Metering in a deregulated era

This report addresses metering and meter data communications to support consumer direct access in the electricity market. It discusses the consequences of the capabilities and limitations of technologies and various approaches to metering and communications. The objective is to support informed decision-making by US regulatory bodies as the electric markets are restructured.

METER DATA ALTERNATIVES

Hourly meter readings, obtained daily, are generally considered the ideal data to support the transactions currently seen as most desirable in a restructured electricity market. These transactions will occur among the wholesale providers and the retail sellers of energy, not generally between customers and their retail suppliers.

Hourly metering is already in place at most large industrial and commercial sites. However, the economic and logistical difficulty of quickly installing the necessary metering for all consumers, including residential, to coincide with the industry unbundling and competitive access is obvious. Accordingly, proxies for actual hourly metering must be produced for the large number of customers who do not have (and will not have for several years, if ever) hourly metering. The most common proxy for hourly metering is profiling.

Profiling estimates the hourly consumption of a consumer by assuming that the consumer’s monthly energy use follows a pattern that is similar to others in the consumer’s ‘class’. From a monthly meter reading, profiling allocates energy consumption to each hour in that month. This assumes that the pattern of individual hourly consumption of the consumer is very similar to that of the class load profile, which averages the consumption of many similar customers.

Profiling has important limitations, but nonetheless may be optimal for certain customers indefinitely. Limitations include:

  • Provides no incentive or mechanism to customers to respond to short term market forces, forgoing major economic benefits of open access.
  • Embodies unavoidable inaccuracies by its averaging of customer behaviours. Some customers will pay more, others less, than they would pay if they had hourly metering.
  • Introduces inaccuracies into the settlement process, which increases financial risk for energy marketers serving small customers.
  • Provides very limited data to support new or alternative rate structures, such as time-of-use, load control or more innovative rates.

Investor-owned utilities have for many years been required to maintain load profiles of customers, and this data can serve as a basis for creating class load profiles for open access. There will be problems, and this report discusses them with alternative solutions.

METER COMMUNICATION ALTERNATIVES

Meter data must be collected and processed, whether customer consumption is measured hourly or recorded monthly and profiled. Present (largely manual) methods are adequate for monthly readings. But new technologies are proving to be lower cost and may, with no regulatory action at all, supplant manual meter reading in time.

Manual methods are plainly inadequate for reporting hourly data. Automated meter reading (AMR) will be necessary. The technology options for such automated communication of meter data can be viewed as falling into two categories – dedicated AMR networks and multi-purpose networks that are ‘transparent’ to the function they are supporting. This report describes both in detail, with examples.

Because they support many functions (for example, paging) transparent networks will become widespread independent of electric industry restructuring. But dedicated AMR networks support mainly AMR, and their growth will be substantially and immediately affected by regulatory direction. Like it or not, regulators must decide the degree to which they will favour dedicated AMR networks. Any action – or inaction – will have a major effect on them. So let us summarise the pros and cons of the two.

Immediate large scale deployment of dedicated AMR networks will have compelling advantages. Major advantages include:

  • A majority of electric customers will be equipped to fully benefit from open access in a relatively short time.
  • This will be achieved at the lowest cost that is now possible, due to the immediate economies of scale.
  • A wide range of new energy services and a few non-energy services is available.

Dedicated AMR networks also have disadvantages:

  • Regionally dominant suppliers of meter communication services may experience low competition once they are established.
  • Dedicated AMR networks (like all networks) have limitations. When energy service providers have ideas for new services that cannot be supported by these networks, the economic obstacles to new service introduction will be larger than if AMR is accomplished by a diversity of transparent networks. We will again be faced with deciding whether a large scale infrastructure investment by society is justified.

Transparent networks have disadvantages too. Right now they are more expensive than dedicated networks. If we leave it to transparent networks to recover meter data, hourly metering will be economical now only at sites that have relatively large electricity bills.

And transparent networks have important advantages:

  • No regional dominance by individual meter communication suppliers is fostered; competition will be rigorous almost everywhere.
  • The diverse applications supported by transparent networks will justify (i.e., pay for) their continuing technical evolution, so their capability is very likely to grow to meet many market needs. When the electricity industry needs more capability, it is more likely to be there, resulting in a more market-driven development of new services.

Fundamentally, the regulatory choice now is to:

  • Encourage dedicated AMR networks to bring advanced metering benefits to more electric customers sooner; OR
  • Do not encourage dedicated networks, allowing a more diverse grid of transparent networks to (more slowly) develop, with greater competition and potentially greater functional capability.

Different states may have different objectives. The many influences on this choice are discussed in the body of the report.

OTHER ISSUES

More than 30 companies currently provide advanced metering products or automatic meter reading systems capable of supporting most or all of the requirements for hourly metering of consumers. The technology is available, and new products are appearing monthly. The impediments to more widespread deployment of these enabling technologies are logistical, economic and political or regulatory in nature.

Industry uncertainties about pending regulatory conclusions concerning meter ownership, maintenance, calibration and data management are an obvious barrier to aggressive deployment. This report addresses these issues to provide a foundation upon which sound regulatory positions may be articulated.

RESULTS

Load profiling will improve as its use is refined, though it can never overcome the limitations above. The price of metering equipment that obviates the need for load profiling is already low enough to be economically attractive to many customers – even some residential customers – and it is falling. It appears certain that once open access is established, there will be a continual expansion of the customer population using hourly metering, and a corresponding reduction of the population billed through monthly readings and included in load profile classes. Profiling may always be more economical for some customers, even when meter prices are very low.

Meters introduced since this study was initiated are modularised in ways that will make it economical for one entity to own the communications segment of the meter, while another (regulated or not) entity owns the calibrated portion.

Metering and meter communication technologies are evolving rapidly and can address a majority of the needs identified in this report.