Smart Mandates

Sometimes the impetus for smart grid movement comes from unlikely sources. In Ontario, the biggest thrust came from the provincial government.

For Toronto Hydro, the provincial government's focus on green energy, conservation and demand management, and green jobs came as welcome support to its own smart grid plans. In late January, I headed north to visit Toronto Hydro Corporation and to find out more about its ''wires'' affiliate, Toronto Hydro-Electric System Limited, one of the largest electric distribution utilities in Canada.

The City of Toronto, covered by Toronto Hydro, consumes about one-fifth of the electrical load in the province. In 2007, Toronto Hydro began one of the largest production deployments of smart meters on the continent, followed by the introduction of time-of-use rates.

Intense changes

Toronto Hydro's corporate offices stand tall in the center of downtown Toronto, not even a block away from the busy flurry of Yonge Street, right in the middle of its customer territory. My guide for the day was Blair Peberdy, the company's vice president of communications and public affairs, who walked me through the steps the company has taken, especially over the past year and a half, as it kicked its smart metering and time-of-use billing programs into high gear.

Peberdy is part of a Toronto Hydro steering committee that also includes the company's vice president of customer care and the chief information officer. This committee, supported by its respective business units, has been working for many years on its smart meter and time-of-use rate deployment. Over the past two years, the work has been what Peberdy can only describe as ''intense'' as the company took the lead in the province in deploying smart meters and time-of-use rates throughout its residential customer base.

One of the key thrusts in Toronto Hydro's current smart grid activity, Peberdy said, came from the Ontario government's push, as part of its new direction in its energy policies, to install smart meters across the province by the end of 2010.

''We looked at this provincial direction and the energy policies of the government and felt there are certain areas that are a natural fit for the company. One is the delivery of conservation and demand management programs, because we have the direct relationship with the residents and business people of Toronto. The City of Toronto consumes about 20 percent of the electrical load in the province. So it became clear that Toronto Hydro would have to participate very effectively in conservation and demand management programs if the provincial intent to create a 'conservation culture' in Ontario was to get traction,'' Peberdy explained.

Building on the company's success in its early years of conservation programming, it made sense to Toronto Hydro to be able to manage electrical usage, to track it and to measure it, ''so we could track every kilowatt saved to the dollar we were investing in conservation and efficiency,'' he said. ''We saw the value to the brand, and our consumer research showed that customers expect the company to be involved in those activities and wanted more.''

Residential smart meters first

''And then we looked at the smart meter issue and said, you know, smart meters are a technology that utilities across North America are talking about. It's been difficult to build a business case to install it, because traditional meters were so inexpensive, though not conducive at all to driving conservation. So here was an opportunity, basically a requirement, to look heavily into smart meters. We were the first utility out of the gate with a smart meter installation plan, and worked very hard to quickly get the technology that we felt comfortable with,'' Peberdy said.

With that commitment to smart meter installation also came a commitment to the provincially mandated time-of-use rates, which are set twice a year (Nov. 1 and May 1) by the Ontario Energy Board (OEB). By way of example, the current time-of-use rates, set Nov. 1, 2009, are shown in the following chart:

FOR ONTARIO CUSTOMERS ON TIME-OF-USE (TOU ) PRICING, THE REGULATED OEB WINTER RATES ARE:

* Electricity used on weekends and holidays is priced at the lowest, off-peak price all day.
** Regulated Price Plan (RPP) rates, by way of comparison, are currently set at 5.8 cents/kWh up to 1,000 kWh of electricity consumed each month; and 6.7 cents/kWh for any additional usage above that threshold. (These rates are received by those consumers currently under contract to energy retailers.)

''We started back in July of last year, and we've been bringing them on in groups of about 100,000 a month,'' Peberdy said. ''These are the residential customers. We will be moving the commercial customers on through the latter part of 2010, and then all customers should be on time-of-use rates as we move into 2011.''

Toronto Hydro made a conscious decision to focus in on its residential customers first. ''That's the largest piece of our customer base,'' he explained. ''Out of close to 600,000 residential customers, almost 500,000 are now on time-of-use rates. There's another 75,000 or so who are with energy retailers, many of whom will be moving to time-of-use rates as their contracts expire, if they choose not to renew with a retailer, and there's another several thousand whose meters are in hard-to-access places that we haven't been able to get to yet, so we'll get to those in the next year.''

Commercial smart meters next

While approximately 75 percent of Toronto Hydro's customers are residential customers, they only use about 20 percent of the utility's total load. ''So,'' Peberdy told me, ''we have this smaller core of business customers out there who are using about 75 percent of the load in the city, that are being exposed to time-of-use pricing, that are conducting business during weekday business hours, which are also peak electricity hours.''

