How Smart Is It? Some States Question Benefits of Smart Meters

The term “smart meter” has been used for a couple decades now. Such devices have been promised to boost grid responsiveness and enable customer participation in time-of-use rate plans that can reduce peak demand. However, as utilities continue to propose rollout plans for the half of Americans still lacking smart meters, regulators are calling for more details on what, exactly, ratepayers will gain from these investments.

Over the course of 2018, utility regulators in Kentucky, North Carolina, Massachusetts and New Mexico have rejected utility efforts to install smart meters throughout their respective service territories. These denials have come even as regulators call for utilities to speed up efforts to modernize their distribution grids. The goal of these regulators, in general, is more responsive operations that recover more quickly from outages and are capable of handling greater volumes of distributed energy resources. But, as utilities in some states have come forward with plans that also include broad deployment of smart meters, regulators have been questioning the companies’ cost and benefit assumptions.

A few definitions could be helpful here. As it’s used today, “smart meter” refers to devices capable of two-way communications between utilities and their customers. The combination of these meters and the back-office systems required to handle the resulting communications traffic is called advanced metering infrastructure (AMI). AMI meters represent a step up from the automated meter reading (AMR) meters installed in many areas in the late 1990s and early 2000s. AMR meters only communicate in a single direction, from customer premises to utility billing operations.

Some statistics may provide insight into regulators’ current skepticism. As of December 2017, nearly half of all U.S. electricity customers had smart meters, according to the U.S. Energy Information Administration (EIA). However, many of these customers have no idea the devices have been installed or that they might also have access to time-of-use rate plans as a result. The EIA’s Residential Energy Consumption Survey from 2015, when smart meter adoption was at approximately 44 percent, found only 22 percent of households reported having a smart meter, and only 8 percent reported being aware they had access to hourly or daily usage data.

Massachusetts is one of the most recent states to reject a smart meter rollout plan, which is notable given its leadership in renewable energy and energy efficiency. In 2014, regulators with the state’s Department of Public Utilities (DPU) ordered Eversource Energy and National Grid to develop plans for grid modernization, and the deployment of advanced metering functionality was a central objective of that order.

However, the May DPU decision against AMI proposals from the two companies stated, “the evidence in these cases revealed weaknesses in the business case for advanced metering functionality presented by each company.”

An additional concern for regulators is that ratepayers are still paying for many of the meters currently installed at customer homes and businesses. In the Kentucky decision against proposals from Kentucky Utilities and Louisville Gas & Electric, regulators noted an average remaining service life of 15 years or more for existing meters, which would result in almost $53 million in stranded costs, for which ratepayers would still be liable.

“The stranded asset consideration is definitely a concern among regulators,” said Autumn Proudlove, senior manager of policy research at the North Carolina Clean Energy Technology Center. “I think that AMI is a pretty foundational technology for grid modernization, but utilities really are not making the case well enough to regulators.”

This argument is bolstered by the experience of New York utility Con Edison, which is currently in the middle of a six-year, $1.3 billion AMI deployment that was approved by state regulators in 2016.

According to Ryan Katofsky, vice president of energy analysis for Advanced Energy Economy, a clean-energy trade group, the utility gave the state’s Public Service Commission a level of detail that clearly laid out what customers had to gain with the rollout.

“They included a comprehensive cost and benefit analysis, and the commission did agree that it was in the best interest of the ratepayers,” he said.

So, the key to expanding AMI to the 50 percent of the country not yet served by smart meters appears to rest on utilities’ ability to connect that technology to a broader set of goals.

“I think in a lot of these cases, utilities really haven’t done a good job of laying out all the benefits that could be recognized,” Proudlove said. “These rejections are not the end of the discussion in these states. AMI is not out of the discussion.”

Utilities are already developing new proposals with regulators’ feedback in mind.

About the Author

Chuck Ross

Freelance Writer

Chuck Ross has covered building and energy technologies and electric-utility business issues for a range of industry publications and websites for more than 25 years. Contact him at chuck@chuck-ross.com.

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