Wednesday, December 29, 2010

Post # 55 -- Smart Meter Privacy Remains a Major Concern

IDC Energy Insights, a Massachusetts-based research and consulting firm, has released a new study – Utility CIOs: Living in a Smart Grid World – presenting results from a survey of "North American utility executive IT leaders." While generally focussed on the role of IT specialists in their companies' smart grid initiatives, the study (summarized here) shows that privacy fears remain in the hearts of many utility customers.

Indeed, according to the survey, privacy has emerged as the number one concern related to data security and management, with data governance as an emerging concern. As utilities implement new initiatives such as smart metering, data volumes are expected to increase significantly. While management and integration of this data are themselves priorities, IDC's respondents overwhelmingly reported data privacy as the key element of IT strategic plans for security. In particular, the study found that customers have a great deal of concern about how their data is being used and distributed.

Beyond the issue of privacy, IDC finds that most utilities have an strategic plan for information technology that takes smart grid into account. However, and surprisingly, one third of the utilities surveyed stated that their IT departments are not involved in developing business cases for new initiatives such as renewable generation, energy efficiency, smarter distribution grids, and smart metering. In fact, in the case of 13% of utilities, IT does not become involved until the project is well under way.

On wonder whether this lack of upfront engagement by utilities with their IT professionals -- which in a curious way mirrors many utilities' lack of upfront engagement with their customers on smart grid issues -- is the cause of at least some of the difficulties utilities have encountered when trying to convince their customers (and regulators) of the benefits of smart meters and other smart technologies.

Saturday, December 18, 2010

Post # 54: A California Smart Meter "Opt-Out"?

In one of the latest examples of consumer-driven push back against smart meters in California (see, for example, here and here), California Assembly member Jared Huffman (D-Marin County) last week introduced a legislation (Bill AB 37) that would enable consumer to decline the smart meter installation.

According to Mr. Huffman’s statement on the proposed legislation, Bill AB 37 directs the California Public Utilities Commission to provide an “opt-out” alternative for customers who do not wish to have a smart meter installed – and to require that utilities make this option available using “wired technology that provides equivalent smart grid reliability and efficiency.”

The opt-out “alternative,” however, is not defined in the bill. Rather, AB 37 directs that by January I, 2012, the CPUC must identify alternative options for customers that decline smart meter installation and “ensure that these options are made available to customers.”

The bill also directs that utilities disclose the timing, magnitude, frequency and duration of radio frequency (RF) emissions. Finally, AB 37 directs that the CPUC temporarily suspend smart meter deployment until this opt-out alternative is in place.

In his statement, Mr. Huffman says his bill “is about giving consumers reasonable choices. Whether or not you believe RF exposures from Smartmeters are harmful, it’s only fair that consumers who are concerned about health effects be given complete technical information and the choice of another technology for devices that are installed at their homes.”

The prospects for this bill are not certain – Assembly Member Huffman represents one of localities where resistance to smart meters has been most vocal, and it is unclear how much overall support AB 37 will have in the California legislature.

Moreover, by tying the “opt-out” provision to some undefined “equivalent” alternative, this bill demonstrates the potential conflict between consumer “empowerment” and efforts to achieve energy efficiency. As one commentator has noted, “[t]he bill may offer some sense of control for consumers over how their utility information is gathered, but it could also change the effectiveness of an integrated smart grid if chunks of consumers choose not to participate.”

Of course, and this appears true of most smart meter debates in the United States, consumers generally become part of the serious debate only against the backdrop of ongoing utility smart meter installation. When the history of smart grid development is written, I expect that the record will demonstrate that utilities should have engaged their customers on these issues prior to smart meter roll outs.

Thursday, December 9, 2010

Post # 53 - New Perspective Down Under

I have previously discussed the on-again/off-again smart meter roll outs in Australia, where there has been some strong consumer push-back, particularly in the state of Victoria (see here and here). A new report now indicates that the Australian utility industry is concerned that the opposition to smart meters is standing in the way of smart grid development down under -- and now recognizes that consumer empowerment will be a key factor.

This is borne out by the 2010 Australian Smart Grid Study recently released by the Asia-Pacific division of Logica, the UK-based international IT and management consultancy firm. Logica surveyed thirteen of Australia's major electricity generation, transmission and distribution companies, each of whom provided one or more interviewees. The study provides a view
of industry strategies and the status of individual programs, and is well worth a read by anyone interested in Australian smart grid development.

