Ten years ago, unleaded gas cost an average of $1.11 per gallon,
the median family income was about $45,000, natural gas cost about $6.16 per
thousand cubic feet, and electricity was about $0.0838
per kilowatt hour. Investor-owned utilities were considered very safe investments,
suitable for widows and children looking for dividends.

Automated meter reading (AMR) was still a developing industry. In fact, federal
legislation was introduced to investigate the possibilities of remote metering.
While the federal government was considering a study, 10 utilities reported
installing more than 230,000 AMR units. That’s a small percentage of
the installed base of meters, but certainly a building block.

For utilities, the primary driver for installing AMR systems was reduction
of meter-reading costs. Collecting the critical monthly billing read without
errors, without human intervention, and as quickly as possible were the main
business case drivers.

Utilities were dealing with specific issues in 1993, including two-income
families that resulted in lack of access to meters, meter-reader safety issues,
and
the increasing automation of processes. The focus was on the reading to provide
input to the billing system. More frequent billing, customized billing dates,
and improved customer service were
all concepts for the future.

The primary technology used for AMR systems was telephone. This could be in-bound
or out-bound but was firmly built on the assumption that residences and businesses
had phone lines that could be used by the AMR system. While business cases
for AMR implementations still include the reduction of meter-reading costs,
the decade progressively has brought substantial changes to the overall utility
marketplace and to the AMR industry specifically.

Changes

These changes have occurred in four main areas: technology, the utility business,
social/economic arena, and regulatory issues. Let’s take a look at some
of them and how they affect the AMR business case.

In 1993, few people could have predicted that the percentage of homes with
landline telephones in the US would actually decrease. There are several drivers
for this, including the decreased cost of mobile services as well as other
technologies available to homeowners such as Internet phones and cable modems.
In addition, the implementation rate of the Internet has been greater than
any previous technology introduction.

These technology changes have affected the AMR industry through the development
of new technologies that can be used for meter reading as well as changing
the benefits of a telephone-based AMR system. Most systems installed today
are radio frequency (RF)- or power-line carrier (PLC)-based.

Changes in the utility business have come from several different areas. The
prospect of deregulation and now re-regulation of the electric industry has
forced utilities to be more focused on their core business. For municipal utilities,
the recent municipal budget challenges also have put more focus on better business
practices.

For both investor-owned and municipal utilities, this has created
the need to adopt technology that meets more than one need. AMR systems no
longer can be justified based only on reducing meter-reading costs. More focus
is placed on the entire meter-reading process. For example, collecting accurate
reads results in fewer customer calls and less expense because the customer-service
department receives far fewer calls complaining about high bills.

The past 10 years have seen a continued growth in the number of dual-income
families. Access to these homes has become more of a challenge. In addition,
these families often are technically savvy and want more control over their
financial lives. This can result in an interest in energy programs that can
lead to savings or simply to the customers’ desire to control the date
that they receive their utility bills.

Finally, increased regulatory pressures have had an impact on the entire
utility business. New focus on better customer service through the elimination
of estimated
reads or percentage of accurate bills has changed how utilities view AMR. While
the deregulation/re-regulation of the electric industry is the most obvious
example, water utilities are being hit by increased legislative pressure from
the Clean Water Act and the Safe Drinking Water Act.

AMR in 2003

Today there are more than 25 million AMR units installed on gas, water,
and electric utility meters. The gas industry leads with about 21 percent of
the
meters changed to AMR, electric has about 16 percent, and water has 11 percent
installed. More than 9 million units shipped in 2002,
and indicators show that 2003 numbers will exceed that substantially.

The early technology choice, telephone, has seen a decrease in sales. On the
other hand, radio frequency products have captured more than 75 percent of
the market. Within the RF market, there are both mobile and fixed network systems.
To date, mobile technology has been installed at about 70 percent of the RF
systems.

While there are more than 20 AMR vendors listed in the most recent edition
of The Scott Report, seven vendors have shipped almost 97 percent of the installed
AMR. These include Itron Inc., SchlumbergerSEMA, Badger Meter Inc., Hunt Technologies
Inc., TWACS by DCSI, Neptune Technology Group Inc., and Invensys plc.

Many of the new systems being marketed provide more than just a monthly billing
read. Network-based systems, both RF and PLC, can provide daily, every four-hour,
or even every 15-minute, readings from the meter. The additional information
being collected can provide benefits to both the utility and the customer.

Utilities are installing AMR systems today to improve customer service as well
as to provide value throughout the enterprise. AMR systems are affecting more
than the meter-reading department; they
are being integrated with resources elsewhere within the utility. More accurate
and timely data has increased value to other departments.

