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Regulators Must Get Proactive - and Stay Paranoid

The world utility regulators have operated in for 100 years is fast disappearing.

EDITOR’S NOTE: This is third of a series of commentaries by Philip Jones, former Washington state regulator and influential past-president of the National Association of Regulatory Utility Commissioners. Last week: Lessons of a Regulator.

So what are the major challenges that I see ahead of us and where should we focus?

First, we must be more proactive and get prepared for a whole variety of issues on the energy front.  It is no longer a best practice for a commission to “call balls and strikes” (an old adage, but I still hear this frequently from commissioners today), meaning fulfilling one’s quasi-judicial role. 

Yes, that is still the foundational role in both statute and precedent, but regulators' quasi-legislative role and  ole in helping to scope and define the new challenges, technologies, and environmental risks is vital today.

Second, it is time to review the regulatory compact as was defined in the 1920’s by Sam Insull, utility leaders, and federal state governmental leaders at the time.  It has served its purpose, and helped to facilitate the building out and maintenance of one of the miracle of modern engineering and industry.  But we cannot rest on our laurels.

Philip Jones

Commissions should reflect on their own statutes, political culture and progressivity of their utilities, and proceed with some workshops or proceedings to scope out this issue.  The REV in New York (which may have attempted too much in a short period of time), the Hawaii proceedings (as Commissioner Akiba always says, the “postcard from the future”), of the various California proceedings on storage targets, the Distributed Resource Plans mandated by AB 327 (employing sophisticated DERMS management systems)– all get a great deal of publicity and they are helping to lead the way and define the issues. 

But these will certainly not work in all states.  Yet, believe me, the paradigm busters are coming (if not already arrived) whether they be a variety of new technologies in EE, DER, storage, demand response, as well as the pressure for GHG reductions and more variable generation integration to the grid. 

And Big Data analytics will continue to provide opportunities to disaggregate broad end-user classes and provide more services to consumers.  So don’t sit back and wait too long passively for petitions to arrive at your doorstep; instead, prudently plan ahead.

Third, don’t allow your utilities, or your commission staff, to operate in traditional silos too much.  These silos can either be functional (accounting, economics, engineering, law, consumer affairs), or by utility sector.  In this era, we need much more engagement and analysis across the sectors as we grapple with both the new threats and opportunities.

Finally, as stated above, recognize that cybersecurity and physical security will continue to be vital issues in both the near and longer term future.  Don’t neglect the issue just because it is too difficult to get your arms around it, and your staff or the utilities want you to stay away. 

This is not just a compliance issue with NERC-CIP rules, or a check the box exercise to engage in with your regulated utilities.  As we have just seen in the past several months, it is becoming increasingly easier for even teenagers (not to mention criminal enterprises, or nation states who have the financial and strategic ability to carry out advance persistent threats, or APT) to purchase malware on the dark Web and spread it across the system. 

Utilities have done quite a bit to prepare for these threats, but this is a dynamic environment and the air-gapping one’s IT and OT (SCADA) systems is totally inadequate. 

A commissioner does not want to be in a position where the electric power is interrupted for a sustained period of time, leaving him or her unable to respond immediately to their governor, legislature, and the media. 

So be a bit paranoid and always stay prepared for any emergency – cyber, physical, or a natural disaster.                                                                                                                                                                                           







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