NO MORE METER MONOPOLY?
So they say. Many believe that utility control over electric metering exerts a chilling effect on retail choice in energy. They claim that competitive energy service providers cannot earn a high-enough margin on the commodity alone, but must offer companion services - metering, billing and value-added options.
Yet the road to competitive metering is pitted with potholes. Utilities, ESPs and private meter vendors and manufacturers can be found arguing over a raft of issues. Does unbundling imply full interoperability, with meters designed for "plug-and-play"? Or will the cost eat up all savings from retail choice? Interoperability implies open architecture - setting technical standards - but for which function or interfaces? Is it at the meter, where the customer takes the product, or upstream, where ESPs and utilities interact with system operators and grid managers?
So far the biggest fights have occurred over data formats and communications protocols. Regulators lack expertise; so they formed working groups - ad hoc assemblies of experts from utilities, ESPs, marketers, ratepayer advocates and trade and professional associations. Also taking part are meter vendors and manufacturers, who, given the chance to set rules for the future of their industry, have tended to oppose standards seen as aiding competitors or undermining the value of their proprietary systems and products.
The payoff, meanwhile, appears uncertain.
"Meter reading," notes Barry Goodstadt, vice president of regulatory affairs at Itron, a metering company, "costs about 1 to 2 percent of the total electric bill for residential and small commercial customers." He continues: "How much can you save out of that? Not much, I suspect, because even creating the structure will cost something. What you're really doing is setting up duplicative systems."
This issue is what confronts utility regulators in states like New York, Pennsylvania, California and Arizona, which have delved most deeply into electric meter deregulation. When that job is done, they must repeat the process on the gas side, where concerns over safety have fattened the debate.
As Goodstadt adds, "It's a tough nut to crack."
Competition: Pros and Cons
Michael R. Jaske, chief forecaster for the energy information and analysis division at the California Energy Commission, reports that by the end of July, electric utility metering, billing and information services were competitive to some degree in at least seven states - whether currently or by date certain, and whether by administrative order or legislative act. The issue was under study in at least five more jurisdictions.
Meter competition was first proposed for the record by Anthony Mazy, a professional engineer at the Office of Ratepayer Advocates of the California Public Utilities Commission. The rationale, as Mazy explains, was to help ESPs compete in a world where the metering equipment and infrastructure was designed and built for the peculiar needs of vertically integrated utilities. (Mazy's comments here, and throughout, are personal opinions; they do not necessarily reflect opinions of the California PUC or the ORA.)
"Certainly," notes Mazy, "the PUC, in unbundling metering, data management and billing, was convinced that ESPs needed these options to make a go of it. The ESPs certainly made their perceived needs explicit and, in fact are now providing these alternative services, although mostly to larger customers.
"But it isn't so much about what ESPs need," he adds, "or what utilities don't need, as about what their customers need: choice."
With a reason to deregulate, California set out to define the parameters for a new metering industry. In July 1997, a workshop on meter and data communications standards proposed a balkanized structure featuring a meter service provider to install and maintain the physical equipment and a meter data management agent to validate raw meter output, add correlated information to characterize the customer and then make data available to all the other players who might need it in California's competitive energy industry - such as the utility distribution company, the scheduling coordinators and the independent system operator. On July 29 the PSWG, the permanent standards working group, issued still another report on technical standards, marked by disputes among meter vendors over data formats and communications protocols.
Other states appear further behind, with the situation particularly muddled in Pennsylvania, where legislative committees have rejected generic rules, but a settlement has given the go-ahead to PECO Energy. (See sidebar, "Setting Standards - Four Key States.")
At first the New York Public Service Commission stuck with the status quo, voting last year to maintain metering as a utility function, but it also asked for recommendations on a competitive scheme. That report was delivered to regulatory staffers on Aug. 17 as drafted by five separate working groups: (1) meter ownership and control, (2) information flow policy, (3) information flow technology, (4) regulations and (5) load profiling. Afterwards, according to Goodstadt, an independent consultant will analyze the working group reports and file its own study, due in November.
"The commission won't likely do much until 1999," adds Goodstadt. "The debate over standards has not yet begun in New York. And arguments between vendors haven't occurred yet, either, and I don't know if they will."
