For the second time this week, Illinois regulators have slapped down big utilities' smart grid spending plans. First it was downstate utility Ameren, and now it's Chicagoland utility Commonwealth Edison.
Yesterday, the Illinois Commerce Commission told ComEd it had to cut about $146 million from the rates it can expect to collect from customers this year. That's about four times more than the $40 million the utility had targeted in cost reductions in a February filing.
That math is open to some interpretation, since ComEd has filed a complex set of formulae for how it's accounting for its costs, which include pension costs and other issues unrelated to the grid itself. Just how the ruling will affect ComEd's $2.6 billion in smart meter and distribution automation projects is unclear. ComEd wants to deploy about 4 million smart meters over the next decade, with Silver Spring Networks as a key partner, along with substation and distribution grid sensors and controls.
ComEd and Ameren are both trying to prove that their plans for a combined $3.2 billion in smart grid spending are worth it to their customers, as per an Illinois state law passed in December. So far, it's not looking so good, although ComEd has filed for a 2013 rate increase that would cover losses this year.
The final ruling has not been posted, but the ICC said it is asking Ameren for more information about how the technology would benefit customers before it allows it to proceed. The ICC's concerns are in line with many of the concerns posted in the Attorney General’s filing a few weeks ago, the regulator said in a Tuesday statement.
The state Attorney General has asked questions on assumed savings including "truck rolls," or the number of onsite work crews that need to be dispatched to fix grid problems or deal with customers. The catch is, there's a rule on the books that people have to be contacted in person “at the time the service is being discontinued” when they’re being disconnected for nonpayment.
That's just the type of cost that automating the grid, via smart meters and other systems, is meant to end. In Ameren’s proposal, the utility estimated that it received about 247,000 disconnect/reconnect orders per year, about 89,000 of which were disconnects for non-pay, more than a third of the total figure.
Besides the remote disconnect issue, there are also questions about the verification of benefits for customers and the details of where and when the technology will be deployed, since some of Ameren’s territory already has some automatic meter reading.
At stake is a $300 million investment in Ameren’s grid over the next decade, including distribution automation and smart meters.
The rejection harks back to Baltimore Gas & Electric’s rejected proposal nearly two years ago, when the Maryland Public Service Commission told the utility that the plan’s surcharge to customers was not justified and that it lacked sufficient consumer education. Eventually the plan was approved with a far lower surcharge, more robust consumer offerings, and no mandatory time-of-use pricing.
In Illinois, smart grid has had a hard road so far, as the state’s two largest utilities have been repeatedly chastised for not spelling out the benefits to customers well enough.
The issue seemed settled at the end of last year, when the state ordered that Ameren and Commonwealth Edison will have to reduce outages by 20 percent, energy theft by 50 percent, and inactive meters (those delivering power to unoccupied homes) by 90 percent under the new rules.
Illinois utilities have to prove the benefits up front, but they’re not alone. California utilities have to file smart grid metrics every year, showing the progress on various projects, from consumer access to energy information to distribution automation.
ComEd received approval from the Illinois state legislature for its $2.6 billion smart grid plan, but the details are still awaiting final approval from the ICC, according to the Chicago Tribune. ComEd's plan includes year-over-year performance metrics that it will be measured against.
Ameren will likely take a page out of ComEd's book and offer up all of the necessary information that is missing to gain approval. The process is being repeated in various other states, where utilities have to be clearer about where the benefits of smart grid lay. Many of the operational benefits from smart grid are for the utility’s bottom line, not the consumer. Bolstering the consumer benefits of smart grid is not important; it is critical for future smart grid projects.
ComEd has signed on to the Green Button initiative to allow consumers to access their data in a standardized format that can then be leveraged by third parties, if the customer chooses, for energy savings applications. Many other utilities that have suffered public concern (or outright backlash) have also signed on to the initiative.
Ameren can be expected to gain approval eventually, but it will take a clear plan, with clear benefits for all, to get there.