  Advances in sensing and communication capabilities as well as power industry
deregulation are driving the need for distributed state estimation in the smart
grid at the level of the regional transmission organizations (RTOs). This leads
to a new competitive privacy problem amongst the RTOs since there is a tension
between sharing data to ensure network reliability (utility/benefit to all
RTOs) and withholding data for profitability and privacy reasons. The resulting
tradeoff between utility, quantified via fidelity of its state estimate at each
RTO, and privacy, quantified via the leakage of the state of one RTO at other
RTOs, is captured precisely using a lossy source coding problem formulation for
a two RTO network. For a two-RTO model, it is shown that the set of all
feasible utility-privacy pairs can be achieved via a single round of
communication when each RTO communicates taking into account the correlation
between the measured data at both RTOs. The lossy source coding problem and
solution developed here is also of independent interest.
