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Summary:

Securing a smart grid stimulus grant doesn’t always guarantee a utility’s smart grid project is in the clear. This week Maryland’s public regulator denied Baltimore Gas and Electric Co’s smart grid project request, which would have deployed 2 million smart meters and cost $500 million.

Securing a smart grid stimulus grant doesn’t always guarantee a utility’s smart grid project is in the clear. This week Maryland’s public regulator, the Maryland Public Service Commission, denied Baltimore Gas and Electric Co’s smart grid project request, which would have deployed 2 million smart meters for all of its customers, and cost an estimated $500 million over five years. Last October the DOE awarded BGE a $200 million grant — the largest available — for its smart grid project and BGE said it would match those funds with $250 million of its own financing.

While BGE has said its smart grid project would ultimately save its customers $2.6 billion, the MPSC said that customers were shouldering too much of the costs of the project and that the utility would need to contribute more of the funds for the project, and could resubmit a proposal. The request has been under deliberation by the MPSC for about a year.

To put it lightly, BGE is not happy:

BGE is deeply disappointed, frustrated, and frankly surprised, by the Maryland Public Service Commission’s (PSC) decision. . . We’re shocked that the PSC is jeopardizing the $200 million stimulus grant awarded by the Department of Energy to help pay for the initiative.

It’s not unusual for utilities to raise customer’s rates to support infrastructure projects, and it seems like all of the recent backlash over smart meters has had some influence over the regulatory body. PG&E has had the most problems and has admitted, and publicly-apologized for, failing to communicate the benefits and purpose of the smart meters to residents. As I reported after reading through PG&E’s 800-page report on the subject, PG&E spent very little time early on planning how to deal with customers. As a result there have been numerous complaints and even a lawsuit.

In MPSC’s response it emphasizes the risks and the lack of benefit of smart meters to the consumer: “The proposal asks BGE’s ratepayers to take significant financial and technological risks and adapt to categorical changes in rate design, all in exchange for savings that are largely indirect, highly contingent and a long way off.” Local news op-eds on the subject are also not too supportive of the utility project. Jay Hancock for the Baltimore Sun writes that the decision will “keep Maryland from being a guinea pig for the smart grid.”

To me this decision says that if utilities continue to have problems communicating the benefits of the smart grid to consumers, this won’t be the last regulator to deny a utility smart grid project.

For more research on the smart grid check out GigaOM Pro (subscription required):

New Opportunities in the Smart Grid

Image courtesy of Velo Steve’s photostream.

  1. I think the Marland Public Service Commision made a wise decision. I would like to see a detailed breakdown of how its customers would save 2.6 billion before allowing this.

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  2. Hi Katie and JimR,

    Maryland PSC’s great leadership decision on BG&E’s Smart Metering Project has answered the question posed in the EWPC article “Is the Smart Grid that is Being Pushed a Costly Mistake?” That decision fulfills Peter Koestenbaum’s leadership strategies on how to achieve greatness: it has extraordinary value on ethics, vision, reality, and courage.

    The summary of said article suggests the leadership step waiting to happen: “The main argument is that, by inaction, each State Government should be responsible to their constituencies for a very costly mistake that is being made by letting the smart grid process continue without giving State Regulators the proper mandate.”

    On top of that, State Governments need to look very closely at the discussions posted in “The Dynamic Pricing Debate Shows that Utilities Won’t be Able [to] Engage Customers.”

    This is taken from the EWPC Post “Every State Government Should Follow Maryland PSC’s Leadership,” which can be read in http://www.energyblogs.com/ewpc/index.cfm/2010/6/23/Every-State-Government-Should-Follow-Maryland-PSCs-Leadership

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  3. Hi Katie,

    In a June 24 blog on SmartGridNews.com, eMeter Chief Regulatory Officer Chris King presented his “… Take-Away for Other Utilities?” in http://www.energyblogs.com/ewpc/index.cfm/2010/6/23/Every-State-Government-Should-Follow-Maryland-PSCs-Leadership

    This is my response:

    With much respect, I went on to read the Order and found out that important information went missing that understates the severity of the situation. What follows is a summary of the findings that are important not just for all utilities, but even more so for state governments, that need to take the leadership to provide a new mandate to state regulators that fits with the risks and uncertainties ahead and specially with the public interest.

