Smart Grid Gets Clipped in Michigan

Updated: Yet more evidence that the smart grid industry is facing pressure to get cheaper, and fast: Michigan utility Consumers Energy may be cutting $400 million from its $500 900 million smart grid spending plan over the next five years, reports Smart Grid Today (subscription req.).

Consumers’ parent company, CMS Energy, is under intense pressure from the Michigan Public Service Commission to shave even more from its capital plans to avoid hitting the state’s already hurting economy with rate increases. Just how the proposed spending cuts might affect smart grid efforts, including a pilot project with Big 5 meter maker Elster and a try-out of WiMax-networked smart meters with General Electric, remains to be seen.

Expect more decisions like this in the future. State utility regulators around the country are denying rate increases for smart grid projects that won’t quickly pay off in cheaper power. In the past two months, Maryland state regulators forced Baltimore Gas & Electric to pay for its $500 $900 million smart meter deployment without raising rates, and Hawaii’s Public Utilities Commission rejected Hawaii Electric Co.’s plan to raise rates for smart grid projects.

Smart meters in particular are getting a bad rap. Both California’s Pacific Gas & Electric and Texas’s Oncor face lawsuits from customers who claim that their new smart meters have improperly jacked up their power bills, and the complaints have also spread to broader, more integrated smart grid projects, like Xcel Energy’s over-budget SmartGridCity pilot in Boulder, Colo.

The big question for the smart grid industry is how to adapt to the new era of frugality. Certainly, the $3.4 billion in Department of Energy smart grid stimulus grants have helped, but, as the BG&E case proves, even having some $200 million in DOE grants in hand can’t protect a utility from having its rate increases questioned. Beyond lowering the cost of smart grid deployments, it’s clear that utilities will be trying to front-load efforts to deliver savings to utility customers: perhaps by accelerating plans to connect smart meters to in-home energy management platforms.

For more research on energy management check out GigaOM Pro (subscription required):

Smart Algorithms: The Future of the Energy Industry

The Developer’s Guide to Home Energy Management Apps

Home Energy Management: Consumer Attitudes and Preferences

Photo courtesy TpolyG

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