But I want to focus here on a key report finding: according to the survey, the "Smart Grid will not happen without consumer involvement." The report goes on:
There has been an increased awareness [among the surveyed companies] of the importance of the customer in the development of the Smart Grid. This represents a significant change from last year, when Smart Grid pilots and thinking tended to be more technologically oriented and focused on the grid.
Logica concludes that much of this new attitude is directly attributable to the consumer revolt in Victoria and the negative press it created nationwide. As a result, according to the survey, companies are now trying to involve customers in the process, and distributors in particular "are closely aligning consumers with their Smart Grid planning." Logica concludes that "a significant portion of the Smart Grid benefits will ultimately be driven by consumers."

Of course, the smart grid jury remains out -- in Australia and everywhere else. But the Logica report is one more example that smart grid proponents, and industry groups in particular, are waking up to the key role consumers will play in any successful smart grid implementation.

Sunday, December 5, 2010

Post # 52 - Another Mixed Consumer Report Card for Smart Meters

Last week, the market research and consulting firm Pike Research announced the results of a survey focusing on consumer knowledge and acceptance of utility smart meter initiatives. The results – which Pike says are based on “a nationally representative sample of more than 1,000 U.S. adults” – have both encouraging and discouraging aspects. In particularly, the survey suggests that consumer knowledge of smart meter issues generally increases acceptance.

On the positive side, Pike reports that that among respondents who said they were “extremely familiar” with smart meters, 67% stated that they had an “extremely” or “very” favorable opinion on the devices.

On the negative side, smart meters were the least popular of the four consumer smart grid concepts covered by the survey. Smart meters received a "favorability/interest" rating of only 29% . Other more popular concepts were home energy management (47%), smart appliances (44%), and demand response services (33%).

At the same time, and likely related to the results, 56% of survey respondents described themselves as “not very” or “not at all” familiar with smart meters. Increased consumer access to electricity usage information was identified as an important benefit by 52% of respondents, making this the most frequent benefit cited. Improved reliability of electricity service was second, with 46% of consumers identifying this benefit as important to them. The most popular reason for an unfavorable opinion about smart meters, chosen by 59% of respondents, focused on concerns that the devices would increase electricity bills.

Pike Research's summary of it survey can be found here. These results seem consistent with other consumer surveys discussed in this blog, see here, here and here. Once again, increased consumer education appears the key to smart meter acceptance. And not just education – consumers must see convincing evidence that can realistically expect to benefit financial from smart meters. It's not clear anyone has really made that case in a satisfactory way.

Sunday, November 28, 2010

Post # 51 - Radiation and Smart Meters: One More Battlefield

Update (12/2/10): The California Public Utilities Commission today, by a 4-1 vote, declined to go forward with the requested health inquiry discussed below, determining that the matter was outside the agency's area of technical expertise. The CPUC decided that it instead should defer on this issue to the Federal Communications Commission. (Technically, the CPUC voted to adopt the decision of an agency administrative law judge dismissing the request for an inquiry. The decision adopted by the CPUC can be read here.)

Although we don't usually think of them in such terms, smart meters are radio transmitters, sending radiofrequency microwave radiation (RF) signals from both electric and gas meters. As the public has become more aware of smart meter roll outs, there have been increasing public concerns over whether such RF signals constitute a public health risk. While industry groups such as the Utilities Telecom Council
point to studies indicating no significant health risks, smart meter opponents are not so sure. And concerns over RF emissions are becoming a new battleground in the smart meter wars.

For example, in Maine, opponents of Central Maine Power Company’s smart meter installation have asked the Maine Public Utilities Commission, which approved the $192 million program, to stop it and investigate potential health effects. And similar concerns are being raised in California.

California, of course, long has been ground zero in the smart meter wars, largely due to the consumer revolts that have dogged Pacific Electric & Gas’ smart meter installation. Concerns over radiation entered the mix this year, and the EMF Safety Network, a group concerned about electromagnetic radiation, filed a request with the California Public Utilities Commission asking for a health study of PG&E’s smart meters. PG&E, in response, asked one of the CPUC's administrative law judges to dismiss that request, and the judge tentatively agreed.

However, in written comments filed earlier this month, the CPUC’s Division of Rate Payer Advocatesa unit within the CPUC charged with seeking the lowest possible rate for service consistent with reliable and safe service levels – recommended that the CPUC investigate those health questions. In its comments, the DRA argues that the CPUC has a responsibility to ensure that PG&E's wireless meters do not endanger public health. The DRA does not itself take a position on the health issue one way or the other. However, the DRA argues that the fear of potential health effects has already helped undermine public confidence in the new meters and must be addressed: "Unless the public's concerns can be put to rest, there is a very great risk that PG&E's SmartMeter deployment will turn out to be a $2.2 billion mistake that ratepayers can ill afford."

