Subject: Baltimore Gas & Electric’s Smart Meter Plan is Rejected
From: "Eric Schwerin" <[email-masked]>
To: "Hunter Biden" <[email-masked]>, "Michael Muldoon" <[email-masked]>
Date: Wed, 23 Jun 2010 14:41:51 -0400

KATHERINE TWEED: JUNE 22, 2010
Baltimore Gas & Electric’s Smart Meter Plan is Rejected
Maryland regulators deny BG&E’s AMI plan, which could jeopardize $136M in stimulus funds.

Baltimore Gas & Electric's proposal to install 1.2 million smart meters has been rejected by Maryland's Public Service Commission.

The state's PSC contends that "the Proposal would not, in and of itself, enhance the electricity transmission grid or the Company's distribution 'backbone,' and therefore it doesn't justify the proposed customer surcharge by BG&E."

But the criticism does not just stop with the buck being passed to the customer. The PSC further alleges that "the Proposal contains no concrete, detailed customer education plan, includes no orbs or other in-home displays, and provides for grossly inadequate messaging, in our view, to trigger the behavior changes contemplated under the Proposal."

And then there's a little issue of time-of-use pricing, to which all residential customers would be subjected. Although there has been a lot of talk about lessons learned from PG&E and Oncor, BG&E obviously did not take some of those customer engagement issues to heart in its proposal. Utilities so far have not installed TOU pricing with residential smart meter rollouts, but they have still had problems when customers see bills go up even though they are on the same rate plans, so it can be deduced that any TOU pricing scheme would need an even savvier customer education plan.

The rejection puts a large chunk of the utility's $200 million DOE award into contention. The AMI proposal accounted for $136 million, with the rest going to reduce the PeakRewards surcharge, which is currently paid by all ratepayers. Regulators noted that the $136 million "discount" still did not make the project cost-effective for customers at its estimated price tag of $482 for the initial deployment and an additional $353 million over the lifetime of the project.

The rejection is a potential letdown for Itron and/or Silver Spring, both of which were rumored to have been selected for the meter installation.

The decision is obviously an even bigger upset for BG&E, which described itself as  "deeply disappointed, frustrated, and frankly surprised, by the Maryland Public Service Commission's decision to deny our application to deploy advanced energy meters." The utility also says that the decision jeopardizes the state's ability to meet the O'Malley Administration's energy efficiency goals under EmPOWER Maryland.

BG&E is not the only utility to see pushback from its PSC. In January, Florida Power & Light's rate increase was denied by the Florida Public Utility Commission.

However, there is a chance for BG&E to resubmit the proposal, the PSC said. The next version will have to be free of a cost recovery plan using a surcharge and must include a business case that is not centered around mandatory TOU pricing.

Even without mandatory TOU pricing, which is still likely years away from being adopted in the residential market, Maryland's PSC has some valid points in what it is looking for in the next proposal.

Plenty of people in the industry know they're not doing a good enough job in educating the public about smart meters and/or smart grid and elucidating why customers should care at all. Many utilities have rolled out the hardware and then months, or even years later, have offered an (not even real-time) energy management system that lets homeowners track and adjust their energy usage.

After BG&E gets over its initial disappointment, it will surely be back at the drawing board to hold onto the $200 million in stimulus funds. The utility has the opportunity to take into account the missteps of other utilities, including the issue of how best to engage and educate consumers on a large scale.

It is unclear whether the DOE funds will be reallocated if the second proposal is rejected.

Eric D. Schwerin
Rosemont Seneca Partners, LLC
1010 Wisconsin Ave., NW
Suite 705
Washington, DC 20007
(202) 333-1880
[email-masked]
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