Opinions were mixed in Arizona, where Tucson Electric, Salt River Project, Arizona Public Service and Enron Capital and Trade Resources each staked out a different position in comments filed after the Unbundled Services and Standard Offer Working Group filed its initial report in November 1997. Last month the state commission approved at least some rules, but many issues remain, according to Paul Taylor, engineer and executive consultant at R.W. Beck's Phoenix office: "I'm the head of the open architecture subgroup of the metering subcommittee. We have to report back by July 1, 1999, six months after the state's electric industry opens up. I don't know yet what the recommendations will be on open architecture. It's just a big ugly messy issue."
An Open Structure:
The Battle Over Standards
"One of the difficulties," explains the CEC's Michael Jaske, "was the charter from the California PUC. What did it want to get accomplished?"
Few doubt that open architecture, interoperability, can help remove commercial bottlenecks. That was made clear by minority comments submitted by independent consultant (and engineer) August J. Nevolo, president of T&NTR, who represented the Electric Power Research Institute on the PSWG.
"If ESPs procure products and services that utilize proprietary standards, the customers will tend to be locked in. This will tend to limit any future choice the customer may have, as there will be an economic barrier to changing suppliers due to products having incompatible metering and/or data communications standards."
Did that mean the PUC wanted PSWG to achieve "plug-and-play" meters?
"The commission itself talked about these terms," answers Jaske. "But it didn't define them or use them clearly. The charter was somewhat under-specified. It wasn't even clear that the goal of interoperability was something that could be accomplished for a cost that people are willing to support. The group in practice was trying to define its own mission to a larger extent than should be expected for a voluntary organization. The more disharmony on any particular issue, the more it surfaces that you have this lack of direction."
The disharmony probably couldn't have been avoided. The process of setting standards naturally tends to produce winners and losers.
"When you have standards like, plug-and-play, the price just drops," notes Bill Rush, assistant institute physicist for the Institute of Gas Technology, and chair of the Institute of Electrical and Electronic Engineers Standards Coordinating Committee No. 31.
"Standards tend to produce a commodity product," explains Stanley Klein, vice chair of IEEE subcommittees on data communications protocols and power systems communications. "You lose product differentiation. New providers can enter the market. The next thing you know, the incumbents are trying to create a niche, with claims like, We not only meet the standards, we exceed them. It's a way of saving market share."
Did disputes between meter vendors limit progress at the PSWG? Mazy is ready with an opinion: "It is certainly my perception, and one which I believe is shared by many others, that the immediate impact of standards on competitive positions underlay many of the parties positions in the workshop."
At the PSWG it appears a need was established for at least four sets of standards - a data format and a communications protocol in each of two places, both at the meter level and at the MDMA server. At the meter level, the PSWG approved ANSI C12.19 as the data format for all new meter types released after March 20, 2000 but with a grandfather clause to exempt all meter products released before that date for the duration of their commercial product lives. At the MDMA server level, according to August Nevolo, it approved EDI (Electronic Data Interchange) as a data format and "implicitly" approved the Internet protocol as a communications protocol. (EDI would replace the California Meter Exchange Protocol, a home-grown interim standard.) The PSWG apparently chose not to fall back on UCA standards developed previously by EPRI.
It would take a book to explain fully the debate over ANSI C12.19. The specifications run more than 150 pages of virtually impenetrable code. Few can describe even what it is. Many have opinions about it.
ABB, which supported the PSWG on this point and supplied concurring comments to the final report, wrote that ANSI C12.19 was "designed to collapse its structures to meet the needs of the simplest device and yet be expandable beyond any meter in production today." At press time, Itron said it would file new comments. Earlier, however, it had supported the PSWG position, but that was probably because of the grandfather clause that gave it an exemption. NERTEC opposed the lifetime exemption, urging a two- or three-year limit, while the California ORA described the clause as "contrary to the PUC's expressed desire to achieve real customer choice."
Enron, Schlumberger, and CellNet Data Systems Inc. all opposed making C12.19 mandatory. As Chris King, vice president of strategic planning and regulatory affairs at CellNet, explains, "We could implement it, but it would cost money and we'd get no real benefit. If it's a good thing, the market will adopt it. There's no need for regulators to force it on the industry."
