Press of Atlantic City

Digital Electricity Meters May Not Be Financially Smart For Consumers, Report Says

Press of Atlantic City — Monday, August 4, 2008

Staff Writer

Electric utilities across the country are pioneering various test programs to give consumers more power over their power rates.

Atlantic City Electric hopes to do the same for southern New Jersey. The Mays Landing-based utility is awaiting approval from state regulators to install so-called "smart meters" at all ratepayers' properties – about 445,000 customers across eight counties – over the next four to five years.

The smart meters use advanced digital technology and replace the more familiar analog meters that power companies have long used to measure a home or business' electricity consumption.

But a report prepared last month for the state Department of the Public Advocate says New Jersey residents would be forced to pay for an "advanced metering" program that has yet to prove its financial worth over time.

The report by Synapse Energy Economics, based in Cambridge, Mass., adds that using advanced metering is not the most cost-effective approach to reducing annual energy use and lowering bills of residential customers in New Jersey.

With advanced metering, a utility sends out an alert – either through e-mail, telephone or text message – to consumers forecasting a time when power demand is expected to spike the next day.

Depending on the pricing plan imposed by the utility, customers are charged more per kilowatt-hour if they use power during those high-demand times. But during nonpeak hours, they would be charged a significantly lower rate. Other pricing programs use rebates to reward customers who cut back.

Exactly how much a customer uses would be tracked through the smart meter. The intended result would be a reduced electricity bill, less of a strain on the power grid and a greater effort by customers to conserve energy, smart meter proponents say.

"It's the wave of the future for the industry," said Bob Dobkin, a spokesman for Pepco Holdings Inc., the parent company of Atlantic City Electric.

Pepco began a two-year trial program two weeks ago with 1,200 customers in Washington, D.C. In addition to receiving free smart meters, some participants are receiving a free "smart thermostat," which via a radio signal reduces a home's central air-conditioning usage during peak times.

"The program will give them the ability to better manage their energy," Dobkin said.

The anticipated cost for Atlantic City Electric to implement an advanced metering program is $128 million, utility spokeswoman Sandra May said.

The utility company estimates that the program can allow for a cost-savings benefit of about $176 million, although getting to that point will take time.

"We can't implement this technology and change consumers' behavior overnight," May said. But "in order to meet the state's ambitious (energy) goals, we need to begin working on advanced metering today."

Public Service Electric & Gas, New Jersey's largest utility, said it received positive feedback from a smart-meter pilot program conducted last year.

The Newark-based utility reported a 47 percent reduction in electricity use on peak days among participants. A later survey found that 80 percent of those involved were in favor of the program and would recommend it.

But the report prepared for the state Public Advocate says individual savings to ratepayers may not be that significant, after all.

One analysis reported an average residential customer would be able to reduce electricity usage by 16 percent during a critical peak period, or the equivalent of $1.24. The total annual average amounts to $9.92.

Investment in smart meters also could result in utility layoffs or reductions, the report said, since workers would not be needed to read digital meters.

Stefanie Brand, director of the Public Advocate's Division of Rate Counsel, said her office had concerns about smart meters before the report and concludes that the program is "not economical for residential ratepayers."

Instead of imposing advanced metering on all customers, the report suggests being more selective about which types of ratepayers participate in the program and only implementing it in service areas where it can make a significant financial difference.

Ev Liebman, a director with New Jersey Citizen Action, a watchdog coalition, said utilities in the state should wait to see how advanced metering shakes out elsewhere in the country. She also questioned how having smart meters will affect the elderly, less tech-savvy people and businesses, especially smaller, service-oriented ones that can't readily change usage habits.

"What we need instead are much more aggressive conservation programs to actually reduce people's usage and not just shift them to a different time of the day," Liebman said.

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