This monograph provides practical guidance on how to evaluate the cost-effectiveness of advanced metering infrastructures. It is written for EEI members and policy makers, and reflects an assumption that careful planning and implementation is the key to regulatory support for cost recovery.
Chapter I, Summary of Key Provisions of Section 1252, sets the context for the discussion by describing the “smart metering” standard of the Energy Policy Act of 2005. States are required to consider whether to implement time-based metering and communications, but have discretion to decide not to implement the standard, or to implement a modified standard.
Chapter II, Background & Selected Drivers, expands the context by providing a historical perspective on the energy issues that lead to the original Public Utility Regulatory Policies Act of 1978. PURPA addressed issues raised by the oil embargo of 1973 (e.g., the need to conserve electricity, to increase electric utility efficiency, to ensure equitable rates). Clearly, these issues remain relevant today.
Chapter III, Advanced Metering Justification, describes the development of a business case to support decisions about whether, and how, to deploy advanced metering infrastructure (AMI). Identifying the full range of operating benefits that modern AMI systems provide is a demanding and time-consuming task, because these systems typically produce benefits that reach into almost every department of the utility. It is vital that the business case be transparent (i.e., allow a variety of audiences, both within, and outside, the utility to understand the assumptions, relationships, benefits, and costs) because AMI represents a large investment and must be defensible in every way. The case also must facilitate revision, because AMI will involve multi-year budgets, and the business case will have to be revised periodically with then-current figures to re-calculate investment performance for the remaining life of the project.
For energy customers and society, benefits typically involve improved service quality, and benefits related demand response, which AMI enables. Bills are more accurate, and more timely; outages are detected more quickly, and restoration activities are faster and more efficient; energy losses due to theft and other causes are reduced, which reduces costs that must be borne by other customers; and system engineering improves with better load data. Demand response gives customers more control over their energy costs, and allows them to realize energy savings if they modify their consumption behavior. Demand response also can avoid costly outages when the system is stressed. Because such benefits are difficult to quantify, they frequently are not accounted for in business cases.
For utilities, savings related to the reduction or elimination of manual meter reading usually constitute the single greatest benefit, accounting for fully one third to two thirds of the total AMI benefit. Other quantifiable benefits vary significantly by utility, but can include the following: accelerated cash flow, revenues realized from new customer services, reduced capital needed as the result of less manual meter reading and optimal transformer sizing, savings realized through fewer billing inquiries and faster resolution of inquiries, savings in meter testing, savings through on-line bill paying, savings in the cost of load research, savings related to improved capacitor control and improved outage restoration, and reductions in non-billable consumption. A typical AMI business case will show that six or eight benefit sources (i.e., six or eight of the items listed in Figure 1, page 17) provide up to 75% of the total AMI benefit from traditional utility operations. The remaining 25% will come from 10 to 25 other sources in varying degrees.