Pacific Gas and Electric Company's $1.7 billion SmartMeter proposal has received unanimous approval by the California Public Utilities Commission, allowing the utility to move forward with a major investment in new high-tech electric and gas meters designed to provide a wide range of benefits to customers while increasing operational efficiencies at the utility.

PG&E's installation of 9.3 million SmartMeter devices for its 5.1 million electricity and 4.2 million gas customers is scheduled to begin in Bakersfield this autumn and finish systemwide in 2011.

"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 Tom King, president and CEO of Pacific Gas and Electric Company. "This technology empowers customers with better information and the ability to make cost-saving choices about the way they use energy. It also gives 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."

With SmartMeter, 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 better decisions.

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

Because SmartMeter records each electric meter's usage every hour, customers will be able to voluntarily 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.

A key feature of SmartMeter technology is the ability to reduce peak load on the hottest days by providing financial incentives to customers who voluntarily shift electricity usage away from critical peaks, which will reduce PG&E's need to purchase power to meet demand at the most critical times, help avoid strain on the power grid, and help reduce reliance on fossil-fuel generation.

To achieve these benefits, the CPUC approved PG&E's proposal to offer customers a critical peak pricing option. Residential customers who voluntarily enroll in the CPP program will reduce their electric rates by nearly 3 cents per kilowatt-hour from June 1 to Sept. 30 during non-CPP events. During a CPP event, enrolled residential customers would pay a 60 cent-per-kWh surcharge in addition to their regular rates for energy used between 2 p.m. and 7 p.m. and enrolled business customers would pay a 75 cent-per-kWh surcharge for energy used between 2 p.m. to 6 p.m. The number of CPP events would be limited to no more than 15 per year and only from May 1 to Oct. 31, but typically a CPP event would occur only on the hottest days of summer.

A typical CPP customer who reduces energy usage by about 25% just during CPP hours will save about 10% on electric bills during the four-month summer rate period. CPP rates will be available to customers with SmartMeter devices as soon as spring 2007. PG&E estimates that only about 15% of PG&E customers will need to enroll in CPP for the SmartMeter program to offset 10 percent of its projected cost.

SmartMeter will also make it easier for customers to enroll in a separate program called time-of-use rates, which now require the installation of a special meter and payment of a monthly fee for that meter.

The electric SmartMeter 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. Dozens of utilities in the United States and abroad are already employing advanced meters. However, PG&E's program is the largest of its kind in the United States.

PG&E's investment to deploy the new SmartMeters technology throughout PG&E's service territory is estimated to be $1.74 billion, consisting of $1.41 billion of capital and an estimated expense of $330 million. PG&E projects that these costs will be offset through operational and power procurement savings achieved by the use of these advanced meters. To fund SmartMeter installation, PG&E is seeking 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%, and decreases each year afterward. After this initial period, it is projected that future rates will reflect savings generated by the SmartMeter program.

The SmartMeter project approved by the CPUC funds a retraining budget for affected employees. 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.

The SmartMeter project stems from a 2002 California Public Utilities Commission order for utilities to consider programs and tools that offer customers improved options to reduce their electric usage during high-demand situations. California's investor-owned utilities were directed to explore advanced metering technologies and conduct a two-year statewide pilot program to gauge customer interest in dynamic pricing options. The pilot showed that enough customers are interested in enrolling in such pricing options that the SmartMeter project should realize its goal of substantial power procurement savings.