April 20, 2008
California's three biggest utilities are charging customers nearly $4.6 billion to install millions of "smart meters" at homes and businesses. These newfangled meters, the utilities promise, will revolutionize energy usage by giving consumers far greater control over how much they pay for power.
Unfortunately, the meters could be outdated before they're even operational.
Instead of installing meters capable of receiving high-speed broadband Internet signals, Southern California Edison, San Diego Gas & Electric and Pacific Gas & Electric have opted for cheaper, lower-speed connections.
Yet the utilities are also laying the groundwork for advanced "smart grid" networks that will use broadband technology for managing power supplies and distribution.
The upshot: smart grids and smart meters that, in essence, won't speak the same language.
"Relative to the meters you have now, the new ones are pretty smart," said Kurt Yeager, executive director of the Galvin Electricity Initiative, a nonprofit group focused on improving the national power infrastructure. "Relative to the meters they should be installing, they're pretty stupid."
The utilities insist that lower-speed meters will function fine with a high-speed grid, and that ratepayers shouldn't be concerned about being sold a pig in a poke.
"The two-way communication is the key component," said Paul De Martini, director of Edison's "SmartConnect" program, which includes the utility's $1.7-billion rollout of 5.3 million new meters from 2009 to 2012. "Whether it's narrow-band or broadband is a secondary consideration."
Perhaps for the moment. The real question is how smart grids will be used five or 10 years from now.
Nobody could have known a decade ago that high-bandwidth services like YouTube and video downloads would one day dominate the Internet. Nowadays, you'd be crazy to access the Net with the slowpoke technology available back then.
The lower-speed meters will cost ratepayers about $100 each. Broadband meters would cost as much as five times more.
The utilities know that what customers get from smart grids today could be very different from what they'll expect in a few years. But they've decided to place short-term economic considerations ahead of long-term technological prospects.
This runs contrary to federal and state policy.
In December, President Bush signed into law the Energy Independence and Security Act, which, among other things, promoted creation of smart grids to better manage the country's power supply.
California regulators directed state utilities to pursue smart-grid technology several years ago to give consumers more control over their energy usage.
The idea is that interactive connections would give utility customers real-time information about energy rates and let them plan their activities accordingly. Instead of doing the laundry in the afternoon when power is expensive, you'd be able to see when rates are lower and save money by doing the wash then.
More intriguingly, a new generation of appliances could be programmed to automatically pick times when energy prices are lower, or when renewable energy such as wind or solar power is more plentiful.
Consumers also would be able to access months of usage and billing records, and run programs to help them determine the best ways to economize.
Meanwhile, grid managers would be able to quickly pinpoint troubles during outages and allocate resources accordingly.
That's the idea anyway. The reality, at least as far as California utilities are concerned, is that the coming smart meters will do little more than save the companies money by allowing them to read customers' meters remotely -- thus enabling them to fire their meter readers.
The new meters also will allow utilities to connect or disconnect service remotely, saving them the expense of sending a technician to your home.
Experts say it's unlikely that the utilities would be able to provide real-time pricing info to millions of customers without broadband connections.
They also say that lower-speed meters could clog existing bandwidth with trouble reports during an outage, preventing utilities from getting an accurate fix on the scope of a problem or where to send repair crews.
The utilities counter that customers will be able to enjoy full smart-grid capabilities as long as they have a separate broadband Internet connection. For those who don't, sorry.
"We think this is the best way to serve our customers," said Anne Shen Smith, senior vice president of customer service at San Diego Gas & Electric, which is spending $570 million to roll out 1.4 million new meters by 2011.
"We can put these meters in now and give you immediate benefits," she said. "Then we'll look at incremental benefits down the road and translate that into what it means for rates and costs."
In other words, SDG&E and the other utilities will upgrade or even replace their meters once they see how much consumers want all the capabilities that come with a broadband smart grid.
"It wouldn't surprise me if there isn't more functionality we want to install down the road," said Jana Corey, director of Pacific Gas & Electric's smart meter program. The San Francisco-based utility is spending $2.3 billion to install 10.3 million new meters by 2011.
Californians could end up having to pay twice to get to the smart-grid future that state and federal officials have already decreed to be our goal. This would be profitable for the utilities, which stand to gain additional revenue with each meter upgrade, but very expensive for ratepayers.
"Once you deploy these new meters, it will be very, very hard to upgrade them," said Robert Robinson, a vice president at consulting firm Booz Allen Hamilton who specializes in electric utilities.
"No one knows what all the futuristic applications will be," he said. "You want to be thinking about the endgame for all the things that will connect to the grid through your meter. All of that will require bandwidth."
It's possible, of course, that the cost of broadband meters will come down in the future, and that waiting to upgrade makes more economic sense. Similarly, not all ratepayers may want the full functionality of a broadband meter.
But if the growth of the Internet tells us anything, it's that it's better to be technologically prepared for all the bells and whistles that come with advanced data networks. Chances are, it'll be cheaper over the long run to bring consumers up to speed now, rather than waiting to upgrade their meters in the future.
Is it too late for the utilities to shift gears? No. Thousands of new meters have already been installed in pilot programs, but millions more have yet to make it to people's homes.
Terrie Prosper, a spokeswoman for the California Public Utilities Commission, said the new meters met performance standards set by regulators.
But she acknowledged that "to be cost-effective, the systems implemented by the utilities are less sophisticated and less expensive than a broadband system."
It seems incredibly shortsighted to build a high-speed network for utilities that consumers will be able to access only through lower-speed meters. State regulators need to take a closer look at this situation and determine what's best for the state as a whole, not just the utilities.
Otherwise, a few years from now, we could have the dumbest smart grid in the country.
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