American smart meter industry needs help from regulators

American smart meter industry needs help from regulators

Currently, across the United States smart meters are present in well under 5% of the total market.  Speakers at the Utilities Telecom Council’s annual conference, held May 5, say use of the advanced devices won’t proliferate unless regulators change their way of thinking.

According to Mike Burns, senior product manager for smart meter manufacturer Itron, a major issue facing utility companies is the fact that regulated prices for the last 20 years have kept rates well below what the market price would be if it were determined by supply and demand.  Burns also believes that rate freezes over the last decade have slowed capital investment; resulting in the antiquated, overburdened electrical infrastructure in place throughout America today.

The situation has become so dire that investments totaling $1.5 trillion over the next 20 years, and $900 billion within the next 10 years is needed ”just to keep the lights on,” according to Burns, further commenting that “we’re heading for a train wreck.”  These huge capital expenditures, necessary for an aged utility infrastructure, won’t leave much for migrating to innovative technologies such as smart metering.

Besides putting the blame on regulators for discouraging infrastructure investments for more than 20 years, current regulatory policies limit the potential of what utilities and consumers could actually take advantage of when energy usage information is collected.  “Smart meters and dumb rates accomplish absolutely nothing,” said Burns.

Regulatory arms of the utility industry are hesitant to adopt variable pricing programs because of the constant pressure from consumer advocacy groups, according to Burns.  Consumer advocacy groups are not convinced that market rates would be in the best interest of the customer, especially if some ended up paying more because of misunderstanding in how the pricing plans are structured.  Regulators are in constant fear (“deathly afraid” as Burns put it) of a situation where customers’ bills doubled or even tripled after a variable pricing scheme was implemented.  If such a “nightmare scenario” were to happen, regulators worry they would lose their jobs.

Dr. Henry Jones, CTO at smart meter innovator SmartSynch, believes the promise that smart meters have to offer society can get through to regulators.  The utility industry must provide a business case for smart meters that is so compelling that its provisions cannot be ignored.  The way to do this, according to Jones, is to “look at who’s been successful so far.”

Examples of success stories are not difficult to find.  Southern California Edison has deployed the devices.  Even though current deployments represent about a quarter of one percent of the energy provider’s total meters in the field, they are accounting for more than half of total revenues.  This translates to over $2 billion every year for the utility.  The big bump in revenues comes from the fact that smart meters are much more accurate than traditional, mechanical meters.  “The move to AMI [advanced metering infrastructure] is a huge upgrade,” added Jones.

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