Smarter Rules for Smart Meters — Episode 204 of Local Energy Rules

The opportunity is that you could have real time electric usage on the order of once every second broadcast to either devices in your home that could then intelligently use that and reduce your peak demand usage. Or if you’re on time of use rates, that could help be aware of your total consumption and reduce it during those peak hours. But you could also send that information up to a cloud-based service that could tie in with other devices. So those smart home ecosystem for example. Or maybe you have a rooftop solar — and you’ve done several shows on net metering and the claw backs of net metering that are occurring. This real-time information would help customers with rooftop solar self-consume more of their power and basically get more return on investment from their existing solar assets. So there’s a number of different values that a consumer would experience just by having real-time information. So not just the bill at the end of the month, but every second what’s happening. Some customers, maybe energy nerds like you and me, we would look at that information pretty frequently and we’d be really curious what is using what. Most customers probably want a service to just help them manage it. They don’t want to pay that much attention while they’re living their daily lives. Nothing wrong with that, but this gives the devices and competitive market access to that information to at least make decisions and potentially provide notifications like text messages on your cell phone saying, hey, your usage went up. If you do something about this right now, you can save $10, something like that.

On the computing side, this is where the phone analogy really comes into play. So we’ve talked about smart meters, to be brutally honest, I think smart meters were really quite dumb up until very recently. And so these new version, and there’s several major meter manufacturers out there making this new technology. They claim that it has reached cost parity with the older version and there’s an app store on the meter. And so you could load or the utility could load apps that serve different functions. Some of those could be just for the utilities benefit. So looking at safety issues. So there’s something called a broken neutral detection. So if your neutral line has an issue that could potentially result in its safety problem, they could detect that, it can scan the voltage. So if you have power quality problems, it can analyze that and send alerts back to the utility.

So those are in the utility management camp, but there’s also benefits for consumers and there’s a technology that’s been around for about 40 years called disaggregation. And this is looking at the patterns of usage for a whole home at a very high level of frequency, a high level of granularity. And through some statistical analysis you can estimate what is using power within the home. So for example, you could say, oh, approximately 5% of your usage is your water heater, 25% of your usage is your air conditioner. And so that device level identification and quantification of that load is something that these new smart meters are capable of doing. And importantly it can do it at zero marginal cost, so zero cost to the consumer.

So these are really transformative changes in the industry. And what PPL had proposed with their Rhode Island subsidiary was to deploy about 700,000 of these meters over a few years. This was a $289 million project. And certainly what was concerning to me was this no bid contract that they had proposed.

So the idea that the utility is going to pay for this meter that can serve purposes on their end and pay for itself, but also would offer services like that to me is very exciting. So the idea of, I’m really interested to dig into that how this no bid contract could have impacted that ability to get to this. So why don’t you talk about you filed testimony in response to this proposal by PPL opposing the direction that they were going. Could you talk about some of the key elements that were in your critique and what you were hoping they would do instead?

So Rhode Island Energy, which is the PPL subsidiary, said, these are important questions, we will address them, but we’re only going to address them in a working group that we will convene after the commission has given us approval and rate recovery for the deployment. And to me, that really felt like an obligation of the public utility commission’s responsibility because there was no requirement for the working group to have consensus. There was no regulatory review of the working group’s findings. We were basically being asked to accept the company on good faith and no promises beyond good faith they would listen to different stakeholders or desires and comments, then they would have unilateral authority to decide whether to act on any of those recommendations.

And when you add in a no bid contract with a metering vendor, it gets more complicated because the way that these large enterprise contracts are executed is there’s a clear scope of work in the beginning, tens of millions of dollars would go into it. I think it’s a four year project timeframe, something like that. And if there’s a change order in the middle of the contract period, that vendor, regardless of who it is, has a lot of authority. The bargaining power really shifts to that vendor to say, oh, it looks like my client here. The utility wants to do something a little bit different. Well, the alternative is for them to rip out all the meters that we’ve already helped them put into place, and that’s going to be really expensive. So I can effectively name my price on additions or changes to the contract. And there’s ways of mitigating some of those effects with a well-written contract. But nevertheless, uncertainty. Changes midstream always go to benefit that incumbent vendor.

And so one of the issues that I raised to the commission was what happens if the state’s energy policy or climate policy changes such that let’s say there’s an EV charging program that the Rhode Island Public Utilities Commission wants to see enabled, but that the metering vendor, let’s say has a competitive spat with certain EV charging companies. And that conflict between those businesses ends up disadvantaging rate payers because you’re in the middle of a contract, the contract’s already been signed, it would be very difficult to change it or replace it. And I said, the state of Rhode Island may discover much to their dismay that maybe there’s smart thermostat programs or EV charging programs that they’re now unable to access because they’ve been locked into a 20 year contract. And so that’s what I meant by this delegation of policymaking authority. We really, just as a matter of monopoly regulation, we really shouldn’t be in the habit of delegating these things to companies that the regulator needs to retain the ability to on fair and reasonable terms, have the utility byproducts and services that meet the stated policy objectives.