Overall the opponents argued that what was much more important, which the PSWG had failed to approve, was a communications protocol at the meter level. Enron, Schlumberger, and CellNet explained further in their joint alternative comments to the PSWG report, noting that C12.19 wouldn't help much without accepting a standard telecommunications technology out of all the various technologies used by the competing metering companies.
George Roberts, director of regulatory relations and strategy at Schlumberger, suggests further that C12.19 focuses too closely on the meter device, instead of the MDMA server.
"We voted for the C12.19 position with the grandfather clause simply to move the issue off the table. It's an immature standard. It does not achieve interoperability and will impose a large cost on the participants, especially on vendors that use radio communications.
"Where standards are necessary is after the validation, editing and estimating - at the point of data communications between the ESPs, the UDCs and the MDMA. That's truly where the rubber meets the road and where the money will be made and lost."
"If C12.19 is so good," asks Chris King, "then why did the utilities on the PSWG vote to make it mandatory for the ESPs, but not for themselves? The motion to require C12.19 for the UDCs was voted down."
Tom Chen, a PSWG member and engineer for eT Communications (a metering reading company) stakes out a middle ground. On one hand, he argues that ANSI C12.19 is "very relevant" in the design of an end device to transport meter data to a computer system. If regulators should mandate C12.19, then, according to Chen, these vendors who already have meters or end devices that meet compliance will have 1 to 2 years advantage over other vendors. Several utilities, including PG&E, are in the process of including C12.19 as a requirement for their future purchases of meter products, he adds.
On the other hand, Chen concedes that "the market need for C12.19 is not known at this time." He agrees on the importance of a standard communications protocol: "The key to open architecture, and interoperability, in my opinion, is in the metering communications. I feel this is the area where PSWG had the most problems in reaching any sort of agreement. PSWG agrees that we need to have some sort of communications standards, but could not agree on how to get there."
Natural Gas: The Next Step?
What about the rest of the country? Must each state that adopts retail choice in electricity endure the same debate that has emerged in California? Or will the entire issue play out in California? And what about gas?
Mazy offers his personal opinion:
"Even now, we are bringing the lessons of electric restructuring to the [California PUC's] Natural Gas Strategy proceeding. The PUC has just ordered gas utilities to unbundle their costs and strongly signaled its interest in the near-term unbundling of billing systems. Once again, we are beginning a series of workshops to elucidate issues concerning the unbundling of 'revenue-cycle services' - meters, meter reading, meter data management, customer-specific information and billing and collections.
"This time, we are not hearing about 'least-unit costs' for monopoly systems, which tend to retard innovation, so much as about 'safety' issues.
"I believe that gas safety is consistent with an unbundled market structure. We will ask the commission to change established, business-as-usual practices to enable complete unbundling while maintaining existing levels of safety. As before, our goal is not to make gas services unbundling happen in any preconceived manner, but to ensure that it can happen, and equitably, if customers want it."
Bill Rush, the gas industry physicist from IGT who crossed over to attend the electric metering workshops, adds his unique slant: "I actually don't know that much about what's going on the gas side. I haven't gone to the gas meetings. The companies who have the vested interests will have the deep pockets to keep sending people. I'm with a nonprofit. I ran out of money.
"But my feeling was that the electric proceeding was the most important for the gas industry. The conclusions they came to in electricity I think will be the ones for gas also. That's why I chose to work so hard in the electric hearings in California. And as California goes, so is much of the rest of the country likely to follow."
Bruce W. Radford is editor of Public Utilities Fortnightly.
Setting Standards-Four Key States
PUC Action, Pending Issues
ARIZONA. Adopts rules Aug. 5, 1998 approving EDI format at server level, but no action taken on ANSI C12.19 at meter level (Decision 61071, Rule 14-2-1613-J4,5). Open architecture subgroup to report by July 1, 1999, six months after first phase-in of retail choice, set for Jan. 1, 1999. Issues first debated in report filed Nov. 1, 1997 by Metering Subcommittee of Unbundled Services Working Group (www.cc.state.az.us/working/unbundle.htm).
CALIFORNIA. Working group files report with PUC July 29 on permanent standards for metering and related data. Recommends ANSI C12.19 as data format at meter level, but with grandfather exemption and cannot agree on communications protocol at meter level (see, 184.108.40.206/wk-group/ dai/pswg). PUC to review after comment period.
