One customer's frustration

Even well-regarded IOUs have work to do

Phil Carson | Jul 29, 2012

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We often hear from utility customers, but many tend to be angry. Others believe that the United Nations is getting to them through their smart meter. 

Occasionally I receive a complaint worthy of attention. These correspondents may not have their facts completely straight, but they appear to be genuinely concerned by their perception of local conditions. 

At the outset, today, let's note that Intelligent Utility and other groups have recognized Oklahoma Gas & Electric (OG&E) for its SmartHours dynamic pricing initiative, its IT work to support that initiative and its profitable, well-run operation. And the company is welcome to respond to our correspondent's complaint, if it desires.

That said, let's look at an OG&E customer's perceptions and my response. Because the basic complaint might well be about my own endorsement of the role of smart meters, rather than anything OG&E has or has not done. I've endorsed smart meters on the condition that a utility has taken credible actions to ensure data privacy and security and is transparent about its intentions around dynamic pricing. 

"I know you probably think I am just another `tin foil hat lunatic' but the facts are the facts: [energy] savings can be achieved without smart meters, if [OG&E] uses education," our correspondent wrote. (I'm withholding our correspondent's name because he wrote me privately.)  "[But] by `forcing the issue' they give folks no choice.

"OG&E stands firm that their [advanced metering infrastructure] system is the best and does not have issues that California and other states have encountered with their technology. Are we to take their word at that?

"Mr. Delaney, OG&E President, admitted in an interview on YouTube with the rep from their smart meter provider that the `initial offerings of the Smart Hours program will greatly help "condition"—he used that word—the consumer to be comfortable with the smart meter.

"However, when asked about demand-based pricing, [Delaney said] that it was `inevitable in the future.'  

"As we speak, OG&E has a new rate case before the Oklahoma Corporation Commission already proposing rate hikes. They are also asking to add $3.50 a month [to residential bills] for several years to help `pay for the cost of rollout,' despite the $350,000 million dollars [sic] the Obama administration gave them to roll out this project.

"OG&E also has made promises of allowing consumers to `schedule' their [smart meter installation], so they can be `comfortable' with how the process works.

"Yet when I called the contractor doing the installs, I was told they were no longer doing appointments due to altercations with customers. So OG&E has no control over their contractor? 

"I don't so much have a problem with the overall idea, I get it. But has no one ever heard of `you get more bees with sugar?'

"I am very frustrated that consumers no longer have any rights, and that we are forced into so many things in what is supposed to be a `free country.' The last word on this is: mandate. OG&E is mandating that its customers have smart meters, forcing us to pay for something we don't necessarily want. If it ain't a tax, they can't force it on us."

Dear correspondent, I wrote: 

I understand your frustration. Indeed, one can manage electricity use and costs without smart meters. Demand response can be implemented without smart meters. But dynamic pricing, which rightly assigns the real cost of electricity on a 24-hour basis, which reflects the wholesale market, cannot be accomplished without the new meters. 

OG&E's dynamic rates do depend on smart meters, both to send the price signal to every home (depending on your specific program) and to accurately bill for usage at off-peak and peak times. Further, the SmartHours program is opt-in, not mandatory. However, you appear to fear that what's voluntary today will become mandatory tomorrow. I understand your concern.

You appear to feel saddled by a regulated monopoly with no other options and might be more comfortable with a market that allowed competitive offerings. Your regulators need to hear from you.

I'd be guessing, but that $3.50 monthly charge likely covers 50 percent of the cost of OG&E's smart meter rollout paid by OG&E, not the 50 percent received from the stimulus funding by the Department of Energy.  

The new meters do offer the utility many operating efficiencies, as well as enabling dynamic pricing. My personal position is that those efficiencies, not the customers, should then pay for the meters. 

Dynamic pricing, however, (at least in theory) should delay huge capital investments in power plants that run only during the peak and, therefore, are an inefficient use of capital as well as adding significantly to emissions harmful to human health. That's a least-cost way to balance supply and demand. Regulators want to contain costs for consumers while approving technologies that might get us there.

However, many utilities are using the mantra that dynamic pricing and smart meters will enable us to understand our usage and, therefore, "save money." That's probably got to change, per your point that we already know how to do that.  

Whether as individuals we agree, many states have passed energy efficiency mandates that require utilities to reduce overall electricity use and peak use to make the current, Rube Goldberg system work. It's not just the system, but it's the fact that folks such as you are conservative on a flat rate, but that only subsidizes those who demand high use during peak periods. So dynamic pricing should also bring fundamental fairness to the equation. These should be positive points for folks interested in containing costs for the utility and, therefore, ratepayers.  

I'm afraid that in the interim, we're stuck with a rickety old system whereby a regulated monopoly puts hardware in and gets a fixed rate of return above costs, though the cultural changes for customers (getting used to more expensive, peak rates) can be jarring. And, despite utilities' efforts to keep it simple, it gets complicated. 

