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Smart Metering - A Case Study

Smart Metering - A Case Study. Presentation By Frank W. Radigan, Principal – Hudson River Energy Group June 10, 2008. Topics of the Day. Who is HREG? Case Study Connecticut NY Utilities Approach. Hudson River Energy Group. 27 years’ experience in utilities industry

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Smart Metering - A Case Study

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  1. Smart Metering - A Case Study Presentation By Frank W. Radigan, Principal – Hudson River Energy Group June 10, 2008

  2. Topics of the Day • Who is HREG? • Case Study Connecticut • NY Utilities Approach

  3. Hudson River Energy Group • 27 years’ experience in utilities industry • Serving gas, water, electric and steam industry • 15 years’ experience at the NY PSC • 12 years’ consulting throughout New York, New England and, more recently, all around the country • Specializing in rates, rate design, revenue requirement, performance based rates, depreciation and power supply issues • Diverse client base, but never the large investor owned utilities

  4. Case Study – Ct. - Background • In June of 2005, the Connecticut Legislature passed Public Act 05-1, An Act Concerning Energy Independence which became known as the “Energy Independence Act” or “EIA”. • The EIA requires the Ct. Department of Utility Control (DPUC) to consider rate design changes to require: • Mandatory three-period TOU rates for customers of not less than 350 kW, • Optional interruptible or load response rate for customers of not less than 350 kW, • Optional seasonal and TOU rates for all customers • Mandatory seasonal rates for all customers • In December 2006 the Ct. DPUC required utilities to submit a metering plan under which it could achieve the Department’s objective of offering TOU rates to all commercial and industrial customers and to the largest residential customers.

  5. CL&P Approach • In March 2007 CL&P filed an Advanced Metering Infrastructure Plan (AMI Plan). • CL&P evaluated available metering technology and the abilities of the various technologies to meet the requirements of the DPUC as well as adaptability to serve other purposes, such as facilitating the use of the next generation of “smart appliances” which will provide customers with greater choices. • CL&P claimed that “Open AMI” was the technology that best accomplished the goals articulated by the DPUC. • CL&P also stated that the most cost effective deployment strategy for this technology was geographically-based deployment on an accelerated basis that would begin in 2007 and conclude with deployment to all CL&P customers by mid-2010.

  6. CL&P Approach – Con’t • CL&P provided four options for the Department to consider ranging from a simple plan designed to comply with the minimum requirements of the EIA up to the full deployment. • The cost of the options ranged from $89 million for simple compliance up to $255 million for full deployment. • Note: CL&P’s current metering system was recently updated to AMR technology at a cost of $112 million to ratepayers. • As part of its plan CL&P wanted full recovery of its AMR investment • At year end 2006, CL&P had a rate base of $1.6 billion so the plan would increase rate base by 23%

  7. Further Changes in Ct. • During the course of the proceeding, the Connecticut Legislature enacted Public Act 07-242, An Act Concerning Electricity and Energy Efficiency (“Energy Efficiency Act”), which provides, in part, that: • Each utility shall submit a plan to deploy an advance metering system which will support net metering and be capable of tracking hourly consumption • Any customer may obtain such a meter on or after January 2009 • Within 6 months of implementation of the statue, electric distribution companies shall offer TOU pricing options to all customer classes, including, but not limited to, hourly and real-time pricing options • Each electric distribution must submit a proposal, and by January 1, 2008, the Department will approve a voluntary critical peak pricing or real-time pricing tariff for each customer class.

  8. DPUC Insight • In June 2007, the DPUC held a technical meeting to discuss the effects of the Energy Efficiency Act on CL&P’s AMI Plan. • At the meeting the DPUC provided the following guidance to CL&P • The plan should provide customers with the tools to manage their electricity usage and costs through new rate structures and the technology to support those structure. • The plan should enable customers to affect a reduction in load during the on-peak hours to enable economic benefits from an altered load profile. • The plan should provide options based on 1) deployment by class or usage, with the intent to capture the largest customers and 2) deployment to blanket geographic areas that can maximize the mesh network capabilities • The Energy Efficiency Act does not require replacement of all 1.2 million meters in CL&P’s system.

  9. CL&P’s Revised Plan • In July 2007, CL&P submitted a Revised AMI Plan to comply with the various provisions of the Energy Efficiency Act. • CL&P developed six options for deployment of AMI, and stated that all six meet the requirements of the Energy Efficiency Act. • For basic compliance, Option 1, the Company would use a technology that is available today which it estimates to cost $10 million. • The next four options increase in deployment level, cost and level of technology. • Option 6, which the Company described as Full Deployment, would enable a “Robust Market Design” available to all customers using the latest technology, and would cost $274 million. Customers would still have to pay for the AMR meters ($112 million).

  10. Facts Learned in Hearings • There are studies in other parts of the country, like California, that suggest the introduction that time-of-use pricing or critical time pricing or some kind of time differentiated pricing does result in a load shift response. • Economic theory states that when you send price signals and the cost of a product goes up that people respond in an inverse way. So from a theoretical perspective, from an intuitive perspective, and then from a more discrete perspective through some of the pilots that have happened, there's absolutely no reason to believe that customers would not respond. • What we don't know about is the level of the magnitude of how our customers are going to respond. We don't have that data. • We cannot guarantee a one-for-one cost benefit, dollar-for-dollar here.

  11. DPUC Findings • The current metering system has the capability to provide all the needs and benefits from TOU rates that customers want and are likely to use. In fact, 30% of CL&P’s load is already on TOU rates. • CL&P’s proposal would make sense if there was a reasonable expectation that large numbers of customers would utilize TOU rates and shift consumption to off‑peak periods. However, at this time there is no evidence to support this finding. • The purported benefits of CL&P’s Open AMI proposal are predicated not on what it will accomplish using today’s customer technology and infrastructure, but rather on what it may accomplish sometime in the future if customers make significant changes in their homes, if customers change out or modify their appliances and if customers change their consumption habits. • The Department also shares the concerns of other participants regarding the “newness” of this technology. It remains to be seen whether OpenAMI will operate as advertised and whether the meters will work in rural or less densely populated areas.

  12. Compliance Filing • Proposal to conduct a Rate Pilot plan in the summer of 2009 • A 10,000 Smart Meter Study • The Rate Pilot will offer, on a voluntary basis, 3 TOU rates to a sample subset of residential, small commercial and industrial customers. • Proposal to target of 2,600 customers (1,300 residential and 1,300 small C&I customers) and evaluate the results of the Rate Pilot to assess customer acceptance of various rate options and ultimate load response that the options may generate.

  13. NY Utilities Approach • In August 2006, the NY PSC issued an order that required utilities to submit a plan for deploying smart meters capable of supporting TOU rates. The PSC further requested the companies to explore the feasibility of using advanced metering systems for gas customers. • NYSEG/RG&E/O&R and Con Ed – replace all existing 6.6 million meters at a cost of $983 million – average $150 per meter. • National Grid -- Continue to deploy smart meters to for large C&I customers. Not cost effective to spend $650 million for 2.2 million customers. • Keyspan and NFG – Already giving advanced metering to largest customer and sees no additional benefit for doing anything else.

  14. Contact Information Frank RadiganHudson River Energy Group237 Schoolhouse RoadAlbany, NY 12203Tel. (518) 452-2585Fax (518) 452-2684 FRadigan@aol.com

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