In most states utilities raise electricity rates in order to pay for the installation of new gear like smart meters — so consumers basically cover the cost of the upgrade. But some consumers and public utilities aren’t so happy about those terms, and in a conference call on Friday regulators from the states of Ohio and Texas addressed the challenges of making consumers pay for smart meters.
With such a difficult situation, Friday’s discussion, sponsored by Smart Grid Today, didn’t yield any easy answers. This year has seen regulators in Maryland, Hawaii, Michigan, Indiana and Colorado pushing back against utilities raising rates on customers to pay back the costs of smart grid deployments. More could be coming from regulators in Virginia, as well as other states, warned John Anderson, CEO of the Electricity Consumers Resource Council, which represents commercial and industrial power users.
Those commercial and industrial users “say they aren’t going to get the benefits, but they are going to get the costs” of smart grid deployments, said Anderson, and those are big power users who are used to interval meters and time-of-use rates. Residential customers are less likely to accept changes to how they pay for power without some immediate reward, he noted. “To spend money, even a few dollars a month, for something they don’t really want, is something I really question,” he said.
But most smart meter deployments can’t justify their costs on operational benefits to the utility alone, said Rob Wilhite, a senior vice president at KEMA Consulting. That means consumer and broader societal benefits must be included. But it’s hard for utilities to put a price on greater reliability, shorter blackouts, being able to integrate more rooftop solar power and other longer-range benefits of smart meters, he noted. (KEMA lays out ways that utilities can recover costs to pay for smart meters here (pdf)).
Wilhite noted that utilities should also look to outside sources of capital for their AMI investments: “There are a lot of capital firms seeking to make new investments” in today’s down economy, and utilities are good credit risks. The danger there is that utilities will also seek to shift some of the risk onto their smart grid vendor partners, said Wilhite, which could shut out startups with innovative technology.
The challenge is compounded by the state-by-state regulation of the utility industry. For example, in Texas, which has a legislative mandate to install smart meters and a deregulated market that allows customers to switch retail power providers at a moment’s notice, the state’s Public Utilities Commission has been able to approve smart meter plans that have added several dollars per month to each customers’ power bill, said commission chairman Barry Smitherman. It’s also done a study showing that smart meters in the state are working properly, similar to a study done for Pacific Gas & Electric in California.
But getting a smart meter is only the first step in a smart grid plan that could include household power displays and power controls, as well as direct utility control, noted Alan Schriber, chairman of the Public Utilities Commission of Ohio.
“We need to let the customer know they can interact with their utility, that a relationship can be established there,” he said. At the same time, traditional demand response-type programs that allow utilities to shut off air conditioners, water heaters, pool pumps and other household power loads “could save a certain amount of money, and could be implemented by the utility. The key is that there be some kind of customer override, so people don’t feel like the utility’s taking over.” As for how the smart meter rollouts now underway in Ohio are hitting customers’ monthly bills, Schriber said it’s too early to tell.
KEMA’s Wilhite noted another smart meter cost that may be getting overlooked: the cost of cybersecurity and privacy protections. The Department of Energy made cybersecurity a must-have for projects receiving part of its $3.4 billion dollars in smart grid stimulus grants, and many state utility regulators are now adding it to their requirements.
To read more of my weekly insights, daily news clips and research reports on the smart grid check out GigaOM Pro (subscription required):
Image courtesy of Woodleywonderworks.