State utility regulators begin to question the benefits of smart grid technology, and customers take to the streets in public protests and demonstrations to oppose installation of smart meters....
Special Section On Metering: Thinking Smart
investments. “With the repeal of PUHCA, you will either eat or be eaten,” says Jana Corey, director of PG&E’s AMI initiative. “Running the utility as effectively as we can positions us better strategically in the market.”
Other key factors include rate schedules and regulatory policy changes needed to implement smart metering. “It takes a lot of time for a utility to get to the point where they can get a new time-of-use rate structure approved,” says Bud Vos, a vice president with Comverge in East Hanover, N.J. “Utilities need AMR and demand-response today, but they don’t have tariffs or the business case built yet.”
In some states, ratemaking structures make it harder to build the business case. Many utilities’ rates are based on power sales and the generation and transmission assets that go with them. For these utilities, investing in load-management can be a losing proposition, even if it breaks even or generates a modest positive return, because the investment could be more accretive to earnings if it were spent elsewhere. EPACT’s mandate directs PUCs to evaluate such structural disincentives, and eliminate them where possible.
In many situations, however, AMI is proving to be a solid investment—either because ratemaking authorities act to reduce disincentives, or the business case is strong enough in spite of them.
Florida Power & Light (FPL), for example, has been developing and expanding its smart-metering program in pursuit of greater load control for nearly 20 years. Today FPL’s demand-response systems shave peak load by 1,300 MW, with an additional 2,000 MW available in emergency situations.
The business case for AMI has improved in recent years as a result of advancements in hardware and software technologies, offering a broader range of features that can save costs. PG&E, for example, has seen the economics of AMI improve steadily since it brought its first proposal to the California PUC in 2002. “At that time, the business case was very uneconomical,” Corey says. “We refined our cost estimates and found additional benefits, and over the next 2-1/2 years the economics got better and better.” As a result, the CPUC recently approved $49 million in rate recovery for PG&E to advance its AMI plan, which envisions bringing DCSI smart meters to all 9.3 million of its gas and electric customers over five years.
The decisions utilities make about AMI investments often arise from how they approach the business case. “Some utilities build their business case around load control, and are using AMR to keep track of data,” Vos says. “Others are starting with an AMR business case, and are building toward load management. Either way it leads you toward greater efficiency and control.”
AMI vendors have developed their technologies to be both technically sophisticated and flexible enough to serve different utilities’ strategies, while accommodating growth and development. But while these technological advancements have strengthened the AMI business case, they also have led to a balkanized field of proprietary technologies.
“As an industry, we haven’t been very successful in moving toward standardization,” says Jim Fisher, director of product marketing with Itron in