(4) nonrequested copies distributed outside the mail, 1,800; e. total nonrequested distribution, 1,800; f. total distribution, 9,539; g. copies not distributed, 286; h. total, 9,825; i. percent paid and/or requested circulation, 81.13. Publication of statement of ownership will be printed in the November/December issue of this publication.

STATEMENT OF OWNERSHIP, MANAGEMENT, AND CIRCULATION (PS FORM 3526-R)

DON’T MISS OUT!

ENERGY TALK reaches key industry leaders and

decision makers in the energy fi eld.

Get the news you need on critical policy issues and electric power trends

electronically from EEI.

To have Energy Talk delivered to your inbox, email [email protected].


INNOVATIVE UTILITY PROJECTS

REVO LUTI O NI ZE THE FUTURE O F ELECTRICITY.plugging innovation

Michigan’s Largest Solar Array Underway

DTE Energy is teaming up with Ford Motor Company to build Mich-igan’s largest solar array. The innovative project, funded by

DTE Energy, will provide employees at Ford World Head-quarters in Dearborn with 360 covered parking spaces and 30 charging stations for plug-in electric vehicles (PEVs).

The solar canopy will have the capacity to generate 1.038 megawatts (MW) of electricity and will offset an estimated 794 metric tons of carbon dioxide emissions annually. It will be the second-largest solar carport in the Midwest, after a 1.1-MW facility at the Cin-cinnati Zoo in Ohio.

The installation is part of an initiative DTE En-erg y launched in 2009 c a l led Sola r Cu r rent s, which aims to help fulfill DTE Energ y’s commit-ment to generate 10 per-cent of its energy from renewable sources by 2015.

“The SolarCurrents canopy project is another exam-ple of how DTE Energy and Ford are working to build a more energy-efficient and sustainable future,” said Irene Dimitry, DTE Energy’s vice president of marketing and renewables. “At the same time, this project will help us come closer to meeting Michigan’s renewable energy goals and diversify our energy portfolio.”

DTE Energy will construct, operate, and maintain the carport for 20 years. An on-site kiosk will be stocked with information about solar power and details about the installation. Construction is scheduled to be completed in early 2015.

“We are thrilled to be collaborating with DTE Energy to bring a more efficient, renewable energy source to our offices,” said Donna Inch, chairman and CEO, Ford Motor Land Development Corporation.

This is not the first time the two companies have collaborated on an innovative, sustainable project. In 2010, DTE Energy and Ford worked together to install a 500-kilowatt solar photovoltaic system at Ford’s Mich-igan Assembly Plant in Wayne, MI, allowing the plant to power vehicle production on a blend of renewable and conventional energy. The system also is projected to reduce the plant’s energy costs by $160,000 per year.

Additional Renewable Energy InvestmentsBy 2015, DTE Energy will have installed nearly 1,000 MW of renewable electric generating capacity—enough to power 400,000 homes or a city three times the size of Ann Arbor, MI. The company is directly investing approxi-mately $1 billion in renewable energy, most of which is being invested in wind projects. An additional $1 billion is being invested in third-party-owned Michigan-based renewable energy facilities. These investments contrib-ute significantly to the Pure Michigan Business Con-nect Initiative—an $8-billion public-private program

designed to prepare and develop Michigan sup-pliers to provide services to companies across the state.

A key contributor to this initiative is DTE Energy’s expansive wind-energ y program. The company dedicated the 112-MW Echo Wind Park in Sep-tember, wh ich is t he fourth to be owned and

operated by the company. DTE also owns and oper-ates the 110-MW Thumb Wind Park, nearly half of the 213-MW Gratiot County Wind Project, and the 75-MW Brookfield Wind Park.

In addition, DTE Energy will purchase the energy from the 20-MW Big Turtle Wind Farm, which will cover 2,800 acres in Rubicon Township in Huron County. The Big Turtle Wind Farm, expected to be operational late this year, will comprise a minimum of 50-percent Mich-igan content and feature new technology advanced by Michigan suppliers.

Ford Motor C

ompany

DTE Energy’s solar array will be located at Ford World Headquarters.

In 2009, DTE Energy launched SolarCurrents, which aims to help fulfill DTE Energy’s commitment to generate 10 percent of its energy from renewable sources by 2015.

Our customers deserve the best we can give them. That’s why Southern Company actively searches for companies

like yours that deliver quality, reliable, competitively priced products and services. For more than 35 years, Southern Company has

worked diligently to develop small and diverse suppliers through contracting opportunities, mentoring and educational sponsor-

ships. To learn more, visit us at southerncompany.com/suppliers today.

©2014 Southern Company

STRONG PARTNERSHIPS DELIVERCUSTOMER VALUE

ALABAMA POWER I GEORGIA POWER I GULF POWER I M ISS ISS IPP I POWER I SOUTHERN NUCLEAR

Monique HenleyAll Clean JanitorialServices LLC

Shannon RileyOne Stop Environmental LLC

Juan ParamoParamo Mechanical LLC

Warren MorganWM Ventures, Inc

Deborah HendersonCertifi ed Constructors Services, Inc

WHERE INNOVATI O N AND

EFFIC IENT TECHNO LO GI ES

MEET.