I certainly do not have the expertise to weigh in on the health issue, although it's unclear to me that smart meters present any concerns not already present with our ubiquitous cell phones, iPads, blackberries, wireless notebooks, etc. But there is a broader issue here. Fears over smart meter radiation are just one more example of apparent industry failure to anticipate consumer concerns. A major obstacle to smart grid advancement – indeed, perhaps the most important obstacle – remains the absence of real consumer input at the front end. Consumer concerns would be best addressed, and consumer buy-in better achieved, if issues such as smart meter radiation were fully debated before smart meters roll outs actually begin.

Tuesday, November 23, 2010

Post No. 50 - Xcel's SmartGridCity: Still Not Over

As I suggested in my most recent post, Xcel's victory at the Colorado Public Utilities Commission is my no means final.

While a PUC administrative law judge ruled that Xcel should be allowed to recoup approximately $45 million in installation costs from retail ratepayer -- about three times the company's original estimate -- administrative appeals to the full commission have been filed Colorado's Office of Consumer Counsel and two other parties. I do not yet have the filings, but their appeals are summarized here.

So the saga of what has been a smart grid poster child -- on way or the other -- continues.

Saturday, November 13, 2010

Post # 49 - Xcel's SmartGridCity Wins Another Round

In another step forward for Xcel Energy's SmartGridCity project in Boulder Colorado, an administrative law judge for the Colorado Public Utilities Commission has ruled that Xcel may recoup nearly $45 million in costs from retail ratepayers -- an amount three time's higher than the company's original estimate. Next stop -- an appeal to the full PUC.

Xcel first announced that the company had chosen Boulder as the location to build its experimental smart grid in 2008. At the time, company officials estimated that the cost to the utility would be $15.3 million. However, the costs incurred by Xcel ballooned over time, causing the company to ask the PUC for permission to increase its rates to pay for the project. Last December, the PUC granted conditionally Xcel's request, but told the company that it must retroactively file for a Certificate of Public Convenience and Necessity, which gives the PUC more authority to regulate the project. The PUC ruled that if the certificate was not granted, Xcel would be forced to refund customers any money collected to pay for the smart grid.

Xcel filed its application last March, leading to contentious litigation before the PUC as to whether ratepayer benefits justified ratepayers bearing the costs. Last August, Xcel, the Governor's Energy Office and staffers at Public Utilities Commission proposed an agreement, recommending that the certificate be granted and that Xcel's cost recovery for SmartGridCity be capped at $44.5 million. It was this settlement agreement that the PUC judge has approved.

But the game is not over -- opponents can appeal the judge's decision to the full PUC. In particular, Colorado's Office of Consumer Counsel -- a state agency charged with representing the interests of residential, small business and agricultural consumers before the PUC -- has strongly opposed the settlement and is expected to appeal.

Tuesday, November 9, 2010

Post # 48 - Ontario Smart Meter Status Report

According to the latest smart meter monitoring report of the Ontario Energy Board (OEB), which regulates natural gas and electricity utilities in the province, Ontario is well on the way towards completing its smart meter rollout.

The OEB report states almost 4.3 million smart meters were installed as of August 31, 2010 – which (according to the report) amounts to 92 percent of the June 2011 target for smart meter installation in the province. About one-third of the installed meters (1.55 million) are enrolled with the meter data management repository, an independent central meter data repository that receives and process the hourly consumer consumption data transmitted daily by each of Ontario ‘s 93 local distribution companies. Moreover, almost 949,000 of the installed meters are on time-of-use (TOU) billing, whereby electricity prices will vary based on the electricity is used. Thus, the province’s distributors appear roughly on target to meet the government’s target of having 3.6 million Regulated Price Plan (RPP) customers billed on a TOU basis by June 2011 (under RPP, prices are adjusted by the OEB for past differences between what consumers have paid and the cost to supply them over a 12-month forecast of future electricity costs).

The report notes that forty-one distributors (representing 3.99 million customers) have June 2011 as mandatory dates. However, four of these distributors (representing 317,728 customers) have indicated they expect to make an application to the OEB to change their mandatory date, and Hydro One Networks has applied to the OEB for an exemption from its mandatory date that would exclude approximately 150,000 customers that are currently outside the reach of Hydro One’s smart meter telecommunications infrastructure.

