Smart meters are the latest rage and Tallahassee is on the cutting edge. Our electric utility began investigating smart meters before 2005 and received the go ahead to spend approximately $40 million from the City Commission in late 2007.
This puts us ahead of the Texas utility Oncor and Southern California Edision who are spending $690 million and $1.3 billion respectively to roll out smart meters by 2012.
What are smart meters? Smart meters replace the traditional electric meters we are all used to with a more advanced device that promises a number of benefits. These benefits include remote meter reading, power theft detection, remote cut-off and turn-on capability, customer billing and usage data on-line and the potential for in-home usage displays.
However, if all of these ” information” benefits are realized, the $40 million smart meter program will still not be cost-effective. The City’s assessment of the fiscal impact of the smart meters was clearly presented to the City Commission on March 28, 2007:
Staff does not expect operational savings alone to exceed the capital investment within the first 15 years of deployment. However with good customer participation (25% or more) in load control and pricing programs, staff expects that operational savings coupled with future avoided capital costs (associated with building new power plants) will exceed total program costs.
Cost effectiveness of the program will be determined by the participation of the citizens of Tallahassee in “pricing” and “load control” programs not yet devised by officials or discussed on the City of Tallahassee’s website.
Simply put “pricing” program means that electricity will cost more during peak times instead of the same price all day long. This program will allow the City to price electricity at a higher price during peak times and therefore “move” usage to off-peak times. With enough participation this will avoid building additional power plants.
“Load control” programs will be voluntary and will pay citizens to allow the City of Tallahassee electric utility to cut-off their air conditioner or some other power gulping appliances for a couple hours during the hottest days of the summer. Again, depending on participation, this program will avoid the need to build additional power plants.
City officials based their analysis on the participation of 25,000 households or roughly 25% of all residential customers in pricing and load control programs. Without this level of participation the analysis shows that the program will not be cost effective.
City officials are confident that the progressive nature of Tallahassee and the conservative estimates in the analysis will make smart meters a winner for Tallahassee.
There are additional factors that should be noted. First, city officials did point out to the Commission that there is not much of a track record for the type of programs required to make smart metering cost effective.
Second, the track record that does exist for variable pricing and load control programs is mixed. A California utility reported good results in a pilot, but other utilities in the Northwest and Maine abandoned the programs after trials.
Third, the informational benefits will come before the pricing and load control benefits. City officials say that the pricing and load control programs are 2-3 years away.