AARP Hearing Center
Background
A “smart” electrical grid uses digital and internet-based technological investments and software to improve the system’s function. For example, smart-grid applications help utilities detect and possibly prevent wider outages from occurring. Such applications include smart meters and installing digital communication devices on poles and wires. Smart meters identify energy consumption in 15-minute increments, in contrast to the standard monthly meter reading for traditional mechanical meters (see also Program design). If utility companies provide access to this data, consumers can monitor their energy usage during peak and off-peak hours. This may allow consumers to manage their household energy use and spending better.
This detailed metering is just one of the hundreds of possible applications new technologies offer. Other types of equipment installed in the system can make the grid more efficient, reliable, and secure, including advanced sensors and distribution system automation.
The cost of installing new advanced equipment like smart meters is a concern. New meters and the associated communication systems and billing software are expensive. It is hard to justify replacing existing meters if they are still functional. The use of smart meters may result in operational savings primarily by avoiding in-person meter readings. But those savings may not cover the overall cost of installation. In order to recover the remainder of the costs, utility companies have typically added a surcharge to electric bills. Such charges could be greater than the savings a consumer may achieve by participating in a smart-meter program. Another concern is that utilities may be allowed to disconnect service remotely without warning to the customer and without offering a payment plan. In addition, some customers are concerned about the privacy of their detailed energy usage data and who can have access to that information.
SMART-GRID AND SMART-METER TECHNOLOGY: Policy
SMART-GRID AND SMART-METER TECHNOLOGY: Policy
Smart-grid consumer protections
Smart-grid technology costs should only be included in rates when the investment will make the grid more efficient, reliable, and secure. When considering such proposals, regulators should prioritize investments that will improve reliability of service.
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 or improved reliability performance.
Smart-meter consumer protections
Policymakers should ensure that smart-meter proposals:
- retain consumer protections,
- are cost-effective for consumers,
- do not require time-of-use rates,
- only allow costs that are reasonable and prudent, and
- do not shift risks to ratepayers, such as through advanced payment.
Residential customers should be able to decline to have a smart meter installed. They should be allowed to opt out of the technology.
Policymakers should assess alternatives to smart meters to achieve the objectives of increased reliability.
Policymakers should require investments in smart meters and the smart grid to be verifiable and transparent. Utilities must be held accountable for the costs they want consumers to pay and the benefits they promise to deliver.
Utility companies should be required regularly to provide data to regulators and the public on the impact of any implemented smart-meter program or other smart-grid investments.
Policymakers should protect vulnerable populations if the installation of smart meters results in substantially higher utility bills.
Policymakers should delay the installation or upgrade of smart meters until after current meters are scheduled to go out of service or until the verifiable benefits of smart meters outweigh the costs.