One distributor – Milton Hydro – has completed TOU rollout for all of its eligible RPP customers. Another – Newmarket-Tay Power Distribution – has completed TOU rollout for all of its residential customers and is proceeding with its eligible RPP general service customers. At the same time, however, an additional 27 distributors (representing 497,203 customers) have reported being behind on one or more of the smart meter program milestones (e.g., scheduling, enrollment testing, unit testing, system integration testing). Of these, 19 distributors do not expect the delay to impact their ability to meet their mandatory TOU date, while the other eight have yet to make a determination.

Moreover, nine distributors (representing 424,237 customers), including the four with a June 2011 mandatory date, have indicated that they will be making an application to the OEB to extend their mandatory date. Eleven distributors (representing 266,860 customers) reported "smart meter entity" confirmed enrollment testing dates that are not consistent with their mandatory enrolment testing date, and 17 distributors (representing 362,880 customers) have not scheduled an enrollment testing date.

Sunday, November 7, 2010

Post # 47 - Smart Grids and Meters May Not Accomplish All that Utility Companies Expect

I have previously blogged about studies indicating that the consumer benefits of smart grid and smart meters may be oversold (for example, Post Nos. 27, 40, 41, and 46). Now, a new study from the British-based technology analyst Ovum casts doubt on the ability of smart grid and smart meters to fully live up to their potential from an industry perspective. While Ovum acknowledges that smart meter and smart grid investments are able to address many issues facing utilities companies, smart meters could increase costs. Ovum also found more investment in newer technologies is needed.

According to Ovum's report on its study, the utility industry faces major -- and possibly conflicting -- challenges. For example, utilities must respond to public concern over CO2 emissions. The cost of needed infrastructure investment is high, while rising fuel costs create pressure to reduce costs. At the same time, many utilities are experiencing an increase in payment defaults due to the economic downturn. Further, the workforce at many utilities is aging rapidly.

Ovum concludes that smart grid and meter investments will be very helpful in dealing with these problems. However, to fulfill the full promise of smart energy, utilities will require further new technologies such as analytics, billing and customer relationship management (CRM) systems. Further, customers may struggle to understand the benefit from smart meters and may be confused by the additional complexity smart meters bring. Ovum also finds that there is a very strong risk that this increase in complexity will cause an increase in customer service costs.

The study highlights two major and related smart grid goals: reducing the environmental impact of existing forms of electricity generation by supporting renewable energy and energy storage; and employing smart meters to influence customer behavior through demand-response programs. But the study cautions that these benefits, while significant, should not be overestimated. While they could make an impact, Ovum concludes that there is a possibility they will not deliver what utilities are expecting.

Friday, October 29, 2010

Post # 46 - New British Smart Meter Study Shows Continued Consumer Skepticism

Significant smart meter roll-outs are starting in the United Kingdom as part of the Department of Energy and Climate Change's ambitious plan to install smart meters in over 27 million British homes and over 2 million British businesses by 2020. But, as I have noted before (see Post Nos. 41 and 18), significant questions of consumer acceptance and buy-in remain.

This is highlighted again by a recent report by, a UK-based price comparison and switching website that, since 2000, allows consumers to compare prices for a range of energy, personal finance, insurance and communications services. Last August, commissioned an on-line survey of over 5,000 British energy customers by YouGov, the internet-based market research firm. The findings are contained in a report released early this month

The report, “Brits in the Dark About Move to Smart Metering,” makes interesting reading. Among the findings:

  • Only 40% of British consumers know what a smart meter is. An additional 35% have heard the term but don’t really know what it means.
  • While the British government predicts that smart meters will lead to a net savings of £14 a year on energy bills by 2020 – approximately $22.40 – 42% of consumers say this is lower than expected, while 38% think the savings are too small to be of interest.
  • At the same time, 74% of households say they would used the information provided by smart meters to cut down on energy usage and be more efficient.
  • However, 40% have misgivings about the amount of information suppliers will be able to glean though smart meters – and 16% are concerned about how the information will be used.
  • Finally, and perhaps most importantly, just 15% presently welcome the move to smart meters!

The report asserts that while smart meters can create "a golden opportunity to put consumers in control of their energy usage and to allow them to understand the positive impact energy efficiency could have on their bills," those benefits will accrue "only. . .if consumers are on board." The report concludes that industry needs to "start talking to customers." Clearly explaining the role of smart meters will be "vital in securing consumer co-operation when the time comes for the meters to actually be installed."

In the meantime, consumer buy-in clearly has not yet been achieved in the U.K. And, as we know, not in the U.S., either.

