Constructing the smart grid would be the beginning, but it's by no means the end of the story. If the smart grid is built out to maturity someday, in Austin or even nationwide, security experts say it could be vulnerable to cyber-attacks.

Computer spies from China, Russia and other countries are tunneling into the U.S. electricity grid to study America's infrastructure, The Wall Street Journal reported in April. An unnamed intelligence official told the newspaper that hackers have left behind software tools that could be turned on during a war in order to damage critical infrastructure systems.

Many utilities are upgrading security infrastructure on the smart grid by replacing the proprietary protocols on transmission towers and substations that were once only secured with passwords, and replacing them with encrypted, authenticated identities assigned to each smart meter, according to Jim Alfred, director of product management for Certicom, a company that provides encryption solutions for utilities that are installing smart meters.

This overhaul will allow network managers to oversee the millions of additional endpoints -- a thermostat is one example -- that will be created by the smart grid, Alfred said.

Watchdogs and industry experts caution that the smart grid could be even more of a hacker's paradise because its network of sensors, wireless technology and home-based energy meters would allow multiple entry points into the system. CNN.com reported in March that security services firm IOActive determined a malicious hacker "with $500 of equipment and materials and a background in electronics and software engineering" could simultaneously take command of smart grid metering infrastructure of thousands or millions of homes and businesses.

A December 2008 report from the U.S. Department of Energy's Electricity Advisory Committee said utilities are increasingly using digital devices in substations to improve protection and increase reliability and control. "However, these remotely accessible and programmable devices can introduce cyber-security concerns," according to the report. While smart grid technology offers more layers of control, it will require built-in security during the implementation, according to the report.

The North American Electric Reliability Corp. (NERC) has developed Critical Infrastructure Protection standards to address cyber-security issues. But in a letter to its members in April, NERC Chief Security Officer Michael Assante expressed concern that only one-third of them had identified "critical assets" and "cyber-critical assets."

"One of the more significant elements of a cyber-threat, contributing to the uniqueness of cyber-risk, is the crosscutting and horizontal nature of networked technology that provides the means for an intelligent cyber-attacker to impact multiple assets at once, and from a distance," Assante wrote.