Smart Meters, Smart Decisions

An Institute for Electric Efficiency (IEE) white paper published in July 2011, “The Costs and Benefits of Smart Meters for Residential Customers,” notes that approximately 20 million smart meters have been deployed in the United States as of June 2011, and it is likely this number will rise to nearly 65 million meters by 2015, representing approximately 50% of all U.S. households. By the end of the decade, the white paper suggests, smart meters may be deployed to almost all U.S. households.

With smart meters on the rise, utilities certainly need to continue promoting the benefits of smart meters to customers and, in so doing, help assuage their concerns. At the same time, utilities also need to continue identifying and internally promoting the value of smart meters for their operations. Some utilities believe they cannot afford to install smart meters. However, with the cornucopia of benefits smart meters can provide to utilities, utilities need to start thinking they cannot afford not to install them.

Outage Restoration

The most significant benefit utilities with smart meters report is the ability to better manage outages. Smart meters provide automatic notification of outages, quicker assessment of the specific locations affected and the ability to verify when power has been restored to all meters.

“From a field operations standpoint, smart meters help identify outages more quickly and pinpoint the locations better,” says Joel Hoiland, CEO of Utilimetrics, a community of advanced metering infrastructure smart grid companies and professionals focused on bringing utilities and their customers together through technology.

“Smart meters provide better sensing of whether power lines are down, or if it is simply a meter problem or some other issue,” Hoiland says. He also notes that smart meters facilitate displays of outage maps, provide updates on outage locations and expected durations, and help utilities ensure outage resolution at every meter location.

According to Rick Stevens, vice president of asset management for Hydro One, being able to use a real-time outage notification event from the meter and integrating it with an outage management system is an important benefit of smart meters. “With smart meters, you can more quickly pinpoint where the fault is, which allows you to dispatch more quickly and with more accuracy,” he says.

For example, as a utility begins restoration efforts, it is not uncommon to have a downstream fault from an upstream fault. However, without smart meter information, the utility may send its crew out to fix the upstream fault (being unaware of the downstream fault), only to have to return later to fix the downstream fault. “With smart meters, you can ping the meters to make sure everything is cleared,” Stevens says. “For a utility our size, and with our travel times, this will be a fairly significant benefit.”

Outage Prevention

Smart meters also provide real-time data that can be used to balance electric loads, thereby reducing blackout-related power outages.

In addition, according to Utilimetrics' Hoiland, smart meter information can offer opportunities for more efficient tree trimming programs. “If limbs are getting on lines and causing momentary pulses and blink-outs, you can identify this and deploy a crew to do some trimming,” he says.

Selected trimming is not only more cost-effective than wholesale tree trimming, but it also can be more customer friendly, because the utility can explain to customers that specific trees need to be trimmed or else they will cause imminent problems. Not being able to provide this kind of specific information can cause public relations problems, according to Hoiland.

“I read a story in the paper a couple of years ago where a utility was going to cut down a bunch of trees,” he recalls. “Residents got up in arms about it, called city hall and the mayor sent the police out to order the crews not to cut the trees. The utility probably had a legal right to do so, but it was not very good PR.”

Customer Service

According to Ryan Hledik, a senior associate with The Brattle Group, smart meter data will tell the utility more than it has ever known about each of its customers. “This creates the opportunity to provide new, tailored customer programs and to foster deeper relationships with customers that were previously not feasible,” he says. “Presenting new and attractive program options, if done effectively, should improve customer satisfaction.”

Hydro One also is seeing benefits on the customer service side. “Historically, we would read the majority of our bills quarterly,” Stevens says. “At some point in time, a customer will have a high bill, and you are more or less at a loss as to what happened.”

If a utility has granular data at the hourly level from the smart meters, it can begin to pinpoint the causes and effects of any billing anomalies, and call center agents can work through these issues with customers. “For example, you can see water heater load spikes, air conditioning spikes and so on,” Stevens says.

Employee Efficiency and Safety

Smart meters turn activities that were once manual, expensive and time-intensive into ones that are automated, inexpensive and quick. Perhaps just as important, connects and disconnects can be done remotely. “There is a tremendous savings associated with not having to send someone out to do the connects and disconnects,” Hledik says.

As it relates to the first two benefits, any time crews are driving in the field, there are mobility costs as well as safety risks. In terms of risks, having fewer people in the field reading, connecting or disconnecting meters reduces the potential for field-related accidents and injuries. “This leads to lower insurance and legal costs associated with accidents,” Hledik explains.

A fourth benefit is a reduction in the need for estimated billing and the resulting billing errors. “With smart meters, you don't need to estimate, because you have the actual data,” Hledik says. Along the same lines, there is a reduction in the need for rebilling. “Back-office rebilling is a very inefficient and costly way to collect,” he adds.

Finally, smart meters can reduce call center transactions. “Customers have much more information available to them, which reduces the need for them to contact the call center,” Hledik explains.

Utility Efficiency

Smart meters are the first step toward allowing utilities to monitor their electric systems more quickly and effectively. This includes better power-quality data that can improve efficiency, service reliability and losses.

“From a business development standpoint, smart meters help utilities analyze consumption, analyze demand-response options and monitor property and equipment,” says Utilimetrics' Hoiland. “Smart meters are also a beginning point for automating the entire utility. Once you have a connection to the endpoint, which is the customer, you have near-instant access to data.”

Smart meters also provide utilities with direct load control with measurement and verification, improved transformer load management and improved capacitor bank switching. “AMI will improve the utility's ability to measure and verify the impacts of direct load control programs,” explains Brattle's Hledik. “It will allow for the replacement of failed equipment that otherwise would not have been detected.”