Sunday, October 24, 2010

Post # 45 - A Regulatory Critique From a Smart Grid Proponent

This blog in the past has summarized many critiques by smart grid skeptics. In this post, we will discuss a detailed critique of both regulatory barriers and areas of opportunity for grid modernization by a smart grid proponent.

The Galvin Electricity Initiative is a non-profit organization founded by former Motorola CEO Robert W. Galvin to promote grid quality enhance through innovation on "microgrids" – modern, small-scale versions of the centralized electricity system (generally, low voltage distribution networks with distributed energy sources).

The Galvin organization is a smart grid proponent, believing that the smart grid promises to provide customers better and more timely information in order to influence more efficient behavior. At the same time, the organization is concerned that the country’s current regulatory structure, particularly at the state level, may create obstacles to the development of a fully effective smart grid. In that regard, this past week, the organization issued a new white paper, "Smart Grid Issues in State Law and Regulation," that examines electricity laws and regulations to identify both barriers and areas of opportunity for grid modernization.

The Galvin paper focuses on 11 states – California, Colorado, Connecticut, Florida, Illinois, Pennsylvania, Massachusetts, New Mexico, New York, Ohio and Texas – using the nation’s experience with state retail access initiatives as a lens through which the best regulatory practices can be viewed and, hopefully, pitfalls avoided. Looking back, the study concludes that many retail access states relied too heavily on the theoretical promise of free markets but often neglected to make that promise a reality. The states, according to the paper, need to do far more to educate customers and lower the barriers of entry to competitive suppliers.

More concretely, the paper puts forth the following recommendations for policymakers, regulators and other stakeholders:

  1. Customer price signals should reflect real-time costs at the time of actual energy use. Utility incentives should be neutralized between demand- and supply-side resource options by tying profits to energy services provided, not simply kWh sales.
  2. Smart grid investments before the meter should be recovered as fixed costs. The costs of meters and load-control equipment for customer-specific load control should be recovered on a variable basis, either as a variable cost or as part of an energy charge.
  3. The risks associated with the deployment of smart grid assets should be symmetrically allocated so that those best positioned to manage assets and with the most at stake financially have the greatest potential for gain or loss.
  4. All customer-specific data must belong to the customer for use as he/she determines. Aggregate system data should be considered public information.
  5. Smart meters should be installed on a universal basis in order to capture their optimal benefits.
  6. National standards are critical, and it is particularly important that meters and data systems are capable of bi-directional communication with customers and suppliers and can be transferred between suppliers.
  7. Customers must have a specifically enumerated set of rights, including (but not limited to) the right to: (1) confidentiality of personal information; (2) ownership of information; (3) choice of supplier and/or portfolio of supply options; (4) real-time price information; (5) appliance control; (6) install equipment to improve service quality; (7) net metering; (8) subscribe to aggregation of demand; (9) select meter and post-meter devices; (10) avoid asymmetric allocation of risk and reward; and (11) choose level of service quality.
  8. New smart grid products and programs must be evaluated to identify best and worst practices and cut losses for consumers when something has gone wrong.
  9. Utilities should receive appropriate incentives that link earnings to performance and ultimate value to customers, rather than to sales of kWh. These incentives will also induce utilities to innovate.

Wednesday, October 13, 2010

Post # 44 - DOE Weighs In On Smart Grid Privacy

In Post No. 7, I discussed aspects of the Federal Communication Commission's National Broadband Plan (NBP). Released last Spring at the direction of Congress, the NBP is the FCC's plan to improve broadband internet access in the United State. The NBP includes recommendations specifically addressing Smart Grid applications -- including recommendations directed to the U.S. Department of Energy. Among those recommendations are that (a) DOE evaluate consumer data accessibility policies when evaluating Smart Grid grant applications; (b) DOE report on the states’ progress toward enacting consumer data accessibility, and (c) DOE develop best practices guidance for the states.

Last week, in response to those particular NBP recommendations, DOE released “Data Access and Privacy Issues Related to Smart Grid Technologies.” In preparing this report, DOE surveyed industry, state and federal practices with respect to Smart Grid technologies, focusing on the issue of residential consumer data security and privacy. DOE says that smart meters became a "focal point" of the report due to their "ability to measure, record and transmit granular individual consumption.” But the report also notes that a truly effective smart grid will consist of "hundreds of technologies and thousands of components, most of which do not generate data relevant to consumer privacy."