As I've said here before, if a regulated monopoly doesn't offer transparency, confusion and suspicion can grow. We think the world of OG&E, but perhaps it needs to clarify what you're hearing and spell out precisely what it's trying to achieve and why certain costs are passed along to you. I'd be fairly confident that OG&E is trying to do that, but I certainly don't blame you if at first blush it doesn't appear to add up.

Phil Carson
Editor-in-chief
Intelligent Utility Daily
pcarson@energycentral.com 
303-228-4757 

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Comments

Misperceptions and lack of response

We have many multi-site commercial clients who remain "in the dark" about "smart meters" and their capabilities AND lack thereof.  Of the roughly 30 million "smart meters" sold and somewhere in the stages of installation, the very large majority are uni-directional communication.  In other words, they send use information to the utility and no information is coming back to the consumer.

And that leads to disconnect.

Utilities are rightly concerned about getting the right information to determine load shaping and demand so they can operate efficiently and profitably.  However, utilities seem to miss the point, primarily due to lack of competition and the stagnant atmosphere of the market overall, that they cannot operate without their clients being successful.

Their customers become successful and maintain that success by doing the same thing as  utilities, namely using information to help operate efficiently.  And yes, that means successfully operated companies will use less energy on a metric basis which hopefully leads to more energy use due to sales increases.

Utilities continue to delay, obfuscate and otherwise make difficult the process of allowing their customers to receive information that would benefit their decision making.

"Smart meters" for the last number of years have been represented as the endgame when they are simply a means to an end that can benefit the utility and their customers.  But they've been oversold and mis-stated in their abilities.  This is leading to confusion, fear and finally, stagnation.

It needs to stop and it is incumbent on the utilities to make the effort to change the conversation.

The (thus far) missed opportunities of smart meters

In the rush to snag ARRA funds, far too many utilities neglected to sufficiently sell the benefits of smart meters to the most important constituency--their customers--or to provide the tools for their customers to reap tangible benefits once they were installed. It's no surprise there's been pushback. As an individual who has worked with and developed interval electricity data applications since dial-up days, I was genuinely excited at the prospect of getting "smart" about my energy usage. Unfortunately what I got was a utility smart meter web site almost maddeningly useless. I had to install my own shadow meter to get what I needed: the ability to download a months worth of 15-minute interval data.  Once I was armed with that information, I got "smart" in a hurry and 1) replaced my old HVAC unit with an ultra-high efficiency model, 2) replaced the malfunctioning hot tub pump that I could now recognize in my profile data, and 3) installed enough solar to knock my electricty consumption down to the baseline tier. My payback period is less than five years and I export electricity to the grid six months out of the year.

What I did for myself is what IOUs need to do for their customers: give them the tools to make smart decisions and maximize the "utility" of their energy dollar. It's not rocket science. At MACH Energy, we built those tools for commercial property owners more than ten years ago. IOUs can't do it all however. It's time for all of us to realize that the subsidies inherent in utility tariffs no longer serve the country or the planet. With the exception of "lifeline" rates, all customer classes should be paying close to what they actually cost to serve. Anything else leads to bad decisions and worse consequences. We've gotten ourselves into a real pickle. As a result of trying to keep electricity cheap for residential customers, we've massively underfunded the infrastructure that could have helped accelerate the transition away from centralized fossil fuel generation and accommodate the inevitable electrification of transportation. We don't need to learn how to live with less electricity, we need to start developing the ablity to accommodate a much higher level of electrification, with generation, storage, and consumption everywhere by systems that don't always stand still. The utility of the future is going to look a lot more like Comcast or AT&T  than the current IOUs that arose out of PUHCA in 1935. The days when utilities were the place for little old ladies to invest their retirement money are rapidly ending. The next several decades are going to get very interesting.

Greg Tinfow, Founder and CEO, Energy Informatics LLC

Choice

As one commenter has already pointed out, consumers do have a choice between taking service from their local utility and producing their own electricity.  In fact, this choice has only become financially viable in the last few years and it has some interesting implications for ratemaking that policymakers are only now beginning to grapple with.

Your correspondent apparently doesn't understand how the combination of an interval meter and time-based pricing means the financial benefits of doing what he would do anyway accrue to him rather than continuing to subsidize the habits of other consumers.  Of course, as you pointed out in your response, the most important reason for time-based pricing is to encourage changes in habits and capital investments on the consumer side of the meter (that could be as inexpensive as a whole-house fan) to help shift demand out of the peak periods.  Critical in California, where current annual load factors are in the low 50% range and coninue to decline.

