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Smart Coaching

Customers won’t join the team unless utilities make it worthwhile.

Fortnightly Magazine - November 2011

I’ve noticed a distinct change in focus when it comes to the smart grid. Over the past year or so, some utilities and technology vendors seem to have de-emphasized smart meters and customer-centric apps like demand response or bill management. Instead they’re looking further upstream. At industry trade shows today, the hot trend seems to be distribution management systems (DMS)—which promise benefits for utility operations without relying on rate plans or changes in customer behavior.

In this month’s Technology Corridor article, Fortnightly Contributor Alyssa Danigelis explores the promise of DMS (“Killer App ”). In her conversations with utilities, vendors and analysts, she learned that while advanced DMS technology holds great potential for improving system efficiency and reliability, it’s really still in its infancy in terms of large-scale applications.

By contrast, advanced metering infrastructure (AMI) has gone through a long maturation process, with various iterations leading from early automated meter-reading systems—with drive-by, radio frequency data collectors—to today’s powerful mesh-network and cellular AMI systems. Several utilities have implemented system-wide rollouts of smart meters, complete with dynamic pricing and demand response plans. And so far, the industry’s experience with AMI has been overwhelmingly positive, despite a few well-publicized setbacks—which were discussed in this column more than a year ago (“Summer of Discontent ,” August 2010) . In that editorial I quoted Xcel Energy CEO Dick Kelley, who said of the company’s Smart Grid City project in Boulder, Colo., “There’s huge value on the utility side of the meter, but it hasn’t been that successful on the customer side. I guess some people thought Boulder residents were super-environmentalists, but in fact they just want their TV to work and their beer to be cold when they get home.”

As this issue was going to press, Boulder residents were expected to vote on a ballot measure on November 1 to decide whether the city will municipalize its utility services. If voters approve the measure, Boulder would end Xcel’s franchise, acquire the company’s assets in the city, and strike off on its own. Many issues are at stake, including cost overruns that pushed the Smart Grid City’s price tag from an anticipated $15.2 million to nearly $45 million—three times what Xcel expected it would be, and beyond its perceived value for customers. In a filing at the state PUC regarding whether Xcel should recoup its costs, the city of Boulder stated, “There is not a clear consensus among the members of the Boulder City Council with regard to the value of Smart Grid City in its present state or the prudence of this investment.”

Regardless of whether Boulder decides to stay with Xcel, the episode illustrates a fundamental challenge. Getting the most out of AMI investments might force utilities to rethink the corporate culture—to really engage customers in ways that get them to care about more than just whether the beer is cold. Are we ready to do that? Or