Bge Betting On 'Smart' Meters

Users Could Save Even With Surcharges For Devices, Utility Says

Critics Skeptical

July 14, 2009|By Liz F. Kay | Liz F. Kay,

Baltimore Gas and Electric Co. has proposed a "smart grid" program using energy meters and other devices to inform consumers when they could gain the most by conserving electricity and gas, but consumer advocates question the savings the company said it could achieve.

If approved by state regulators, BGE's plan, announced Monday, would replace meters for all of its residential and business customers, costing $500 million that would be recovered over five years through bill surcharges. The price tag could be lower, because BGE plans to apply for $200 million in federal stimulus grants for smart grid technology.

But consumer groups remain skeptical of the savings, given the large costs. The Office of the People's Counsel, which represents consumers, wants the Maryland Public Service Commission to hold a full hearing with speakers testifying on the record so everyone can examine the evidence behind the projections. BGE said it expects a hearing next month.

"Frankly we haven't been convinced yet that this is a great thing for ratepayers," said Theresa Czarski, deputy people's counsel. "The bottom line is, we really think all utilities need to ... prove the benefits and give a good rundown of the costs."

Surcharges would start at 38 cents per month for electricity customers and 44 cents per month for natural gas customers during the first year and would increase to an average of $1.24 for electricity customers and $1.52 for gas customers.

The technology would allow customers to save three times the cost of these charges each month, said Mark Case, BGE's senior vice president for regulatory affairs. And, consumer costs would be even lower if the federal Department of Energy grants are approved, he said.

The technology would also save BGE about $600 million by automatically notifying BGE of power outages or other problems and allowing the company to read meters remotely - eliminating the need for about 100 meter-reader positions, in addition to other operations and maintenance costs, he said.

If approved, BGE would begin installing more than 2 million residential and business meters by the end of 2009. With the meters and other monitoring devices that are installed inside your home, consumers would have more immediate access to information about their usage and its cost on an hourly basis - and could thus respond by cutting back, according to the company.

About 3,000 BGE customers tested the advanced metering technology last year, with more than 93 percent giving it a favorable rating, according to the company.

The majority of the savings - about $2 billion - would come from consumers reducing usage during peak periods, Case said. Under the proposal, smart meter rates would go into effect in 2012, and BGE customers would earn rebates by choosing to conserve energy during the peak hours of 2 p.m. to 7 p.m. on specific critical use days, such as high heat days. BGE said even those who didn't cut peak usage would benefit from lower prices as a result of reduced overall demand.

This estimate relies upon consumers taking steps to cut their usage, but in pilot programs, residents cut back by as much as a third, he said. "In a climate like Maryland where so much focus is on the cost of energy, consumers seem pretty willing to make the effort," Case said.

With lower demand for electricity, the initiative would reduce the need to import electricity and to build new power plants, Case said. It also permits the company to reach the state's EmPower Maryland conservation goals of reducing energy use by 15 percent by 2015.

With 2 million meters in place, BGE would have "2 million points of information," Case said. It could use the technology to make the delivery of power more efficient, reducing line losses and wasted energy, he said.

That "would be worth tens of millions of dollars in energy savings to our customers," Case said.

Johanna Neumann of the Maryland PIRG said that her group supports initiatives to update the nation's electric grid, but from their perspective, doesn't think it makes sense to do it in one big push. Neumann said that the average lifespan of a meter is about 10 years, so BGE could replace them gradually rather than swap out nearly new ones - and charge customers for them.

She also worried that sensitive populations, such as seniors, might not be able to reap as much of the savings of time-of-use pricing.

"It makes sense to have signals to consumers about the true cost of electricity," she said. "The implementation is where the devil really comes into the details."

Case said that phasing in the smart meters more gradually would dilute the cost savings, because of economies of scale. "It's not efficient or cost effective to scatter the meters throughout the territory," Case said.

Czarski said that it would be wise to be cautious beforehand, because supporters of deregulation promoted its consumer benefits as well. Now, many consumers and legislators point to the lack of regulation as the root of their higher energy bills.

There are also concerns that no standards have been established for these meters, as well as worries that the reliance on technology presents security risks both for people in their homes but more importantly for the electricity grid itself.

Case said that whatever vendor BGE uses for the program will incorporate standards for security and other factors as the standards are developed.

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