Two Companies,
Two StrategiesThe question is whether to own or lease,
but each route offers its own advantages.
With deregulation nipping at their heels, utilities are looking for ways to gain and maintain
customers. Aggressive utilities are seeking new customers outside of their service territories and offering competitive prices, new products, and new services. Other utilities are refocusing their efforts on marketing and, more important, customer service.
Obviously, generating revenue and saving money stand out. In that spirit, many utilities have cut costs by replacing meter-reading personnel with automated meter-reading (AMR) technologies, which offer other advantages: outage reporting, tamper detection, remote connections and disconnections, demand billing, two-way communications, time-of-use (TOU) rates, and real-time pricing (RTP). The most common form of AMR transmits information by radio frequency, and employs hand-held devices and a drive-by system known as mobile radio frequency (mobile RF). Fixed meter-reading network systems, another option, use mounted radio transmitters, which are said to improve service.
Many utilities are experimenting with the more advanced technologies, but some are only now getting their feet wet.
o o o
South Carolina Electric and Gas Co. (SCE&G) runs a pilot AMR program, having installed 2,500 new meter units to date. SCE&G wants to avoid the expense of reading meters manually, especially the frequently high union labor costs. "We look at AMR as a strategy for dealing with deregulation. It helps to differentiate us from being just another electric commodity. Providing improved service and additional value-added services helps to distinguish [SCE&G] from other competitors," says Jim Kirby, manager of distribution engineering services.
In addition to meter reading, SCE&G offers outage reporting, tamper detection, and load profiling. Soon the utility hopes to offer TOU billing, appliance monitoring, home security, and demand billing. AMR project services are currently provided under SCE&G's basic residential tariff, but additional services such as home security and appliance monitoring will be offered for an additional charge, much like call waiting and 3-way dialing.
Kirby says the pilot has led the company to improve its marketing efforts. It now gives additional training to customer service representatives to prepare them as quality-service consultants. Their job will entail finding out what customers want, need, and expect, so that SCE&G can capitalize on service.
By mid-summer, about 10 months into its pilot project, Union Electric (UE) had installed nearly 50,000 wireless, automated metering units. Another 75,000 were scheduled for early fall, and a total of 800,000 by 1999. UE
contracted for the pilot program with CellNet Data Systems, which employs cellular radio and computer database technology. (See, "Utilities Bullish on Meter-reading Technology, PUBLIC UTILITIES FORTNIGHTLY, Jan. 15, 1995, p. 29.)
"AMR is just the tip of the iceberg," says Ray Wiesehan, superintendent of special projects at Union Electric. "A great deal of potential is there. The technology is such that it lends itself to a whole new arena . ... [Technology] will dramatically change the way utilities offer value-added services. Customers will see a
180-percent different outlook as the network is put into place."
UE already offers enhanced features such as outage notification, tamper detection, TOU billing, RTP, and connect and disconnect services. Data is transmitted as frequently as every five minutes, allowing UE to better respond to customer inquiries. "We've seen tangible demonstrations of the system's reliability and function," says Chuck Brenner, UE vice president of information services. Wiesehan adds: "An advantage of AMR is the very low costs. [We have] cut rates three times since 1990. [Our] rates are 15 percent below the national average. We are steadily increasing customer satisfaction."
SCE&G purchased the meters and data concentrators for its current pilot from Schlumberger and has hired contractors for its 7,000 planned meter installations.
However, SCE&G still holds responsibility for operation and maintenance of the data system. Although SCE&G has looked at several contractors, including its current supplier, for its purchase
of more AMR equipment, the company for various reasons has not yet finalized plans for a purchasing order. According to Kirby, SCE&G is still evaluating the technological performance of the AMR system and determining where it makes the most cost-effective sense to deploy the system. In addition, SCE&G has not yet decided how many AMR
services it will want to offer its customers.
SCE&G has weighed the pros and cons of owning versus leasing the communication system. As Kirby sees it, however, comparing the two options is like "comparing apples with apples." He reasons that the equipment costs the same, no matter who owns and operates it. He also points out that both options carry the same fixed costs, such as maintenance and installation. Nevertheless, he admits to certain obvious advantages and disadvantages.
One advantage in leasing the information system, Kirby notes, is turnkey service. In the case of meter reading, that term can mean different things to different companies. According to the American Meter Reading Association, "turnkey" AMR may include all or any part of the following services: installation of the meters; providing the software that collects the data from the meters; linking the AMR system that collects the data to a billing system; and operation, maintenance, and repair of the AMR system. Additional services can be included, but any and all services are agreed upon by the vendor and the utility.
On the other hand, Kirby notes, "When you don't own it, you can't earn on it . ... You must work under a business contractual agreement." As Kirby explains, by owning the equipment the utility can use it for other services, thus earning a return on the investment. All revenues are retained within the company, excluding the initial startup costs. Kirby reasons: "It's more a philosophy, 'Do we want to own the information system or let someone else take over and do it for us.'"
Like SCE&G, UE also considered ownership, but decided to lease because the responsibility of installing, operating, and maintaining the network falls to CellNet. For its part, however, CellNet balks at the term "lease." Instead, the company views the contract as a partnership, with ownership on both sides.
"We are selling the service of delivering information to the utility over our network. The utility owns the information. They maintain ownership of the customer data and the meters," says Rachel Silber, marketing communications program manager for CellNet.
UE and partner CellNet have no plans to use a wire system any time in the near future. "The same services can be provided through any medium, but right now a wireless system makes utilities competitively stronger," says Silber. While CellNet expects to incorporate new technology for the utilities it services, the company is not "looking to be all things to all people."
SCE&G currently uses a fixed-network system located at its company headquarters. The utility favors a fixed network because it is competitively priced, provides a consistent path to the customer, and can be implemented where no telephone coverage exists. In addition, Kirby cites enhanced revenues and improved customer service.
When asked about the financial risk involved in purchasing the meters (about $100 each) and other additional equipment, Kirby countered: "With the benefits [of AMR], we can calculate almost 100 percent of the offsetting expenses. There are enough savings from AMR to cover investment costs." t
Rashida Syed, a senior and major in English literature at Howard University in Washington, DC, recently completed a three-month stint as a summer intern at PUBLIC UTILITIES FORTNIGHTLY.
Water Meters
AMR Goes Underground
Automated meter reading (AMR) has reached a new level with Itron's wireless ERT (encorder, receiver, transmitter) 40W/Pit Enclosure, a module that accurately reads outdoor, underground meters. The module (em compatible with Badger Meter, Inc.'s Record-all meters as well as the Mueller/Hersey Co. line (em may be read by Itron's offsite meter reading, drive-by mobile AMR, and fixed network AMR systems.
Gas Metering Hits the Real Time
The Gas Research Institute (GRI) (em in conjunction with AMETEK, Inc. and several other partners (em is developing a low-cost, gas energy-content meter that uses real-time energy measurement (RTEM) technology. The microprocessor-based microcalor-imeter determines the energy content of natural gas by measuring the energy released when a precise volume of sample gas is burned in the presence of a catalyst gas.
GRI says the meter will provide local distribution companies with real-time data on energy value, Btu consumption rates, and total energy consumption (em enabling greater precision in customer metering, transportation custody transfer, and quality monitoring and assurance.
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