The Province of Ontario is committed to advancing an energy policy that will ensure a vibrant, reliable and sustainable electricity industry for future generations. And like so many other jurisdictions around the globe, Ontario’s expanding economy and population growth in recent years has resulted in a measurable increase in electricity demand.
Forty percent of Canadians call Ontario home – a geographic area that spans over 1 million km2. The province generates an estimated $500 billion in gross domestic product (GDP), a figure that is larger than the GDP of Austria, Belgium or Sweden. Manufacturing represents the core of the province’s industry, but industries in the natural resource sector also contribute significantly to this vibrant economy.
Ontario uses more than 152 million MWh of electricity a year. To ensure that the province’s electricity system keeps pace with economic growth, reforms, fuelled by government legislation, are changing the face of Ontario’s electricity industry. Not only is there a need to build new generation and transmission, but greater attention is now being focussed on renewable and clean energy alternatives and the importance of energy conservation. These have become key considerations in the government’s ‘new’ energy strategy.
Another force has also been at play in Ontario’s electricity market. In the late-1990s the province began the process of dismantling a vertically integrated government-owned monopoly. Although Ontario’s foray to a fully competitive market was short-lived in 2002, a discernable shift in energy policy by the government has had a marked influence on the changing landscape of the province’s electricity industry – characterised by the movement away from a competitive market model to a ‘hybrid’ model aimed at balancing competition and regulation in the industry.
One of the centrepieces of the government’s energy policy is the smart meter initiative that will see the installation of close to 4.5 million smart meters in every residence and small business in the province by 2010, with the first 800,000 meters installed by the end of 2007.
The smart meter initiative is part of a broader government commitment to create a ‘culture of conservation’ in the province, designed to address peak demand issues and the ongoing strain on Ontario’s electricity supply. Unlike conventional meters, time-of-use, or smart meters will provide consumers with the tools that will help them better manage their electricity use and allow them to be more responsive to price signals in peak demand periods. A corresponding price plan will provide low, mid and high peak period pricing that will be adjusted bi-annually to reflect the costs of generating that power.
With similar implementation projects now slated for California and other jurisdictions in the US and around the world, much attention is being focused on Ontario’s progress in the move towards the first installation milestone of deploying close to a million meters before the end of next year. The province’s distribution sector, with its expertise and experience in metering, has assumed a central role in laying the groundwork for smart meter implementation.
Electricity distributors have been given the responsibility for purchasing, owning, installing, operating and maintaining the meters. It’s been a long road to get to this point today. Key stakeholders – including government decision makers, electricity distributors, and the province’s regulator, the Ontario Energy Board – have been consulting and coordinating efforts for close to two years. Now a significant point in the initiative has been reached where the first major wave of planned installations is moving forward.
Driving Ontario ’s smart meter initiative
Earlier this year, the provincial government passed ‘enabling’ legislation to facilitate smart meter implementation in Ontario.The legislation provided government decision makers with the authority to determine design details of a smart meter system. Most details of the smart meter initiative are being brought forward through regulation.
Over the last few months, considerable activity has taken place to move closer to initiating the first phase of the government plan – the installation of the first 800,000 meters. To date, the release of regulations is providing clarification on a number of key components in support of implementation, including:
- The criteria and requirements for meters and metering equipment, systems and technology, including advanced meter infrastructure (AMI) specifications
- Discretionary metering activity and procurement principles
- Cost recovery
- Priority installations
- Draft meter data management/repository (MDM/R) functional specifications.
In addition, the government has recently entered into an arrangement with Ontario’s Independent Electricity System Operator (IESO) to coordinate and project manage smart meter implementation activities. The Smart Metering System Implementation Programme (SMSIP) relates specifically to the delivery of the MDM/R functionality, i.e. interfaces between the MDM /R and electricity distributors’ AMI and customer information systems.
Kick starting the implementation process – meter procurement and the first wave of deployment
In Ontario, six of the province’s largest utilities and publicly owned Hydro One account for 70% of the province’s electricity consumers. The government has targeted this group of distribution companies to move forward with meter procurement in order to achieve the initiative’s target of installing 800,000 meters by the end of next year. In addition, there are a few distributors who have been given approval by Ontario’s regulator to proceed with meter deployment.
In selected cases, certain distributors have been given the nod to expand their pilot projects to their entire service territory. The government has three key objectives: Meet the target of 800,000 meters installed by the end of 2007; ensure that there is an orderly and smooth deployment of smart meters; and, ensure that a competitive procurement process results in the lowest possible cost to ratepayers. Meter technology must meet minimum specifications that have been set out in government regulation.
More particularly, the criteria and requirements for the meters, metering equipments, systems and technology have been laid out as part of the functional specifications for the AMI. Additionally, procurement activities themselves must be consistent with the principles that have also been set out in regulation guidelines.
This includes, among other factors, that procurement is economically prudent and cost effective, and that the process is competitive and accessible to a range of interested bidders. Vendors of record were selected through a competitive request for proposal (RFP) process conducted by the coalition of Ontario’s large distributors over the summer. Government-owned Hydro One has also selected their vendors of choice through a RFP process that took place last year.
