Tuesday, August 18, 2009

Niagara Mohawk Must Divulge Cost Data Regarding Proposed "Smart Grid - Smart Meter" Projects

When Niagara Mohawk d/b/a National Grid filed a proposal with the PSC to spend funds on a "smart meter" project, the cost of which would be borne by its customers, it seemed to have foreclosed critical examination of the sanity of the investment when it claimed that the cost data is confidential and trade secret. Documents supporting this fashionable "smart grid" project were filed with the sections on costs kept secret.

Alert Albany Times Union business reporter Larry Rulison requested release of the cost data, and the PSC Records Access Officer Steven Blow required its release. On appeal, PSC Secretary Jaclyn Brilling upheld the ruling in an August 13 decision. See National Grid Told to Reveal Details - PSC Says Utility Cannot Withhold Financial Info Regarding "Smart Grid" Plan, Albany Times Union, August 18, 2009.

The "smart grid" and "smart meter" rage includes the utility wishlist item to invest billions of dollars to replace all existing electric meters - many of which were only recently replaced to allow periodic remote meter reading - with meters capable of providing the utility with instantaneous additional data about when and how much electricity customers are using. This in turn would permit realization of the deregulators' dream of introducing price spikes into customer bills with volatile, unpredictable pricing systems based on flawed and perhaps manipulated wholesale NYISO prices. The PSC's companion wishlist item, for legislation to give it power again to mandate time of use pricing that has been rejected by most residential customers, which it has pursued unsuccessfully for years, is again mentioned in the recently issued Draft State Energy Plan. See New York Residential Real Time Pricing Experiments Must be Voluntary, PULP Network, August 27, 2007.

If utilities spend billions on "smart" meters they may make a good return on the investment through retail rates paid by their customers. This may be particularly attractive to New York utilities: they no longer are investing billions in power plants, due to their having largely gotten out of the power production business, and their investment adventures into less regulated activities, through holding company affiliates a la Enron, turned out to be far less profitable than safer investments in regulated activities with regulated profits.

The PSC, initially enthusiastic about "smart" metering, asked the New York investor owned electric utilities to submit proposals in 2007. When the price tag became known, however, the PSC recognized that the rate impact could harm customers, questioned the benefits claimed, rejected the utility proposals to invest billions, and suggested instead there be small scale pilot projects to test out the costs and benefits before going whole hog. See, PSC Requires More Study Before Allowing Major Investment in "Smart Meters", PULP Network, January 11, 2008.

The situation changed again this year with the possibility that "free" federal money under the Recovery Act ("ARRA") might be used to underwrite part of the cost of "smart" meter investments. The PSC issued orders recently to enhance the utilities' application for ARRA funds by assuring it would require consumers to pay half the cost of smart grid investments if the federal government gives grants to utilities for the other half of the cost. Thus, New York utility customers would be on the hook for part of the cost, while the general body of federal taxpayers would pick up the rest with the ARRA funds, with the utilities possibly picking up 10% or so per year on the new investment and possible tax incentives too.

"Smart" is not enough to justify the stampede to invest billions of utility ratepayer and ARRA dollars in this fad. It needs to be studied intelligently, and evaluated along with other options, including alternatives that may be even "smarter" in light of the limited funds available to consumers and taxpayers. For example,
  • How much more efficiently would the electric system really run with the new smart grid gismos that will enable utilities to increase prices at any time without advance notice? Aren't the touted savings mainly from shifting usage to other times of the day by increasing prices during peak times? Will smart grid devices permit more import of electricity not from wind turbines, but from coal-fired generation through transmission from adjacent areas where there is a glut of cheaper coal-fired generation?
  • Couldn't New Yorkers save far more energy by putting the same investment into other proven cost-effective energy saving measures that reduce consumption, rather than shift it, and lower bills rather than raise them unpredictably?
  • The Draft State Energy Plan contemplates weatherizing only 25,000 homes of low income households per year. At that rate, this proven measure, which is known to result in large energy savings, will not be implemented for more than 50 years.
  • Would a "cash for clunkers" program to unplug and crush old inefficient refrigerators, freezers, and air conditioners accomplish more economic stimulus by giving consumers lower bills and more cash to spend, in contrast with a "smart meter" program that could raise their bills, decrease their spending powers, and increase profits for a foreign utility?
  • We already see 300,000-plus customers losing utility service each year due to its unaffordability, and deliberate interruption of service to collect bills, affecting about one million people, about 5% of the state's population. If "smart grid" projects result in higher costs, what will be the impact on households and businesses already at the limit of their budgets?
There is little discussion in New York of the "smart grid" costs and alternative investment choices for the proposed commitment of limited customer and public resources.

In other states, AARP and other consumer advocates have critically examined utility proposals to squander large sums on "smart" meters. When the cost is weighed against a realistic appraisal of the likely benefits, the investment may begin to look rather "dumb." See the testimony of Consumer Affairs Consultant Barbara R. Alexander for AARP in a recent case, linked in AARP Opposes PEPCO Plan for Spending on "Smart Meters", PULP Network, June 19, 2009;. See also
Critical attention needs to be paid to this issue by the public and the press and consumer advocates. Before yielding to pressure from utilities, technology, and deregulation enthusiasts to spend billions of dollars, yes, billions in New York State alone in utility candy to be paid for by ratepayers through higher bills, we need to learn a bit more about
  • why price spikes and existing voluntary time differentiated rates are not popular with the overwhelming majority of consumers,
  • whether the touted benefits of the new meters can be realized
  • whether the benefits are grossly overstated,
  • whether there are better investments of consumers' dollars to be made, for example, in the areas of energy efficiency or development of renewable energy alternatives, and
  • a human environmental impact assessment, to learn how the cost impacts and implications of "dynamic pricing" will affect the most vulnerable New Yorkers, more than 300,000 of whom already are losing service each year because they cannot afford existing prices, before exposing them to experiments to test their behavior changes when faced with spiking prices.
In an important paper on "smart" meters, Barbara R. Alexander points out the lack of evidence to justify widespread residential real time metering, and flags important consumer issues:
The push to install more expensive smart meters (and their associated communication and data storage systems) and consider more “real time” or volatile electricity prices for residential electric customers has the potential for significant harm to many residential customers and particularly to limited income and payment troubled customers. Almost no jurisdiction has acknowledged the potential adverse impacts on these vulnerable customers who must have essential electricity service to assure household health and safety. Nor has any jurisdiction specifically ordered an analysis of proposals for dramatic changes in the pricing of electricity on limited income or payment troubled customers. * * * *
It would be unfair and poor public policy to leap into new metering technology and new methods of pricing essential electricity service to residential customers without a careful analysis and access to factual information on the impacts of such proposals on customer bills and usage patterns. The lack of such information is particularly glaring for low income customers. * * * *

Wholesale market structure and pricing mechanisms are still being vigorously debated and to rely entirely on such immature and potentially “wrong” price signals to customers who rely on essential electricity services for minimum health and safety standards should raise red flags and longer term analysis prior to embarking on expensive new metering and rate design programs.
Alexander, Smart Meters, Real Time Pricing, and Demand Response Programs: Implications for Low Income Electric Customers, 2007.

08/28/2009 -- Larry Rulison, Utility Asks PSC to Reconsider – National Grid Appealing Order to Reveal Details of New $290 Million Plan, Times Union, August 28, 2009.

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