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Rising Power Prices: The Metering Industry's Big Break?

San Diego Gas & Electric turns vendor heads with its plan to install real-time meters, but the company could face heat from regulators.
Fortnightly Magazine - October 1 2000

real-time meters for residential and small-volume customers, as SDG&E plans to do in Phase II? ORA project coordinator Linsey conceded that the question wasn't easy.

"The issue for metering," he said, "has always been to balance the metering costs against the benefits. So it probably doesn't make sense to track individual customers' response beyond a general load profile. Certainly given the recent price runup, and since prices are expected to remain high, it's reasonable to say that we should go lower than we did before [require real-time meters for a smaller level of demand], but that doesn't necessarily yield an answer as to how low we should go."

Utility engineer Mark Lively, of Gaithersburg, Md., showed more skepticism. When asked whether real-time energy meters might make a dent in electricity prices for residential customers, Lively answered, "Only if politics don't get in the way, as it does now for SDG&E."

Lively concedes that customers want "to be good citizens when the governor calls for a cut-back on air conditioning." But he stresses that regulators often don't let real price incentives out of the bag.

"Even if my supplier is paying $5,000 per megawatt-hour," notes Lively, "why should I cut back? Under traditional regulation, consumption only costs me $100 per megawatt-hour [under the utility's standard-offer rate], plus a minuscule share of that $5,000 that gets to me through the fuel adjustment clause. And even under real-time pricing, politics may not allow SDG&E to charge me the $5,000 per megawatt-hour rate. Consider the recent decision to defer part of the July fuel clause adjustment because it kicked the price up too high.

"What good is real-time metering," he asks, "if we don't use it to set real-time prices?"

And politics may well dictate the fate of real-time metering in California. On Aug. 30, the state legislature passed a bill that would fix the price of the electricity commodity (the product traded on the California Power Exchange) to 6.5 cents year-round. When interviewed on Sept. 1, Mike Schmidt, a regulatory expert at Sempra Energy, said the measure would create something akin to statewide mandatory "budget billing," with payments for electricity supply levelized over 12 months, "with overcollection in the winter and undercollection in the summer." According to Schmidt, the governor was evaluating the bill over the Labor Day weekend.

Utility Control: Fears of Monopoly

When asked whether SDG&E's metering plan was good for utility competition in California, and whether he would support it, Michael Shames, the executive director of UCAN, the Utility Consumers' Action Network, paused and then offered a revealing reply.

"This is not an easy question to answer," said Shames, from UCAN headquarters in San Diego.

A couple years back, when it deregulated metering and billing, the California PUC stressed that the very design of the metering system both reflects and constrains the design of the industry. It concluded then that the ability to control and design operation of these systems was essential to the ability of competitive energy retailers to reach and conduct business effectively with their customers. In other words, when