Toronto Hydro is a summer peaking utility, primarily driven by air conditioning load. Most of that load, both summer and winter, is business commercial customers, with a mix of office towers as well as small industrial malls and industrial parks. These medium-sized customers are the hardest to get to, because there are a lot of them, they're dispersed all over Toronto Hydro's territory, and many are renting the facilities they use.

With its residential customers nearly all switched over, the utility is focusing on improving its sales channels and key customer account management channels, so it can have the business-to-business discussion necessary with its customers about conservation programs and demand management programs it is bringing into the market, as well as time-of-use rates.

''It's really getting to these business customers on a one-to-one basis with programs that make sense to them, that they can take advantage of to lower their business costs, their operating costs,'' Peberdy said. Toronto Hydro expects a mandated conservation target to come from the OEB imminently, possibly tripling what the utility is already doing. ''We're going to have to find ways, and most of these targets are going to have to come from the business sector, because that's where the power consumption is. So, we're working on ways to get into that customer sector with programs that make sense to them, that they're willing to sign onto. And that is one of the biggest challenges we're going to face.''

Will it spark change?

An oft-debated topic when it comes to time-of-use rates is whether there needs to be a definitive-some say punitive-difference between off- and on-peak rates in order to trigger response. While Toronto Hydro's time-of-use rates are set by the OEB, rather than the utility, Peberdy was willing to weigh in on the subject with me from the utility's perspective.

''If you're trying to trigger consumer revolt, then you bring in a very aggressive time-of-use regime that will send price shocks to consumers,'' he said. ''But our feeling is that the more moderate approach the province is taking is the right way to go to get consumers to understand the concept, to be able to achieve some reduction on the bill should they start to make the behavioral changes.

''It also gives the company time to start to bring out new programs for customers to make conservation and load shifting more practical and more realistic. Then, over time, as the conditions may warrant, aggressive pricing signals could be set. I think for us the key thing now is to get the rates in, to get the billing systems stabilized, and to help consumers to understand and accept this pricing model. By trusting that the bills are accurate and that the rationale is sound, we can then provide them with the tools, over time, to be able to either manage it themselves or have the utility or someone else manage it for them.''

So far, so good

Toronto Hydro is the largest jurisdiction in North America that is moving all of its customers onto time-of-use rates. The company has, as of January 2010, issued more than 100,000 bills on a two-month billing cycle, supported by a lengthy advance notification and education program for its new time-of-use customers. By May, 500,000 bills will be in production. So far, calls to the call center have increased by only 10 percent, Peberdy said: ''The accuracy of the bills has not been a question. It's been more of a clarification around the rates. We've set up a password-protected Web site so consumers can go on and actually track their consumption day to day, and make a comparison of what their rates will be under time-of-use rates versus the tiered rate.''

Here's how it works: As part of the advance notification to each customer that they will be moving onto time-of- use rates as of a certain date, they receive a communiqué with a log-in password. This password then allows them to ''play'' with their energy usage at certain times of day, to see how they can change their electric bill by shifting some of their normal on-peak load to off-peak times.

''We're thrilled with the Web site. We feel that 100,000 customers who have registered onto their own personalized time-of-use site out of 500,000 is a good penetration through this first go-round,'' he said. ''And this begins to get people to understand the rates, and to get some idea as to what are the behavioral things they can do, and get them thinking about that.''

Moving beyond the smart meter

Toronto Hydro sees the smart meter, and the change in consumer behavior with time-of-use billing, as foundational supports to it smart grid aims. One of the next steps, Peberdy said, is to move beyond the meter: ''We're talking to appliance manufacturers about smart appliances-what they look like, what can we start to pilot in Toronto, and what is the communications gateway into the home. Through the meter? Or is it through the Internet? Or is it some other way? We're open to all options and I expect we will be testing all of those different gateways in the near future.

''The interesting thing around the meter is, the thought has been that the smart meter will provide the communications gateway into the home. And it may well. However, having done a massive deployment of them now, and moving customers onto time-of-use rates, we're starting to think that the meter is a meter, and should operate as a meter, and that's what we should expect it to do. Whether or not it becomes a communications gateway is something now that we're rethinking as to whether or not we want it to, or do we want it to do what it was originally designed to do, which was to accurately track consumption at times of day and feed absolutely accurate information back to the company so that we can issue timely, accurate bills based on time-of-use rates?''

