Pepco to Exelon Seek Rate Hikes to Deter Power Grid Hacks

Pepco Holdings Inc. and Exelon Corp. are two electric utilities among others who are seeking permission to raise their customer rates in order to recoup the costs of installing measures to protect the smart grid from hackers in order to meet the cybersecurity regulations developed by the Obama administration after the president gave an executive order for regulators to review whether rules are needed for their industries. These resulting regulations from the U.S. Federal Energy Regulatory Commission affect about 1,100 utilities across the country, requiring them to ensure that their generators, power meters, and several other components that will be connected to the internet are all secure. Edward Goetz, a vice president for Exelon, said yesterday in an interview that the incentives for keeping the smart grid secure should include the ability to raise their rates in response. The demand is not only for a rate increase to reimburse the utilities for the investment in protecting their network, but also for future reimbursement as new cyber threats arise that may require further regulations.

The executive order from the president did includes encouragement by offering incentives for compliance. The White House cybersecurity coordinator, Michael Daniel, recently commented that allowing the utilities to increase rates is in fact one of eight incentives being considered. He also noted that the core practices of protecting the smart grid have been known for years, but the barriers to their adoption have traditionally been convincing the utilities of the clear benefits of making the investments in protecting their networks. Another current obstacle is the lack of clear rules determining how reimbursement can be achieved. An FERC commissioner has stated that the FERC does understand the utility concerns, acknowledging that the costs are significant, and that the process would be assisted by federal consistency around what should be compensated. This consistency is something that may not exist with the costs of energy distribution overseen individually by each state while the costs of power transmission are overseen by the FERC.


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