WHERE INNOVATI O N

AND EFFIC IENT

TEC HNOLOGIES MEET.the edge

The Benefi ts of Utility-Provided Distributed Energy Resources By Lisa V. Wood, executive director of the Institute for Electric Innovation and vice president of The Edison Foundation.

Today’s evolving power grid must meet three criti-cal needs: integrating new energy resources; pro-viding customer solutions; and optimizing the grid platform itself. (See Figure 1.)

Public policies are driving the grid toward a mix of central station power sources and distributed energy resources (DER). As a result, electric utilities nationwide continue to broaden the types of DER that they provide to their customers. Today, such services include energy effi -ciency (EE), demand response (DR), microgrids, rooftop solar, community solar, and energy storage.

It is well-known that electric utilities have provided EE services to their customers for more than a decade. Today, 32 states have some type of lost revenue recovery or decoupling mechanism that removes the disincentive for electric utilities to invest in EE. A decade ago, fewer than fi ve states had this regulatory mechanism in place. As a result, electric utility EE budgets totaled almost $7 billion in 2013—up from just $3 billion in 2007.

In the past fi ve years, the number of electric utilities offering DR and smart pricing programs in addition to the more traditional direct load control programs has increased signifi cantly. For example, more than 100,000 residential customers have enrolled in Oklahoma Gas and Electric’s voluntary SmartHours variable pricing program. Pepco has two DR programs with residen-tial customers—the EnergyWise Rewards direct load control program (with approximately 250 megawatts of capacity) and its newer price-responsive Peak Energy Savings program to manage demand via price signals.

The Institute for Electric Innovation focuses on advancing the adoption and application of new technologies that will strengthen and transform the power grid. The Institute’s

members are investor-owned electric utilities that represent about 70 percent of the U.S. electric power industry and are committed to an affordable, reliable, secure, and

clean energy future.

Consolidated Edison’s coolNYC program uses a plug-level meter with load-control capabilities (the modlet) to control some of the more than 6 million room air condi-tioners in New York City. There are many other examples across the country.

Supply-Side Distributed ResourcesDemand-side distributed resources—both EE and DR—are an increasingly valuable asset to the modern grid. However, supply-side distributed resources are equally important. In the past few years, utilities have started to provide supply-side DER to their customers.

For example, Arizona’s Tucson Electric Power pro-vides all of its residential customers with the option to purchase solar energy through its Bright Tucson Community Solar Program and, in New Jersey, PSE&G provides solar to its residential customers through its Solar 4 All™ Program. Duke Energy’s NC Solar Photovol-taic (PV) Distributed Generation Program offers rooftop solar PV to commercial customers and schools where Duke Energy installs, owns, and maintains the solar resource. Dominion’s Solar Partnership Program is in the process of installing up to 30 megawatts of distributed rooftop solar PV by partnering with business customers and public/community buildings. These are just some of the options that utilities are providing to customers.

While we don’t know how the future will unfold, we do expect DER to play a key role in the future power grid. The benefi ts of having utilities provide DER—both demand- and supply-side resources—range from affordability and availability for all customers, to facilitating and priori-tizing long-term asset planning, meeting environmental goals, and increasing the reliability and stability of the nation’s evolving power grid.

In today’s busy world, customers are looking for com-prehensive solutions to address their energy needs, and they expect an integrated offering of electricity and DER from their electricity provider or utility.

Using both supply- and demand-side DER effectively allows electric utilities to provide the most appropriate services to customers at the most affordable cost. As dis-tributed resources continue to grow nationwide, having electric utilities provide this important resource makes business sense and delivers broad-based benefi ts to all customers.

F I G U R E 1

EVOLVING POWER GRID HAS MULTIPLE ROLES

Source: Institute for Electric Innovation

Regulatory Environment

EVOLVING GRID PLATFORM

GridOptimization

New EnergyResources

CustomerSolutions

Hedge program evaluation often relies on simplistic back-casting and over-emphasizes how different hedge strategies would have performed through the most recent “event” or market environment. This inadequate screening process promotes counter-productive program revisions and can lead to the next big exposure, whether it is a double-digit rate hike or an implicit excessive price or cost insurance.

A better approach to hedge strategy evaluation starts with simulating performance through all market conditions, not just the most recent cycle. Only by stressing decision processes through a variety of acute markets can an

www.paceglobal.com

understanding of the potential range of hedge outcomes be thoroughly understood and a responsive program can be properly designed. A program’s performance through extreme up, down, and flat markets is the true test of your risk management strategy.

Pace Global combines a structured assessment process with powerful hedge simulation tools and flexible hedge program objective functions to help you select risk management structures that best meet your program objectives.

To learn more, contact Bo Poats at (703) 818-9100.

Worried about your hedge program? You’re not alone…inadequate program design and execution can lead to large exposures. Pace Global’s structured process and robust tools can help put your program on track.

Visit us at booth 4225 or www.quantaservices.com

��

UTILTMAP CORPORATION

ONE PROVIDERMANY SOLUTIONS

Documents

A Different Way of Doing Business - EEI - Home...NOVEMBER/DECEMBER 2014 SOUTHERN COMPANY’S TOM FANNING: A Different Way of Doing Business 30 43 SPECIAL SECTION: CYBER AND PHYSICAL