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July 13, 2009

BGE: Smart meter surcharge less than $1.60/month

Baltimore Gas and Electric released some details of its ambitious smart-meter program. A few highlights. 1) It's hoping to get up to $200 million in federal stimulus money to help pay for the program. 2) Rather than instituting "real time" pricing, putting all customers at risk of incurring expensive peak charges, the program would pay customers rebates for avoiding peak use. 3) Customer charges to pay for meters would be from $1.24 per month to $1.52.

Without having gone over this in detail, I can say that I suspect it's not a perfect proposal. But the world and Maryland need smart meters to cut energy use, and using stimulus money to help install them is a great idea. Yes, it looks like it'll cost customers $20 a year or so in up front costs. But it''ll save lots of money and carbon over the long term. If everything works as planned, it will be worth it.

The first phase of BGE's Smart Grid proposal would be the installation of 2 million advanced, or "smart," electric and gas meters, operating through a robust utility-to-customer, two-way communications network, which forms the foundation for an automated, digital intelligent grid. The utility is also planning to roll out a new Smart Energy Pricing (SEP) program as its standard rate schedule, which would pay customers rebates for reducing power consumption during peak periods. In the pilot of advanced metering technology and Smart Energy Pricing, participating residential customers reduced their consumption during peak periods by 26 percent to 37 percent, saved more than $100 on average and gave the program a 93 percent satisfaction rating.

BGE's ability to rapidly and most cost-effectively carry out the Smart Grid initiative depends upon PSC approval and cost recovery in a timeframe that would allow the utility to qualify for a competitive Department of Energy (DOE) grant of up to $200 million to partially fund the initiative. BGE anticipates filing its DOE grant application in early August 2009, and it is anticipated that DOE would begin announcing grant awards in October 2009. The utility estimates initial deployment and operating costs of nearly $500 million over five years, and expects that over the project's lifecycle customer savings will exceed costs by a ratio of more than 3 to 1.

Under the cost recovery mechanism proposed by BGE, the monthly customer surcharge would be 38 cents per month for electric-only customers and 44 cents per month for gas-only customers in the first year of implementation, and the customer cost would increase slightly over time as benefits also ramp up. Over the life of the program, the monthly surcharge would average approximately $1.24 and $1.52, respectively, for residential electric and gas customers, and would be reduced based on the award of a DOE grant. Customer savings from reduced energy and operating costs will be several times greater than the amount of the surcharge.

Posted by Jay Hancock at 11:08 AM | | Comments (14)
Categories: BGE/electricity
        

Comments

Why is it always the BGE customers who seem to be at fault? Why are we always portrayed as some kind of dumb and uncaring characters, who insist on maintaining chilly temperatures in their abodes during the summer heat?

I personally care very much about the environment and about spending my money wisely. I would love to save energy as much as possible. But I live in an apartment complex in a building that seems to have no insulation whatsoever and antiquated appliances. Every year we try to "winterproof" our windows as much as possible, but as soon as the temperatures hit 30s, I hear our heat pump going on non-stop while our rooms are barely warm. On our balcony we can see the snow is melting under the doors, which means we are heating the outdoors. And now it's not even that hot yet, but our a/c comes up every few minutes and it's set at 78 F. Our oven (by a brand that doesn't even exist anymore) is leaking so much heat that the handle gets very hot.

Our apartment management could not care less about this since it's not their money that is flying out the window (literally). Why not use a government grant to improve the insulation and appliances in the old apartment buildings instead of giving it to some evil corporation? Not only this will reduce the energy use but it will also help the citizens with lower income.

So, this is a "capital cost". Why should consumers pay capital costs when consumers hold no shareholder value which would at least theoretically yield "capital gains" on the investment. Seriously, isn't this yet another case of businesses asking consumers to shoulder the costs while they reap the rewards? Seems to me that the savings in power sales by current consumers would allow BGE to sell the power saved to additional consumers, therefore reaping additional profits based on the expenditure of a capital investment made by non-shareholders who get no rewards from the company for their expense. (Savings on the energy is a plus, but I have no guarantee that I'll save any dollars, as I'm already a low power user and conservator during peak hours.) My risk, BGE gain.