Jack Ellis, Tahoe City, CA

It's the best compromise

It's a simple reality that it costs utilities more to generate power during peak periods. To meet the peak power needs they have to maintain expensive reserve capacity that sits idle at other times. Thus it's totally justified that utilities install smart meters and price higher during times of higher demand. It's just an accident of history that the technology wasn't able to do this before. Back when it actually cost money to make a long distance phone call, pricing was based on when you called as well as for how long. Everybody accepted that.

On the other hand, does the utility need to know exactly what the consumer does with the power he or she consumes any more than the phone company needed to know what you were talking about? Once the consumer knows the price, he or she is fully capable of making usage decisions and scheduling use of major appliances. As a result, I think the best compromise is that smart meters should stop at the wall, and not reach into the house.

        Milton Scritsmier

        Boulder, CO

One customer's frustration

One thing that MANY people related to the industry forget is that the group the uses about 70% of the power (commercial, industrial and institutional users) have been billed with a relatively simple TOU system for many years.  If they used power during the utilities well posted peak hours, they paid a higher price.  Often that included BOTH the power used AND the demand rate.  

The pricing difference is, and was, significant- often, there was NO demand charge for after-peak demand or it was no more that 50% of the on-peak rate.  Similarly, for many utilities, the off-peak cost of usage was perhaps 70% that of the on-peak rate.

Yet- for 99+% of those customers, "the way we have always done it" has been good enough. Yes, some of them have used those rates to install devices to limit how deeply they go into the peak power usage "pool", but that is about as far as things have gone.

WHY would any reasonably intelligent person believe that a comparatively uneducated RETAIL customer would suddenly get so smart on how and when to operate their electrical devices or install some type of either storage or "peaking" generator to avoid the higher costs of power- especially when the NEW time-of-use ratees can change in both schedule AND cost on a daily basis?

The magic answer is- they won't in sufficient quantities to make MUCH difference.  A system in Montreal (I believe) was recently touted as helping that utiltiy "keep the lights on" during some recent very hot weather but I would be hard pressed to believe that enough customers decided to turn off their AC systems during the mid-afternoon to save a few bucks.  In all likelihood, the utility was able to buy enough power from the grid and run its peaking generators enough to get past the huge power drain that occured.

I, too, am a beiliver int the smart meter concept.  It definitely provides the utiity with better ways to project the retail customer actions, and it is a good tool for ANY custtomer that wants to use the tool to their advantage.  Bur- it also lets the utiltiy better recover THEIR operating costs- deing able to DIRECTLY pass on the cost of buying higher value electricity from the Grid, rather than "blending" it into their overall cost structure.

All I am saying is that we need to stop fooling ourselves with some misguided notion that "smart meters" will be the end-all of power grid effectiveness.  They CAN be a great tool for those who want to use them, but- for most- I believe that they will be just a fancier way of doing things "the way we have always done it".

Opt-out

It bothers me when customers insist they have no choice when it comes to electricity. They most certainly do have a choice. They can buy power from a vendor or they can generate their own. Electric Utilities are constantly bombarded with regulations on everything they do. I think there should not be an opt-out program for this. The benefits of going to smart meters are incredible. And they are just the beginning of the technological revolution that is taking place for the power industry. It is absurd that people who are buying that power get to have a direct say via regulation on what type of meter ther power company will use.

I once heard it described that buying power is like renting a generator from the power company while installing your own power generation is buying. For people who claim to be so energy efficient, I recommend they buy a system of their own.

Customer Choice and Control

In the early 1990s, Central Power & LIght (headquarters Corpus Christi, Texas), a subsidiary of Central and South West, a Dallas-based IOU holding company and my employer back then (AEP since the merger in 2000), staged a project in Laredo on the Texas-Mexico border, in which they ran hybrid fiber-coax cable to 2,000 homes and wired several appliances with control devices, so that the customer could have choice and control over their appliances in the evenings during peak. Imagine the technology cost of such a program back then! But the nature of the program was captured in its name: choice and control for the customers - what foresight, roughly 20 years ago. I often reflect how utilities have lost sight of their purpose when they neglect these ideas and practices. We picked up on that program a few years later in 1997 at CSW Communications when we renamed the company C3 Communications with the same theme.

Imagine in today's environment if a utility were to exercise such true empathy by providing just that - customer choice and control over how they receive and consume energy. With today's technology, this type of DR is possible, and it needs both TOU rates and the ability to easily curtail specific devices with set-it and forget-it automation - HEMS, AMI and TOU. I'm afraid that AMI got the cart in front of the horse as far as many consumers are concerned. I suspect paying these surcharges would be a lot easier if they had been consulted before utilities committed dollars on their behalf (choice) and then if they had a means to adjust their consumption to meet their own sense of balance, between cost, comfort and convenience (control). I suspect many would feel less agreived than they do now. With more emphasis on collaboration and consultation with the end users in this system, I believe we will begin to see our way through to a future with more balance and harmony.