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Did The Massachusetts DPU Misread The (Smart) Meter?

June 12, 2018

Last month, the Massachusetts Department of Public Utilities (DPU) decided that the deployment of smart meters wasn’t a good idea at the moment, saying the costs outweighed the benefits and citing “weaknesses” in the business case behind the proposal. With all respect to DPU, we think that’s a missed opportunity. 

In a May 10 order, the agency “declined to preauthorize any customer-facing investments at this time.” (Translation: No smart meters.) In doing so, DPU delayed five-year advanced metering plans by Eversource, which had put forth a $138 million program; Unitil, $1.3 million; and National Grid, $74 million to $369 million.

Here’s what DPU said in justifying its decision:

The evidence in these cases revealed weaknesses in the business case for advanced metering functionality presented by each company…The Department weighed the significant costs associated with full achievement of advanced metering functionality using advanced metering infrastructure against the considerable uncertainty regarding benefits from reduced demand, capacity savings, and customer participation in time varying rates or other forms of dynamic pricing. We determined that the benefits of a full deployment of advanced metering functionality do not currently justify the costs…

From our perspective, there are three general takeaways behind the department’s thinking:

  • Cost and redundancy. DPU said the utilities had already deployed automatic meter reading systems, and the change from manual reading to remote reading has already occurred. “Any decision to prematurely retire these meters and replace them with other advanced metering infrastructure would come at a significant cost,” the department added.
  • No wide adoption of “dynamic pricing programs.” To achieve the benefits of advanced metering infrastructure (AMI), the agency said, customers would have to participate in time-of-use rates, real-time pricing, and “other dynamic pricing programs.” But as more customers move from basic services to alternatives such as municipal aggregation, the department would “need the certainty of wide adoption of dynamic pricing products from the competitive supply market to maximize the benefits of advanced metering functionality.” Without this level of adoption, it added, DPU “lacks the needed assurance that the benefits associated with advanced metering functionality will justify the substantial costs.”
  • Data sharing. Although Eversource, Unitil, and National Grid all said they plan to make customer usage data available to third-party providers, DPU said market stakeholders still need to “develop a uniform statewide data access strategy.” 

Cutting through the technical-speak, this issue is largely about digitization; that is, the conversion of complex customer consumption data into a digital form that can be easily accessed, shared, and acted upon to ensure reliable, affordable electricity. Viewed through that prism, DPU’s arguments appear to come up a bit short.

To be sure, Massachusetts already has remote-read meters. But they’re used primarily for billing; the utility reads them, and customers get a bill. While smart meters serve that purpose as well, they also deliver critical customer data – not just how much power is being used, but how and when.

So if providers can get this information from smart meters in real time (every 15 minutes, for example), they can develop products and services that focus on the specific patterns of specific customers. By the same token, the meters give customers more control over consumption, enabling them to adjust usage – say, move the air conditioner up a degree or the heater down a degree – during periods when electricity is most expensive.

The upshot? Customers save money during peak demand periods and, as a result, enjoy lower monthly bills. On top of that, cutting consumption at times of high usage eases stress on the grid, minimizing the potential for service interruptions. And it reduces the need for more generation, thus reducing the environmental footprint associated with power production.

But for that to happen, utilities – who have the data – need to make sure it is in digital form and then share it with other providers. Although in some markets that is being done now, the information is often a day or more old when provided to third parties, rendering it basically useless; in Massachusetts, the delay is XX. Telling customers on a Tuesday they could have reduced usage on the previous Monday doesn’t have an effect on costs (other than keeping them higher than necessary).

Speaking of which, we’ll concede the DPU is right in saying there will be a cost factor in smart meter deployment. But that’s only part of the story.

A study in one utility market found that real-time pricing – which requires smart meters – saved customers an average of 13.2 percent on their bills compared with a traditional flat-rate system. A second study, in a second market, showed savings of nearly $360 per year. And still a third determined that as much as 66 percent of the overall benefits of smart meters accrue to customers.

So to recap:

Smart meters put customers in control. They can help reduce consumption. They promote grid resiliency and a cleaner environment. And the savings to users will go a long way toward compensating for any increase in costs.

Those benefits are real, they are achievable now, and they argue against any concerns that deployment of smart meters would be “premature.” What’s more, the Energy Information Administration reported that at the end of 2017, utilities had about 70.8 million AMI installations. That means a lot of customers, in a lot of markets, are already seeing a lot of advantages that continue to elude Massachusetts.

Why not just give providers access to the data they need to develop pricing programs that capture the upsides of smart meters, and then give customers the choice to opt in or opt out? Demanding a “certainty of wide adoption” in an ever-changing energy landscape makes little sense. There are no certainties, other than the fact that power needs to be put where it belongs – in the hands of the people and businesses who pay the bills. 

In all fairness, DPU did say in the order that it was not moving away from the idea of AMIs, and vowed to engage stakeholders in a dialogue about how to resolve the issues in a way that enabled “a successful future deployment of advanced metering functionality.” That’s fine. 

But if you look at the state of smart meters today, the future is now. Here’s hoping that Massachusetts isn’t going to let the opportunity to seize that future pass customers by.