Monopolistic Utility Companies Suppress the Use of Customer Data — Episode 155 of Local Energy Rules

And then we have the utility business, and this is where I was so pleased to come across your work, because I wasn’t aware that someone had thought through so carefully, not just this idea of like access to customer data as something that might be useful, but you’ve really thought through it in terms of like, what are the structural, market structure problems that prevent us from getting access to customer data? And I feel like there’s some good stories to tell as well. Maybe you could just talk about like in a heat wave or maybe in like the Texas freeze context, when these big events happen on the electricity system that constrain the system, why does customer data at this point in time matter? Why does it matter if we have access to how people are using their electricity? Why does it matter that customers might have access to their own data about that?

So that’s a great example of where there was, there was a disparity or an asymmetry between the utility, the incumbent utility that had much faster access to this data, but then they would sort of say, well, there’s these processing delays and, and we have to run it through these big systems in order to provide it to you. And that delay of, you know, 12 or 24 or 48 hours could meaningfully impact your responsiveness on the supply side of things to the power grid. So that was one example.

Another also in a heat wave context is there are efficiency, aggregators that will, you know, save a few hundred Watts with one household and a few hundred Watts with another household. And you wrap that up into tens or hundreds of thousands of households. And you end up with several hundred megawatts of flexible load on, on the power grid. And the only way to value those services is with the meter data. So you need to know, you know, what was the usage before the heat wave event? What was the usage after? There’s a little bit of complicated mathematics to calculate a sort of fair subtraction of your, you know, usage based on a compared to the baseline. But the usage data is, is really the fulcrum of the whole system, because that’s how the aggregator goes to the wholesale market operator and gets paid for their service. And in turn, those payments can flow through in part to the consumers who are donating their flexibility, if you will, in their power usage. So those are two great examples of where the data on every household, you know, measured often at a 15 minute interval plays this really important role behind the scenes in lowering cost for everybody.

It was, I met one of the founders of OhmConnect maybe in 2013. So some, some time ago, and they were trying to get, this seems like a simple task, but they were trying to get the California Independent System Operator to agree to treat the usage data that was available on, let’s say the PG&E website. So when you log in to pay your bill, you can view your energy usage history. And OhmConnect with telling the California ISO, you need to treat the data that is available on the webpage as called settlement quality data. That’s sufficient for meeting all of the rules and regulations around settlement data at the wholesale market level. And that seems like a really simple thing. You know, you have energy usage data on the website and shouldn’t you just be able to send that to the ISO and get paid? It was extremely difficult to get that. And the utilities introduced to all sorts of problems like, well, the data that we provide to customers, isn’t really settlement quality data. It’s this other kind of rough, raw data that is not sufficiently polished. And so therefore you can’t take that to the wholesale market. And every time you start peeling back one obstacle after another, it always seems there’s something else that’s in the way. And eventually we were able to overcome that problem, but let’s just say the system is not designed to help distributed resources get the information they need at a quality and timeliness that they deserve.

Well, we’re a lot more sophisticated these days. What are we collecting out there? What are utilities collecting in terms of customer usage data, and how could we be using that?

And the second function is those meters communicate it over a radio network that’s sometimes proprietary back to the utility for billing purposes, and this allows the utility to fire their meter readers. So instead of having a person drive around in a van and, you know, go into your backyard and read the meter, they could lay off all those people and just solve the problem with a radio network instead. And that was sort of advanced metering infrastructure AMI 1.0, you might call it. To date, there’s upwards of about a hundred, maybe 110 million of those meters that are deployed across the country. So it’s fair to say that the majority of American homes and businesses now have a so-called smart meter version one on their house or their business.

What’s been frustrating for me is, and other DER aggregators, is that it’s extremely, has been extremely difficult for utilities to universally enable that capability. So there are states where customers have paid for this, this meter it’s called referred to as the home area network, but the utilities refused to turn it on. And so this is the case in Washington, DC, where the smart meters have been deployed for probably 12 years or so. And even to this day, despite a lot of clamoring from individual customers, from businesses, from the Washington DC municipal government, Pepco still will not turn on the home area network radio for being able to use it for energy management purposes. So it’s a big frustration and that’s sort of the state of the U.S. today. It’s a patchwork. Some states like California, you can access the home area network, but then there’s other places in Maryland and in Washington, DC, parts of Ohio where you can’t use it.

