BGE’s smart meter plan in limbo


Kenneth DeFontes,
President, BGE
Baltimore, MD, U.S.A. — (METERING.COM) — June 23, 2010 – Baltimore Gas & Electric’s smart meter rollout plan has been thrown into disarray with its rejection by the Maryland Public Service Commission (PSC).

In a critical 54-page ruling Monday the PSC said that while sharing BGE’s (and others’) hopes, and even enthusiasm, for the long-run potential and importance of the proposed “smart grid initiative,” it found the business case for the proposal to be untenable. In particular, “the proposal asks BGE’s ratepayers to take significant financial and technological risks and adapt to categorical changes in rate design, all in exchange for savings that are largely indirect, highly contingent and a long way off. We are not persuaded that this bargain is cost effective or serves the public interest, at least not in its current form.”

BGE’s proposal filed July 13, 2009, as outlined by the PSC, consists of three primary components: (1) universal deployment of “smart” meters and modules throughout the company’s service territory over a three-to-five-year period, thereby replacing or upgrading all existing electric and gas meters; (2) installation of a related utility-to-meter-to-premise two-way communication network; and (3) implementation of a mandatory time-of-use rate schedule for all residential electric customers.

The cost of the project was estimated at $835 million – $482 million during the initial deployment period and an additional $353 million over the expected life of the program.

The PSC in its ruling said that notwithstanding its name and the size of its anticipated price tag, the proposal would not, in and of itself, enhance the electricity transmission grid or the company’s distribution “backbone.” Rather, the company’s advanced metering infrastructure (AMI) proposal encompasses “three foundational elements” of a broader “smart grid initiative” that BGE envisions implementing at some future date.

Further, the PSC said, BGE’s proposal also is a request to establish a customer surcharge for advance recovery of the costs, thereby shifting all financial risk to BGE customers and offering a “no-lose proposition” for the company and its investors.

The PSC then went on to comment that it was clear that the timing of the proposal was motivated in no small measure by the availability of funding for smart grid investments from the American Recovery and Reinvestment Act (ARRA), and while the company had been awarded $136 million in funding (out of a total $200 million award), “a $136 million ‘discount’ on an $835 million ratepayer investment cannot dictate the outcome here.”

Other points criticized by the PSC include the absence of a detailed customer education plan, orbs or other in-home displays, an opt-out option from TOU rates for vulnerable and other customers who would not benefit from these rates, and aspects of the business case.

In its official response BGE said it was “deeply disappointed, frustrated, and frankly surprised by the PSC’s decision to deny our application to deploy advanced energy meters to each of our 1.2 million customers and save them $2.6 billion,” and “shocked that the PSC is jeopardizing the $200 million stimulus grant awarded by the Department of Energy (DOE) to help pay for the initiative.”

According to subsequent reports BGE is yet to decide whether to refile its proposal, and the company is considering its next steps, which will include a meeting between BGE executives and members of the PSC, who they feel might not have understood parts of the proposal.

BGE president Kenneth DeFontes was also quoted as saying that a meeting would be sought with DOE officials soon.