Smart Metering A Case Study

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Smart Metering - A Case Study

• Presentation By Frank W. Radigan,
• Principal Hudson River Energy Group
• June 10, 2008

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Topics of the Day

• Who is HREG?
• Case Study Connecticut
• NY Utilities Approach

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Hudson River Energy Group

• 27 years experience in utilities industry
• Serving gas, water, electric and steam industry
• 15 years experience at the NY PSC
• 12 years consulting throughout New York, New
  England and, more recently, all around the
  country
• Specializing in rates, rate design, revenue
  requirement, performance based rates,
  depreciation and power supply issues
• Diverse client base, but never the large investor
  owned utilities

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Case Study Ct. - Background

• In June of 2005, the Connecticut Legislature
  passed Public Act 05-1, An Act Concerning Energy
  Independence which became known as the Energy
  Independence Act or EIA.
• The EIA requires the Ct. Department of Utility
  Control (DPUC) to consider rate design changes to
  require
• Mandatory three-period TOU rates for customers of
  not less than 350 kW,
• Optional interruptible or load response rate for
  customers of not less than 350 kW,
• Optional seasonal and TOU rates for all customers
• Mandatory seasonal rates for all customers
• In December 2006 the Ct. DPUC required utilities
  to submit a metering plan under which it could
  achieve the Departments objective of offering
  TOU rates to all commercial and industrial
  customers and to the largest residential
  customers.

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CLP Approach

• In March 2007 CLP filed an Advanced Metering
  Infrastructure Plan (AMI Plan).
• CLP evaluated available metering technology and
  the abilities of the various technologies to meet
  the requirements of the DPUC as well as
  adaptability to serve other purposes, such as
  facilitating the use of the next generation of
  smart appliances which will provide customers
  with greater choices.
• CLP claimed that Open AMI was the technology
  that best accomplished the goals articulated by
  the DPUC.
• CLP also stated that the most cost effective
  deployment strategy for this technology was
  geographically-based deployment on an accelerated
  basis that would begin in 2007 and conclude with
  deployment to all CLP customers by mid-2010.

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CLP Approach Cont

• CLP provided four options for the Department to
  consider ranging from a simple plan designed to
  comply with the minimum requirements of the EIA
  up to the full deployment.
• The cost of the options ranged from 89 million
  for simple compliance up to 255 million for full
  deployment.
• Note CLPs current metering system was
  recently updated to AMR technology at a cost of
  112 million to ratepayers.
• As part of its plan CLP wanted full recovery of
  its AMR investment
• At year end 2006, CLP had a rate base of 1.6
  billion so the plan would increase rate base by
  23

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Further Changes in Ct.

• During the course of the proceeding, the
  Connecticut Legislature enacted Public Act
  07-242, An Act Concerning Electricity and Energy
  Efficiency (Energy Efficiency Act), which
  provides, in part, that
• Each utility shall submit a plan to deploy an
  advance metering system which will support net
  metering and be capable of tracking hourly
  consumption
• Any customer may obtain such a meter on or after
  January 2009
• Within 6 months of implementation of the statue,
  electric distribution companies shall offer TOU
  pricing options to all customer classes,
  including, but not limited to, hourly and
  real-time pricing options
• Each electric distribution must submit a
  proposal, and by January 1, 2008, the Department
  will approve a voluntary critical peak pricing or
  real-time pricing tariff for each customer class.

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DPUC Insight

• In June 2007, the DPUC held a technical meeting
  to discuss the effects of the Energy Efficiency
  Act on CLPs AMI Plan.
• At the meeting the DPUC provided the following
  guidance to CLP
• The plan should provide customers with the tools
  to manage their electricity usage and costs
  through new rate structures and the technology to
  support those structure.
• The plan should enable customers to affect a
  reduction in load during the on-peak hours to
  enable economic benefits from an altered load
  profile.
• The plan should provide options based on 1)
  deployment by class or usage, with the intent to
  capture the largest customers and 2) deployment
  to blanket geographic areas that can maximize the
  mesh network capabilities
• The Energy Efficiency Act does not require
  replacement of all 1.2 million meters in CLPs
  system.

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CLPs Revised Plan

• In July 2007, CLP submitted a Revised AMI Plan
  to comply with the various provisions of the
  Energy Efficiency Act.
• CLP developed six options for deployment of AMI,
  and stated that all six meet the requirements of
  the Energy Efficiency Act.
• For basic compliance, Option 1, the Company would
  use a technology that is available today which it
  estimates to cost 10 million.
• The next four options increase in deployment
  level, cost and level of technology.
• Option 6, which the Company described as Full
  Deployment, would enable a Robust Market Design
  available to all customers using the latest
  technology, and would cost 274 million.
  Customers would still have to pay for the AMR
  meters (112 million).

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Facts Learned in Hearings

• There are studies in other parts of the country,
  like California, that suggest the introduction
  that time-of-use pricing or critical time pricing
  or some kind of time differentiated pricing does
  result in a load shift response.
• Economic theory states that when you send price
  signals and the cost of a product goes up that
  people respond in an inverse way. So from a
  theoretical perspective, from an intuitive
  perspective, and then from a more discrete
  perspective through some of the pilots that have
  happened, there's absolutely no reason to believe
  that customers would not respond.
• What we don't know about is the level of the
  magnitude of how our customers are going to
  respond. We don't have that data.
• We cannot guarantee a one-for-one cost benefit,
  dollar-for-dollar here.

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DPUC Findings

• The current metering system has the capability to
  provide all the needs and benefits from TOU rates
  that customers want and are likely to use. In
  fact, 30 of CLPs load is already on TOU rates.
• CLPs proposal would make sense if there was a
  reasonable expectation that large numbers of
  customers would utilize TOU rates and shift
  consumption to off-peak periods. However, at
  this time there is no evidence to support this
  finding.
• The purported benefits of CLPs Open AMI
  proposal are predicated not on what it will
  accomplish using todays customer technology and
  infrastructure, but rather on what it may
  accomplish sometime in the future if customers
  make significant changes in their homes, if
  customers change out or modify their appliances
  and if customers change their consumption habits.
  
• The Department also shares the concerns of other
  participants regarding the newness of this
  technology. It remains to be seen whether
  OpenAMI will operate as advertised and whether
  the meters will work in rural or less densely
  populated areas.

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Compliance Filing

• Proposal to conduct a Rate Pilot plan in the
  summer of 2009
• A 10,000 Smart Meter Study
• The Rate Pilot will offer, on a voluntary basis,
  3 TOU rates to a sample subset of residential,
  small commercial and industrial customers.
• Proposal to target of 2,600 customers (1,300
  residential and 1,300 small CI customers) and
  evaluate the results of the Rate Pilot to assess
  customer acceptance of various rate options and
  ultimate load response that the options may
  generate.

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NY Utilities Approach

• In August 2006, the NY PSC issued an order that
  required utilities to submit a plan for deploying
  smart meters capable of supporting TOU rates. The
  PSC further requested the companies to explore
  the feasibility of using advanced metering
  systems for gas customers.
• NYSEG/RGE/OR and Con Ed replace all existing
  6.6 million meters at a cost of 983 million
  average 150 per meter.
• National Grid -- Continue to deploy smart meters
  to for large CI customers. Not cost effective
  to spend 650 million for 2.2 million customers.
• Keyspan and NFG Already giving advanced
  metering to largest customer and sees no
  additional benefit for doing anything else.

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Contact Information

• Frank RadiganHudson River Energy Group237
  Schoolhouse RoadAlbany, NY 12203Tel. (518)
  452-2585Fax [phone]
• FRadigan_at_aol.com