Many customer-service benefits remain unchanged in 10 years: elimination
of estimated bills, reduced off-cycle reads, and reduced billing disputes.
However,
regulatory pressure has been the driver for the system installation in some
cases. One utility was required to answer 80 percent of its calls within 20
seconds. There were two ways to meet this mandate. The utility could substantially
increase the size
of its call center, or it could decrease the number of incoming calls. The
choice was a new AMR system.

AMR provides actual reads for each bill. Customers are increasingly unhappy
with estimated bills. If their cellular bill can tell them to the second how
long they spoke and with whom, why can’t their utility bill tell them
more than just the estimated usage for the past 30 days.

For some utilities, installation of an AMR system has reduced service-center
calls by more than 50 percent. The day after bills are sent is no longer the
worst day in the customer-service center.
With daily meter readings available, utilities can let customers choose their
billing date. Using software, the utility can present meter-reading data to
customers on a Web site so that they can see where their greatest consumption
is occurring.

Daily meter readings not only benefit the customer, they also benefit the utility.
One of the first benefits is a reduction in costs related to move in/move out
customers. This can be a major expense for utilities in college or university
towns with a large transient population.

But more important, having accurate, finely granular data gives utilities the
tool to bring more control to their process. When meter reading is collected
on only a monthly time frame, analysis of usage patterns is very difficult.
But with daily meter readings, load profiles can be built by customer, by neighborhood,
by substation, or by supply line.

Accurate load information enables engineering departments to correctly size
the infrastructure of the utility. In one case, information from the AMR system
was used to right-size transformers at a utility, resulting in substantial
savings. Likewise, water utilities can correctly size and select meters by
knowing what the typical consumption and high consumption for a service area
will be.

Marketing departments can use the data collected to run models
of different rate structures. Time-of-use rates become an option for utilities,
better matching costs to price. One California study indicated that peak-rate
usage could be shaved by 20 percent if customers had accurate pricing information.
And each megawatt of reduction can equate to $400,000 in savings per year for
the utility.

With a network AMR system installed, utilities can then look at other services
they can provide their customers. One utility provided energy analysis services
to large customers. By looking at when energy was being used and correlating
with building activity, the utility quickly identified incorrectly set HVAC
systems. This resulted in 5 percent
to 10 percent savings for the customer. For the utility, it provided differentiation
of its service on a proactive basis.

With more than 25 million points installed at more than 6,000 utilities, the
business cases are diverse. But more utilities are finding that AMR looks much
more attractive.

Future of AMR

With more than 200 million meters yet to be changed out to AMR, what does the
future hold? There are a number of drivers that can give some indications.
These include lower-cost equipment with more features, customer demands, and
continuing legislative and regulatory pressures.

The AMR industry continues to be very active. New products and new manufacturers
appear frequently. Many of the new products focus on reducing the cost of the
meter and AMR module. For some, this is done by integrating the two technologies,
for others it occurs through reducing the cost of installing the final product.

The new products often have new features. These include leak detection abilities
for water-oriented AMR products and solid-state electric meters that combine
metering and AMR capabilities.

The increased choice of communication technologies – Zigbee, 802.11b,
and Blue Tooth – have created a wider spectrum of AMR products. Utilities
have the ability to tailor their AMR solution to their territory and customer
needs. Solutions exist for urban, suburban, and rural communities and can be
combined to provide a custom-fitted solution rather than one-size-fits-all.
The increased levels of customer service provided by retailers have raised
the bar for utilities. Many customers want to be able to choose their billing
date. They want exact bills, and many want better control over their energy
purchases. AMR systems can assist utilities in meeting these challenges.

Meter-reading dates typically have mandated billing dates. With meter readings
available on a daily or more frequent basis, a change can be accommodated easily.
Likewise, installation of any AMR dramatically increases the accuracy of the
read. In some cases, AMR system providers will guarantee accuracy rates in
excess of 97 percent.

Control over energy costs can come from a number of AMR systems. For some customers,
a prepaid metering system that lets them pay
for energy usage on a weekly basis may meet their needs. For others, remotely
controlling the thermostat from their office may be their requirement. AMR
systems today can provide these benefits.

Legislative and regulatory demands will not lessen in the coming years. AMR
systems can provide the raw data to meet some of these. For example, monitoring
of the network used in an AMR system can provide more accurate outage information
than calls received from customers.

Discussions surrounding the Energy Bill recognized the value of advanced metering
to the nation and included tax incentives.

The more than 6,000 utilities in North America that have made an investment
in AMR are seeing the benefits. There is an immediate impact on the cost of
collecting meter reads, but the benefits flow throughout the enterprise. More
accurate reads reduce the burden on customer service departments and allow
meter readers to focus on upgrading systems rather than collecting meter reads.
Engineering departments can use the data to make better decisions in developing
the infrastructure, and outage teams can respond more rapidly to the correct
location.

AMR isn’t just about meter reading; it is about the information that
enables a utility to make well-informed strategic decisions and to excel.