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Smart-grid projects hit speed bumps

In some places, utilities' plans to install smart meters are getting challenged by regulators who question whether the technology's costs will be balanced by benefits to consumers.

Is this the summer of discontent for smart meters?

Utility Baltimore Gas & Electric is in the process of working with regulators get approval for a plan to install smart meters at some of its customers, one of the cases drawing interest by smart-grid industry watchers.

During hearings last Thursday and Friday, BG&E made changes to the proposal, which was rejected by regulators in June. The Maryland Public Service Commission had concluded that consumers were shouldering too much of the cost and risk of the proposal, which led to last week's hearings and counterproposal.

Electric-grid image

As part of the economic stimulus plan, billions of dollars will be spent by utilities and the federal government on modernizing the grid, with a significant emphasis on installing two-way smart meters. These meters are meant to bring benefits, such as giving consumers more information on electricity usage and making it easier to locate problems during a power outage.

But as public utility commissions assess these projects, regulators are scrutinizing the costs of the technology and weighing that against potential benefits to ratepayers.

"In a monopoly market, regulators are in the position of defending the consumers," said IDC grid analyst Rick Nicholson. "Utilities have to prove that benefits will accrue to consumers...and commissioners are questioning the benefits."

In another case, Hawaiian Electric's proposal to expand a smart-meter test was denied two weeks ago by the state utility commission. The utility had planned to install an additional 5,000 meters, adding to existing pilot project of 9,400 smart meters. But regulators denied the request, saying Hawaiian Electric should create a comprehensive plan for upgrading the grid, according to an Associated Press report.

"They want to see the smart-grid roadmap first," Peter Rosegg, spokesman for Hawaiian Electric told AP. "It's not a big setback...They're saying, 'Let's do it in a more deliberative manner.'"

Duke Energy, too, scaled back a plan to install smart meters to customers in Indiana after its initial proposal was rejected last fall over concerns that it did not demonstrate clear benefits to consumers. It's in the process of resubmitting its proposal.

Meanwhile in Colorado, Xcel Energy is amid hearings regarding the high-profile SmartGridCity project, which has failed to live up to expectations due to what appears to be poor management of the project. The utility did not initially seek approval from state regulators to recoup the costs of the technology investments. But now that costs have spiraled up, it is seeking to increase rates to pay for it.

Whether the cost of smart-meter installations can be justified financially depends to some degree on the utility, said Nicholson. The public utility commission in Maine, for example, last month enthusiastically approved an advanced metering project because it reduced the utility's operating expenses through things such as automated meter reading, rather than consumer energy savings, he said.

Going slower?
Backlash over smart meters has been in the news during the past several months. But the bulk of that pushback has been from consumers, notably customers of California utility Pacific Gas & Electric.

In May, PG&E did an audit of its smart meters and found that very few of them did were not working accurately. It also recognized that it needed to improve customer education and service. Now various cities and towns are urging the utility to go slower on smart-meter installations.

The case of BG&E in Maryland was notable because regulators rejected the plan, making utility industry executives around the country take an interest.

At a utility conference in June, the high-profile CEO of Duke Energy, Jim Rogers, said that utilities need to take steps to avoid a "blowback" from smart-grid projects by articulating benefits and educating customers. Utilities should give consumers products and services, such as in-home energy displays and an energy audit, to get them more involved in managing home energy, he said.

BG&E utility is eager to find out whether its smart-grid program will go through because it stands to receive $200 million in federal money to partially fund the project. The utility originally projected that the 15-year program would add about $3.60 a year for an average customer but save nearly $100 million a year, according to the Baltimore Sun.