You know, I’ve heard, for example, like some electric co-ops that have smarter meters will actually call customers themselves. I think this was in Tennessee, for example, Chattanooga, one of the pieces of their smart grid rollout was that if somebody’s energy use spikes, they’ll call the customer proactively and say, Hey, by the way, did you know your energy use has been spiking over the past few days. If you haven’t been doing something different, you may have a faulty thing or other, and if you need help, we can help.

So it’s really funny to think, uh, funny, it’s not funny, it’s disturbing to think that we’ve all paid for this technology, right? We’ve paid for this hardware as a customer of the utility to be installed outside of our home. And yet we can’t use it. So what’s going on in DC? I don’t know if you have more detail about DC in particular, but why wouldn’t they want to turn this on? What’s the problem?

So you hear cybersecurity concerns. You hear concerns about cost. This is I think sort of ironic because the utility has no problem billing customers for the hardware that enables this capability, but then when it comes to actually turning it on, they say, oh, you know, this would cost too much money. We might have to have call center representatives who need to walk our customers through the device connection process to their meter, and there’s there. And it just would be unfair to, you know, put the costs of this enablement on all customers, even though only a small number of customers might use it. So that that’s another argument that we sometimes hear.

And it’s frustrating because it’s sort of the classic incentive where the utility wants to deploy. They want capital expenditure and they want it in the rate base. But then when it comes to actually using the meters for what they were designed for, they, they say, oh, well, we couldn’t possibly do that. Our IT systems can’t handle it. And, and that sort of thing. So we’ve been sort of circling around that in Washington DC for a number of years. I will say that the meters that Pepco has in Washington DC are exactly the same meters that Pacific Gas and Electric has. And PG&E has been enabling the home area network since probably 2013 or 2014. So we know it can be done. It can be done securely. It can be done on a large scale. This is a solved problem, but some utilities just don’t want to embrace that.

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I feel like this is the same, this is the corollary to like the whole fight we have about power generation right now, right? So advocates are saying, don’t build new gas power plants. In the long run, you’re not gonna use them because either your state has climate goals, it’s gonna reduce your ability to use that power plant or simply it’s gonna be uneconomical cuz as the prices of natural gas, methane gas have gone up so much, it’s no longer as competitive with renewable energy resources. And so these as another example of stranded asset, except this this time, it feels like it’s on purpose. It’s to say, yeah, we really just wanted to build, put the meter on your house to make the money, but we don’t really intend to use it.

So obviously that’s, I mean, in terms of implications here, though, what’s happening is that we’re spending a lot of our money collectively, the utility is spending this money for us. Regulators are approving it and saying like, yeah, this is a great idea. And then customers are essentially not getting to tap into the advantages, whether it’s for the individual customer who could maybe participate in some market where their potential to help save energy could benefit everybody. Or we’re not taking advantage of it because the utility has to go out and build more resources to meet energy end that we could be addressing if we collectively shared this information.

So one of the things that I’m interested in talking about a little bit here is I really love essays that are written by Scott Hempling. He’s now an administrative law judge with the Federal Energy Regulatory Commission, but formerly did a lot as a litigator and attorney, a lot of work on utility mergers and kind of utility structure. And he talks about this idea of what he calls unearned advantages and specifically the things that a utility has simply because it’s the monopoly because the government has said, here’s a public franchise. You will have no competition. We will regulate your rates, et cetera.

So as the incumbent utility, just because they are the utility, because they read your meter because provide that customer services, the monopoly, they have access to data about your energy usage. And what they’re essentially saying is even though we didn’t earn that right to have your data, we didn’t do anything special. We, we collect it because it’s part of our business. We are using that as our competitive advantage against these other people that might wanna do stuff. So we wanna do a power plant and OhmConnect says that they could do the same thing for less money. Well OhmConnect, because we can restrict their access to the data, we can keep them from competing with us in the field of power generation. Is that, I mean, is that what you’re seeing happening here? Is this, does my description of unearned advantage capture what’s going on here with the data?