And this is potentially really transformational. We’re talking about 2 to $8,000 per home to fund efficiency improvements. And to prove those improvements, in order to get the rebate, you have to have your energy usage data. And it’s importantly, this is both electric and gas and if you have delivered fuels like propane fuel oil, things like that, which is pretty common in the northeast, you need all that information to demonstrate the reduction. And what was concerning to me about Rhode Island Energy’s proposal was that they really hadn’t thought about that, about how the implementing the IRA HOMES and their Office of Energy Resources, which is the state agency that’s going to be receiving and administering the funding, how they would actually interact with it and use it. And one example is natural gas data. So although this was an electric application for spending on the electric side, we had recommended that the state require Rhode Island Energy to include natural gas usage data. And the argument was this is an absolute necessity if you want to administer these funds coming into the state. Your listeners may not know, but Rhode Island actually has one of the most aggressive climate laws in the country with a very aggressive decarbonization target in 2045. And so this opportunity really can’t be missed.

And so the idea that waiting for a working group one, two or three years from now to then consider the question of, well should natural gas be included, that just was not going to sit well and not comport with the aggressive climate policy of the state. And so that was an example of I think that there’s several others too involving exactly what types of information. For example, if you’re using under the IRA, there’s something called a BPI 2,400 that’s standard from the Building Performance Institute for tracking for basically doing a modeled calibration of energy usage in a home so that you can see how much energy you’d save as a result of some intervention and you need to have in order to pass that standard. A lot of meter readings need to have both, whether it’s an actual meter read or whether it was estimated. So estimated meter readings do happen and that can negatively affect your ability to get a rebate through the IRA. And so again, Rhode Island energy could just decide not to include that actual versus estimated attribute of energy usage and that would throw the administration of this program into chaos.

So those are just some of the examples that made me very uneasy about shifting a lot of this responsibility into a working group.

That was obviously concerning, but it was also pretty clear that the company hadn’t really thought about any of these big questions. So the fact that there are computers inside the meter, the fact that there was Wi-Fi, I don’t think they’d really wrestled with that role and what that means for them as a sort of digital platform monopoly in addition to just being a wires and poles monopoly. And so I think they were genuinely curious and hadn’t heard opposition of the type that I was putting forward. And I think a lot of utilities are in that position. For 15 years now, they’ve successfully deployed smart meters all across the country, air quotes around successfully. I think so often they’ve given short shrift to the consumer benefits, but there’s a playbook for investor and utilities to follow. And now I think they’re at the point where the technology has advanced that it’s raising much more serious questions that they just weren’t prepared to answer.

To some extent, I’m happy to provide some education both to the utility and to the regulator in this type of context, but this is a nationwide issue. According to our calculations, there will be over 55 million of these new meters with Wi-Fi and computers on board deployed across the country by 2030, many of which with federal funding as a result of the IIJA, which is the Infrastructure Investment and Jobs Act. These are key questions just as we’re asking questions about app stores with Google and Apple. We also need to be thinking about Monopoly questions on our electric.

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So this is an opportunity for transparency. Those who’ve worked in this home area network industry as it’s often called, are familiar with the term bring your own device or BYOD. And that’s the idea that I shouldn’t have to get pre-approval or only receive a Wi-Fi device that has been approved or certified somehow by the utility. And so the utility has to provide a plan about this bring your own device functionality, which is a very positive step forward.

And the third item that I thought was a win was the commission required them to provide a plan for the terms and conditions between the app store operator and a software developers who might write apps for the meter and the terms and conditions. It maybe sounds pretty boring. Lots of people agree to terms and conditions when they use websites today, but the terms are really important because this is the interface between a monopoly and a competitive marketplace. And so for example, if the meter vendor, which is also invested in electric vehicle charging programs and smart thermostats, if they had terms and conditions that were unfair or coercive, things like you’re not allowed to connect your home EV charger over Wi-Fi to the meter because that would disadvantage our product. That would be an example of an unfair term. And so the commission required the utility to put forth a plan for how they’re going to address these fair, open, non-discriminatory terms with software developers. So I thought that was really positive.

On the negative side, they did punt a lot of these issues. They didn’t rule on the merits of many of them. They just said we’re going to have a separate proceeding in the future to consider all of these details. So we’ll have a second bite at the apple, if you will, on those. But at least there’s a roadmap, there’s a table of contents that the commission wants the utility to fill. In the last point on a sort of disappointment, was the commission approved to move forward with this no bid contract. And I’m definitely disappointed by that given number one, the rapid technological development in the space. I think it’s reasonable to do RFP, but also it’s just as a public entity. Yes, there are inefficiencies associated with doing a request proposal, but if you’re spending public money, I just think it feels wrong when you don’t do that. I don’t think you’re doing right by rate payers, but the commission reasoned that PPLs other investments with this metering vendor from Pennsylvania and Kentucky warranted basically an extension of that contract and they felt that that was at a low enough price that an RFP was not necessary.