Let's put our anger and mistrust aside and remember how a regulated utility works. In return for the ability to operate as a natural monopoly (remember, we only want/need one set of infrastructure)BGE bases its rates on cost of DISTRIBUTION ONLY, subject to PSC approval. In other words, customers pay for the company's DISTRIBUTION costs plus profits. BGE purchases electricity in the energy market in PSC-controlled bidding - that cost is a pure pass-through and BGE makes no profit on that. For BGE to be able to purchase the smart grid meters and associated equipment, and labor to install and maintain, it needs to borrow the capital to do that. Remember, the PSC oversees BGE's investments in capital as well. They will borrow some but that capital is expensive and ratepayers will pay that cost as well. It's a balancing act and the contribution on the part of the customer in surcharges will be paid back several times over in rebates and likely in reduced electricity procurement costs. Getting stimulus dollars pegged for smart grid infrastructure will be immensely helpful. You may not realize it but BGE is doing an incredible amount of forward thinking on your behalf. And yes, they are a business and want to make money. You may not realize this either, but a financially healthy utility is in the customer's best interest.

Not a perfect proposal is code for fatally flawed. Installing meters that differentiate between peak & off peak hours of consumption will not in any way improve the efficiency of the grid and most likely will not change consumer consumption. It's a bogus deal.

Not a perfect proposal is code for fatally flawed. Installing meters that differentiate between peak & off peak hours of consumption will not in any way improve the efficiency of the grid and most likely will not change consumer consumption. It's a bogus deal.

MJ Marsalek's comment is dead on. After 18 years in this industry I can tell you that:
1. the new meters + communications + data management will generate more carbon than they remove.
2. will have maintenance cost and ongoing op cost that will shock everyone.
3. will not change the habits of people who are not already rationing themselves and will lead to forced rationing of electricity.
4. is a political scam driven by the herd mentality of liberals and politicians who think Al Gore knows the "truth" about global warming. NB: Gore uses 15X the energy of the avg american and knows absolutely nothing about electricity or climate.

I have compared the two meters for years and the comsumer will be the loser.
My friend has a time of use meter that was installed by the builder many years ago and I have a standard meter.
Each month we would compare the total cost per kilowatt hour,(total bill including taxes fees and yes his meter rental charge)
He rearranged his whole life by carefully doing laundry and showering late at night. He only ran A/C off peak hours and little heat during the day in winter.
He also installed a timer on the water heater so it would only go on late at night.

His average cost per KWH showed no savings compared to my cost per KWH even with the cost saving measures he had taked.
He called BGE to try to get a standard meter and was told once the time of use meter is installed, you can not get a standard meter.
See for yourself, compare your bill with a bill from someone with a meter different from yours.
Most people would not be as frugal as my friend and will higher electric bills even when they use th same ammount of energy.
The result of installing these meters will take more money from the consumer and give BGE higher profits

Instead of imposing an untested idea/system on ALL customers, why doesn't BGE do a test of this "fabulous" smart meter system with a sizeable sample of customers, say, 100,000, to determine if this "smart energy" system will actually produce the savings promised?
Instead, an untested, new system is about to be imposed on ALL customers. WHY?
To save energy?
Not likely.
Rather, "smart meters" are a way to enable a central authority, BGE, the state, and/or federal governments, to control heat & A/C in every house in Maryland.
Tyranny!!! Insanity!!!!

