Monday, April 5, 2010

Post # 8 - The Smart Meter Wars: Consumer Concerns in California As Harbingers of the Future?

As I’ve said before, smart meters are the average consumers’ principal (and most visible) link to the Smart Grid. Creation of a fully operable Smart Grid may well hinge on consumer acceptance of smart meters in their homes. Consumer acceptance, in turn, has at least three elements: (1) information ownership/privacy; (2) consumer confidence that smart meters accurately reflect actual electric usage; and (3) consumer willingness to pay for smart meter installation.

I already have a number of posts up on data ownership/privacy (see Post ## 4 and 5). As for the related “pocketbook” issues of smart meter accuracy and the cost of installation, California is proving to be a major battleground. On the one hand, smart meter installation is probably more advanced in Californiathan in any other state. As of today, the California Public Utilities Commission (CPUC) has authorized the installation of approximately 5.3 million smart meters by Southern California Edison (SoCalEd), approximately 1.4 million electric smart meters and 900,000 natural gas smart meters by San Diego Gas and Electric Company (SDG&E), and approximately 5 million electric smart meters and 4.2 million natural gas smart meters by Pacific Gas and Electric (PG&E), see here.

But this has not come without controversy, particularly with respect to PG&E. To date, the CPUC has received complaints of over-billing – based on allegedly inaccurate smart meter data – from 600 PG&E customers (compared to 10 such complaints from SoCalEd customers and 15 from SDG&E customers), see here.

In response to those consumer complaints (and pressure from California legislators), the CPUC has hired the Structure Group, a utility-consulting firm based in Texas, to conduct an independent evaluation of PG&E’s meters. The contract to Structure is worth about $1.4 million, and will be funded by the CPUC.

At the same time, the cost of smart meter installation, and the question of who pays, may be coming to a head in response to plans of Southern California Gas Company (SoCalGas) to fund a $1 billion smart meter program for its customers. Last month the CPUC’s Division of Ratepayer Advocates (DRA), an independent consumer advocacy division within the agency, has urged the CPUC to reject SoCalGas' application. DRA asserts that the proposed program is not in the best interest of SoCalGas customers, who will allegedly receive only about 85 cents in benefits for every dollar spent on the project. DRA also asserts that the program would raise rates for SoCalGas customers over the next six years. Previously, in February, CPUC Administrative Law Judge Jessica Hecht, who conducted hearings on the company’s application, issued a “proposed decision” recommending that the SoCalGas proposal be rejected. Judge Hecht asserted that the proposal would result in costs exceeding benefits by more than $145 million. SoCalGas disputes the judge's findings, saying that the new project would be slightly in the black at the end of the technology's 30-year life span. Further, in a competing “alternate proposed decision, CPUC Commissioner Dian Grueneich recommended CPUC approval of the project with relatively minor changes (see here and here).

I believe that, in the long run, smart meter installation will roll on in California and many other jurisdictions. But I also think that the smart meter battles in California (and similar battles currently going on in Texas (see Post # 6 and here) are harbingers of rough going for the foreseeable future on the road to Smart Grid “nirvana.” Again, the retail consumer will be the key player, because the consumer is being asked to both foot the bill for smart meter installation and pay bills based on the data that smart meters generate. Retail customers are voters, and smart meter installation will require that the voters believe the benefits will outweigh the costs.

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