“Smart” metering that provides time-based usage data is getting a lot of attention from utilities, regulators, and those concerned with managing peak electric demand. A push is on to bring it to many facilities, even where power prices remain regulated. While seemingly a shining example of advanced technology, it may also have a dark side.

For all but their largest customers, most utilities continue to use simple electromechanical meters. A typical unit logs electricity usage since it was installed, with monthly readings based on the incremental difference seen since the prior reading. Some also show peak demand between readings, but not the time of their occurrence. While this technology worked fine for almost a century, rising costs of energy and its infrastructure call for new ways to minimize those costs.

The push begins

Key to that effort is expanding customers’ understanding of how they use energy - not just how much, but also when and how fast. If the economic impact of their usage was made clear through price signals (i.e., rates and incentives), regulators believe customers would respond.

To that end, the federal Energy Policy Act of 2005 included a section requiring all states to examine various time-sensitive pricing schemes (e.g., real-time pricing). Such rates may encourage customers to cut back on usage during peak periods whenever wholesale power prices spike. Doing so saves money for individual customers while bringing down the average hourly price for all customers. But most existing meters cannot support such pricing.

Smart meters for all

Meters for customers already paying time-of-use rates (which represent less than 1% of all customers) may be linked to the utility through telephone landlines, sending a continuous stream of usage data to a computer that shows when - and how fast - power is being used. Some customers have hooked into such meters to see that data, allowing them to control loads in near real-time, cutting their peak demand charges. Landlines are not, however, a practical way to do so for the other 99+% of customers.

Using the Internet, cellular networks, powerline carrier (PLC), and other forms of communication could, however, provide the infrastructure to do so. If meters were upgraded to continually convey usage and demand information, time-based rates could be offered to many more customers. Such a one-way flow of information could quickly reveal the extent of power outages, assisting repairs. Meter readers would become obsolete, cutting the utility workforce, with savings for all ratepayers. Where two-way communication existed, utilities could remotely initiate - or terminate - electric service, reducing theft, late payments, and site visits. Such remote capability could also control customer load shedding systems (e.g., cycling air conditioning compressors).

Several states (e.g., California) are pushing utilities to install such meters down to the small business level (~50 kW) or lower. Doing so allows wider participation in demand response programs that encourage customers to cut back power use, in return for payments and/or rate cuts.

The darker side

While many welcome this option to minimize new generation and transmission, there’s a flipside. Without smart meters, a customer’s usage pattern is assumed to match that of his rate class, and all members of that class are charged the same rate, even if the poor load profiles of some are resulting in higher costs to others. Those rates may also be averaged across a season or year to simplify pricing, resulting in relatively minor differences from month-to-month.

Once customers’ actual hourly usage data becomes available through new meters, however, such averaging is no longer either necessary or desirable. It is then possible to pass through (e.g., via fuel adjustment charges or new rates) the volatility seen in hourly wholesale pricing, whether or not retail deregulation has occurred. A few states have made such rates mandatory (or are thinking about it) for customers having such meters. Smart metering then becomes a Trojan Horse for mandatory hourly pricing.

To escape such volatile pricing, many large customers in deregulated states are now instead buying power from competitive marketers offering a variety of rate options, ranging from flat pricing to hourly pricing. Where that option does not exist, customers may wish to take note of local efforts to expand smart metering and be heard regarding exactly how the technology will be applied - before accepting it with open arms, or open wallets.