“Historically, we have not had good hourly load profile information,” reports Hydro One's Stevens. When utilities start connecting generators, it becomes important, for deriving thermal capacity and short-circuit levels, to be able to understand not only the generation capabilities but also what the offsetting load profile is.”

Hydro One is starting to actually mine a lot of smart meter data to get good load profile, so it can accurately assess the impact of connected generation along the various parts of feeders. “This allows us to do good distribution modeling using accurate hourly load profiles of both load and generation,” Stevens explains.

Smart meters also allow utilities to access better and more comprehensive data that can assist in efficient grid system design. For example, according to Hledik, engineers can identify bottlenecks and other inefficiencies, which can help reduce the problem of grid overbuilding. “If you have a good sense of what the natural load is for a particular area, you can build your grid appropriately,” he explains.

Hydro One's Stevens agrees. “We serve a lot of small towns and communities in rural Ontario,” he explains. “Over the decades, we used to build long radial feeds with no monitoring or control. We are now installing generators all over the place, and the need for information is becoming very important in terms of how we plan system upgrades.”

Having the meter data provides the utility with a level of granularity in terms of load and generation consumption patterns. “When you augment that with GIS information, you can start doing some good profile analysis and assessment of capacity upgrade requirements,” Stevens says.

In the past, if a new subdivision was going in, the utility had to send a couple of linemen out with a recording ammeter and voltmeter, which they would hang for three or four weeks. Then, based on this information, the utility would make its best guess. “Now we have the granular data from the meters themselves, as well as time and effort spent on geospatial information systems, which provide all of the conductor and feeder characteristics,” Stevens says. “Bringing all of these technologies together allows us to do a good job of asset management, especially as it relates to growth and system upgrade requirements.”

Utility Finances

The total financial benefits for a utility with smart meters are significant, and they range from relatively small to very large.

For one, smart meters improve billing, accounting and revenue protection. “Bills go out immediately, cutting days off the cash cycle,” Utilimetrics' Hoiland says. “This significantly speeds cash flow and associated earnings on revenue.”

There also are reduced costs associated with load research data. “Since you have all of the necessary data already, you can do your own load forecasting,” explains Hoiland.

Smart meters also provide for early detection of meter tampering and theft. Utilimetrics recently held a learning lab with a West Coast utility. “As part of the lab, their security department gave a presentation,” Hoiland says. “They indicated that over 50% of their theft problems were related to marijuana growing operations.” The growers would take over multiple houses and convert the houses to growing operations. The houses would need a lot of power for heat, light and fans.

“With smart meters, the utility can detect large consumptions of electricity,” says Hoiland. “When they were reading meters only once a month, though, the access to this information was too slow.” Often, one flag associated with excess usage was a blown transformer, because it was not sized to handle the extra load. “Now, with smart meters, the utility can identify a particular neighborhood and then start monitoring the individual houses or buildings within that particular area,” Hoiland explains. This leads to a reduction of blown transformers, because growing loads are identified sooner. The utility also reported there have been some house fires because of wiring not being adequate to handle the loads.

Moving up the financial benefits ladder, smart meters enable dynamic pricing and rate options — raising or lowering the cost of electricity based on demand. This can lead to reduced hedging costs, according to Hledik. “By offering time-varying rates to customers, utilities will avoid the cost of hedging against market price volatility,” he explains. “That risk is passed through to participants in the dynamic pricing program who benefit from a lower average price as a result of taking on that risk.”

And at the very largest level, the information smart meters provide to customers who allow them to reduce usage and the information that allows utilities to reduce grid overbuilding helps to avoid the exorbitant capital expenses and the related regulatory red tape associated with building new power plants.

Regulatory Goodwill

According to Brattle's Hledik, electric utilities are currently facing flat or declining per-capita sales. However, costs are expected to rise with the need to provide increasing amounts of low-emission energy resources. “This will put upward pressure on rates, and regulators are likely to become increasingly sensitive to requests for rate increases,” Hledik says.

“Previous history shows that periods of high capital investment by utilities are associated with lower-earned ROEs. If a strong portfolio of AMI-enabled demand response and energy-efficiency programs can limit the required new resource investment, they can be value-enhancing by allowing the utility's margins to be greater than they otherwise would be.” The enhanced reputation from these programs among regulators also may result in a higher-allowed ROE, everything else being equal, than if the utility is viewed as resisting such programs.

The Environment

Smart meters can help utilities become more green. One obvious way, of course, is reduced customer power usage, especially during peak hours. Another is reduced pollution associated with having so many employees in the field reading, connecting and disconnecting meters. A third is not having to build as many new power plants.

“In addition to the potential for reduced emissions through load reductions, the smart grid has the potential to facilitate the integration of greater amounts of renewable resources,” Hledik says. “Executives in the renewable industry are citing large amounts of renewables market penetration that would specifically be enabled by smart grid adoption.”

In sum, while utilities need to continue to emphasize the value of smart meters to their customers, they also need to spread the message internally to make sure everyone in their own organizations are on board and actively promoting the adoption and expansion of smart meter rollouts.

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William Atkinson (w.atkinson@mchsi.com) has been a full-time freelance business writer since 1976, specializing in utilities.

Companies mentioned:

The Brattle Group www.brattle.com

Hydro One www.hydroone.com

Institute for Electric Efficiency www.edisonfoundation.net

Utilimetrics www.utilimetrics.org