And smart meters became a critical part of providing value. And it, it provided a capital expenditure opportunity that was arguably lost with power generation getting deregulated. What’s interesting is that utilities often don’t have the real digital capabilities in house to be able to use smart meters to their full potential. So there’s a new generation of smart meters, which maybe we’ll talk about in a second, that provides a lot of opportunities for understanding where our power’s being used in the home. And that requires a lot of data science and skill with managing data that’s provincially,  traditionally been within the scope of the tech sector, not really the monopoly utility world. And so on one hand you have utility saying, well, we have to be the generator of this energy data because we bill you for it. And it’s essential part of our system. But on the other hand, they don’t really have the capabilities, even though they might have the ambitions of exploiting it and using it in a way that’s maximally valuable. And so I would say that there’s, I agree with what you said, John, but I think there’s, there’s a capability aspect in addition to the mismatch of incentives. And this is, it results in some frustrating results.

So for example, there’s some utilities that are, you know, sitting lots of smart meter data and have not been putting it to use, but then when anyone else tries to go to them and say, here’s how we’d like to help you target your energy efficiency programs better using our, you know, mathematical prediction models. Here’s how we can deliver better load aggregation services, whatever it might be, then the utility say, well, no, you, you can’t do that. And because of cyber security or privacy or this or that. And so on, on one hand, they know that the smart meter data is valuable, but they really think it’s their exclusive right  to exploit it. And so even though they really may not have the capability of following through with it, they end up boxing out some of these other entities that have even with customer permission.

So this is, you know, where Mission Data get to evolve, cuz we’re always advocating for permission based exchanges of data. And so this is not the case where we’re asking for, you know, wholesale copies of the utility database, you know, just to go on a fishing expedition or to market products and services to customers. That’s not what we’re talking about. We’re talking about an individual customer gives their permission to a solar installer or to a demand response aggregator or an energy efficiency company. And it is the utility’s job as a steward to that in a standardized, rapid, simple way.

And that’s where the utilities say, mm let’s hesitate. Let’s draw this out several years so that we don’t have to face the music. And they’re afraid of what ultimately underlies a lot of the resistance and, and lays on the part of utilities to enabling data portability is I think a, an anti-competitive impulse that they really see this as theirs to exploit. And they don’t like the idea of any other company doing a better job at using customer data and delivering useful services for people. To your example, John, that could be high bill alerts. So the utility may have a rightful natural monopoly on a meter. It only makes sense to have one meter on the premises. That seems reasonable enough. But what about the digital services that are possible from the data collected? What gives the utility the natural monopoly over that things like energy desegregation of where your power’s being used in the home based on analysis of trends. Is that a monopoly function? I don’t think so. And so to your point about unearned economic advantages, this is definitely a case where utilities want to be able to be the only provider of these insights about your energy usage. And that creates a market asymmetry for the companies that we work with that are, you know, really, really trying to do some interesting things with energy data analysis.

But I will point out the United Kingdom has thought about this a bit differently in the UK. There’s one meter on each premises, but the data doesn’t go to the distribution utility. It goes to a centralized authority called the DCC. The Data Communications Corporation, I believe is what it stands for. And from there, it’s available to the retail suppliers for billing, and it can be available to other third party aggregators at that point as well. And so the British are very, you know, in many ways they invented deregulation with Thatcher in the eighties and, you know, national grid was split up into different different segments. And so that’s an interesting way of thinking about how to structure the industry. So we take it for granted that, you know, the utility has to own the meter and the data that’s generated from that. But that’s an assumption. You know, I think the empirical evidence, as you suggest, for utilities being the best, most capable users of that information is certainly up for debate.

So Silicon Valley Clean Energy decided not to build their own data portability infrastructure from scratch like PG&E did, SVCE hired a specialist called Utility API as to be the software company that provides that exchange between the utility and numerous distributed resource companies. And utility API has a lot of experience in this realm. They know how to serve the needs of the distributed energy community. So they know what the needs of the solar salesperson is, who is trying to generate a price quote for solar and potentially a battery system with a net meter 2.0 customer in Southern California. And they know what an energy efficiency provider to sell heat pumps and help transition a customer off of natural gas heating to a heat pump in Massachusetts. And these are skills that utilities often don’t have. And so to give you a sense of the variation in a place like Chicago, Illinois, where ComEd has offered their green button system for several years to date, there’s only something like three companies that are actually using that system, for a variety of technical challenges and sort of failures on CommEd part.

