Consumer advocates across the country have begun to question cost effectiveness of proposals for massive deployment of "smart meters" for residential use. See, Niagara Mohawk dba National Grid Seeks Continued Secrecy on Cost of Its "Smart Grid" Proposals, PULP Network, Nov. 25, 2009.
One of the objectives of smart meter/demand response advocates is to create a market based solution (reduced demand) to correct unreasonable high prices in the wholesale electricity spot markets. This is in lieu of effective FERC regulation of unreasonable, gamed or manipulated prices in ISO/RTO markets such as those of the NYISO. Underlying the notion are flawed premises -- if spot market prices are competitive they are therefore just and reasonable and so they should be passed thru to consumers.
Such conflation of competitive prices and reasonable wholesale electric rates is wrong, as a matter of law -- and the Supreme Court has said so. The introduction of smart meters to charge the continually changing ISO/RTO prices would be harmful and costly.
FERC, which is now enthusiastic about smart meter deployment, previously said that retail utilities should not base their prices on spot markets:
A retail rate design that exposes consumers to the volatility of commodity prices would be extraordinary, particularly when consumers do not have the ability to receive or respond to price signals. While the Commission has no authority over retail electricity rates nor authority to rule on the prudence of SDG&E's provision of retail electric service, we would expect any responsible retail supplier to rely on a portfolio of resources and to turn to the spot market only to engage in economy transactions or to meet portions of its load that could not be predicted well in advance or which were not anticipated due to resource outages greater than are covered by prudent reserves.San Diego Gas & Electric Company, FERC Docket No. EL00-95-000, p. 10 (Aug. 23, 2000).
See PULP Comments to Task Force on Competition.
Earlier this year, FERC rejected efforts of consumer groups to investigate whether ISO/RTO spot markets are yielding reasonable rates, saying in essence that retail utilities can avoid those prices:, stating
While this Commission has jurisdiction over RTOs and ISOs, participation by utilities in these markets is on a a voluntary basis. Federal regulations do not require anyone to make purchases from any RTO or ISO, including PJM. Many entities generate most of their own electricity or purchase it through long-term contracts and make only limited purchases through RTO or ISO spot markets. And, while these organized wholesale markets are subject to this Commission's jurisdiction, state and local regulators have jurisdiction over retail distributor procurement policies. Those policies affect the prices that utility retail customers pay.FERC's Advice: Avoid Our Deregulated ISO/RTO Spot Markets, June 24, 2009. Giving customers the means to "receive or respond to price signals" (presumably those set in real time by RTO/ISO spot markets with smart meters) is not a reason to abandon the principles of portfolio purchasing, stable and predictable rates to rely on the flawed spot markets and introduce real time pricing for residential consumers, as Enron and other market enthusiasts proposed in the latter part of the last century. FERC rebuffed efforts to conduct a simple inquiry into the gameability and exercise of market power in the spot markets in its RM 04-7 order regarding market rates. See No Evil: FERC Refuses to Examine Gaming of RTO/ISO Electricity Spot Markets, PULP Network, April 22, 2008.
In addition to serious questions of the cost and the wisdom of introducing price spikes to customers through smart meters, consumer advocates are also questioning the reliability of the new devices, their potential use to accomplish remote shutoffs, use of the data from the meters, and potential cyber security issues. See Will "Smart" Meters Pass The Test of Time?, PULP Network, November 24, 2009.
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