Summary:

A state court has ruled that the IC was wrong to allow utility Commonwealth Edison to pass on certain costs to its customers, including the $5 million passed on to customers in 2008 for a smart grid pilot project now getting underway.

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The state-by-state setbacks for utilities’ smart grid dreams have come to Illinois. A state court has ruled that the Illinois Commerce Commission was wrong to allow utility Commonwealth Edison to pass on certain costs to its customers, including the $5 million passed on to customers in 2008 for a smart grid pilot project now getting underway. ComEd has said, barring an appeal, it may have to seek alternative means of paying for the project or perhaps scale it back.

This could be bad news for Silver Spring Networks, Tendril, and others involved in the project, which is composed of smart meters, solar panels, battery energy storage, self-healing grid technologies and a host of consumer energy pricing programs. As laid out last year, the pilot project would involve 141,000 smart meters from General Electric with Silver Spring networking gear inside installed in the Chicago area, and links to Tendril’s home energy management systems.

With the technology in place, ComEd hoped to test out a variety of methods for involving homeowners in their power usage. The plan is to use different tools — simple paper-mailed home efficiency reports, web interfaces, programmable thermostats, and in-home energy usage displays and controls — with a variety of variable pricing, rebate and incentive schemes, and study the results to see which ones work the best.

ComEd, a subsidiary of Exelon Corp., didn’t immediately respond to requests for comment on the court decision or its plans for the smart grid project. I would imagine the utility may turn to its deep-pocketed smart grid partners — I’m looking at you, GE — to help out. Rob Wilhite, a senior VP at KEMA Consulting, suggested in a conference call last month that more and more utilities will be turning to corporate smart grid partners to help shoulder the cost burden of installing their equipment, perhaps to the detriment of startups trying to get new technologies into pilot projects.

One thing’s for sure: ComEd isn’t the only utility that’s been told it can’t charge customers as much as it likes to pay for smart grid deployments. Baltimore Gas & Electric was forced to shoulder most of the costs of a smart meter project after Maryland state regulators found their business case lacking. Hawaii regulators have demanded that Hawaii Electric Co. find alternatives to increased customer rates for a project, and Michigan regulators have asked Consumers Energy to shave some $400 million off its $900 million smart grid spending plan.

ComEd’s case is a little different, however, in that it had the support of its state utility regulator. It was a state appellate court that ruled that both the ICC and ComEd were wrong in the way they’d determined how much of the costs of various projects could be passed on to customers. That’s a different set of issues than the smart meter complaints at the heart of a lawsuit underway in California, as well as one that was recently sent back to utility regulators in Texas.

All told, ComEd may have to pay back $48 million to its 3.8 million customers (about $12 per customer), and the decision could cost parent company Exelon about $77 million per year in revenue losses, not to mention $85 million in its current rate increase request.

How the ruling might affect other ComEd smart grid plans remains to be seen. Those include a “smart grid innovation corridor” launched last month, which got a $5 million Department of Energy smart grid demonstration grant to install solar panels and management systems at 100 homes to study the impacts on power supply and pricing. That project also includes intelligent substations, distribution automation, dynamic voltage regulation and an electric vehicle charging partnership with General Motors.

In June, ComEd said it would ask the ICC to consider an alternative plan to the traditional rate-setting process that might allow the utility to recover costs of investments as they occur, not only for the $45 million for distribution grid improvements, $5 million for an electric vehicle charging pilot, and $10 million for low-income customer support it wants now, but for future smart grid investments it may plan in the future. (For more information on different methods utilities now use to pay for smart grid deployments, check out this KEMA Consulting report (pdf)).

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