'Smart meters' could generate ways to save on electricity

Imagine an electricity meter that can pinpoint power outages, automatically turn household appliances off when wholesale electricity gets too expensive and - with enough of them in use - possibly reduce the need for new power plants.

All rank among the potential benefits of so-called smart meters, which are fast becoming the darling of the utility industry as state and federal regulators push power providers to cut energy costs. Utilities are turning to the devices as they struggle to meet demand, which in some areas is expected to outpace construction of new power plants and transmission lines. The meters average about $100 or more per household to install, but advocates insist that consumers will save much more than that in power costs over the long run.


Baltimore Gas and Electric will join the movement this year as it begins testing meters that, among other things, could save customers money by rewarding them for using less power during times of peak demand, as on hot summer afternoons. The technology works in part by making it possible for utilities to measure a customer's power use on an hourly basis without the need for meter readers, who must head into residential neighborhoods to collect the data.

Many experts say the trend reflects a growing realization among utilities and policymakers that cutting demand might be a faster and more effective way to bolster the nation's aging power grid than building new plants. It also represents a seismic change in thinking for utilities, which have historically seen their profits linked to how much electricity they sell.


"It costs less to not use [electricity] than it does to construct new generation," said Ray Dotter, a spokesman for PJM Interconnection, which manages the power grid for Maryland, the District of Columbia and 12 other states. PJM supports the use of smart meters as a way to balance energy consumption in the grid.

Though critics worry that utilities are pouring billions of dollars into technology that would be better spent on conservation, most agree that benefits are to be gained from smart meters.

Currently, most residential customers pay the same electricity rate day after day no matter when energy is used, even though the true price of power can change drastically throughout the day and year.

A key feature of smart meters is the ability to record a customer's energy usage hourly and then send that data back to the utility over low-voltage power lines or through wireless transmission. The technology eliminates the need to have meter readers go out into neighborhoods to collect the data - a function performed by subcontractors in BGE territory.

Once smart meters are installed, a utility could use the data to offer customers different rates for using power at different times of day. That would allow utilities to greatly expand and enhance their existing "time-of-use" programs, which could help consumers save on electricity costs.

The financial incentive is designed to encourage customers to reduce demand when energy is needed the most. Most industrial customers already use such an approach, often employing energy consultants to tell them when to curtail usage to achieve the greatest savings. Currently, too few residential households enroll in the time-of-use programs to have a major impact on the power grid. But with residential rates soaring, utility officials say they believe more homeowners will be willing to sign up for such programs.

Some regulators see a day when time-of-use rates will be the norm rather than the exception. For example, Pacific Gas and Electric Co. in California has begun installing 10.3 million smart electric and gas meters in every home in its service territory. The effort will cost $2.2 billion over 20 years and be funded by ratepayers.

The movement got a boost from the Energy Policy Act of 2005, which ordered states to investigate the potential implementation of such "demand response" programs. Those studies are under way in Maryland and elsewhere.


Done right, proponents say, demand response programs can shave as much as 10 percent to 15 percent off customers' bills by rewarding them for shifting certain tasks - such as washing dishes or doing laundry - to early morning or evening hours. State and federal regulators say the potential for savings might be greatest in the Mid-Atlantic, where a shortage of transmission lines can send wholesale power prices soaring during a heat wave. Wholesale power that might normally sell for $60 to $100 per megawatt within PJM can briefly climb to more than $1,000 on exceedingly hot days.

"The good news is that when markets are tight - like they have been in the PJM - even small changes in demand can have a big effect in reducing the wholesale price of electricity," said William R. Prindle, deputy director of the American Council for an Energy-Efficient Economy in Washington. BGE has consulted with the energy policy group on conservation programs it is developing.

BGE plans to launch a pilot program to test new meter technology as part of a broader energy management strategy that will include conservation. The initiative comes in the wake of a 72 percent rate increase that resulted in part from rising wholesale energy prices.

"We are looking at ways to better help our customers manage energy costs and usage, and there are various programs out there to do that," said Linda Foy, a spokeswoman for BGE.

