(August 2011) Economic consultant Michael Rosenzweig challenges Constantine Gonatas’s proposal for ensuring FERC’s demand response rulemaking achieves its objectives. Also, Juliet Shavit...
Bringing Customers On Board
Realizing the benefits of smart meters.
many of these plants go idle for long periods of time, and economies of scale never are achieved until general consumption patterns rise to threshold levels. Customers ultimately pay the price for these investments through rate-case adjustments, and the costs are always there regardless of plant utilization.
On the surface, AMI technology represents a maturation of communications and data technologies for the utility industry. AMI meters take automated meter reading (AMR) to a new level, facilitating two-way communications between utility control center operations and installed end points. While much of this technology has existed for years in supervisory control and data acquisition (SCADA) solutions, AMI represents a coming of age for the utility industry and its participants.
In its most simplistic sense, AMI initiatives have the capability to transform utility operations, utility cost structures, customer services, the cost of services, and decision making through a new flood of data that wasn’t readily available before. However, data alone will not improve the situation for the customer. Smart utilities should be able to improve efficiencies and drive down some system costs by implementing smart-metering systems and infrastructures. Examples include: reductions in labor and overhead expenses associated with manual meter-reading operations, remote connect and disconnect capabilities and missing meter reads and estimation procedures; increases in productivity gains associated with the shortened cash-conversion cycles and accounts receivables; and decreases in unbilled energy costs associated with revenue protection and energy monitoring.
Are these cost savings enough to justify the cost of AMI and meter data management (MDM) systems implementations? Probably not, given the many other competing pressures, regulations, and issues presented so far. This change by itself alters only the utility’s approach. Completing a successful transition to the new paradigm and realizing the hoped-for return on investment (ROI) is where the residential and commercial customer comes in.
Reducing Costs with DSM
As noted previously, customers continue to voice their displeasure with rising costs, unpredictable variances, and overall service. Regulators continue to voice concerns and enact regulations designed to further reduce operating costs through less costly, alternative energy sources and improvements to infrastructures. Because customers have the potential to reduce overall and event-specific consumption, demand-side management (DSM) theory and programs have risen to the forefront of solution discussions. If they can reduce overall demand, utilities may be able to limit or postpone the huge investment in additional generation sources that otherwise would be required to meet peak demand and regulatory requirements.
But DSM tactics rely upon actions to reduce or shift demand. AMI and smart-metering processes can provide the visibility that both customers and utilities require to take action, but the critical response actions must come from the customer. Drawing inferences from other industries such as consumer products, healthcare, and financial services, one can see that combining a rich flow of data with the ability to use it has contributed to the transformation of both cost structures and customer behavior. The utility industry is no different—perhaps just a bit behind other industries in implementing these solutions. Utilities do, however, face some complications and challenges associated with re-engineering customer