And yet at Silicon Valley Clean Energy, within weeks of them announcing that they were providing this state portability system, there were dozens– I, I think it was more than 50 companies who actively started using it, serving, you know, the large commercial customers and the residential customers. And now there’s even an electric vehicle load management tool. That’s extremely customer friendly where all the customer has to do to charge their electric vehicle at the optimum rate is just to share their energy usage from Silicon Valley Clean Energy to a smartphone app that coordinates with their electric vehicle charger and automatically has their vehicle charged at off peak times. And it selects the right rate that’s appropriate for them to save them money. And so this is an innovation that happened very, very quickly, and you compare that to some of the investor owned utilities and the pace of change and iterative development is just much, much slower.

And so this is what my paper that we issued about a year ago on digital platform regulation was trying to address. It’s, you know, thinking about utility regulator, not as just a rate-setting authority over, you know, poles and wires, but as we enter a digital age, they have to become savvy in a digital context. And that means holding utilities accountable for when their IT systems don’t perform very well. And just to give you an example, even California, which, you know, has aspirations to have a plug and play, high DER future, California has been sitting on allegations of data failures on the part of Southern California Edison for more than two and a half years. There’s a company that filed a formal complaint with the commission. They identified numerous alleged failures on the part of Southern California Edison. I’ve read the complaint. It seems very credible to me. And the only action that the a public utilities commission has taken to date is to grant themselves extensions on the statutory deadline to have the matter resolved. So we’re now 2.5 years into getting resolution on some major technical failures. And it just doesn’t seem like the regulators have the capacity or the will to, to take on this challenge.

I mean, we’ve kind of described here, I think really well, the fact that we have an incentive problem, we have an expertise problem. We’ve got an anti-competitive instinct problem. Like there’s so many reasons there are potholes, but the problem seems to be in general that we continue to allow there to be potholes. How do we fill the potholes? I wanted to ask you before we have to wrap up what are some of the things that we can do? What, you know, maybe some things from your digital platform regulation paper, recommendations you might have for utility regulators, for legislators, how do we make sure that we can get the best and most efficient and most cost effective energy system by making sure that this data about this isn’t just locked up in this concept of utility?

And so in this area, I’ll give a shout out to National Grid in New York, they hired the company called Utility API that I just mentioned. And it’s a similar story where they had a strong number of third parties express interest and using their system much more than their neighbor to the south, ConEd or Consolidated Edison in New York City. So there was an understanding, I think among the IT and leadership teams at National Grid that they needed to know the limits of their expertise and hire a firm that could do a good job. So that, that’s the first thing.

The second thing also sounds really simple, but it’s really important. And that’s a bug tracking system. So if you’ve ever filled out a technical support request, you know, for your internet service being down or something like that, they created the ticket. And that ticket sort of works its way through the technical support system. It might get escalated if you know, there’s higher levels of expertise that are involved. Many utilities don’t even have a trouble ticket system. They rely on email that many of them do not have phone calls. They’re, you know, giant corporations and they don’t want you to have anybody’s individual phone number. And so we, we hear stories from companies that we work with that have submitted support requests, and they’re waiting months to get an answer, basic things like when I hit this web server, I should get a response and I’m getting an undescribed error. I can’t move forward until you fix this. And then nothing happens. And this, many of the energy companies that are trying to serve customers, they’re entrepreneurs, they’re innovators. Sometimes they’re really small firms and they’re not going to challenge the utility in a formal context. They don’t want to bring a formal complaint against the utility. They don’t want to make a lot of noise with the regulator or with politicians because there’s a fear of retaliation.

And so having a trouble ticket system that’s transparent in which the utility regulator gets to see what is the response time on average to a ticket, how quickly do they acknowledge the existence of a problem and actually resolve it? This is for any customer support organization, we had this figured out 20 years ago, but it’s, I think it’s time for public utility regulators to take up the mantle and really think of themselves as overseers of a tech support platform. That’s an important part of accountability.