My Utility Gave Me a Smart Meter, So Now What?

Many utilities across the U.S. and Canada have been deploying Advanced Metering Infrastructure (AMI) or "Smart Meters" over the last several years. The 2009 American Recovery and Reinvestment Act (ARRA), also known as the "stimulus" included funding for many Smart Meter projects via the Department of Energy. As a consumer, your ability to capitalize on a deployment of AMI by your utility depends on a variety of factors. In this blog post, we'll review some of these factors and discuss various AMI deployments.

Pennsylvania Power & Light (PPL) is a progressive utility in northeastern PA that led the way in AMI deployments in the U.S. In approximately 2002, PPL commenced the installation of hourly interval meters for all of its residential and small commercial customers. This hourly interval data is helpful for PPL (e.g., outage tracking, etc.), but it can also be used by competitive energy suppliers who can offer prices that reflect a customer's usage pattern. This is great for customers who use more energy on nights and weekends, but its bad for customers with poor load profiles whose true cost to serve would otherwise be socialized by flat rates. PPL's data also enables demand response and other innovative energy technologies to thrive in their service territory. PPL's communication technology is unique in that their meters send data back to PPL over PPL's powerlines.

The Electric Reliability Council of Texas (ERCOT) is currently on the leading edge of AMI integration into retail energy markets. In ERCOT, every consumer is forced to choose a Retail Energy Supplier (REP) and each REP must settle the hourly usage of their customers in the ERCOT market. The ERCOT market's maximum spot price is $9,000/MWh and a few hours of those prices are enough to blow up many REPs. As a result, the REPs have a significant incentive to help their customers conserve energy during high priced hours. The result is that small-scale demand response has become a retail energy product in ERCOT via bundling packages offered by REPs. For the REPs, this is a necessary risk management tool (DR as a physical hedge in their supply portfolio) and for the customer there are savings opportunities if they can shift usage away from peak periods with severe price spikes. Reliant (an NRG subsidiary) has partnered with Nest Labs to offer discounted supply in exchange for the ability to control the customer's thermostat. Champion Energy Services has recently begun to offer bundled DR options in its supply product offerings. Just Energy is one of the biggest residential DR companies in ERCOT, although there is little public evidence of it. Through their partnership with Ecobee, they've bundled energy supply with Ecobee thermostats and use them to manage residential air conditioning load during high priced intervals. The bundling of supply and DR in ERCOT is a great example of how smart meter data can unleash a wave of innovation that helps balance supply and demand and make an ERCOT capacity market totally unnecessary......., but I digress.

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In other parts of North America, the AMI picture is more mixed. Ontario made the installation of AMI a major policy objective and the majority of Ontario consumers now have "Smart Meters" and are subject to Time of Use (TOU) rates. The Ontario Energy Board has made peak demand reduction a cornerstone of its energy policy and AMI coupled with customer education around TOU rates has been a critical part of its strategy. Due to massive design flaws in the Ontario deregulated power market (we'll cover that in a future post), Ontario consumers get the majority of the TOU price signal through the distribution component of their bill. So far, it appears that the strategy is working as Navigant consulting recently released a study confirming a link between TOU rates, shifts in consumer energy consumption patterns, and a reduction in peak demands. 

The experiences of residential consumers in the Central Maine Power (CMP) service area in Maine are more typical of AMI deployments. CMP deployed Smart Meters after it was awarded a grant from the DOE as part of the "stimulus". The Smart Meters have been very helpful to CMP in that they have reduced the need for meter readers and associated vehicles/travel expenses and have also given CMP much better situational awareness regarding outages. CMP consumers have yet to reap the full benefits of this AMI deployment. While consumers can see their usage through the Energy Manager application, competitive energy suppliers and energy service providers can't obtain this information in a timely fashion for use in ISO-NE settlements (as they do in ERCOT). CMP needs to perform an overhaul of its Meter Data Management System (MDMS) before the AMI data is available fast enough for all participants in the retail energy value chain. Maine Public Utility Commission Docket 2013-00168 proceedings have indicated that the expense associated with a new MDMS and associated billing systems have far exceeded CMP's original projections. While the AMI roll out has reduced certain expenses, it has necessitated a significant capital expenditure requirement in order for the AMI and associated data to be fully utilized. At CMP, AMI and Smart Meters have been a journey with a destination to be reached sometime in the future.

In Massachusetts, the MA Dept. of Public Utilities just issued Order 12-76-A which lays out a framework for AMI investment and deployment among Massachusetts utilities. To date, NStar, NGrid, Unitil, and WMECO have engaged in "Smart Meter/Grid" pilots, but the technology has not been deployed on a significant scale. While many residential electric meters in MA may look smart, they are mostly one way meters that chirp reading data to meter readers who collect the data via drive-bys in specially outfitted vehicles with equipment that can collect the data. Order 12-76-A requires the utilities to develop 10-year Grid Modernization Plans (GMPs) and a Comprehensive Advanced Metering Plan (CAMP) to be submitted as part of the public record.  For a state with lots of technology, MA is taking its time in the development of AMI policy.

