Should utilities replace current consumption meters with “smart metering” systems that provide more information to both utilities and customers? Increasingly, the answer is yes. Today, utilities and customers are beginning to see the advantages of metering systems that provide:
- Two-way communication between the utility and the meter; and
- Measurement that goes beyond a single consolidated quarterly or monthly consumption total to include time-of-use and interval measurement.
For many, “smart metering” is synonymous with an advanced metering infrastructure (AMI) that collects, processes and distributes metered data effectively across the entire utility as well as to the customer base (Figure 1).
SMART METERING REVOLUTIONIZES UTILITY REVENUE AND SERVICE POTENTIAL
When strategically evaluated and deployed, smart metering can deliver a wide variety of benefits to utilities.
- Significantly speeds cash flow and associated earnings on revenue. Smart metering permits utilities to read meters and send the data directly to the billing application. Bills go out immediately, cutting days off the meter-to-cash cycle.
- Improves return on investment via faster processing of final bills. Customers can request disconnects as the moving van pulls away. Smart metering polls the meter and gives the customer the amount of the final bill. Online or credit card payments effectively transform final bill collection cycles from a matter of weeks to a matter of seconds.
- Reduces bad debt. Smart metering helps prevent bad debt by facilitating the use of prepayment meters. It also reduces the size of overdue bills by enabling remote disconnects, which do not depend on crew availability.
Operational Cost Reductions
- Slashes the cost to connect and disconnect customers. Smart metering can virtually eliminate the costs of field crews and vehicles previously required to change service from the old to the new residents of a metered property.
- Lowers insurance and legal costs. Field crew insurance costs are high – and they’re even higher for employees subject to stress and injury while disconnecting customers with past-due bills. Remote disconnects through smart metering lower these costs. They also reduce medical leave, disability pay and compensation claims. Remote disconnects also significantly cut the number of days that employees and lawyers spend on perpetrator prosecutions and attempts to recoup damages.
- Cuts the costs of managing vegetation. Smart metering can pinpoint blinkouts, reducing the cost of unnecessary tree trimming.
- Reduces grid-related capital expenses. With smart metering, network managers can analyze and improve block-by-block power flows. Distribution planners can better size transformers. Engineers can identify and resolve bottlenecks and other inefficiencies. The benefits include increased throughput and reductions in grid overbuilding.
- Shaves supply costs. Supply managers use interval data to fine-tune supply portfolios. Because smart metering enables more efficient procurement and delivery, supply costs decline.
- Cuts fuel costs. Many utility service calls are “false alarms.” Checking meter status before dispatching crews prevents many unnecessary truck rolls. Reduces theft. Smart metering can identify illegal attempts to reconnect meters, or to use energy and water in supposedly vacant premises. It can also detect theft by comparing flows through a valve or transformer with billed consumption.
- Ensures contract compliance. Gas utilities can use one-hour interval meters to monitor compliance from interruptible, or “non-core,” customers and to levy fines against contract violators.
- Ensures regulatory compliance. Utilities can monitor the compliance of customers with significant outdoor lighting by comparing similar intervals before and during a restricted time period. For example, a jurisdiction near a wildlife area might order customers to turn off outdoor lighting so as to promote breeding and species survival.
- Reduces outage duration by identifying outages more quickly and pinpointing outage and nested outage locations. Smart metering also permits utilities to ensure outage resolution at every meter location.
- Sizes outages more accurately. Utilities can ensure that they dispatch crews with the skills needed – and adequate numbers of personnel – to handle a specific job.
- Provides updates on outage location and expected duration. Smart metering helps call centers inform customers about the timing of service restoration. It also facilitates display of outage maps for customer and public service use.
- Detect voltage fluctuations. Smart metering can gather and report voltage data. Customer satisfaction rises with rapid resolution of voltage issues.
For utilities that offer services besides commodity delivery, smart metering provides an entry to such new business opportunities as:
- Monitoring properties. Landlords reduce costs of vacant properties when utilities notify them of unexpected energy or water consumption. Utilities can perform similar services for owners of vacation properties or the adult children of aging parents.
- Monitoring equipment. Power-use patterns can reveal a need for equipment maintenance. Smart metering enables utilities to alert owners or managers to a need for maintenance or replacement.
- Facilitating home and small-business networks. Smart metering can provide a gateway to equipment networks that automate control or permit owners to access equipment remotely. Smart metering also facilitates net metering, offering some utilities a path toward involvement in small-scale solar or wind generation.
Many of the smart metering benefits listed above include obvious environmental benefits. When smart metering lowers a utility’s fuel consumption or slows grid expansion, cleaner air and a better preserved landscape result. Smart metering also facilitates conservation through:
- Leak detection. When interval reads identify premises where water or gas consumption never drops to zero, leaks are an obvious suspect.
- Demand response and critical peak pricing. Demand response encourages more complete use of existing base power. Employed in conjunction with critical peak pricing, it also reduces peak usage, lowering needs for new generators and transmission corridors.
- Load control. With the consent of the owner, smart metering permits utilities or other third parties to reduce energy use inside a home or office under defined circumstances.
CHALLENGES IN SMART METERING
Utilities preparing to deploy smart metering systems need to consider these important factors:
System Intelligence. There’s a continuing debate in the utility industry as to whether smart metering intelligence should be distributed or centralized. Initial discussions of advanced metering tended to assume intelligence embedded in meters. Distributed intelligence seemed part of a trend, comparable to “smart cards,” “smart locks” and scores of other everyday devices with embedded computing power.
