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Opting Out

Providing reasonable options for customers who object to smart meters.

Fortnightly Magazine - January 2012

specifies that the agent must honor the utility’s obligations, including its privacy rules, and in no event is allowed to retain customer data for uses other than those specified in the contract.”

The utility is allowed to share a customer’s data with any other third party only if the customer has specifically authorized it, Ackerman says.

Examples of these utility obligations to protect customer data are available by searching the Internet, as public utility commissions commonly post their rules on their web sites. For example, according to Bill Nugent, a former Maine commissioner and a past president of the National Association of Regulatory Utility Commissioners, utility protection of consumer data is a longstanding requirement in Maine, dating from the 1980s and earlier. Maine Public Utilities Commission rules require utilities to treat customer data as confidential. Nugent points to a Maine regulation (Code of Maine Rules, 65 (Public Utilities Commission)-407 (General) Chapter 815 (Consumer Protection Standards for Electric and Gas Transmission and Distribution Utilities), Section 4 (Customer Privacy)) which states in part:

“A utility shall not disclose, sell or transfer … individual customer information, including, but not limited to … electricity or gas usage … without the consent of a customer.”

This is in striking contrast to very popular loyalty programs of consumer retail businesses, which are largely free to use customer data in any way that suits their purposes. In such loyalty programs—for example, Ace Hardware’s Ace Rewards, CVS’s ExtraCare, and Best Buy’s Reward Zone—retailers collect detailed information on the timing and content of consumers’ purchases, just as utilities will do with smart electric meters. The retailers use these data to analyze and optimize many aspects of their businesses, as utilities also will. All the retailers have privacy policies (readily available on their web sites), and most promise to keep customer data private. While they have compelling commercial reasons to follow their own policies, they’re free to change them at any time without notice and to use consumer data in whatever way is most profitable for them. Unlike utilities, the explicit constraints of rules and laws give commercial retailers ample room to take actions to which some consumers might object. This hasn’t stopped consumers from joining the programs in huge numbers and enjoying the benefits.

In summary, data privacy is a serious issue. Utilities are generally required by rules and laws to protect their consumers. High-resolution meter data might deserve even more rigorous privacy protection. If that’s necessary, existing precedents in utility rules and regulations establish a ready basis for drafting new rules. An active public dialogue will be appropriate to define any such new rules. Once they’re in place, privacy concerns need not be an obstacle to smart metering or smart grid.

Solution Alternatives

Many utilities and regulators have decided that no opt-out service will be offered. For those that do elect to offer such a service, the broad requirements are reasonably clear, but much detail remains unresolved. At a top level, the requirements are shown in Figure 1.

The utility’s requirements are principally driven by the potential to improve electric