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Metering in Real Time: A New Cost Equation for Electric Utilities

Fortnightly Magazine - September 1 1997

Is it now worth the investment to install smart meters, complete with two-way communication?

The meter has always been the "cash register" in the basic operations of the utility business. Now it is also becoming a vital communications link, carrying information between a utility and its customers. The meter can supply information critical to customer retention and value-added marketing, as well as more effective system operations.

In choosing from among the wide range of metering options available today, a utility should find a technology that fits its business model. If the company is not interested in offering energy management services and does not foresee any competition for customers in its service territory, then it may choose to settle for a more basic solution or perhaps just continue with manual meter reading.

On the other hand, if the utility plans to be competitive, seeks additional revenue streams and wants to find ways to reduce customer costs while maintaining margin (thus protecting its customer base), then it will need a more advanced meter that enables these new services.

Metering options vary widely in cost, function and return on investment. This disparity reinforces the conclusion that a utility should choose a metering system in line with its overall business plan.

Metering Options

A traditional meter costs around $25 in volume, plus $6 to $10 annually for a human meter reader. If a utility contemplates an investment in automated meter reading, or AMR, the utility must first ask itself if the increased functions alone justify the potential cost savings. Carried further, what return on investment is needed to invest in a full-blown, two-way communications gateway?

To explore these issues, data on leading metering products from a variety of suppliers was analyzed. Calculations included expenditures for equipment, software, project management and related items.

To conduct the analysis, metering options were grouped into four classes:

1. Meter modifications, or kilowatt-hour meters that have been fitted with some sort of AMR module. These meters usually are capable only of limited AMR.

2. Existing electronic meters, both with and without two-way communication capability. Generally capable of AMR and load profiling.

3. Advanced electronic ("smart") meters, with and without two-way communication capability. Capable of AMR, load profiling and time-of-use control.

4. Full-service gateways, which offer full, two-way communication. Capable of AMR, TOU control, load profiling, load control, outage notification, surge protection, real-time tamper protection, messaging and many other value-added services.

Chart 1 shows a summary of the four classes, including communications protocols and capital cost range for each one based on a 100-unit trial and a 50,000-unit rollout. Chart 2 shows the meters' functions.

Technologies and

Cost Structures

In the analysis, it was assumed that all communications space was leased by the utility. Though the cost of leasing spectrum bandwidth (whether radio frequency, cellular, or broadband) varies slightly according to geographic region and is subject to availability, the numbers were close enough for the purpose of this study.

On the other hand, building and installing these different communications infrastructures will increase communications costs per customer. These costs can vary widely, depending