Among the report’s findings:

  • There is considerable consensus that consumer education and flexibility regarding smart grid technologies, as well as the pace of deployment of such technologies, will be critical to their long-term success.
  • Many smart grid technologies generate granular or detailed consumer-specific energy-usage data (CEUD) that could reveal personal details about the lives of consumers, "such as their daily schedules (including times when they are at or away from home or asleep), whether their homes are equipped with alarm systems, whether they own expensive electronic equipment such as plasma TVs, and whether they use certain types of medical equipment." Because data of this nature is both valuable and sensitive, adequate privacy protections are necessary.
  • Utilities should continue to have access to CEUD and be able to use CEUD for utility-related business purposes.
  • There is “almost universal consensus” that consumers should be able to access their CEUD. Moreover, consumers should be able to decide whether and for what purposes, other than the provision of electrical power, any third-party should be authorized to access their CEUD.
  • Although the report focused on residential consumer data security and privacy, many commentators agree that the energy-usage data of commercial or organizational consumers of utilities should be treated as CEUD and commercial or organizational consumers should be able to protect the privacy of their energy-usage data.
  • The deployment of smart grid technologies should be flexible and take into consideration the special circumstances of rural, low-income, minority and elderly electric utility consumers.
  • States should focus on whether, or how, they should regulate the process through which consumer can authorize third-party access to their CEUD.
  • A central "clearinghouse" for available information about practices and information relating to the regulation of the privacy and data protection aspects of the Smart Grid technologies should be created.

DOE's privacy report was release in conjunction with a second report, “Communications Requirements of Smart Grid Technologies,” also issued in response to the NBP. The second report report examines how the communications needs of utilities and the electrical grid are likely to evolve as smart grid technologies become more widely used. This report recommends that to improve overall coordination, utilities and other smart grid constituents should be represented on key federal industry committees that address communications- and network-related security and reliability issues.

Thursday, October 7, 2010

Post # 43 - Blow to ComEd's Smart Grid Program in Illinois

In another potential check to smart grid development, an Illinois state appellate court last week placed a major economic hurdle in the path of Chicago-based Commonwealth Edison Company's smart meter program. Like similar cases before public utility commissions in other states (e.g., Maryland, Hawaii and Ohio), the issue was who should bear the initial cost of smart meter installation and implementation. In ComEd’s case, the utility actually won at the PUC level but lost (for now, at least) at the court house.

Last fall, ComEd received approval from the Illinois Commerce Commission for a one-year Advanced Metering (AMI) Infrastructure piloti.e., a smart meter pilot program. The pilot involved the installation of over 130,000 smart meters in nine towns in the Chicago metropolitan area between last November and last May. Moreover, the smart meter pilot is part of the ComEd’s broader "Smart Grid Innovation Corridor," one of the broadest collections of smart grid pilots in the country. ComEd's overall smart grid pilot involves new technology and implementation approaches in areas such as residential solar power, ComEd's first intelligent substation, distribution automation and electric vehicle charging stations.

To help pay the freight, ComEd asked the ICC to approve a "system modernization project" charge (or SMP rider) to retail customers that would immediately recoup these smart grid development costs. Under Illinois law, the ICC generally is precluded from engaging in so-called “single-issue rate making” – i.e., riders aimed at addressing particular costs elements in isolation from a utility’s overall costs. However, there is an exception for “exceptional circumstances.”

In this case, ComEd argued, the SMP rider was new and innovative and created a mechanism for funding discretionary projects that are not necessary for retail distribution service as such. Further, ComEd argued that the smart meter infrastructure -- the new meters and the necessary computer software and hardware to process the information collected from the smart meters -- were essential “building blocks” for smart grid development.

The ICC approved the SMP rider to the extent limited to smart meter installation costs. With respect to post-installation costs, the ICC ruled that ComEd could re-file the SMP rider to cover additional smart grid investment. However, Illinois Attorney General Lisa Madigan and the Citizens Utility Board, a nonprofit consumer advocacy group, sought judicial review, arguing that the ICC effectively had created precedent for allowing Illinois utilities to add “fees to consumers’ bills to cover costs, such as capital projects and improvements, which are solely in the [utilities’] control.”

On September 30, 2010, the Appellate Court of Illinois (Second District) overruled the ICC. In its opinion, the Court held that:

Rider SMP does not meet the criteria to warrant single-issue ratemaking. The expenses related to [smart meters] and the smart grid technologies. . . are not unexpected, volatile, or fluctuating, as ComEd alone dictates the program's scope and, therefore, its costs. The capital costs associated with [smart meters] and the smart grid technologies are not the result of legislative mandate, but rather are the result of ComEd's decision to innovate to reduce other costs. ComEd can cover the expenses by a fiscal and operational plan that is completely within the utility's control. The [ICC] heard no evidence that the system modernization costs might produce unacceptable financial outcomes if not afforded special treatment.

