State regulators deny 'smart grid' proposal

June 21, 2010|By Liz F. Kay and Hanah Cho, The Baltimore Sun

A high-tech proposal promoted as a way to save utility customers billions of dollars and help them better control energy use was thrown into doubt Monday, after state regulators denied BGE's request that ratepayers shoulder most of the upfront costs.

The Maryland Public Service Commission, the state's top energy regulator, issued an order after months of deliberation saying that Baltimore Gas and Electric Co. should contribute some of the hundreds of millions of dollars needed to deploy the "smart meter" technology. The meters would allow consumers to track their electricity use in real time.

"The proposal asks BGE's ratepayers to take significant financial and technological risks and adapt to categorical changes in rate design, all in exchange for savings that are largely indirect, highly contingent and a long way off," wrote members of the PSC in its order.

BGE President Kenneth DeFontes said he was "dumbfounded" by the PSC's decision — and it's not clear whether the utility will revise the application.

"At this point, it's hard to see how we could pursue it with the constraints that the commission has put down," he said.

BGE officials have said smart meter technology would allow two-way communication between customers and the utility. With these meters in place, consumers could track their electricity on an hourly basis. The utility would benefit from immediate information about outages and other system problems on the grid. It would also automate meter readings, saving the utility money because it would no longer need meter readers.

The program was structured to benefit consumers, DeFontes said. "We view this as something going beyond the traditional role of a utility," he said. "We want to give customers an opportunity to save."

The plan was estimated to cost a total of $835 million over the 15-year life of the meters, which BGE officials sought to recover through bill surcharges that the PSC had to approve. BGE received $200 million in federal stimulus grants through the U.S. Department of Energy designed to encourage smart grid projects, which would have decreased the cost of the initial five-year deployment.

The surcharge would start at 38 cents a month for electricity customers and an additional 44 cents for those who also use natural gas. Over the course of the 15-year program, it would rise to an average of $1.24 a month for electricity customers and an additional $1.52 for gas customers.

BGE officials have said that the company's 1.2 million customers would save as much as $2.6 billion over the life of the meter.

The commissioners wrote that they understood the federal grants would help offset some of the costs that consumers would face. However, commissioners said that even a $200 million "discount" on an $835 million ratepayer investment cannot dictate the outcome here."

Department of Energy officials said they would continue to work with BGE to reshape the utility's smart grid proposal. However, "we will have no choice but to explore moving the funds to other projects" if Monday's ruling prevents BGE from going forward with the program, said Matt Rogers, the federal agency's senior adviser for Recovery Act Implementation, in a statement.

The Maryland Energy Administration supported the proposal with some changes.

But advocates for consumers and senior citizens objected to the proposal, saying that the new technology was untested and existing programs such as PeakRewards provide a more cost-effective way to cut energy use. They also raised concerns that families with young children and seniors might have a harder time cutting usage during peak hours, when demand is greatest and therefore most expensive to the utility.

Representatives of the advocacy groups said they were pleased with the commission's decision.

"I think it was a very difficult decision for the commission to make, but obviously, it was the right thing to do, given the amount of money that was at risk for consumers and the related impact on their lives through pricing schemes," said Paula Carmody of the state Office of the People's Counsel, which represents consumers who go before the PSC.

"This is a win for consumers," said Hank Greenberg, director of advocacy for AARP Maryland. "The proposal would have required consumers to participate in this unproven program and they would have paid for it over the next 15 years."

Fielding Huseth of Maryland Public Interest Research Group said he hoped that, in the wake of the decision, the commissioners would encourage utilities to ramp up their energy-efficiency programs.

"We commend the PSC for acting in the public interest on this," he said. "Smart meters don't save consumers money — energy efficiency does."

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