An Intelligent Idea

Our View: Details Deserve Scrutiny But Bge Smart Grid Concept Is Sound

July 15, 2009

Baltimore Gas and Electric Co.'s proposal to install customer smart meters to promote conservation is (at 450 pages) a complicated plan that will require close scrutiny by the Maryland Public Service Commission. But the essential idea - to enable the utility to track electricity and gas consumption on an hourly basis and set prices accordingly - is not only smart but vital for Maryland's energy future.

Under BGE's plan, a smart meter would be installed in every business and home. Unlike ordinary meters that are manually inspected every month, such devices keep constant track of how much energy is being used and can wirelessly transmit that information to a central office.

With that level of monitoring available, BGE proposes giving rebates to consumers who cut back on power consumption on certain peak days, probably 10-12 times each summer when air conditioners drive up electricity demand during exceptionally hot days. Average residential customers might receive $10-$12 as a rebate each time this happens (they would be alerted by a phone call, text message or e-mail one day in advance of the event) for a total potential savings of $100-$144 a summer.

The rebates would be financed by the savings BGE would accrue by not having to buy so much power at peak periods, when wholesale prices are much higher.

But how would BGE cover the $500 million start-up cost of the 15-year program, including installation of the new meters at about $200 a pop? That's one of the potential rubs. The utility proposes borrowing the money and charging the customers up to $1.24 a month to recover the costs. The charge might be substantially less, however, if BGE receives a $200 million grant from the federal government's $4.5 billion smart grid program, approved earlier this year as part of President Barack Obama's stimulus package.

Whether a monthly surcharge is the best way to finance the program or if the all-carrot-and-no-stick approach of a rebate is the best way to pass along savings are certainly among the many elements of the proposal that bear close regulatory review. But that doesn't make the smart meters themselves any less vital. And it's also important that the PSC act promptly so BGE's grant application can be approved this fall.

Smart meters do more than give customers an incentive to conserve. They also allow the utility to make better-informed decisions about how electricity is distributed (how much voltage goes down the lines), which should save money by reducing waste.

A smarter grid has many other benefits, too, including giving BGE better real-time information about when and where power outages occur (down to the address of every home without electricity); providing more accurate billing data in general; and reducing energy consumption overall. Indeed, BGE estimates that when added to existing conservation efforts, smart meters would help save more power (1,700 megawatts) than a new nuclear plant would create.

That means a BGE customer who never sees a dime in direct rebates would still save substantial money in the end no matter who pays for the smart meters. And that's not even taking into account the benefits of lowered production of greenhouse gases from coal-fired power plants (the primary source of energy for BGE customers). Reducing the impact of climate change could ultimately prove to be the biggest benefit of all.

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