For ComEd's customers, the ruling means they could be in store for a possible rebate — upwards of $48 million, according to an October 4, 2010 ComEd filing with the SEC. In the meantime, ComEd must reevaluate how best to cover the costs of smart grid development and, according to press reports, the appellate court's decision places the smart meter pilot in jeopardy. ComEd has until November 4, 2010 to appeal the appellate court's decision to the Illinois Supreme Court.

It must be emphasized that the court's reasoning was based entirely on questions of Illinois retail rate making law and did not involve the long term benefits of smart meters or the smart grid. Thus, it could be a mistake to draw any global inferences regarding overall smart grid development. Nonetheless, the court's action highlights a recurring smart grid theme: the product may be great, but who pays?

Sunday, October 3, 2010

Post # 42 - Smart Meters in the Nation's Capital

(UPDATED, 10/23/10) The recently issued final report of a smart meter pilot in Washington, D.C. concludes that residential consumers in the nation’s capital consistently respond to variable electricity prices. But, at the same, a consumer watchdog agency in D.C. worries that a impending smart meter roll out is happening without the necessary consumer education.

The project, PowerCentsDC, ran from about mid-July, 2008 through October 2009, and involved approximate 900 D.C. customers of Potomac Electric and Gas Company – or Pepco – the utility service which delivers electricity to 778,000 homes and businesses in the District of Columbia and its Maryland suburbs. Project participants – who lived in all areas of the city, including low-income neighborhoods – received a smart meter, a smart thermostat (if desired and the residence qualified), and new energy price plans that allow savings for customers who reduce consumption during hours when wholesale electricity prices are high.

In fact, PowerCentsDC was the first pilot in the nation to test smart meters with three different pricing plans. Most participants chose a plan in which customers were charged five times the average price during "critical peak pricing" events, which occurred about 60 hours per year, and offered a slightly reduced rate for the remainder of the year. The second plan was an hourly pricing option that offered peak versus off-peak pricing based on the time of the day electricity was used. The third plan offered rebates to customers who voluntarily curbed their electricity use during peak events. For all three plans, consumers could choose to allow their smart meters to automatically adjust a home's electricity use when notified of a peak event. Consumers were able to find out ahead of time when peak hours might occur via an automated phone message, e-mail, or text, and choose to reduce consumption during those hours. Participants also received a chart illustrating their usage habits with each monthly electricity bill.

The pilot program’s final report, issued early last month, finds that most customers with access to smart meters reduced overall electricity use when presented with their habits and a financial incentive to save. Most would also rather curb usage or face high premiums a few times a year during extreme peak events than worry about keeping track of daily peak and off-peak usage hours. So-called peak reductions in summer were greater than those in winter and most of those peak summer events occurred when daily temperatures rose (according to the report, the fact that summer peak reductions were greater than winter “impl[ies] more discretionary load").

When asked to name the methods they used to reduce consumption during peak events, 60 percent of participants said turning off appliances, while 59 percent said they adjusted the air-conditioning. Only 25 percent said they adjusted their heating system (although it should be noted that 54 percent of the participants had a heating system powered by natural gas).

The results also indicate that people may be more willing to curb electricity use, or face paying an extremely hefty surcharge during peak events a few times a year, rather than curbing electricity on a daily basis during specified peak hours.

Perhaps most important for smart grid proponents, the report found that more than 90 percent of all PowerCentsDC participants ended up saving on their Pepco electricity bills, compared to non-smart meter customers. Further, 93 percent of participants said they preferred using a smart meter and a peak rate system than Pepco's current rate plan.

The PowerCentsDC report thus appears to bode will for Pepco’s D.C.-wide installation of smart meters, which is scheduled to begin this week. But at least on local agency is concerned that things may not be ready for prime-time.

On September 27, 2010, D.C.’s Office of the People's Counsel – an independent agency within the D.C. government charged with advocacy on behalf of consumers of natural gas, electric and telephone services in the Nation’s capital – filed a petition with the D.C. Public Service Commission seeking to suspend the smart meter rollout until the Pepco does more to educate consumers about the program.

The petition is noteworthy because along, with Pepco, the D.C. Peoples Counsel was a sponsor of PowerCentsDC and is not a smart grid opponent. Thus, on the one hand, the D.C. Peoples Counsel supports smart meters to the extent that the technology “empowers consumers to reduce their electric consumption, supports energy efficiency, reduces the District of Columbia's overall electric load capacity, and does not impose a financial burden on seniors, those on fixed incomes and lower income electric utility consumers.”

