At a customer's home in Bakersfield last week, leaders from PG&E and the California Public Utilities Commission celebrated the installation of Pacific Gas and Electric Company's first SmartMeter electric and gas meters, kicking off a five- year program to deploy 10.3 million new meters throughout the utility's service area. The SmartMeter program will eventually offer a wide range of customer service benefits while reducing utility costs and giving customers more options to save on energy bills.

While a number of utilities in the United States and abroad have demonstrated the effectiveness of the technology, PG&E's program is the largest of its kind in the United States and is also using the technology in innovative new ways. PG&E is investing $1.7 billion in the new high-tech meters.

Leading the ceremony on Nov. 16 were PG&E Corporation Chairman, CEO and President Peter Darbee and California Public Utilities Commission President Michael Peevey.

"PG&E's SmartMeter program is one of the cornerstones of a sweeping effort to take a dramatic leap forward in the way we deliver service to our customers," said Darbee. "As we build the SmartMeter network, we will add more and more features to empower customers with better information and the ability to make cost-saving choices about the way they use energy. This technology will eventually give PG&E new rapid response capabilities to restore service following an outage, as well as enhanced abilities to assist customers when they phone our call centers."

"I am pleased to witness today the installation of the first smart meter for a PG&E customer," said Michael R. Peevey, president of the California Public Utilities Commission. "This technology will link the prices energy consumers pay to the costs of that energy in the wholesale market, empowering consumers with the information necessary to make sound energy choices. Research suggests that even modest levels of price sensitivity in the retail market can yield substantial benefits as customers decrease or shift their energy usage. These types of demand response programs are one of the best ways to meet the energy needs of California's growing population, as outlined in our Energy Action Plan."

As PG&E continues to build the SmartMeter network the number of customer service benefits will grow. Starting in summer 2007, PG&E's SmartMeter meters will be read remotely. Within one to two months of getting the new meters, customers will no longer need to unlock gates, tie up dogs or make special arrangements to allow meter readers access to tough-to-reach meters. Customers will also have online access to daily information about their energy use, allowing them to make more informed energy-use decisions.

In 2008, SmartMeter technology will continually read circuits so that within minutes of a power outage, PG&E can pinpoint the outage scope and location. In many cases, this will allow dispatchers to send crews directly to suspected trouble spots, in contrast to the current practice of crews sometimes having to patrol entire circuits until problems are located.

Because the SmartMeter system records each electric meter's usage every hour, customers will have the option to take advantage of electricity prices that vary by season and time of day -- potentially reducing their bills by shifting their energy use from peak to off-peak periods.

Starting in the summer of 2007 PG&E will offer customers with SmartMeter technology a new voluntary pricing program called Critical Peak Pricing, which could help many customers save money on their energy bills. The CPP program includes a special pricing option designed to reduce peak load on the very hottest days by providing financial incentives to customers who voluntarily shift electricity usage away from critical peaks. The number of critical peak days would be limited to no more than 15 each summer season. This will reduce PG&E's need to purchase additional power to meet demand at the most critical times, help avoid strain on the power grid, and help lessen reliance on fossil-fuel generation.

The SmartMeter system will also make it easier for customers to enroll in a separate program called time-of-use rates, which now requires the installation of a special meter and payment of a monthly fee. The time-of-use rate allows customers who can use less energy on weekday afternoons in the summer to save money on their summer bills.

The electric SmartMeter device is virtually identical in size and appearance to existing electric meters. The gas SmartMeter module is a small part that can be added to an existing gas meter.

PG&E's investment to deploy the new SmartMeter technology throughout its service territory is estimated to be $1.7 billion, consisting of $1.4 billion in capital expenditures and an estimated expense of $330 million. These costs are expected to be offset by operational and power procurement savings achieved by the use of these advanced meters. To fund the deployment of the SmartMeter program, the CPUC approved in July slight rate increases. For the average residential customer with both gas and electric service, the increase ranges from 49 to 99 cents per month for the first five years, or about 1 percent, and decreases each year afterward. After this initial period, it is projected that future rates will reflect savings generated by the SmartMeter program.

The CPUC also approved funds to retrain PG&E's meter readers. PG&E has been working with the International Brotherhood of Electrical Workers, the union representing meter readers, to address labor impact issues and has reached an agreement to provide several means for affected employees to find alternative work within PG&E.