Guest Editorial: Why Rush to Smart Meters?

By Don Wood Why is there such a big rush by the California Public Utilities Commission and the utilities to buy and install new ?smart? electric meters in every California utility customer?s home? It seems to us that there are a lot of parties who stand to make a lot of money by this effort, but residential ratepayers may not be among them. In fact, many residential customers may see rates increased by billions of dollars but not see any real benefits. Makers of advanced electric meters stand to make $3.6 billion dollars in new sales. They?ve been actively involved in the CPUC?s demand-response proceeding through the California Consumer Empowerment Coalition to promote CPUC approval of the project. The coalition includes Landis+Gyr, Cellnet, Siebel, and Nexus, among others. Utilities are eager to comply with orders from the CPUC to file applications to install smart meters for everyone, in part because (1) they can lay off their existing meter readers over time as they install the new remote-read meters, and (2) they can rate-base the $3.6 billion and collect on it in rates over the life of the new meters, thereby increasing their profitability. CPUC approval will allow utilities to recover up to 11.22 percent interest on the investment at current rates of return. While we generally support installing automated metering infrastructure (AMI) technologies in the facilities of small to medium-size commercial and industrial energy customers (those with peak demand of under 300 kW), we suspect it may present big problems for small businesses such as restaurants that operate during the traditional weekday peak summer hours from noon to 5 p.m. The larger customers can control their energy consumption patterns by realigning their work shifts or turning off high-demand machinery when alerted by the California Independent System Operator. We do not understand the urgent emphasis on installing these meters in residential customers? homes. For one, existing state legislation caps residential electricity rates, so we?re not sure how the new meters would allow the utilities to send customers economic signals by charging increased residential time-of-use-based electric rates. We suspect that the majority of California?s residential energy customers are at work during the weekday summer peak hours of noon to 5 p.m. That makes it pretty doubtful that many of them contribute to the state?s electric peak load anyway, since their homes typically sit empty with the air conditioner off while they are at work. It looks to us that this scheme would mostly affect those residential customers who do not normally go to work, such as retired folks or households that don?t have jobs to go to. Hitting those customers with extremely high default rates for summer afternoon electric use might not make much difference in peak load, since that segment of the residential market already uses less than the average residential customer does. For example, program load impact studies have shown that customers who participate in the utilities? low-income energy-efficiency programs, on average, use about 10 percent less electricity than the average residential customer. That is even before they enroll in the program?mainly because they live in smaller, older homes and can?t afford to pay high gas and electricity bills. Some parties are arguing that every home needs to have time-of-use meters in order to support the governor?s new Million Solar Roofs initiative. We?re not sure why this would be needed to make the governor?s solar roofs project feasible. The CPUC?s current net-metering rules only require the utilities to pay customers for any excess solar power they put back into the system based on average residential electric rates. It might become necessary if the net-metering rules were refined to require that utilities pay solar customers time-of-use prices for any surplus solar power put back into the grid. But for now, we suspect that the proposed solar roofs project could go forward without making the 99 percent-plus residential customers who won?t be getting solar roof systems under the initiative pay for expensive smart meters on everyone?s homes. In any case, we hope the commission takes a hard look at the various parties? justifications for purchasing and installing automated time-of-use meters in residential customers? homes. We need to make sure that residential customers are going to benefit directly from this initiative before they are required to pay a large part of the projected $3.6 billion in rate increases the effort will cause. ?Don Wood is senior policy adviser, Pacific Energy Policy Center. He can be reached at (619) 463-9035 or at dwood8@cox.net.

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Guest Editorial: Why Rush to Smart Meters?

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