This procurement activity will kick start the implementation of the government’s plan. But this is only a beginning – a remaining 3.5 million meters still need to be installed by 2010. At this juncture, there are approximately 75 electricity distribution companies that are still in a position to determine their options in moving forward. These utilities have been invited to ‘piggyback’ with the larger distributors and their selected vendors for bulk meter purchases.
They may opt to wait as more metering companies enter the fray and bring a wider choice of meters and technology to the market. For those utilities that are proceeding with phase one of their installations, in moving forward to full deployment there still remains an ability to consider and take advantage of further options down the road.
Technologies are advancing and moving forward an expanding choice of meter technologies is expected. In fact, there over 20 commercial meter companies currently awaiting Measurement Canada approval so they can bring their products into the marketplace. The government is encouraging electricity distributors to carry out pilot projects as new smart meter technologies are introduced over the coming months.
Ontario has chosen to provide flexibility in the procurement process as long as regulated functional specifications and conditions are met. A one-product fits all approach has not been taken, which is allowing distributors to acquire the metering technology best suited to their geographic and individual requirements in a cost-effective manner.
Smart meter funding issues are a fundamental consideration
Issues surrounding cost recovery of smart meters remain a fundamental consideration for Ontario’s electricity distributors. Although regulation was released over the summer, there is still a need for further regulatory clarification as some of the initial stages in the implementation process are worked through.
New regulation stipulates that distributors will recover their costs through distribution rates. Under current regulation electricity distributors can recover the costs associated with the acquisition of smart meters, metering equipment, systems and technology and any associated equipment, systems and technologies subject to the approval of the Ontario Energy Board. Additionally, distributors will be able to recover costs associated with meter data functions that they will perform with the regulator’s approval. Prudent expenditures are determined by the regulator and are an integral part of the approval process.
The Ontario Energy Board approved distribution rate applications for 2006 earlier this year. As rate applications were being compiled, government legislation on the smart meter initiative had not yet passed into law. As a result, many distributors opted to exclude smart meter implementation plans in their applications until greater clarity on the initiative became available.
Some short term funding solutions are being sought in order to advance the bulk meter purchase of meters (particularly in cases where distributors might want to ‘piggyback’ with approved vendors). Without the surety of recovering costs, there is understandable hesitation on the part of some distributors to move forward.
The ability of key players to confront and work through significant financial issues is paramount to this project. This kind of cooperation is essential to realising the success of the initiative. Similarly there is cooperation with the government and regulator in order to address the regulatory and financial barriers confronting distributors.
The importance of the development of the MDM/R
As various pieces of the smart meter model come together, a clearer idea is emerging of how the various functions will interface with each other. As can be imagined, bringing the various technical components together is a complex process.
The AMI infrastructure will remotely collect time-stamped hourly meter reads and send them back to the distribution company. The distributor will then send this data to a centralised MDM/R where the raw data will be processed and returned to the utility in a format that supports customer billing. Ontario’s electricity distributors are committed to a governance model for a central repository that will give distributors significant interest in a body developed to ensure that the system is working effectively and in harmony with distribution systems.
As noted above the IESO – the agency that is responsible for balancing electricity supply to meet demand, and then directing transmission flow in Ontario – was named to take over the responsibility for programme management of the smart meter infrastructure. The agency’s main responsibility is to establish the MDM/R functions and its system integration into the end-to-end infrastructure and customer information systems.
Essentially, the IESO is managing development and delivery of the MDM/R, including procurement, technical specs, standards and integration with metering infrastructure and customer information systems. An RFP has been issued to pre-qualified vendors as it relates to MDM/R system delivery. On another front, electricity distributors are actively participating in two stakeholder working groups: the Customer Information System group will examine the interactions between the AMI and MDM/R and input requirements, while the Advanced Metering Infrastructure group will be addressing the interactions between the MDM/R and CIS and billing functions.
A number of details need to be worked out, including how the central repository will be structured, how the data will be stored, and what opportunities will be available to access data, among other issues.
Moving to full deployment in Ontario ’s smart meter initiative
The industry appreciates the fact that Ontario is being viewed as a pioneer in implementing a smart meter initiative of this scale. It is fully aware that many jurisdictions are watching its progress with keen interest and that the experience in Ontario will provide valued information to jurisdictions throughout North America which are moving forward with implementation plans of their own.
There is little doubt that cooperation and industry collaboration have played an essential role in advancing the initiative in the province. It is very much a work in progress that will achieve the best results in the shortest time by continuing to foster a working partnership between electricity distributors, government and regulators. Ongoing pilot projects are continuing to provide valuable information and guidance in moving forward.
As an example, two pilot projects that are studying time-of-use pricing and consumer usage patterns are currently underway in cooperation with the Ontario Energy Board. As new meter technologies come into the marketplace, it is fully expected that distributors will continue to conduct pilots to test emerging meter technologies. Smart meter pilots conducted over the past 18 months have provided invaluable data and information to distributors from across the province and have been instrumental in the development of functional specifications, consumer education programmes, and providing insight into system interfacing.
Distributors will also become more involved in programmes and technologies to help reduce peak demand enabled by the smart meter, such as air conditioning control and smart end use devices, because of their close linkage to the customer. Key industry players are going to have to continue to work together with some determination to meet the timeline of full deployment by 2010.There is still much work to be done, but movement is believed to be in the right direction as deployment begins for the first wave of installations in the province