Although there are many pros and cons to AMI deployment, Smart Meters are seeing increasing resistance from people who are worried about the radiation associated with communications by these meters. In Massachusetts, there is a group called Halt Smart Meters - Massachusetts who have organized a vocal opposition even to pilots of the technology. While it may be easy to dismiss Smart Meter critics as modern day Luddites and scientific studies (such as the one conducted for Vermont Dept. of Public Service) indicate that the radiation emitted by Smart Meters is safe, there are people who claim to have electrosensitivity. Electrosensitivity is poorly understood and while many knowledgeable people assert that the symptoms are psychosomatic, its hard to say with 100% certainty that what people with claimed electrosensitivity are feeling isn't real. Opt-out fees, and even the ability to opt out itself, have been a major source of controversy in Smart Meter deployments and will likely continue to be until the issues around electrosensitivity are resolved (which could be decades). Other issues involve data security as hackers could use this data for criminal purposes (e.g., best time to break into your house) and data security is a constant and evolving challenge. 

Regardless of the issues, this author thinks Smart Meters are cool and if your firm needs help understanding AMI as it relates to retail energy markets/tariffs, give us a call.

Dude, Where is my ISO-NE Demand Response Check?

Once upon a time, ISO-NE Demand Response (DR) was nearly a gravy train. Back in the early 2000s, the state of Connecticut would practically buy you a back-up generator if you were in the Southwestern Connecticut (SWCT) load pocket. While it wasn't quite money for nothing, it was a really good deal and customers only had to respond to audits and the occasional (like once a year) DR event. While I may wax nostalgic in hindsight, ISO-NE had a severe capacity crunch in that era, especially in SWCT and Boston. DR met a very important social and business need and people were able to make money by helping out by being a DR resource.

When EnerNOC launched its IPO in 2007, ISO-NE accounted for 60% of the firm's revenues. This halcyon period for DR in ISO-NE spawned a revolution in energy management as ISO-NE clearly demonstrated that customer load could exhibit demand elasticity. ISO-NE was the first deregulated market to embrace third party demand response providers. and the companies that pioneered the New England market are now selling their solutions globally. In addition to EnerNOC, other firms such as CPower (now Constellation), Energy Curtailment Specialists, and Comverge thrived in the ISO-NE market during this period. When the ISO-NE Forward Capacity Market (FCM) made its debut in 2007, it added a layer of complexity to DR but it also validated DR as a dispatchable capacity resource.

Fast forward to the spring of 2013 and the ISO-NE DR landscape looks much different. Many of the players from several years ago have left the market or substantially pulled back. EnerNOC recently significantly reduced its position in the ISO-NE FCM as the market had become unprofitable for all but the largest customers or those with advanced automation. 

Why did this happen? If you really want to get into the weeds, read FERC's Order on ISO-NE's proposed tariff revisions in Docket ER12-1627-000 but I'll summarize below.

Must Offer Requirement - ISO-NE is going to force DR providers to always offer DR capacity into the Day Ahead and Real-Time energy markets on a 24x7 basis. In a portfolio of many customers, its extremely difficult to determine how much capacity is available from each resource on an hourly basis and even more difficult to determine an appropriate offer price. Most DR resources have high opportunity costs and don't want to be dispatched more than a few times per year. In addition, a DR provider could be subject to a market manipulation accusation if they only offered their capacity at high prices not connected to opportunity costs. The Must Offer Requirement is really bad for DR.

Onerous Data Requirements - The DR providers remaining in the ISO-NE market have invested in data infrastructure, but the challenges of gathering near-real time data from many sites, ensuring its integrity, and sending that data to ISO-NE is a very difficult task. ISO-NE imposed data requirements on DR providers that became onerous, yet the economics of the market didn't justify the labor effort or technology required to meet ISO-NE's data standards. In addition, when corrupted data accidently slips past your quality control filters and results in a FERC investigation and penalty, you think long and hard about whether continued participation in the market makes sense.

ISO-NE FCM Floor Price Goes Away in 2017 - In all of the FCM Auctions, there has been a price floor that has provided certainty regarding the minimum price for capacity. ISO-NE has been oversupplied for capacity, but the price floor has provided support for capacity payments and ensured DR's economic viability. In 2017 this price floor goes away and that is likely to significantly diminish demand response payment rates in most of ISO-NE where it will no longer be economic for many end users to participate.

I'm pretty sure that DR will thrive again in ISO-NE, but for the average commercial or industrial customer, DR will be on hiatus for a couple of years until these issues get worked out at ISO-NE. In the meantime, customers can manage their ICAP tags or participate in price response, but capacity based DR in ISO-NE is taking a break for now.