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Metering Relationships in the Era of Deregulation

Fortnightly Magazine - March 1 1995

to remit to the IPP (the wheeler would add a markup for wheeling charges). Under a third option, the end-use customer receives two bills: one bill from the wheeler for net wheeling charges, and a second bill for energy charges from the IPP.

Either way, nonpayment leads to IPP service termination, but through the tariff process laid down by the wheeler (remember, it's the utility's meter). In reality, it is the IPP, as customer of record, who fails to pay the wheeler, who in turn terminates service. Wheeling charges borne by the IPP for the end-use customer would continue until account closure or shutoff. Reconnection to the wheeler, at tariffed prices (or with another IPP at market prices), would depend upon payment of unpaid wheeling charges, not energy charges. Even though obligated to pay wheeling charges, a clever IPP would refrain from paying them as leverage to impede service reconnection with the local wheeler and gain prompt payment of all energy charges. Risks are actually shared by the IPP and the wheeling utility.

Scenario #3:

IPP Takes Over

In this scenario, the IPP breaks out of local meter control by substituting its own multidata meter, which would communicate information to the IPP as well as the wheeler for the customer, now known as an IPP metered customer or IMC. These smart meters, some of which are in trial runs, would communicate by cellular, remote, cable, fiber optics, or telephone lines. Obviously uneconomic at this time for mass residential use, absent big capital expenditure, these remote reading methods offer unlimited potential for medium- and large-sized customers, who would share some costs and whose energy volume would justify the cost. Electronic shared billing permits the local wheeler to track delivery charges.

The IPP would assume complete risk for the IMC's nonpayment and remain liable for wheeling charges until account closure or shutoff, again using nonpayment of wheeling charges as leverage for payment for energy. Assuming all credit risks with an IMC, the IPP would establish the account and credit terms, bill for all charges, and shut off for nonpayment either remotely (depending upon the technology) or manually, probably through a local contractor or the wheeler itself.

But the IMC (the consumer), faced with an IPP-initiated shut-off, may reconnect to the local wheeler, through the same or new meter, but subject to new credit terms. Assuming that the IPP would have paid all wheeling charges (and likewise absorbed the loss), the local utility would not condition reconnection upon payment of IPP wheeling or energy charges. However, the fact of nonpayment to the last IPP might convince the local wheeler to demand and receive a healthy deposit. Assuming that the IPP has not paid the wheeling charges (perhaps as a ploy to keep the customer?), the IMC, as a condition of service, might be compelled to pay the wheeling charges again. Failure to pay outstanding wheeling charges might prevent the customer from acquiring energy from any IPP, as the wheeler has no obligation to provide wheeling service, absent payment of those charges.

Competitive forces could motivate