Tendril Networks is quietly working to bring the last generation of "semi-smart" meters into the smart grid fold.

The Boulder, Colo.-based startup is busy testing its home energy monitoring and control software and hardware with 29 utilities seeking to give customers tools to curb power use (see Tendril Extends Its Reach in Smart Homes).

So far, utilities have mainly concentrated on doing that through so-called AMI, or advanced metering infrastructure, technology – smart meters that promise two-way communication between home devices and utility control rooms.

But five of Tendril's utility trials are seeking to link an older meter technology – AMR, or advanced meter reading – into that two-way network, company CEO Adrian Tuck said Tuesday.

Those meters were made for "drive-by" meter reading. They send out bursts of data about every minute to passing utility vehicles so employees don't have to get out of their trucks to read meters in people's backyards, but otherwise lack the ability to receive data or communicate with each other.

But Tendril is working with Itron Inc. (NSDQ: ITRI) by licensing the rights to read the smart meter maker's proprietary means of transmitting AMR data and beam it into homes via ZigBee. That's the networking protocol that's emerging as a standard for bringing smart meter data into homes and letting in-home devices talk to one another.

Right now, Tendril's trials involve giving homeowners this AMR meter power information, and then using statistical models or hardware that measures power use by appliance and home system to get a better grip on where they're using the most power, Tuck said.

From there, "provided [home owners] have an Internet connection, we will provide them with an experience that will be like being connected to a smart meter," he said, by giving utilities a means to send information back into the home. That could include information on peak electricity pricing or demand response signals to ask homeowners to turn off air conditioners and other big power using appliances during times of peak demand.

That's the same promise that smart meters offer, but hooking up AMR meters could expand the market for those kinds of services.

To be sure, millions of AMI smart meters are being rolled out by utilities, but their older cousins are far more common (see Smart Meter Installations Grow Nearly Fivefold). Itron alone has shipped more than 32 million AMR electric meters, about 30 million AMR gas meters and about nine million AMR water meters, said Deloris Duquette, Itron's vice president of investor relations.

"We believe this is a great way for utilities that have an installed base to extend their investment," Duquette said in an email. Utilities that spent a lot of money installing AMR meters over the past decade will have a hard time justifying the cost of replacing them with smarter meters in the short term.

That fact has led other smart grid-related companies to look to Internet to provide two-way communication while they wait for more smart meters to be installed (see A Broadband Smart Grid?).

Home automation system maker Control4 and smart grid software developer Gridpoint said last week they'll work together on using the Internet to bring energy monitoring and control capabilities to homes not served by smart meters. Texas utility Energy Future Holdings Corp. is giving its customers "iThermostats" that can be programmed over the Internet, even as it plans to bring its customers more than three million smart meters by 2012.

There are potential drawbacks to using Internet connections, however. The first and most obvious is that not everyone has them, said Ben Schuman, an analyst with Pacific Crest Securities.

"That can prevent a certain customer segment – low-income customers – to be able to participate in programs," he said. That might be a problem for utilities that need approval from regulators and ratepayer advocates to spend money on such projects, he said.

Tendril's Tuck agreed that this is "a very sensitive subject" for utilities. Maybe, he said, "the cheapest thing we can do here is to give Internet connections to people who don't have them."

Tuck wouldn't say which five utilities Tendril is working with on the AMR pilot projects, though he did say that the Northeast was a "huge focal area."

"We unequivocally think that smart meters are a good thing and everyone should have one," Tuck said. That makes sense, since Tendril last week said it was licensing its software to third-party smart meter and in-home energy monitoring equipment makers, including Itron, Landis+Gyr and Silver Spring Networks (see Tendril Targets Meter Makers).

But for the millions of homes that aren't scheduled for a smart meter anytime soon, Tuck said, "Do you ask them to wait for 10 years, or find a way to bridge smart grid type technology to them?"