    Instead of finding BG&E proposal cost-effective, the PSE Order actually says “We have concerns about other aspects of BGE’s business case as well…” While believing in the intentions of BG&E, the Order adds “We simply think it more equitable that BGE and its ratepayers venture into this relatively unknown territory as partners.” A very important fourth change was related to risk sharing by said partners while adding other risks unaccounted for in the business case.

    Those findings are well in agreement with the EWPC article “Forget the Customer Engagement Debate; Think Risk Taking Suppliers ( http://bit.ly/EWPC08 ),” whose summary says: “The outstanding Maryland PSC’s leadership decision is a potential precedent, which will help utilities and state governments accept the fact that the utility partnership with a regulator run out of steam. Instead of a predictive customer engagement debate to extend the obsolete indirect regulated risk free business model, for example on utilities AMIs, we need a new bargain in the power industry to facilitate a customer partnership with one of several suppliers having an emerging direct competitive risk taking business model.”

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    1. José Antonio Vanderhorst-Silverio, Ph.D. Friday, June 25, 2010

      This post should be deleted, because it has a wrong link on Chris King’s article. The next article has the correction.

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  4. Hi Katie,

    In a June 24 blog on SmartGridNews.com, eMeter Chief Regulatory Officer Chris King presented his “… Take-Away for Other Utilities?” in http://www.smartgridnews.com/artman/publish/Business_Policy_Regulation_News/BG-E-Fallout-What-s-the-Take-Away-for-Other-Utilities-2562.html

    This is my response:

    With much respect, I went on to read the Order and found out that important information went missing that understates the severity of the situation. What follows is a summary of the findings that are important not just for all utilities, but even more so for state governments, that need to take the leadership to provide a new mandate to state regulators that fits with the risks and uncertainties ahead and specially with the public interest.

    Instead of finding BG&E proposal cost-effective, the PSE Order actually says “We have concerns about other aspects of BGE’s business case as well…” While believing in the intentions of BG&E, the Order adds “We simply think it more equitable that BGE and its ratepayers venture into this relatively unknown territory as partners.” A very important fourth change was related to risk sharing by said partners while adding other risks unaccounted for in the business case.

    Those findings are well in agreement with the EWPC article “Forget the Customer Engagement Debate; Think Risk Taking Suppliers ( http://bit.ly/EWPC08 ),” whose summary says: “The outstanding Maryland PSC’s leadership decision is a potential precedent, which will help utilities and state governments accept the fact that the utility partnership with a regulator run out of steam. Instead of a predictive customer engagement debate to extend the obsolete indirect regulated risk free business model, for example on utilities AMIs, we need a new bargain in the power industry to facilitate a customer partnership with one of several suppliers having an emerging direct competitive risk taking business model.”

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  5. [...] Jul. 8, 2010, 8:22am PDT No Comments       Despite all of the hullabaloo over consumer backlash and smart meters, the investment in smart meters will actually only make up a small percentage of the spending for [...]

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  6. [...] all of the hullabaloo over consumer backlash and smart meters, the investment in smart meters will actually only make up a small percentage of the spending for [...]

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  7. Change is not easy. Top down thinking can be efficient but it runs the risk of alienating the very people you are in business to serve. We live in a time where the public distrusts large corporations, especially utilities. Implementing the “smart grid” is even more difficult than building the original “didnt-need-to-be-smart-grid. I see this this way because we have to overcome the inertia of the existing. As a culture, we don’t get it about energy. Adding information technology to the energy delivery system and end point consumption appliances allows us to collectively leave more for our kids. It is the next logical step in evolving our electrical energy system. How to get there is the question of our time. It wont be easy, it won’t be without false starts and mistakes but the time is now to get going – sacrifice now for the benefit of our collective future.

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  8. [...] binning”.(Enlighter)More on LEDs: planar lighting. (LEDs Magazine)Denied: Maryland doesn’t get smartmeters just yet. (Earth2Tech)Fossil fuel subsidy WTF.  Aren’t we past rewarding stuff like this? [...]

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