TREND: Smart Grid Complications

Despite a trendy moniker and lots of hype and interest, the smart grid has been facing some major setbacks of late, as regulators and customers begin challenging some of the claims for what interconnected smart meters will deliver in the way of tangible benefits. "In a monopoly market, regulators are in the position of defending the consumers," said IDC grid analyst Rick Nicholson. "Utilities have to prove that benefits will accrue to consumers . . . and commissioners are questioning the benefits."

One of the smart grid efforts that has gotten the most attention, Xcel Energy’s "SmartGridCity" pilot project in Boulder, Colo., is facing failure. The city has asked the Colorado Public Service Commission to effectively terminate the project linking some 2,000 homes in the community. As reported by Greentech Media, the city told the regulators, "First, and most importantly, there is not a clear consensus among the members of the Boulder City Council with regard to the value of SmartGridCity in its present state or the prudence of this investment." Xcel’s franchise to serve the city has expired, and Boulder is looking at "how best to move forward towards increasing its supply of clean energy."

In Maryland, where the state Public Service Commission earlier turned down a smart meter build-out by Constellation Energy subsidiary Baltimore Gas and Electric (BGE), the regulators in August approved a considerably scaled-down meter plan. BGE first planned to use some $200 million in federal economic recovery funds to finance the meter purchase and recover the costs (and a return) from customers. As the Baltimore Sun reported, under the plan the regulators later approved, "BGE would shoulder the early costs to install smart meters in homes and businesses and wouldn’t be able to seek reimbursement through rate increases until 2014 at the earliest. If the rate hikes are approved starting the following year, BGE estimates that the utility’s 1.2 million customers could pay $1.10 a month on average over a 10-year period."

Hawaii’s Public Utilities Commission also turned thumbs down on a plan by Hawaiian Electric Co. for a vastly expanded smart meter program. The utility wanted to add another 5,000 smart meters to an existing pilot project with 9,400 meters, recovering the $1.35 million cost from customers upfront. Ultimately, the utility wants to mount a $115 million program reaching nearly half a million meters. The regulators told the utility they want to see a comprehensive smart grid plan. Any smart meter plan, they said, "should include or be preceded by an overall smart grid plan or proposal filed with the commission." The utility said it does not regard the decision as a major setback. Hawaii’s state energy administrator told Pacific Business News, "The smart grid is a whole portfolio of services that enable the most cost-effective and responsive grid. The death of the smart grid has been greatly exaggerated."

In California, Pacific Gas & Electric’s (PG&E’s) smart meter plan has set off protests as customers opposed to higher electric bills have taken to the streets. In July, about 60 protestors picketed PG&E’s San Francisco headquarters, chanting: "One, two, three, four. Smart meters no more." The utility wants to have some 10 million meters in service in 2012. But several local jurisdictions, including the city of San Francisco, have asked PG&E to delay the meter rollout. San Francisco petitioned the California Public Utilities Commission for a moratorium on the meters. The city of Fairfax passed an ordinance banning the devices, challenging their safety and accuracy. An editorial in the Marin Independent Journal said, "Forcing your customers to do something without first explaining why and making sure they are aware of what’s happening and comfortable with it is not the best way to run a business."

—Kennedy Maize is MANAGING POWER’s executive editor.