The company said the scope and details of the program are being worked out, but it is expected to touch all 1.1 million of its customers. Pepco has proposed a similar pilot program in Washington, where it hopes to outfit the homes of 2,250 customers with smart meters. The plan is awaiting regulatory approval.

Experts say lowering demand even a few percent or less at critical times means some power producers don't have to turn on their most expensive natural gas and oil generators to meet demand. Such "peaking" plants often operate fewer than 100 hours a year but can have a disproportionate effect on the wholesale price of electricity.


However, critics note that shifting power usage to different times of day will not reduce - and might even enhance - the need for baseload coal and nuclear plants, which come with environmental costs.

"Before any utility spends billions on massive new metering technology, they ought to be spending that money on energy-efficiency programs," said Martin Kushler, director of utility programs for the American Council for an Energy-Efficient Economy.

If a customer puts off washing dishes until 10 p.m., he is still using the same amount of electricity as he would if he did dishes during the day, Kushler said.

But proponents counter that customers who turn down their air conditioner or pool pump for a few hours during the hottest part of the day are using less energy even if they turn it back on at night, when it's cooler. In addition, smart meters force consumers to pay more attention to how and when they use energy. Once they see the potential for savings, many consumers find ways to use less, some argue.

Smart meters offer other benefits, such as making it possible for utilities to automatically tell which customers are without power instead of having to knock on doors or wait for them to report a problem. Such information shortens the time it takes to make repairs.

The meters also can be linked with other devices, such as "smart" thermostats, which come equipped with displays that, among other things, can be programmed to tell a homeowner how much energy he is using and at what price. In exchange for rebates, customers could allow their utility to remotely raise the setting on their thermostats on a few hot days each year.


Over the long term, other devices could be added that remotely control individual appliances, telling them to temporarily shut down during times of high energy demand. Industry officials envision a day when many new appliances will be equipped with standardized computer chips allowing them to be controlled remotely, with smart meters acting as a sort of control hub. Such devices are a step beyond older radio-frequency technology that BGE and others have been using for years to remotely control customers' air conditioners and water heaters.

"What it's doing is really introducing a lot of intelligence to the system," said Victor Richey, chief executive officer of ESCO Technologies Inc., whose DCSI subsidiary produces the smart meters that Pacific Gas is fielding in California.

Pacific Gas has the largest smart-meter program in the U.S., in part a result of that state's continuing efforts to manage power usage after a costly energy crisis that resulted in rolling blackouts five years ago. The utility says its pilot studies show that the meters induce consumers to shift some power usage to off-peak hours. Larger efforts have been undertaken in Europe. Enel SpA of Italy outfitted 27 million customers with the devices.

Utilities in the U.S. have historically been slow to adopt demand response and conservation initiatives because in most states the utilities' profits are linked to how much electricity they sell. State regulators estimate that a 1 percent decline in energy use can cut profits for a distribution utility - such as BGE - by as much as 5 percent to 10 percent.

But Maryland and a growing number of other states are moving to "decouple," or sever, the relationship between profits and electricity sales, allowing utilities to earn a consistent rate of return even if customers use less electricity. Pepco and Delmarva Power have included a decoupling proposal as part of rate cases they recently filed with the state Public Service Commission. BGE's gas rates already function that way, and the electric side of the business is expected to follow suit the next time the utility goes before the commission for a rate case.

The move toward smart meters won't come cheap, which might worry Maryland consumers hit with recent rate increases. Pacific Gas customers, for example, will see a temporary rate increase of 1 percent with the installation of smart meters. But the savings generated will more than pay for the meters, said Paul Moreno, a spokesman for the San Francisco-based utility. Many industry experts and consultants say the meters generally pay for themselves in five to seven years.


"It's a modest cost now for a big benefit over the longer term," Prindle, the energy efficiency group's deputy director, said of demand response and conservation programs. "If we don't smarten up the grid, we're going to just wind up with a Third World electric system eventually."

For the record

An Page A1 article Sunday "smart meter" technology incorrectly stated that Baltimore Gas and Electric employs contractors to read electric meters in its territory. The meters are read by BGE employees.The Sun regrets the errors.