At the same time, the D.C. Peoples Counsel expresses concern about what it terms Pepco’s “lack of early consumer education about how the smart grid will be deployed, the benefits consumer can expect in the short term as well as any alerting them to potential problems that may occur.” The D.C. Peoples Counsel argues that “the ultimate success of the program is inextricably linked to comprehensive customer education on the front end.”

In a response filed filed with the Public Service Commission on October 1, 2010, Pepco argues that the Peoples Counsel's petition is premature. Noting the success of the PowerCentsDC pilot (and what Pepco describes as successful advance notifications to the project participants), the utility notes that its deployment of new meters commencing on October 4th "is, for now, no more than the exchange of old meters for new ones." The utility asserts that, since none of the "smart" capabilities of the meters will be activated at this time, "it would be imprudent to prematurely promote the advanced features that are not yet available." At the same time, Pepco states that customers are being notified in advance with a letter and fact-sheet. Moreover, "Pepco will interface customers at various community events, train [Peoples Counsel] and Commission staff to respond to Smart Meter questions, and provide educational materials through direct mail, the Pepco website, and various media outlets."

In an October 22, 2010 order, the Public Service Commission denied the Peoples Counsel's petition. The D.C. PSC stated that the D.C. City Counsel already had authorized Pepco's implementation once the company had established sufficient funding -- which it had, from a Depart of Energy stimulus grant. Further, the PSC noted that it already had granted a request by the Peoples Counsel to establish a collaborative Advance Metering Infrastructure (AMI) Consumer Education Task Force to develop a comprehensive educational program to educate D.C. consumers on smart meter implementation. While denying the Peoples Counsel's petition, the PSC directed the AMI Consumer Education Task Force to continue its efforts and to address any problems that may develop among stakeholders.

Tuesday, September 21, 2010

Post # 41 - British Study Suggests That Smart Meters Are No Silver Bullet

Following up on my prior post on the recent smart meter study by the Delft University of Technology in the Netherlands, a new British study likewise suggests that smart meters may not necessarily deliver hoped-for energy consumption reduction.

The study, "Smart Metering: What Potential for Household Engagement," was prepared by Dr. Sarah Darby of the University of Oxford’s Environmental Change Institute. Dr. Darby examined motives and outcomes to date of smart metering programs in California, Italy, Sweden and the Netherlands, among others. She finds that there in fact is little hard evidence about smart meters can actually achieve.Her research shows that smart meters are being rolled out for different reasons in difference regions. In Italy and Sweden, for example, the focus has been on reducing fraud and providing accurate billing. In the Netherlands, Ireland and the UK, and to a lesser extent California, the intention is for smart metering to help users improve their energy efficiency and reduce demand. But in some of these regions, notably the Netherlands and California, efforts have been plagued by customer resistance to the gathering, monitoring and storing of personal data.

Dr. Darby believes that if the roll-out is not handled right, demand reduction will not necessarily flow from an improvement in information. In her judgment, what appears to count more than the smart meter itself is the message energy companies provide about energy use over time and trustworthy, relevant comparisons.

Thursday, September 16, 2010

Post # 40: Dutch Report Suggests Smart Meters Are No Silver Bullet

A recently concluded Dutch study suggests that smart meters and similar home energy monitoring devices may not be the silver bullet that guarantees substantial reductions in home energy use. In particular, the report – entitled “Home Energy Monitors: Impact Over the Medium-Term and prepared by a research team from the Delft University of Technology concludes that initial savings may not be sustainable over the long term.

The study team examined the behaviors of households where “Home Energy Management Systems" – which the report defines as “intermediary devices that can visualize, monitor and/or manage domestic gas and/or electricity consumption” – had been installed on a trial basis. The goal was to see whether the participants sustained changes in electricity consumption over 15 months. In particular, the team wanted to find out if early reductions in energy consumption were continued over a longer period.

Participation in the study – and the required installation of the “HEMS” devices – was voluntary. The team monitored a total of 304 participants over four months, and then gave them the option of retaining the monitor. Those who kept the monitor were surveyed again 11 months later.

The findings showed that there were initial savings in electricity consumption of an average of 7.8% over the first four months, but these savings were not sustained over the medium to long term. At the same time, the study also found that some people were more receptive to energy saving behavior changes than others and quickly developed new habits, giving them continuing substantial savings.

The authors believe that that more research is needed not just into the design and usability of home monitoring devises, but also on social science issues and contextual factors. The basic conclusion: installing energy monitors alone will not necessarily reduce electricity consumption.