Smart Grid and Smart Meters

Background

Congress has recognized the need to update the nation’s power system and set as a national goal the creation of a “smart grid.” A “smarter,” more modern electrical grid uses sensors, monitoring, communications, automation, and computers to improve the system’s flexibility, security, reliability, efficiency, and safety. For example, at present utility companies without smart meters do not automatically detect power outages; someone must alert the utility to request repair when the power goes out in a neighborhood. By improving the grid with distribution automation systems, utilities could reduce outages and automatically detect them when they did occur. Service could be restored, without human intervention, within minutes of the problem occurring.

Smart meters identify energy consumption in more detail than conventional meters do (see this chapter’s section Smart Grids and Smart Meters). Furthermore, consumers could see consumption information, meaning they could monitor usage during peak and off-peak hours and make decisions to help them better manage their household energy spending. This detailed metering is just one of hundreds of possible applications these new technologies offer. Also important are other types of equipment, such as advanced sensors and distribution automation systems. These are examples of equipment that make the grid more efficient, reliable, and secure.

The cost of installing new smart meters is another area of concern, given the cost of the meters, when existing meters have not fully depreciated. Utility companies can realize operational savings by installing advanced meters, but those savings may not cover the overall cost of installation. Thus, to recover the remainder of the costs, utility companies may ask regulators for authority to add surcharges to consumers’ electric bills. Such charges could potentially be greater than the savings a consumer might achieve by participating in a smart-meter program.

Smart Grid and Smart Meters: Policy

Focusing on the value for consumers

In this policy: FederalState

Policymakers should ensure that smart-grid deployment makes the grid more efficient, reliable, and secure, and better interconnected between regions. It should also prioritize distribution system automation components that have immediate, demonstrable, and direct value for consumers over smart meters.

Regulators should require independent audits to determine whether utilities are prudent in their expenditures and that costs paid by ratepayers are offset against claimed benefits of operational savings.

Reforming demand response practices

In this policy: FederalState

Policymakers should ensure that smart-meter proposals retain consumer protections, are cost-effective for consumers, only allow costs that are reasonable and prudent, and do not shift risks to ratepayers, such as through advanced payment.

Policymakers should assess alternatives to smart meters.

Policymakers should ensure that investment in smart meters and the smart grid are verifiable and transparent and that utilities are held accountable for the costs they want consumers to pay and the benefits they promise to deliver.

Policymakers should ensure that utility companies regularly provide data to regulators and the public on the impact of any implemented smart-meter program.

Policymakers should ensure that vulnerable populations do not suffer adverse consequences in the event that the installation of smart meters results in substantially higher electric bills.

Residential customers should be able to opt out of having a smart meter installed.