Smart grid and consumer protections
- September 6, 2010
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Yesterday's column—"Smart meters: accuracy, and anger"—prompted a response from an economist at a state-level office of consumer counsel:
"Your article, and much of the debate over smart meters, misses what to my mind is the biggest question about smart meters and dynamic pricing. That is, to make use of the information on real-time use and prices will take a lot of time and energy that most people will not be willing to spend, and the potential savings will not be seen to be worth that time and energy.
"For most people electric bills are a small portion of income and the potential savings are even smaller. Paying attention to the real-time information provided by a smart meter will simply be an annoyance for most people and they won't do it. Further, implementing dynamic pricing into that environment may mean people will be vulnerable to huge increases in their bills.
"Someday, if we have smart appliances easily programmed to respond automatically to standardized information without consumers having to learn to program them, there may be potential benefits to a full rollout. For now, consumer pushback should be expected and may be just starting."
First, these are excellent points. And with the estimate, cited in yesterday's column, that only 1 percent of all smart metered electricity customers have dynamic pricing available, the industry is in a position to address these points. A handful of complaints over smart meter accuracy has driven national stories, now countered by third-party findings on meter accuracy. As our correspondent noted, however, the rollout of dynamic pricing programs may well provide the impetus for much greater—and more clearly justified—pushback.
Second, these points gave me good reason to crack open a white paper that reached me last week, which echoes many of these same concerns and attempts to address them.
"The Need for Essential Consumer Protections: Smart Metering Proposals and the Move to Time-Based Pricing" was just released and is sponsored and authored by five well-known organizations: the National Association of State Utility Consumer Advocates (NASUCA), the National Consumer Law Center, Public Citizen, Consumers Union (publisher of Consumer Reports) and AARP, the organization formerly known as the American Association of Retired Persons.
Space permits me to note just a few key points from the new white paper. In essence, it's apparent that our correspondent's concerns are widely shared.
- Smart meter proposals must be cost-effective and utilities must share the risks and benefits used to justify the investment.
- Time-of-use rates, or dynamic pricing, must not be mandatory.
- Regulators should assess alternatives to smart meters to reach the same load management goals. (Particularly direct load control programs.)
- Smart meter investments should not result in reduced levels of consumer protections.
- Privacy and cyber security concerns must be addressed prior to a smart meter rollout.
- Utilities and policymakers should include comprehensive consumer education and bill protection programs in the evaluation or implementation of smart meter proposals.
- Investments in smart grid need to be verifiable and transparent and utilities need to be accountable for the costs they want customers to pay and the benefits they promise to deliver. (Costs should be reasonable and prudent.)
Whether these recommendations are adopted by the Obama Administration or individual states remains to be seen. There's been a fair amount of discussion about the value to ratepayers of smart metering and dynamic pricing, relative to utility-side efficiencies stemming from, say, distribution automation. Surely this white paper will contribute to that discussion.
I'd also note that it's becoming apparent that smart grid constituencies are frayed and beset by the old saw that "politics make strange bedfellows." The term "consumers" encompasses both individual homeowners and giant, multinational industrial concerns. Homeowners may be generally in favor of modernizing the grid, with related air pollution regulated, but they are leery of the smart meter's role in that regard, if it means a threat to their privacy or a major increase in the cost of electricity.
Lastly, if our correspondent is correct that potential homeowner savings from smart meter- and dynamic pricing-related technologies are too small to bother with, but potential increases in bills are great enough to create widespread backlash, then utilities have much to consider between their current smart meter rollouts and the introduction of dynamic pricing.
I've proffered the notion that the gap between smart meter rollouts and "tangible consumer benefits" creates both an opportunity for and a threat to smarter grids, and that point has never been clearer to me than after hearing from our correspondent and reading the above-cited white paper.
Intelligent Utility Daily