Smart metering options for electric and gas utilities

Should utilities replace current consumption meters with “Smart Metering” systems that provide more information to both utilities and customers? Increasingly, the answer is yes and utilities and customers begin to see the advantages of metering systems that provide:

• Two-way communication between the utility and the meter.
• Measurement that goes beyond a single consolidated quarterly or monthly consumption total to include time-of-use and interval measurement.

For many, “smart metering” is synonymous with an Advanced Metering Infrastructure (AMI) that collects, processes, and distributes metered data effectively across the entire utility and to the customer base.

Advanced Metering Infrastructure (AMI) facilitates the movement of meter data across the organization.

Smart Metering Revolutionizes Utility Revenue And Service Potential

Strategically evaluated and deployed, Smart Metering can deliver a wide variety of benefits to utilities.

Financial Benefits

Smart Metering:

• Significantly speeds cash flow and associated earnings on revenue. Smart metering permits utilities to read meters and send the data directly to the billing application. Bills go out immediately, cutting days off the meter-to-cash cycle.
• Improves return on investment via faster processing of final bills. Customers can request disconnects as the moving van pulls away. Smart Metering polls the meter and gives the customer the amount of the final bill. On-line or credit card payments turn final-bill collections from a matter of weeks to a matter of seconds.
• Reduces bad debt. Smart Metering helps prevent bad debt by facilitating the use of prepayment meters. It also reduces the size of overdue bills by enabling remote disconnects; there’s no need to wait for crew availability.

Cost Reductions

Smart Metering:

• Slashes the cost to connect and disconnect customers. It can virtually eliminate the costs of field crews and vehicles previously required to change service from the old to the new residents of a metered property.
• Lowers insurance and legal costs. Field crew insurance costs are high. They are even higher for those subject to stress and injury while disconnecting customers with past-due bills. Remote disconnects lower these costs. They also reduce medical leave, disability pay, and compensation claims. Remote disconnects also significantly cut the number of days employees and lawyers spend on perpetrator prosecutions and attempts to recoup damages.
• Cuts the costs of managing vegetation. Smart Metering can pinpoint blink-outs, reducing the cost of unnecessary tree trimming.
• Reduces grid-related capital expenses. With Smart Metering, network managers can analyze and improve block-by-block power flows. Distribution planners can better size transformers. Engineers can identify and resolve bottlenecks and other inefficiencies. Results include increased throughput and reductions in grid overbuilding.
• Shaves supply costs. Supply managers use interval data to fine-tune supply portfolios. More closely matching procurement and delivery reduces supply costs.
• Cuts fuel costs. Many utility service calls are “false alarms.” Checking meter status before dispatching crews prevents many unnecessary “truck rolls.”
• Reduces theft. Smart Metering can identify illegal attempts to reconnect meters or to use energy and water in supposedly vacant premises. It can also detect theft by comparing flows through a valve or transformer with billed consumption.

Compliance Monitoring

Smart Metering:

• Ensures contract compliance. Gas utilities can use one-hour interval meters to monitor compliance from interruptible (“non-core”) customers and levy fines against contract violators.
• Ensures regulatory compliance. For example, a jurisdiction near a wildlife area might order customers to turn off outdoor lighting so as to promote breeding and species survival. Utilities can monitor the compliance of customers with significant outdoor lighting by comparing similar intervals before and during the restricted time period.
• Reduces outage duration by identifying outages more quickly and pinpointing outage and nested outage locations. Smart Metering also permits utilities to ensure outage resolution at every meter location.
• Sizes outages more accurately. This lets utilities dispatch crews that have the skills needed, in appropriate numbers.
• Provides updates on outage location and expected duration. Smart Metering helps call centers inform customers about the timing of service restoration. It also facilitates display of outage maps for customer and public-service use.
• Detect voltage fluctuations. Smart Metering can gather and report voltage data. Customer satisfaction rises with rapid resolution of voltage issues.

New Services

For utilities that offer services outside commodity delivery, Smart Metering provides an entry to such new business opportunities as:

• Monitoring properties. Landlords reduce costs of vacant properties when utilities notify them of unexpected energy or water consumption. Utilities can perform similar services for owners of vacation properties or the adult children of aging parents.
• Monitoring equipment. Power-use patterns can reveal a need for equipment maintenance. Smart Metering permits utilities to alert owners or managers to a need for maintenance or replacement.
• Facilitating home and small-business networks. Smart Metering can provide a gateway to equipment networks that automate control or permit owners remote equipment access. Smart Metering also facilitates net metering, offering some utilities a path toward involvement in small-scale solar or wind generation.

Environmental Improvements

Many Smart Metering benefits listed above have obvious environmental benefits. When Smart Metering lowers a utility’s fuel consumption or slows grid expansion, cleaner air and preserved landscape result. Smart Metering also facilitates conservation through:

• Leak detection. When interval reads identify premises where water or gas consumption never drops to zero, leaks are an obvious suspect.
• Demand response / critical peak pricing. Demand response encourages more complete use of existing base power. Used with critical peak pricing, it also reduces peak usage, lowering needs for new generators and transmission corridors.
• Load control. With the consent of the owner, Smart Metering permits utilities or other third parties to reduce energy use inside a home or office under defined circumstances.

Issues in Smart Metering

System Intelligence

There is a continuing debate in the utility industry as to whether smart metering intelligence should be distributed or centralized.