Today, industry consensus favors centralized intelligence. Why? Because while data processing for purposes of interval billing can take place in either distributed or central locations, other applications for interval data and related communications systems cannot. In fact, utilities that opt for processing data at the meter frequently make it impossible to realize a number of the benefits listed above.
Data Volume. Smart metering inevitably increases the amount of meter data that utilities must handle. In the residential arena, for instance, using hour-long measurement intervals rather than monthly consumption totals replaces 12 annual reads per customer with 8,760 reads – a 730-fold increase.
In most utilities today, billing departments “own” metering data. Interval meter reads, however, are useful to many departments. These readings can provide information on load size and shape – data that can then be analyzed to help reduce generation and supply portfolio costs. Interval reads are even more valuable when combined with metering features like two-way communication between meter and utility, voltage monitoring and “last gasp” messages that signal outages.
This new data provides departments outside billing with an information treasure trove. But when billing departments control the data, others frequently must wait for access lest they risk slowing down billing to a point that damages revenue flow.
Meter Data Management. An alternative way to handle data volume and multiple data requests is to offload it into a stand-alone meter data management (MDM) application.
MDM applications gather and store meter data. They can also perform the preliminary processing required for different departments and programs. Most important, MDM gives all units equal access to commonly held meter data resources (Figure 2).
MDM provides an easy pathway between data and the multiple applications and departments that need it. Utilities can more easily consolidate and integrate data from multiple meter types, and reduce the cost of building and maintaining application interfaces. Finally, MDM provides a place to store and use data, whose flow into the system cannot be regulated – for example, in situations such as the flood of almost simultaneous messages from tens of thousands of meters sending a “last gasp” during a major outage.
WEIGHING THE COSTS AND BENEFITS OF SMART METERING
Smart metering on a mass scale is relatively new. No utility can answer all questions in advance. There are ways, however, to mitigate the risks:
Consider all potential benefits. Smart metering may be a difficult cost to justify if it rests solely on customer acceptance of demand response. Smart metering is easier to cost-justify when its deployment includes, for instance, the value of the many benefits listed above.
Evaluate pilots. Technology publications are full of stories about successful pilots followed by unsuccessful products. That’s because pilots frequently protect participants from harsh financial consequences. And it’s difficult for utility personnel to avoid spending time and attention on participants in ways that encourage them to buy into the program. Real-life program rollouts lack these elements.
Complicating the problem are likely differences between long-term and short-term behavior. The history of gasoline conservation programs suggests that while consumers initially embrace incentives to car pool or use public transportation, few make such changes on a permanent basis.
Examining the experiences of utilities in the smart metering forefront – in Italy, for example, or in California and Idaho – may provide more information than a pilot.
Develop a complete business case. Determining the cost-benefit ratio of smart metering is challenging. Some costs – for example, meter prices and installation charges – may be relatively easy to determine. Others require careful calculations. As an example, when interval meters replace time-of-use meters, how does the higher cost of interval meters weigh against the fact that they don’t require time-of-use manual reprogramming?
As in any business case, some costs must be estimated:
- Will customer sign-up equal the number needed to break even?
- How long will the new meters last?
- Do current meter readers need to be retrained, and if so, what will that cost?
- Will smart metering help retain customers that might otherwise be lost?
- Can new services such as equipment efficiency analyses be offered, and if so, how much should the utility charge for them?
Since some utilities are already rolling out smart metering programs, it’s becoming easier to obtain real-life numbers (rather than estimates) to plug into your business case.
Technology is “smart” only when it reduces the cost of obtaining specified objectives. Utilities may find it valuable to try lower-cost routes to some results, including:
- Customer charges to prevent unnecessary truck rolls. Such fees are common among telephone service providers and have worked well for some gas utilities responding to repeated false alarms from householder-installed carbon monoxide detectors.
- Time-of-use billing with time/rate relationships that remain constant for a year or more. This gives consumers opportunities to make time-shifting a habit.
- Customer education to encourage consumers to use the time-shifting features on their appliances as a contribution to the environment. Most consumers have no idea that electricity goes to waste at night. Keeping emissions out of the air and transmission towers out of the landscape could be far more compelling to many consumers than a relatively small saving resulting from an on- and off-peak pricing differential.
- Month-to-month rate variability. One study found that approximately a third of the efficiency gains from real-time interval pricing could be captured by simply varying the flat retail rates monthly – and at no additional cost for metering.  While a third of the efficiency gains might not be enough to attain long-term goals, they might be enough to fill in a shorter-term deficit, permitting technology costs and regulatory climates to stabilize before decisions must be made.
- Multitier pricing based on consumption. Today, two-tier pricing – that is, a lower rate for the first few-hundred kilowatt-hours per month and a higher rate for additional hours – is common. However, three or four tiers might better capture the attention of those whose consumption is particularly high – owners of large homes and pool heaters, for instance – without burdening those at the lower end of the economic ladder. Tiers plus exception handling for hardships like high-consuming medical equipment would almost certainly be less difficult and expensive than universal interval metering.
A thorough evaluation of the benefits and challenges of advanced metering systems, along with an understanding of alternative means to achieving those benefits, is essential to utilities considering deployment of advanced metering systems.
Note: The preceding was excerpted from the Oracle white paper “Smart Metering for Electric and Gas Utilities.” To receive the complete paper, Email email@example.com.
- Holland and Mansur, “The Distributional and Environmental Effects of Time-varying Prices in Competitive Electricity Markets.” Results published in “If RTP Is So Great, Why Don’t We See More of It?” Center for the Study of Energy Markets Research Review, University of California Energy Institute, Spring 2006. Available at www.ucei.berkeley.edu/