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Written by Will Quinn   
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Sunday, 31 October 2010

Smart Meter



Why wouldn’t you get excited about something called “smart metering”? In case you haven’t heard, smart meters are being marketed as the gas and utilities digital metering system of the future. You remember your old meter—it had those spinning mechanical dials that someone from your utilities company had to manually inspect to determine your energy and gas usage—well, fret no more, digital, wireless, eco-friendly smart meters are in your future!

In 2006, the California Public Utilities Commission (CPUC) approved Pacific Gas and Electric’s (PG&E) $1.7 billion proposal to install 9.3 million SmartMeterTM devices around the state –to be completed in 2011.1 PG&E lists some SmartMeterTM benefits: “faster power outage restoration, peak load reduction, and more customer options to save on energy bills.”2 The idea behind smart metering is that if energy use is monitored and broadcast continuously throughout the day, the consumer is constantly informed of his or her energy consumption, and thus will consume less energy at peak times. So then why are smart meters so contentious?

Consumer Concerns: Pricing

It is clear that PG&E wants SmartMetersTM for real-time data and ease of digital access, but do they make sense for consumers? Let’s start with PG&E’s own words about pricing:
Residential customers who voluntarily enroll in the Critical Peak Pricing (CPP) program will reduce their electric rates by nearly 3 cents per kilowatt hour from June 1 to September 30 during non-CPP events. During a CPP event, enrolled residential customers would pay a 60 cent per kWh surcharge in addition to their regular rates for energy used between 2 and 7 p.m. Enrolled business customers would pay a 75 cent per kWh surcharge for energy used between 2 and 6 p.m. The number of CPP events would be limited to no more than 15 per year, and only from May 1 to October 31, but typically a CPP event would occur only on the hottest days of summer.3
This press release excerpt sounds more like fine print on a credit card contract than any sort of pricing benefit program. The program attempts to reduce strain on the power grid during summer months by increasing the price of electricity during peak demand times. The underlying assumption is that the consumers have access to real-time consumption data, fully comprehend the pricing changes/increases during peak hours, and have the ability to reduce their energy usage during these times. If this assumption holds true, then PG&E would not need to “purchase power to meet demand at the most critical times,” and there would be a reduction in “reliance on fossil-fuel generation.”4 Win-win, right?! Perhaps not…

England: Let us first look to jolly old England where every home must be fitted with a smart meter by 2020.5 “The government estimates putting smart meters in the country's 26 million homes could save customers and energy companies £2.5-3.6 billion over the next 20 years, but says it will cost more than double this to buy and install the equipment.”6 The government’s preferred plan has the utility companies paying the £8.11 billion in upgrade fees upfront, but gives them the option to pass the bill on to the people—resulting in up to £340 per household.7 However, the Energy Retail Association, representing the major utility companies, said that smart meters would be "cost-neutral" to customers because the savings to the consumer will help fund installation. This is based partly on “[p]revious studies [showing] that smart meters encourage homeowners to cut their energy use by 3-15%.”8 This assertion certainly relies on utility companies to actively educate their customers on using the smart meter and consumers in turn reducing energy consumption accordingly. Let’s now look at what Americans think of the smart meters…

Baltimore, Maryland: Part of the 2009 $3.5 billion economic stimulus bill that was signed into law by President Obama allocated funds for “smart grid improvements.”9 President Obama said, “This investment will place smart meters in homes to make our energy bills lower, make outages less likely, and make it easier to use clean energy.”10 It is surprising then, that Maryland’s public service commission rejected an $835 million smart meter installation plan proposed by the Baltimore Gas and Electric Company (BGE) and, in doing so, lost $136 million of federal stimulus money for the project. The commission expressed enthusiasm for the long-run potential of smart meters, but said BGE was asking consumers “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.”11

BGE submitted a new plan as soon as the first was dismissed. After much negotiation and weeks of testimony, the second plan was ultimately accepted.12 The new plan called for “prudently incurred costs” upon the consumer, and “dropped its idea of forcing all customers to pay peak time prices, or more expensive rates when power is in the highest demand — the new program will make those time-of-use rates optional.”13 BGE claims the project will eventually save consumers $2.5 billion in electricity bills but many are not sure how or over what time frame. The utility also said it would improve its customer education to ensure “all of its customers, including limited-income customers and senior citizens, have the information they need prior to each phase” of the project.14 However, other utilities have missed the memo on customer outreach and education, and as a result, Both Pacific Gas & Electric in California and Oncor in Texas, face lawsuits from customers who claim they have been overcharged for electricity since the installation of their new smart meters.15