Initial discussions of advanced metering tended to assume intelligence embedded in meters. Distributed intelligence seemed part of a trend, like “smart cards,” “smart locks,” and scores of other everyday devices with embedded computing power.

Today, industry consensus favors centralized intelligence. Why? Because while data processing for purposes of interval billing can take place in either distributed or central locations, other applications for interval data and related communications systems cannot. In fact, utilities that opt for processing data at the meter frequently make it impossible to realize a number of the benefits listed above.

Data Volume

Smart Metering inevitably increases the amount of meter data utilities must handle. In the residential arena, for instance, hour-long intervals that replace monthly consumption totals replace 12 annual reads per customer with 8,760. That’s a 730-fold increase. In most utilities today, billing departments “own” metering data. Interval meter reads, however, are useful to many departments. They can provide information on load size and shape, analysis of which helps reduce generation and supply portfolio costs. Interval reads are even more valuable when combined with metering features like two-way communication between meter and utility, voltage monitoring, and “last gasp” messages that signal outages.

These new data provide departments outside billing with an information treasure trove. But when billing departments control the data, others frequently must wait for access lest they risk slowing down billing to a point that damages revenue flow.

Meter Data Management

An alternative way to handle data volume and multiple data requests is to offload it into a stand-alone meter data management (MDM) application. MDM gathers and stores meter data. It can also perform the preliminary processing required for different departments and programs. Most important, MDM gives all units equal access to commonly held meter data resources.

Meter Data Management addresses departmental needs across the utility

Meter data management provides an easy pathway between data and the multiple applications and departments that need it. It can more easily consolidate and integrate data from multiple meter types. It can reduce the cost of building and maintaining application interfaces. And it provides a place to store and use data, whose flow into the system cannot be regulated, such as the flood of almost simultaneous messages from tens of thousands of meters sending a “last gasp” during a major outage.

Weighing The Costs And Benefits

Smart metering on a mass scale is relatively new. No utility can answer all questions in advance. There are ways, however, to mitigate the risks:

Include All Potential Benefits

Smart metering may be hard to cost justify if it rests solely on customer acceptance of demand response. It is easier to cost-justify when it includes, for instance, the value of the many benefits listed above.

Evaluate Pilots

Technology annals are full of stories about successful pilots followed by unsuccessful products. That’s because pilots frequently protect participants from harsh financial consequences. And it’s difficult for utility personnel to avoid spending time and attention on participants in ways that encourage them to buy into the program. Real-life program rollouts lack these elements.

Complicating the problem are likely differences between long-term and short-term behavior. The history of gasoline conservation programs suggests that while consumers initially embrace incentives to car pool or use public transportation, few make such changes on a permanent basis.

Examining the experiences of utilities in the smart metering forefront – in Italy, for example, or the US states of California and Idaho – may provide more information than a pilot.

Develop a Complete Business Case

Determining the cost-benefit ratio of Smart Metering is challenging. Some costs ­– meter prices, installation charges – may be relatively easy to determine. Others require careful calculations; when interval meters replace time-of-use meters, how does the higher cost of interval meters compare with the fact that they do not require time-of-use manual reprogramming?

As in any business case, some costs must be estimated:

• Will customer sign-up equal the number needed to break even?
• How long will meters last?
• Will we undertake retraining of current meter readers, and what will that cost?
• Will Smart Metering help us retain customers we might otherwise lose?
• Can we offer new services, such as equipment efficiency analyses, and how much can we charge for them?

Because some utilities are already rolling out Smart Metering programs, it is increasingly easy to obtain real-life numbers rather than estimates to plug into your business case.

Consider Alternatives

Technology is “smart” only when it reduces the cost to obtain objectives. Utilities may

find it valuable to try lower-cost routes to some results, for instance:

• Customer charges to prevent unnecessary “truck rolls.” Such fees are common among telephone service providers and have worked well for some gas utilities responding to repeated false alarms from householder-installed carbon monoxide detectors.
• Time-of-use billing with time/rate relationships that remain constant for a year or more, giving consumers opportunities to make time-shifting a habit.
• Urging customers to use the time-shifting features on their appliances as a contribution to the environment. Most consumers have no idea that electricity goes to waste at night. Keeping emissions out of the air and transmission towers out of the landscape could be far more compelling to many consumers than a relatively small saving resulting from an on- and off-peak pricing differential.
• Month-to-month rate variability. One study found that approximately a third of the efficiency gains from real-time interval pricing can be captured by simply varying the flat retail rates monthly—and at no additional cost for metering.[ 1] While a third of the efficiency gains might not be enough to attain long-term goals, they might be enough to fill in a shorter-term deficit, permitting technology costs and regulatory climates to stabilize before decisions must be made.
• Multi-tier pricing based on consumption. Today, two-tier pricing is common.[2] Three or four tiers might better capture the attention of those whose consumption is particularly high – owners of large homes and pool heaters, for instance – without burdening those at the lower end of the economic ladder. Tiers plus exception handling for hardships like high-consuming medical equipment would almost certainly be less difficult and expensive than universal interval metering.

References:

[1] Holland and Mansur, “The Distributional and Environmental Effects of Time-Varying Prices in

Competitive Electricity Markets.” Results published in “If RTP Is So Great, Why Don’t We See More Of It?” Center for the Study of Energy Markets Research Review, University of California Energy Institute, Spring 2006. Available at www.ucei.berkeley.edu.

[2] That is, a lower rate for the first few hundred kilowatt-hours per month and a higher rate for additional hours.