However, the issue of smart grid and smart home won't wait idly by while Toronto Hydro establishes its metering protocol, so the utility is actively exploring other communication gateways into the home besides the meter. ''Now is the time for us to ensure that these bills are going out in an accurate way, in a way that consumers understand. And that's what the meter's designed to do,'' Peberdy said. ''So we're thinking of 'Hey, meter, do your thing. We may be back to you to talk about a smart home, but in the meantime, we're going to explore some other avenues.'''

It is also looking at other computer applications it can offer consumers, such as the ability to access their daily consumption, receive outage notifications, or turn appliances on and off via BlackBerry and iPhone applications.

Infrastructure rebuild

In the meantime, Toronto Hydro shares the same boat as many other utilities across North America, with a one-two punch combination of an aging infrastructure and an aging workforce. In February, the utility announced its plans to invest more than $275 million this year to replace and upgrade its aging distribution system. Since launching its infrastructure renewal program in 2007, the utility has invested approximately $420 million to upgrade its distribution system in Toronto, much of which was installed in the 1950s, 1960s and 1970s.

''We've taken forward rate applications to the Energy Board that have been very, very forthright and ambitious in addressing the fundamental problems on the grid that relate to aging infrastructure,'' Peberdy said.

As a distribution utility, Toronto Hydro sees a clear opportunity, as it is rebuilding its infrastructure, to start looking at smart technologies on the ground floor, and to be able to plan and build them into the utility's new grid infrastructure. The company is adding smart transformers, transformer monitors and other smart technology as it goes.

''As we replace capital and assets, we're looking for what's out there in the market that we can put in to tie into a smart grid kind of strategy that we need to put together,'' he said. ''So, the approach then to the grid is to think smart technology as we're doing a design and rebuild.''

Ivano Labricciosa, Toronto Hydro's vice president of asset management, built on that even further: ''Our model for the future is forecasting the demand for service before it arrives,'' he said. Labricciosa is also looking to a future in which hardware integration becomes second nature to manufacturers. ''The guys that I think will make it at the end of the day are the ones who will work together on the manufacturing end,'' he said. ''A lot of my dialogue is 'Help me work with you and others to help make this work as we develop it going forward.' Coordination between all stakeholders is of essence.''

Workforce rebuild

''Another area that we've been working on that I think will resonate with many utilities is the fact that we've got an aging workforce, so we have an interesting situation where we're quadrupling the capital budget and the capital construction program, but we've got a workforce with an average age of close to 60 years old, with close to 40 percent retiring within the next six or seven years. So clearly, we have a workforce renewal issue, as well,'' Peberdy said.

''About three years ago we again went forward as part of a rate application to the Energy Board and said, 'look, we're facing this problem'.'' We argued for an increase in head count, which many utilities going before regulators are loath to do. But we said that it's critical for us to start recruiting younger employees specifically into the electrical trades, the skilled trades. This is a 4-1/2 year apprenticeship. We've got to have these younger employees on the job while these older workers are still here so that we can have a knowledge transfer and a safe transition from an aging workforce to a younger one.''

The OEB agreed, and Toronto Hydro started actively recruiting. Since 2003, it has hired more than 120 new apprentices into its workforce and plans to hire 40 additional apprentices by the end of 2010 into the overhead line profession, the underground cable splicing profession, substation mechanics, and other areas. In addition, the utility now operates what is considered one of the best and most comprehensive in-house electrical utility trades training centers in Canada, fully accredited as a training delivery agent by the Ontario Ministry of Training, Colleges and Universities.

Greening the Toronto grid

Thanks to Ontario's Green Energy and Green Economy Act, passed in May 2009, distribution utilities such as Toronto Hydro-Electric System Limited can now also become renewable generators through the government's newly announced Feed-in-Tariff (FIT) program.

Here, too, Toronto Hydro is looking at all of its options, and wasting no time getting involved. ''We're considering a fairly significant solar PV down at Exhibition Place [at the edge of Lake Ontario] and we're testing offshore wind off of Lake Ontario for a potential wind farm,'' Peberdy said. As well, the utility is involved in an electric car program announced in late January.

But for the moment, the biggest piece of the puzzle remains successful implementation of smart meters and time-of-use rates. ''The beauty of these,'' Peberdy said, ''is it starts to make smart homes and smart grids make sense to the consumer on another level. So if we're talking about load shifting to bring peak demands down, to provide less stress on the provincial grid, to provide the province more time to consider its generation issues of how it's going to shut down coal plants without overloading the grid, then it all starts to make sense to the consumer…and that's why these smart meters and these time-of-use rates are so critical to us.''