Gosh, the majority of the people reading this paper apparently don't bother to complete any research. Instead they would rather continually voice false statements and exhibit unjust bias towards a MD based company. Kudos to Jay for finally stepping up and realizing that CEG is a profit driven company trying to operate within the parameters of the law. CEG isn’t the bad guy in this one, that role is reserved for our two-faced State government. How about actually reading and understand the article before you comment on it ‘Flyingcow’. This so called “untested idea/system” has actually already been put through a pilot testing program and is now ready to be rolled out mainstream, which also accompanied a state of customers saving an average of $100 per customer and was met with a 93% overall satisfaction rating, not bad for a program that encompassed 4 months (June-September). Those numbers are fantastic for a company that has endured such a nasty public slandering campaign put forth by the current administration and for a long time back by this paper. Oh and ‘JOEH’ glad to see that your 18 years of industry experience has been wasted. So am I to assume that you are an expert in the fields of electric distribution electric metering, and environmental forecasting? These meters are designed with forward thinking of their impact on the environment. I fail to see how these new meters will produce more carbon emissions than the previous ones. Please explain this to me. I can rationalize the fact that they may require more maintenance because they are more advanced pieces of equipment, but did you think about the fact that these meters will be read remotely, thus eliminating the need for hundreds of employees, in cars, to drive around the territory every month to read these meters. I would guess that eliminating that alone would offset any additional emissions over the life of this initiative. Don’t forget that BGE is acting on a government mandate for out fearless leader, Marty, to cut energy consumption 15% per capita by 2015. How about easing up a little bit and actually listing to some knowledgeable sources before blindly believing everything that the political re-election machine puts out as fact, which is usually anything but the truth.

@Ryan's comments

From the Hancock blog item:
"The first phase of BGE's Smart Grid proposal would be the installation of ***2 million*** advanced, or smart electric or gas meters..."

Note the words, "first phase."

Hancock's blog item said nothing about prior testing.

Keep drinking the BGE kool-aid, Ryan.....

I have often wondered whether it would make sense for an electric company such as BGE to buy and distribute solar panels to its customers -- doing that would, I think, increase their generation capacity without building new plants and be more environmentally conscious generally. Plus, buying in that kind of bulk would drive down the costs for the panels, which is one of the biggest hurdles to people installing more of them on their own. It seems like that would be a better way of spending the DOE grant, other stimulus funds, and customer money, than doing these smart meters.

I have often wondered whether it would make sense for an electric company such as BGE to buy and distribute solar panels to its customers -- doing that would, I think, increase their generation capacity without building new plants and be more environmentally conscious generally. Plus, buying in that kind of bulk would drive down the costs for the panels, which is one of the biggest hurdles to people installing more of them on their own. It seems like that would be a better way of spending the DOE grant, other stimulus funds, and customer money, than doing these smart meters.

Flying Cow,

Seriously? I told you to reread the post. What do you do? Not read it? Assume you know? Think I'm wrong? Let me quote the part of the post that shows exactly what I'm talking about. I'd love to print it out and slap you across the face with it for being so ignorant.
"In the pilot of advanced metering technology and Smart Energy Pricing, participating residential customers reduced their consumption during peak periods by 26 percent to 37 percent, saved more than $100 on average and gave the program a 93 percent satisfaction rating. "

Wrong again you O'Malley loving reject. Go vote for him again and send our State into another decade or two downward spiral. Fact is Erlich did more for this State in 4 years than O'Malley could do in 40.

Flying Cow - As Ryan pointed out from Jay's entry, in 2007 the PSC cleared the way for BGE to complete the pilot of this technology and the pilot itself is complete. Phase one pertains to the full scale implementation, post-pilot.

Anonymous - From what I have seen, a Time of Use (TOU) meter is different from an Advanced Metering Infrastructure (AMI) meter that will be used in the Smart Meter implementation. You are making a comparison with the wrong meter.

MJ Marsalek & joeh - The proposal would arm consumers with the information they need to curtail their usage, especially at the most critical times (grid capacity, rolling brown-outs, etc.). The only way they won't get anything out of it is if they put nothing into it. The bottom line is people need to be smarter about how they use energy. To do that takes data, and the more recent the feedback is to the usage the more likely we are to make smart decisions about our usage and pin point and resolve issues.

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About Jay Hancock
Jay Hancock has been a financial columnist for The Baltimore Sun since 2001. He has also been The Baltimore Sun's diplomatic correspondent in Washington and its chief economics writer. Before moving to Baltimore in 1994 he worked for The Virginian-Pilot of Norfolk and The Daily Press of Newport News.

His columns appear Wednesdays and Fridays.
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