California: Considering California’s pro-environmental reputation, the intense resistance against smart meters in the state seems unexpected. By the Fall of 2009, the California Public Utilities Commission (CPUC) had received over 600 complaints from consumers claiming the smart meter installation caused “unexpectedly high” bills.16 An independent review of the PG&E SmartMeterTM system was released in September 2010. This report concluded that the high power bills were not a result of malfunctioning SmartMetersTM, but rather were “attributed to a heat wave last year that coincided with their installation as well as poor customer service by PG&E” Michael Peevey, the president of the utilities commission, said, “I have been personally confident the meters are sound. But PG&E needs to improve customer education. This is not a surprise.”17

While PG&E may acknowledge their poor customer service practices, they likely did not anticipate the backlash that ensued. On top of general concerns regarding the accuracy of the meters, customers in the San Francisco Bay Area raised their voices with concerns that devices emit electromagnetic frequencies that are harmful to people—despite the fact that the wireless signal emits substantially less energy than a cell phone.18 Recent concerns include claims that the wireless signal from the SmartMeters™ interfere with household electronics.19 PG&E responded this year by telling people that it is the other household electronics that are causing the problems, and advised that they purchase new devices that are not affected by “legally transmitted equipment like a SmartMeter.”20 As one would imagine, this response has not been received with applause!

Google has commented on the fact that consumers can only receive real-time energy usage data but CANNOT receive real-time data on their energy pricing.21 Addressing this concern, the Federal Communications Commission’s new U.S. National Broadband Plan has taken an aggressive stance and cautioned States that if they do not protect consumers—by requiring real-time pricing data along with energy usage to be available via internet—Federal legislation could be the next step.22

Consumer Concerns: Privacy and Security

Perhaps one of the most serious concerns surrounds the security of the information gathered by smart meters. It sounds a bit Orwellian, but with this technology, the utility companies have access to private consumer information “such as when [consumers] eat, what time they go to sleep, or how much television they watch.”23 Just like there are guidelines surrounding what sort of information Google can gather on searching tendencies, and how long they can keep that information, guidelines should be set for the info gathered from smart meters as well.

Elias Quinn, a senior policy analyst at the Center for Energy and Environmental Security at the University of Colorado, feels that “we are kind of walking into 'smart meter' development blindly. There is no general informed consent."24 He goes on to claim that utilities companies could be tempted to sell this information to marketers, who would in turn create specialized advertising campaigns, as seen on the internet. He gives examples of advertising sleeping medication to someone who uses above average electricity at night, or increased insurance rates for someone who is known to drive while sleep deprived. He says the benefits of smart meters outweigh the costs, but recommends laws that restrict the resale of data as a way to prevent abuses.25

Let’s Be Smart

Smart Metering technology is very likely the future of utilities management as it has amazing potential to increase information flow and efficiency. However, we need to act intelligently! Consumers need to be informed on how their rates may change and what they can do to prevent rate increases. Governments must continue to act in the best interest of its citizens and ensure that the total costs of installation are not just passed through from the utility company to the consumer. People will feel less taken advantage of if the utility companies are transparent and keep consumers informed. People are smart too—the utility companies just need to give us the tools so that we can learn and save energy and cash!

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_______________________________________________________________________________

1 http://www.pge.com/about/news/mediarelations/newsreleases/q3_2006/060720a.shtml
2 Id.
3 Id.
4 Id.
5 http://www.guardian.co.uk/environment/2009/may/11/smart-meters-energy-efficiency
6 Id.
7 Id.
8 Id.
9 http://www.stateline.org/live/details/story?contentId=500546
10 Id.
11 Id.
12 http://gigaom.com/cleantech/baltimores-smart-meter-project-is-back-on-track/
13 Id.
14 Id.
15 http://gigaom.com/cleantech/pges-smart-meter-report-a-case-study-of-infrastructure-over-customer/
16 http://green.blogs.nytimes.com/2010/09/02/report-says-heat-not-smart-meters-hiked-bills/
17 Id.
18 http://www.pge.com/myhome/edusafety/systemworks/rf/
19 http://www.smartplanet.com/technology/blog/thinking-tech/wait-california-smart-meters-do-have-problems/5148/
20 Id.
21 http://gigaom.com/cleantech/california%E2%80%99s-smart-meter-battle-google-vs-utilities/
22 Id.
23 http://www.physorg.com/news176703307.html
24 Id.
25 Id.




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