The M Files

Gib Armstrong

As an outcome of our evolving deregulated electricity market and quest for smart grid development, ?ó?é¼?ôsmart meters?ó?é¼?¥ are being installed throughout Pennsylvania and the country. While in many ways using these devices represent a game-changing approach to the business of electricity supply, the majority of home and business owners are unaware of their purpose and existence. As the new metering programs are unveiled, a debate has sparked within the energy industry over the merits of the new technology versus potential security and energy information/privacy risks.

To help us all become better informed on this technology, I interviewed a man in the know:
Gib Armstrong, Director of Regulatory Affairs for BlueStar Energy Solutions.

Q. Why are electric utility companies installing smart meters throughout their territories?
A. In Pennsylvania, Act 129 now requires them to. But some utilities, like PPL, took the initiative without waiting for a mandate. They did it to cut administrative costs and give customers more functionality. Beginning in 2002, PPL was the first utility to deploy Automated Meter Reading (AMR) meters that can record real-time usage and be read remotely no more meter readers. As a customer, I was glad to see that overhead disappear. AMR meters can also support demand response, data analysis, and money-saving, market-based, hourly pricing plans, which is the direction the electric market is moving.

Q. What are the potential benefits of smart meters to electricity customers?
A. For the first time, suppliers can see how much power a customer has been using in real time, make projections about future use, and offer them a price plan accordingly.

That’s just the beginning look for a host of innovative products and services to unfold. The revolution that occurred with telecom deregulation is waiting to happen with electricity. When the first cell phones came out, no one imagined that a mere 20 years later we would be sending video from our phones around the world for free. That’s the power of free markets and innovation, and that power is about to be unleashed in the electricity industry as well.

Q. From my perspective as an energy services professional, the high tech features of the meters are currently underutilized. Can you give us a glimpse of future program strategies?
A. The meters let suppliers do at least two things they could never do before: communicate price signals to the customer and see their customer’s usage in real time. Look for aggressive suppliers to begin offering not just fixed rates, but market rates, where your price moves with market conditions, which is usually lower than an annual fixed price. For example, I have an hourly rate with BlueStar Energy, the supplier I work for. Instead of paying over 10 cents for every kilowatt-hour, my price fluctuates sometimes going below five cents. Paying “by the hour” saved me over 20 percent on my June bill. BlueStar also sent me a device that tells me how much power I’m using. So now each day I go on the PJM website and download the PPL zone prices for the next day. When it goes above seven cents per kilowatt hour, I shut off the A/C. By the time anyone notices, it is 6p.m., prices are back down, and I turn the A/C back on.

You may also see suppliers offer demand response. Today this is mostly for large power users, who can get paid monthly for the promise that they will respond to high-grid demand by cutting back on usage?It’s kind of like a grid insurance program where the power user gets the premium. AMR meters create the opportunity for even residential customers to benefit from programs like this.

Q. There’s a rising tide of criticism that smart meter roll-outs are premature due to issues with security weakness. Is there merit to that criticism?
A. No doubt security will be a big deal, and there will be several issues to address. For instance, some AMR meters talk with each other through a “mesh” network, where each meter is also a relay device.   Sophisticated “listeners” can tell things about you just by intercepting your power noise, like whether or not you are home, and even what type of appliances you have. The challenge will be to transmit the information from the customer to the supplier and utility, while protecting it at numerous communication nodes along the way. While these and other issues pose real challenges, American persistence and ingenuity will find market-based solutions just as they always have as long as the market is not hampered by regulators and bureaucrats.