Energy Biz - September/October 2008 - (Page 72) » Guidebook part of the Solution BUSiNESS CASE gAiNS STRENgTH By WARREN CAUSEy for nearly 30 years, auToMaTed metering at utilities has been a solution in search of a problem to solve. The problem has arrived, in spades. Automated meter reading actually was invented by a utility in the upper Midwest back in the late 1970s. For the next nearly 30 years, it bumped along as an interesting idea, but one for which it was extremely hard to build a business case. Replacing meters is an expensive proposition, especially when large numbers of meters are involved. Utilities ran hundreds of pilots across the country, but despite the claims of vendors, simply eliminating meter readers did not justify the costs. The first utility to do a full deployment of automated meters was Kansas City Power & Light, now Great Plains Energy. KCP&L deployed some 400,000 CellNet meters between 1996 and 1998. However, the drivers for that decision had less to do with the financial aspects than with other issues, including the utility getting a very good deal on a system, says Doug Morgan, retired KCP&L chief information officer, who was intimately involved in the deployment. “My introduction to AMR was in the early 1990s when we visited Itron, CellNet and some others in the field,” Morgan says. “Pacific Gas & Electric had a couple of hundred units installed as a prototype. That was the first exposure I had to it. “We were like everyone else at that time, you couldn’t justify AMR financially just based on meter reading,” Morgan says. “However, in the 1990s we were fortunate to have a CEO who had looked at the breakup of AT&T and at California and believed we were going to have to survive in a world of utility competition. In fact, Missouri had planned to go to full deregulation in 2002. We were looking at all kinds of potential competitive services and believed that in a competitive environment, the one with all the customer information held all the cards. “In those days, everyone wanted to sell you the system and that was too expensive,” Morgan continues. “However, we talked to CellNet for about a year and they claimed AMR could be economical. So we challenged them, saying, ‘You come to Kansas City and put it in and we’ll pay you the same price September/October 2008 (MeterinG and data ManaGeMent) we pay meter readers. You take the risk and we’ll buy the service from you.’ We got a deal no one else ever got at that time. Because we were the first, we got a unique deal for several years.” KCP&L’s pioneering effort broke down some barriers for the AMR industry and eventually several other utilities went to full deployments despite the difficulty of making a business case for such deployments in the absence of competition, which stalled after California’s ill-designed effort at competition collapsed. Thus one problem advanced meter infrastructure and automated meter reading could have helped with went away, as far as most utilities are concerned. Today, however, there is another major problem arising that, really for the first time, will enable utilities to build a sound business case. That is impending shortages of electricity nationwide and the rapidly escalating costs of fuel for generation. The shortages and the skyrocketing fuel costs are interrelated and have multiple causes. Two of the major reasons for impending shortages are the inability of utilities to build new central plants and expand transmission systems to embrace emerging clean energy generation. Advanced metering infrastructure becomes much more attractive from an economic standpoint as energy costs rise. If, as regulators and others are pushing, utilities can add automation to their grids and then extend that into homes, they can reduce demand by cutting off appliances and reducing load. This push for smart grids and home automation depends upon an electronic gateway to the home and, although there are some other options, AMI fills this bill nicely. Many utilities are turning to AMI today, as a result of regulatory pressure and from seeing the handwriting of higher costs and constrained supply on the wall. Chief information officers now are beginning to see how the business case can be made. Dave Harkness at Public Service of New Mexico said in a recent interview that the escalation of costs for generation and impending shortages of supply, because of opposition to building new coal-fired generation, is making AMI much more attractive. “Demand response and smart grid can’t substitute for all the generation that will be needed, but it can 72 E n E rgyB i z
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