On June 18 (Decision 98-06-81), and July 1 (Decision 98-07-032), it set rules for utilities to (a) certify and train meter providers and (b) bill and credit customers. PUC opened metering to competition in May 1997 (Decision 97-05-039, 177 PUR4th 386). PUC first set rules for competitive metering on Dec. 3, 1997 (Decision 97-12-048, 182 PUR4th 284).
NEW YORK. Five working groups file reports, on or about Aug.17, recommending competitive model, and were to post findings on Internet (www.dps.state.ny.us). State regulatory staff "hopes" to review and report back to full PSC by end of year, ahead of deadline. Earlier, Aug. 1, 1997, PSC decided to retain electric metering as utility function, but had asked working groups to recommend "workable" competitive framework (Case 94-E-0952, Opinion No. 97-13).
PENNSYLVANIA. Adopts rules May 14 (Docket No. L-00970128, 186 PUR4th 267), for optional deployment of qualified advanced metering equipment and networks (otherwise metering stays as utility function), but rules are rejected June 8 by House and Senate standing committees, and again on June 18 by Independent Review Commission.
But at PECO Energy, restructuring settlement on May 14 opens metering and billing to competition (R-00973953, P-00971265, 186 PUR4th 105). Most issues resolved by order adopted June 26. Data formats and communications protocols set by working group on electronic data exchange, as adopted earlier on June 1 (Docket No. M-00960890F.0015, 186 PUR4th 257).
1 Now competitive: Arizona, California, Illinois, Maine, Nevada, New Hampshire and Pennsylvania. Under study: Connecticut, Maryland, Massachusetts, New Jersey and New York. See, Michael R. Jaske, "A Review of Competitive Metering and Billing and Early Experience in California," occasional paper presented July 28, 1998, before the Committee on Energy Resources and the Environment, at the summer meetings of the National Association of Regulatory Utility Commissioners.
2 See, "Meters Go to the Dogs," and "Meter Markets: a New Value Proposition," Public Utilities Fortnightly, Sept. 1, 1997, pp. 4, 38.
3 Final report, PSWG, p. 40. See 220.127.116.11/wk-group/ dai/dai3msg00060.htm.
4 Nevolo explains: "There was limited discussion of data communications protocols for access to metering data at the MDMA server. The interim standards for access to this data are Internet protocols and Secure Socket Layer SSL3. A detailed assessment would have looked at alternatives. This was not done. Thus, in my opinion the interim data communications protocols were adopted implicitly. EDI was approved as the [MDMA server-level] data format standard."
5 According to Stanley Klein, Bill Rush and August Nevolo, UCA version 1.0 (Utility Communications Architecture) was designed to standardize communications in six specific areas, (1) control centers, (2) distribution automation, (3) transmission substations, (4) generating plants, (5) corporate database systems and (6) the customer interface, based upon a protocol known as Open System Interconnection and a 7-layer scheme of functions. The updated UCA version 2.0, developed in the mid-1990s, offers even more capability, says Nevolo.
Michael Jaske suggests that UCA standards may no longer be appropriate: "UCA concerned standards for facilitating meter communications back to the distribution system, but competitive metering systems don't need that functionality. Why should California, going in the direction of competitive metering, buy into a standard that facilitates unnecessary services? The advocates of UCA were never able to show that this extra functionality came at a low or trivial cost. The meter manufacturers didn't want to adopt it."
However, Bill Rush believes that UCA could have served as the communications protocol at the meter level, and in fact argued that point before the PSWG, but without success.
6 American National Standards Institute, "Utility Industry End Device Data Tables" (also known as the "Tucker Tables," after the originator, consultant Richard Tucker).
7 Itron offered these comments to the final PSWG report: "The number one reason that blind adherence to C12.19 is not in the best interests of a competitive, open access market, is that it is recognized by the ANSI committee that wrote it as a standard that requires additions and modifications to reflect current technology and market conditions."
8 "Interoperability of meters would require selection of a single communications technology (from telephone, cellular phone, PCS, two-way aging, various network meter reading radio technologies, satellite, etc.), and agreement on the exact implementation of the C12.19 data formats, which despite the standard, differ in implementation by each manufacturer."
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