Following the Enronian dogma of electricity deregulation enthusiasts (and some environmentalists), Ontario embarked on large scale residential deployment of so-called “smart meters” a few years ago. “Smart meter” proponents claim a variety of hypothetical benefits from having residential customer prices thrum with the flawed hourly electricity spot market prices in jurisdictions like Ontario (and New York, which effectively ceded its state jurisdiction over utility power generation to FERC and its market rate policies). In Ontario, residential “smart meters” were installed at a cost of more than $2 Billion. Faith in the electricity market deregulation dogma was so great there was no prior cost-benefit analysis. The verdict is in. The 2014 Annual Report of the Office of the Auditor General of Ontario finds that it was folly to go down the “smart meter” road without adequate benefit/cost analysis. The Report states:
[W]e noted that as of FY 2014, the total approximate costs of implementing Smart Metering had reached almost $2 billion. • With respect to benefits, only 5% of the distribution companies we consulted reported operational savings, mainly from no longer having to send staff to read meters manually, and all of these were of modest size; the other 95% said they realized no savings and their operating costs relating to smart-metering activities since implementation had actually risen. As well, the savings achieved by ratepayers were so far limited, contrary to overnment communications to the public that smart meters and TOU pricing would help “save money” and “lower electricity bills” if appliances were run during Off-Peak hours. In fact, over half of the distribution companies we consulted received a high volume of complaints about “increased bills with no savings” from ratepayers with smart meters who paid TOU rates...In addition, several large distribution companies analyzed a sample of their residential ratepayers and found that a majority would see no reduction in their bills after implementation of TOU pricing. Therefore, of the four sources of projected benefits …, two of them (reduction of distribution companies’ operating costs and reduction in ratepayers’ energy costs) have not been achieved. The remaining two sources of benefits (avoiding expansion of power-generation capacity and deferring or avoiding expansion of transmission and distribution systems) have yet to be seen because, as noted previously, the 2010 peak-demand reduction target was not met and actual peak demand has remained relatively stable since 2010. **** Those distribution companies that had tracked the nature of complaints reported that a majority of the concerns raised by ratepayers related to TOU pricing and fell into the following categories …: • Ratepayers were upset about high electricity bills or “increased bills with no savings,” which they believed were caused by faulty smart meters, but were in fact due to the increase of TOU rates as a result of the significant growth of the Global Adjustment (see section Significant Impact of Global Adjustment on Time-of-use Rates Not Transparent to Ratepayers). • Ratepayers had “limited understanding and information about TOU pricing;” and • Ratepayers had “limited or no ability to change electricity consumption,” especially small businesses and individuals at home during most of the day.
There are always strong constituencies for investing billions in utility system modifications, simply because of the large number of customers (and wallets) involved can spread huge costs with little notice, and the ability, through regulation, to recover from customers uneconomic costs flowing from misguided utility policies, due to the unavoidability of bills for essential utility service, which will be discontinued if not paid. The Ontario experience should send a warning signal to jurisdictions like New York under constant pressure to deploy “smart meters”. This pressure to make the same mistake as Ontario comes from
- groups like the Environmental Defense Fund (EDF),
- market enthusiasts who mistakenly believe they can counter unreasonable prices not with corrective measures but with “demand response” via time of use pricing enabled by “smart meters”,
- “smart meter” purveyors, and others.
Background The Utility Project has long taken a skeptical view of the rationales for massive residential “smart meter” development. We have insisted that before the PSC or utilities spend billions on “smart meters” they be shown to be cost effective. The Project recently opposed EDF’s campaign for mass deployment of residential “smart meters” in the last Con Edison rate case. See Testimony of former New Hampshire PSC Commissioner Nancy Brockway for Utility Project, at pages 44-47. For further background, see
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