FERC’s new rule on compensation for demand resources tips the market balance toward negawatts. Arguably the commission’s economic analysis is flawed, and the rule represents a covert policy...
2008 Regulators Forum: Putting Efficiency First
New rate structures prioritize conservation, but will customers buy it?
deployment plan that’s been approved by the commission are reasonable and necessary. Also our rules say very clearly that deployment of an AMI program is voluntary. If you want to recover a surcharge for the deployment of this large capital expenditure, then you need to deploy meters that meet the specifications and requirements that the commission has established, and the best way to do that is to file a deployment case. We’ve got two filed right now. We’ll make a determination as to whether what you’re planning and the costs to be incurred are reasonable and necessary.
I see meters as another piece of hardware that the wires and poles company owns and has to take care of. Since they’re fully regulated in our state, they’re entitled to a reasonable return on those. What we hope is companies in the deregulated retail sector—and we have very good indication it will happen soon—will come up with products they will offer to their customers or prospective customers that take advantage of the functionality of these meters. So we’re going to see what kind of creativity our retail electricity market has. We know that Reliant Energy, for example, is so eager to roll out a product using advanced meters that they’ve proposed they’ll pay for some of the meters up front, because they think many of their customers will want them.
I’m comforted by many of the pilot projects we’ve seen around the country, such as the one in the Pacific Northwest, which concluded that customers who are provisioned with these meters save between 10 and 15 percent on their monthly bills. That makes the meter cost-effective, at least given the price points we’ve seen. In our market it also facilitates some things we think are important, like quick move-in and move-out. If you have an advanced meter you can do that very quickly. We’re also able to facilitate retail switching. Today, if I want to switch from company A to company B, it might take three or four weeks to get done, unless I request an out-of-cycle meter read, which costs me an additional amount. With an advanced meter, ERCOT can do that through the TDU, literally the same day you put in the request to switch.
The last thing—which I know is important in my state because we have a couple of non-attainment areas—I think we’re going to be amazed with the reduction in overall energy consumption, particularly during the peak hours and during the summer. If you’ve got a metro area that’s dealing with non-attainment issues, that can be of tremendous benefit.
Morgan (D.C.): The first thing regulators need to do is thoroughly examine the business case for smart metering, beyond things like outage detection and remote turn-on and -off. You start totaling up all the potential benefits and costs of advanced metering, and that may require looking not only at the easily quantifiable things but also the more intangible benefits like customer choices and options and so on, and then make a public policy decision based on that package.