New Hampshire actually has some enabling legislation and the commission approved in 2022 a settlement agreement, which I was a part of, and which calls for a statewide repository. So there’s three electric and gas utilities and there will be one point of entry essentially for the secure and permission based exchange of billing data, account information, usage data. So that’s great and that’s going to really help their administration of the IRA funding.

Where we’ve been leveraging federal funds most recently is we filed a preliminary application called a concept paper to the U.S. Department of Energy under their GRIP program. This is a grid resilience and innovation partnerships, and we’ve pitched a regional approach. So there would be utilities from Massachusetts, Connecticut, and potentially Maine all involved in this effort. And that also happens to overlap with the ISO New England footprint. So if there are aggregations of DERs participating in wholesale markets, they’d have a much easier time moving from jurisdiction to jurisdiction across state lines. So there’s a lot of efficiencies to be gained there and potentially lower power prices on the wholesale market for consumers. So that’s really positive.

We’re still in the sort of early application phase on that, but it is a trend to combine these utilities data systems into one place. And New York has actually made a big effort on that called the Integrated Energy Data Resource, the IEDR, and that’s going live. It has gone live with several features last year, the permission based exchange of individual customer usage data that is going online I think this month. So there’s a lot happening in the Northeast on this topic, and it’s going to be really exciting for the heat pump installers of the world, the installation providers to really make the most efficient use of the IRA funding.

The FTC petition that you mentioned, there’s a lot that antitrust enforcers can and should be doing on the app store issues with advanced meters that I mentioned. If you think that Google or Apple have some antitrust liability around their app stores, the Epic games lawsuit, which just had a jury verdict, that’s certainly material here. Well, I think the problem is 10 times worse for the smart meters because I can at least choose what type of phone I want to use, but I don’t have any choice about what meter is on the side of my house. And so if there is a violation of antitrust laws, I think that’s very ripe for exploration.

And the last point has to do with the Department of Energy grants. They’re giving a lot of money to utilities for grid resilience. These are very important necessary improvements to the power grid that we need. And one of the requirements from the Department of Energy is that data needs to be provided to customers per green button Connect, and it also needs to be available, in their phrasing, on an “open non-discriminatory real-time basis.” And the question before the department right now is are they going to enforce those requirements? The first round of grants has been awarded to about 34 utilities. This is a billion dollars of taxpayer money going to fund these utility projects. Many of those projects are very important and useful, but is the federal government going to require open non-discriminatory access to the information that’s generated by these meters? That remains to be seen.

I did send some initial inquiries to some utilities asking what their plans were for Green Button Connect after being granted these awards. And I received some initially very puzzled responses like we’re not sure what you’re talking about. Our project doesn’t seem to involve that requirement. So there seems to be some fumbling around here.

And I’d really like to see a more assertive stance from the Department of Energy, just like the U.S. government does with regard to broadband funding, where the government says, we’ll fund fiber, but it needs to be an open network for the life of the investment. And same thing here, if we’re going to fund metering and resiliency improvements with utilities, those improvements should be on an open access basis. So that’s something where the rules are already written. The question is the Department of Energy actually going to enforce it and put it in their contracts?

And moreover, this is something we should get in front of because we don’t want lawsuits about very legitimate grievances standing in the way of taking advantage of the energy management capabilities that are here that could really save money on people’s bills in a very tangible way.

As for the digital platform issue, I’ll just say that it is very similar to other digital platforms. So when there is a gatekeeping power, we start to see some of the same behaviors. So there could be discriminatory terms and conditions. There’s a lot of ability for surveillance to occur so of a competitive nature. So if the platform operator sees a successful app on their platform and they say, Hey, that’s actually doing really well, why don’t we copy that? Why don’t we mimic that with our own offering and then make it very difficult for this company who’s young and innovative and invested the time and effort in maybe a riskier project has a much harder time being successful. So those are sort of inevitable incentives that arise with any digital platform and electric utilities are not immune to that.

And if I had a magic wand, I think I would really make sure that utility regulators know that part of their job, perhaps an equally important part of their job as setting rates, is ensuring that decisions that they make about the reach of utilities does not disadvantage these adjacent competitive markets. So in your previous podcast with Seth Handy on Rhode Island, which by the way I thought was excellent, he had some really great comments about the market and you had good discussion on antitrust issues. I don’t think regulators understand that. The federal courts have said that the federal government has very limited authority to enforce fair competition laws on government sanctioned monopolies, and some of that is very reasonable. But what that means is that if you’re a utility regulator, it is your job not just to focus on rates and prudence of costs, but you have to be thinking, is the utility entering an energy management offering going to hurt the competitive market?

Because a lot of companies in this space, if you were to take this issue to court and litigate, the federal courts are probably going to tell you, you can’t come to us. You have to go to the state PUC. They’re the ones who are in charge of settling this matter. And so this is just something that I don’t think most regulators think is their job, but the federal courts have made it clear it is their job. In fact, there’s no one else who’s going to do this, who’s charged with this responsibility in most places.