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Obama Pledges $250 Million to Upgrade Aging U.S. Electric Grid

The Obama administration outlined a plan to upgrade the U.S. electric grid, providing as much as $250 million in loans for rural towns and urging steps that would bar utilities from using market power to raise prices.

The strategy encourages state and federal regulators to favor “smart-grid” technologies such as advanced meters that can increase energy efficiency. It advises protections for consumers against anti-competitive actions as companies develop services to take advantage of new technologies.

State and U.S. antitrust agencies should “address the possibility that some firms with substantial market power are in a position to impede the market entry of new products and energy management applications,” according to the plan released today.

The administration is seeking to coordinate public and private efforts in replacing aging infrastructure as federal and state agencies adopt measures to encourage development of renewable energy such as wind and solar power. President Barack Obama wants to put 1 million electric vehicles on the road by 2015 and double clean-energy use in the U.S. by 2035. Congress is considering measures to protect the grid from cyber attacks.

The U.S. government invested $4.5 billion in grid upgrades in the 2009 stimulus bill, matched by $5.5 billion in private investment. The stimulus helped to install 5 million smart meters, Energy Secretary Steven Chu said today at a White House event announcing the grid plan.

“We do need a modernized electrical grid for this 21st century economy,” Chu said.

Industry Investment

Investor-owned utilities are planning at least $61 billion in high-voltage power-line projects through 2021, according to the Edison Electric Institute, a Washington-based industry group.

Smart-grid policies have been adopted in 25 states, creating a patchwork of different approaches, according to the White House plan. “While there is no one-size-fits-all set of smart-grid solutions, there are important unifying policy strategies that can advance U.S. leadership in the 21st century clean-energy economy,” according to “A Policy Framework for the 21st Century Grid” issued by the administration.

The White House plan has four goals: spurring innovation, speeding investment to help cut utility bills, giving consumers greater control over their energy use and taking steps to secure the grid against cyber attacks. It also allocates $250 million in loans through the Agriculture Department to promote grid upgrades in rural communities.

10 States

Utilities in Indiana, Kansas, Kentucky, Montana, North Carolina, North Dakota, Tennessee, Virginia, Washington and West Virginia are scheduled to receive the loans, according to the Agriculture Department.

“It’s important that we not hurtle down this path without a plan and clear priorities,” John P. Holdren, director of the White House Office of Science and Technology Policy, said at briefing in the Old Executive Office Building in Washington.

Regulators “should strive to reduce the generation costs associated with providing power” during periods of extreme temperatures, when electricity costs are highest, according to the White House plan.

The Federal Energy Regulatory Commission in March adopted a rule to promote smart-grid technologies and energy efficiency. The rules may aid companies such as EnerNoc Inc. (ENOC) of Boston and Comverge Inc. (COMV) of Norcross, Georgia, which sell utilities and consumers with software and hardware to improve energy efficiency. Power providers including PPL Corp. (PPL) of Allentown, Pennsylvania, and Constellation Energy Group Inc. (CEG) of Baltimore opposed the rule, saying the agency didn’t have jurisdiction to set rates for energy efficiency.

Utility Mergers

Constellation and Exelon Corp. (EXC) of Chicago are seeking merger approval from FERC, which must determine whether the acquisition is the public interest. Duke Energy Corp. (DUK) of Charlotte, North Carolina, and Progress Energy Corp. of Raleigh also need agency approval for their merger, which would create the biggest U.S. utility.

The Obama administration said in its plan that it would “make sure grid operators have access to actionable threat information to the electric grid” in order to prevent cyber attacks.

Joseph McClelland, director of FERC’s Office of Electric Reliability, told a House committee last month that the agency lacks comprehensive legal authority to quickly respond to cyber attacks on the grid.

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To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net

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