EnergyBiz - September/October 2007 - (Page 63) » Guide&Sourcebook (Metering and data ManageMent) building a Case for advanced Metering infrastructure BusinEss and rEgulaTory CHallEngEs By warrEn CausEy regulators get involved in any business operation, natural market forces are skewed — usually at tremendous cost to taxpayers and customers. AMR and AMI, automatic meter reading and advanced metering infrastructure, are prime examples. AMR was invented at a utility nearly 20 years ago. It has evolved gradually since then and many utilities, large and small, have embraced the technology so that today more than 25 percent of all residential meters, and a much higher percentage of commercial and industrial meters, are automated. Steady, if unspectacular, growth in deployment of the technology continued into this century. The problem with AMR and AMI is that it is quite expensive and is, therefore, difficult for a utility to cost-justify on a purely economic basis, particularly at the residential level. Simply eliminating meter readers does not suffice to develop a return on investment business case for automatic meter reading. If automated meters can provide improved efficiencies in other areas, such as turn-on, turn-offs, demand response and time-of-use pricing, then the business case becomes easier to make — not easy — but easier. Such a business case always is complex, however, and in order for utilities to embrace AMR and AMI, they have to get regulatory approval for the costs and some provision for cost recovery in rates. That isn’t always easy. It means rates have to go up, something government often doesn’t take into consideration when requiring businesses to install particular technology. Then, the regulators and legislators who required the move complain about increasing rates, as does the public at large. In 2005, the federal energy act did not mandate automatic meter reading or advanced metering infrastructure, but it did put pressure on state utilities commissions to put pressure on utilities to install AMR and AMI. This pressure was applied by requiring the public utility commissions to require the utilities to justify why they shouldn’t offer timeof-use rates to their residential customers. Time-of-use rates can only be offered by advanced metering. Typically, California jumped in with both feet requiring its utilities to begin deploying advanced metering infrastructure by a fixed date, regardless of the costs, which will be substantial. California utilities now are in the process of developing or acquiring the required technology. Again, typical of California government regulation, it isn’t yet clear how the tremendous costs involved will be handled. “In compliance with California PUC regulations, SCE launched in 2005 a five-year program to deploy 5 million next-generation meters in its service territory to provide time-of-use pricing, and demand-side management whEnEvEr GovErnMEnT anD capabilities,” says Mahvash Yazdi, senior vice president, business integration and chief information officer, Edison International and Southern California Edison. The overall architecture and initial business case was completed in 2006. The focus this year is selecting the metering, telecommunications, and meter data management solutions, and conducting integration testing through limited pilots. According to various sources, Edison International recently had its list of potential advanced metering infrastructure technology suppliers down to a very few. Utilities throughout the rest of the country are not immune to the pressure being applied in Washington. Although no other state utility commissions have gone as far as California has in requiring full-blown advanced metering infrastructure, the handwriting is on the wall and utilities in many other states are taking steps to begin calculating the height of the economic mountain and how to go about scaling it. An example is Southern Company, which serves a major portion of several Southern states. Despite a relative lack of pressure from the regulators in those states, Southern is committed to installing advanced metering infrastructure in a portion of its service territory in or near Atlanta, and working with the regulators to get the expense rate based. Just up I-75 from Atlanta, however, one of the nation’s largest cooperative utilities, Cobb Energy, already has 64 E n E rgyB i z September/October 2007
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