PG&E’s Bakersfield Problem: Getting the Customer on Board

What are the lessons to be learned from Pacific Gas & Electric's unfortunate experience with customers who blame their new smart meters for jacking up their power bills?

Andrew Tang, the utility's smart grid chief, waded into the controversy a bit at Thursday's GreenBeat conference in San Mateo, Calif.

The issue has been a pervasive topic at this week's conference, with worries that it could be the start of a public backlash against smart grid deployments (see Green Light post).

In brief, complaints of higher power bills from Bakersfield, Calif. residents that got smart meters this summer have led to a would-be class action lawsuit, seeking to gather thousands of plaintiffs to demand damages against PG&E and any other entity involved in installing, building, managing and monitoring the smart meters (see PG&E Sued Over Smart Meters, Slows Down Bakersfield Deployment).

First off, Tang reiterated PG&E's stance that the issue is not malfunctioning smart meter systems, but rather a confluence of a hotter-than-usual summer weather and two price hikes enacted over the preceding 12 months (see Green Light post).

Those price hikes were targeted at upper tiers of power use – that is, higher rates for those who used more power in a billing period, Tang noted. For a customer paying the top rates in those "increasing block rate tariffs," a typical air conditioning unit can use up to $2.20 an hour in electricity, he noted.

Of course, in Bakersfield, where temperatures can linger in the 97-degrees Fahrenheit range for multiple summer days, and drop no lower than 85 degrees Fahrenheit at night, "I would hazard a guess that air conditioning is not optional," Tang said.

And because of that, people that use more power out of necessity may not see any benefit in the push to lower overall power use through those marginal higher rates, he said.

That's an issue that looms large for plans to start using smart meters to deliver information on power prices that change during the day, to encourage people to use less power when utilities are facing peak demand, he noted.

Many industry observers say that variable pricing systems must be expanded beyond their limited use today to give customers the motivation to save power (see Utilities Mull Price Points, Policies for Home Energy Management).

PG&E plans to finish installing about 10 million smart meters by 2011. Right now, they don't have any connection to in-home displays or services that can show customers how much power they're using or give them ways to control it.

But that kind of smart meter-enabled home energy management is part of the utility's plan, as well as almost all the others now installing smart meters in the millions.

In fact, PG&E has built into its $2.2 billion smart meter business case some incentives to bring in-home energy management devices to its customers.

"The smart meter is... the enabling layer to do that," Tang said.

But it can also cause shifts in business-as-usual that could impact customer bills, he said. After all, customers that can't – or won't – access those higher peak prices, and make changes in home power consumption to avoid paying them, may well rise up against the higher power bills that result.

But how do you manage those customer expectations? Attendants of the two-day GreenBeat conference had some ideas.

First off, utilities need to change the way they propose time-of-use rates to customers, said Adrian Tuck, CEO of home energy management startup Tendril Networks.

"A lot of times, the wrong question is asked," Tuck said Wednesday. That is, utilities ask customers to submit to higher peak rates – but don't explain that the other options will be even more expensive new power plant construction, or rolling blackouts.

"Most of the people we're working with see this as an opportunity to improve that relationship, and change the nature of the conversation," he said.

But utilities also have to avoid waiting too long between installing smart meters – which save utilities money by allowing them to stop hiring people to walk from house to house to read meters – and bringing the next-generation home energy management they've promised, he said.

"There's a real risk here that the lag between the smart meter going in... and the in-home network that provides value to the consumer is so great that the consumer starts to feel disenfranchised," he said.

Scott Hublou, senior vice president of products for EcoFactor – a startup that can analyze and optimize home HVAC systems without customer control – said Wednesday that a "set-and-forget" system that customers don't have to remain engaged in will be far more acceptable to customers.

As Gary Fromer, CEO of demand response provider CPower, said Wednesday, he doesn't pay attention to his household refrigerator, and whether it's defrosting during the peak afternoon times or at night, when power is cheap.

Appliance makers such as General Electric and Whirlpool are promising smart appliances that can communicate with utilities to use less power or shift it to low-demand times, of course, and, "There's a service to be provided to help people manage those things," Fromer said.

Steve Westly, managing partner of The Westly Group venture capital firm, took a more fatalistic attitude toward the issue in his Thursday appearance at GreenBeat.

"Anytime you come out with something new, everyone on the planet comes out and complains," Westly said. "There will be legal suits, and PG&E will screw some things up," he continued, pointing to the utility's decision to deploy the meters during the highest power use season of summer amidst increasing rates. 

Still, the ability to see more real-time energy usage information will eventually find traction with homeowners, he predicted.

"At the end of the day, people want to have control over their energy bill," he said.

Tang didn't limit his Thursday discussion to PG&E's Bakersfield customer-relations problem. He also reiterated some of the challenges the utility is facing in meeting peak demand and integrating renewable energy and plug-in vehicles into its grid (see PG&E's Smart Grid Challenges and Solutions by the Region).

In a side note, Tand said that using fiber optic cables for its smart grid communications networks, while it would have offered speedy and reliable service, would also have been an "order of magnitude" more expensive than the wireless mesh technology from Silver Spring Networks that PG&E has settled upon for its smart meter deployment (see Green Light post).

On the other hand, he did say he feels some "frustration" when seeing how some Asian utilities – many of them state-owned – are able to lay fiber cables alongside new transmission and distribution lines.

Photo of a PG&E smart meter in Fremont, Calif. via Flickr/Creative Commons.