A no-holds-barred interview with the electric industry’s chief architect of wholesale electric market design.
Snake Oil & Smart Meters
Customers deserve the straight truth about electricity costs.
bodies—rather than trying to warm the air to 72 degrees.
These are excellent arguments, but they’re not exactly what my friend had in mind when he imagined cutting his heating bills in half. And of course these arguments don’t justify a $400 price tag for the heater. Any 1,500 watt, portable radiant heater (like the $20 ceramic unit that sits next to my desk) will do exactly the same thing.
I didn’t want to tell my penny-pinching friend that, in the middle of his daughter’s birthday party. But eventually he’ll figure out he’s been swindled, and his heater salesman will have some explaining to do.
Who Do You Trust?
Like my neighbor, all energy customers are looking for cheap and easy answers. Their first choice will be to continue their current lifestyles, or perhaps improve them, while paying less for energy than they’re paying today. They want someone to give them 200 percent efficiency, even if they know in their gut it’s impossible.
Conversely, energy consumers don’t want to hear prices are going up, or that they have to change their habits. They would rather believe the salesman who offers a quick fix. After all, he’s promising to give them a secret weapon in their daily fight against the big, bad energy companies, most of which seem to be offering nothing but higher energy bills.
In some ways, this situation is the industry’s own fault.
Since electrification in the early 20th century, utilities have encouraged people to take electricity service for granted. Arguably, that’s the goal of the regulatory compact—to make electric service so reliable and affordable that customers never have to think about it. We’ve shielded the customer from the nitty-gritty details of energy service, such as the true costs of flat-rate tariffs in a system designed to serve the critical peak load. As long as the lights stayed on and the bills were affordable, why should anybody care about the details?
Now, in states where smart metering and TOU rates are moving forward, we’re asking customers to think about their utility service—and not for some branding and bundling scheme (“You want home security with that?”) We’re asking people to actually learn about electricity—where it comes from, how much it really costs and how its production and delivery affects the environment. We’re asking customers to learn how their personal choices affect the system, and we’re asking them to take responsibility for those choices.
Many Americans are ready and willing to accept that responsibility; they’re probably expecting it, given what’s happening with fuel prices and environmental concerns. Unfortunately, they’re not sure they can trust the utility industry to offer the best possible deal—and that might be the smart grid’s biggest hurdle.
This distrust comes from experience. Most recently, half-baked attempts at retail restructuring discouraged real competition and hid price increases from consumers until it was too late. Broken promises led to disappointment and anger, as artificial price caps expired and prices spiked painfully.
So when the utility industry starts touting a newfangled solution for saving electricity costs, is it any wonder American