Consumers Energy drastically cut the budget and scope of a smart meter plan in Michigan, calling the project a casualty of hard times.

The company is cutting out smart gas meters as part of its strategy and reducing its smart meter budget from $900 million to about $500 million over the next five years. This scale-back is part of a wider decrease in spending overall, which is down from $7.2 billion to $6.4 billion.

"We have made some modifications. We are still committed to a smart grid program. We are taking out smart grid gas meter modules, they are no longer part of our plan," said Roger Morgenstern, a company spokesman for Consumers Energy.

Basically, this means that 1.7 million gas customers won't get smart meters, but the 1.8 million electric customers will. Eventually, the gas customers may get included, but this is the plan for now.

"We see more benefits with the electric smart meter because they are more dynamic," said Morgenstern.

However, Michigan residents won't start getting their electric meters until they are deployed in 2012.

It's unclear how this will affect Elster's EnergyAxis for Smart Grid Field Pilot or General Electric's first smart grid program to use high-speed wireless with WiMAX.

"We are not discussing plans with our proprietary vendors," said Morgenstern.

These cutbacks notwithstanding, Consumers Energy is still one of the largest investors in Michigan, even in this economy. The $6.4 billion in funding will go towards the implementation of the smart grids, wind generation, other renewable investments, and on-going maintenance and gas utilities.

The recession is putting extra pressure on smart grid spending nationwide.

"We have seen cutbacks happening in Boulder, Colorado in a reaction to Xcel Energy's pioneering pilot project [with a total cost of about $100 million if completed]. There was some push-back in Baltimore Gas & Electric service territory as well," said Massoud Amin, an engineering professor at the University of Minnesota. 

The smart grid will save customers money down the line. As we mentioned before in our "Baltimore Moves Forward" post, customers will save $2.6 billion over 15 years.

Amin reminds us of the daunting costs that smart grid implementation is likely to require over the next two decades. However, the $150 billion cost of implementing the smart grid should not overshadow the obvious reasons why we need a smart grid in place: more than 4% reduction in energy by 2030 would save the nation $20.4 billion, reduce the cost of outages by $49 billion per year, reduce emissions by 12% to 18% per year, and increase the nation's energy security.

As Consumers Energy and other utilities become focused on deploying smart meters, Amin worries that the overall goal of enabling the smart grid is being overlooked. Either way, he certainly doesn't want to have to cope with the increasing risk of blackouts.