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Smart Meters on The March

New federal policies portend a wave of demand-response programs, and perhaps a new era in resource planning.

Fortnightly Magazine - September 2005

Montpelier, Vt. "We are still seeing a debate about whether this equipment is ultimately in the best interests of consumers, and that debate is mostly happening in retail-competition states."

Some jurisdictions are tackling this problem directly. The state of Connecticut, for example, recently passed legislation that mandates time-of-use metering and directs the state Department of Public Utility Control to determine "appropriate recovery mechanisms" to ensure utilities are made whole from losses incurred implementing the requirements. And in Pennsylvania, utilities now can use load-management resources to meet their obligations under the state's version of a renewable portfolio standard. 2

Such ratemaking approaches hold promise for helping investor-owned utilities overcome the angst of investing in systems that reduce their power-sales revenue. Nevertheless, the economics of building a smarter grid depend on many variables—particularly the difference between peak- and baseload-power costs. In the short term, installing smart meters might prove worthwhile in some locations but not in others.

In Ontario, for example, utility planners see rising capacity shortfalls and Kyoto-protocol requirements as sufficient motivation to deploy advanced metering in the province. Analysts expect lawmakers elsewhere to follow Ontario's lead. A recent Gartner Research study concluded, "By 2007, at least five energy markets globally will mandate the rollout of AMI. Convergence of communication, information and energy technologies will result in intelligent meters becoming the cornerstone of the intelligent grid."

The intelligent grid, moreover, might prove to be the enabling technology for a range of major changes in the way utilities manage customer demand—not just through load shifting and network management.

"At the national level, the whole area of metering and its linkage to real-time pricing and time-of-day pricing is central to the efficiency strategies in the energy bill," Zimmer says. Properly deployed, advanced metering could make it easier to value and implement conservation measures and other resource alternatives, which ultimately might revolutionize utility resource-planning processes.

"In most states, right now there isn't a clear responsibility for utilities to do what might be called integrated resource planning, balancing one option against others," Delurey says. "Until we have a more dynamic market, it's difficult to answer the question of how people value demand response and conservation."

Indeed, a recent study by the American Council for an Energy Efficient Economy (ACEEE) found that demand-response research thus far virtually has ignored the potential energy efficiency benefits to be gained through smart metering. "Simply pursuing demand response without incorporating energy efficiency would be unfortunate," stated Dr. Martin Kushler, ACEEE Utility Director. "It's critical that we design programs that both reduce peak demand and improve overall customer energy efficiency." 3

As fuel-price pressures increase, such questions likely will assume a higher profile in state proceedings to investigate advanced-metering programs. To the degree the industry and its regulators can develop workable mechanisms for overcoming the business dilemmas it presents, smart metering could usher in a new era in utility ratemaking, and in resource planning.

 

Endnotes:

  1. Torpey, Jim, Madison Energy Consultants, "Is There a Business Case for Demand Response in the MADRI Area?" July 22, 2005.
  2. Act 213 of 2004, Alternative Energy Portfolio