The High Economic Costs of
Smart Meters

DTE and Consumers Energy will soon begin charging time-of-use rates. You will be paying through the nose for electricity at peak times, and if your income is low, forced to do your cooking and laundry in the wee hours of the morning. This isn’t hyperbole. Read this article in mainstream, apolitical About.com’s Home section.

"[The smart grid] costs too much, and we're not sure what good it will do. We have looked at most of the elements of smart grid for 20 years and we have never been able to come up with estimates that make it pay. . . . The real issue is, are we doing the customers more good by putting money into more advanced electronics or would we do them more good by putting the same money into replacing more old cable? To me that's an unknown answer. If I had to choose, I'd bet on the cable.” John Rowe, CEO of Illinois utility ComEd, in an unguarded moment.¹

“No net economic benefit to ratepayers.” Michigan Attorney General Bill Schuette

“The reason we’re putting these meters in is to be able to bill the time-of-use rates that are going to be mandatory.” Cleveland Utilities

 “Boondoggle.” Consumers Digest

“It costs too much, and we're not sure what good it will do.” John Rowe, CEO of Illinois utility ComEd, in another unguarded moment ²

“[Smart meter] deployment . . . allows utilities to lower operating costs while increasing revenues.” Frost & Sullivan

"Smart-meter conversion represents little more than a boondoggle that is being foisted on consumers by the politically influential companies that make the hardware and software that are required for the smart-meter conversion." Consumers Digest

Smart meters do not save the customer money. Smart meters are being  touted as a way to solve our energy problems and help “green” America. For that reason, Obama’s Recovery and Reinvestment Act of 2009 granted $3.4 billion to utility companies for smart meters and the smart grid. However, many experts 3 (and even the U.S. government 4) doubt that we will actually see any reduction in energy use as a result of smart technology. Instead, what we are seeing throughout the U.S., Canada, and Australia  is a rise in rates as smart meters are installed. Peak rates in some areas can be 10 times regular rates. Utilities raise rates is by instituting “time-of-day” rates—also called “peak pricing” or “time-of-use” rates—raising rates at peak times while not lowering them (usually) at other times. In Oklahoma and in some parts of Texas, peak rates are up to 10 times regular rates (highest when demand is highest). Because smart meters have not been fully installed, many U.S. utilities have not yet implemented time-of-day pricing, or have done so on a limited basis. However, wherever mandatory time-of-day pricing is implemented, rates go way up. Apolitical About.com has a chilling article on what is to come. This article is well worth reading. Here’s an excerpt: “For those who cannot function in the wee hours of the morning or late at night, consider dividing your wash into loads and run your washer and dryer for one load every evening, as soon as the off peak time slot begins. If the cycle is too long and you're an early-to-bed type of person, use a shorter cycle and consider hanging the wash to dry.”

Here are a just a few examples:

• On-peak rates 3 times off-peak rates (22 cents/kWh vs 7 cents/kWh) (parts of Texas) ⁵
• Peak rates up to 10 times off-peak rates (parts of Texas) ⁶
• Electric rates 15% higher between 6 a.m. and 9 p.m. (Washington) ⁷
• Electric rates doubled between 7 a.m. and 9 p.m. (Ontario) ⁸

Michigan Attorney General Bill Schuette filed suit in the state appeals court, stating that there is no net economic benefit to consumers resulting from the use of smart meters and that there is unlikely to be any future benefit. ⁸ The court of appeals agreed. ¹⁰  Illinois Attorney General Lisa Madigan agreed with Schuette, stating:

The utilities have shown no evidence of billions of dollars in benefits to consumers from these new meters, but they have shown they know how to profit. ¹¹

The Michigan Association of Businesses Advocating Tariff Equity says that smart meters will increase utility rates, and, along with the Attorney General, filed suit in state court. ¹² They say that the current analog meters work just fine and that there is no reason to install smart meters ¹³

Consumers Digest sums it up well ¹⁴:

Smart-meter conversion represents little more than a boondoggle that is being foisted on consumers by the politically influential companies that make the hardware and software that are required for the smart-meter conversion.

Smart meters are supposed to help to give you more control over your energy use. But many experts doubt that you’ll ever see the electricity and cost savings that electric companies and smart-meter manufacturers tout.

This quote from John Rowe, CEO of the Illinois utility ComEd’s parent company, Exelon, at an American Enterprise Institute forum, says it all:

It costs too much, and we're not sure what good it will do. We have looked at most of the elements of smart grid for 20 years and we have never been able to come up with estimates that make it pay. . . . The real issue is, are we doing the customers more good by putting money into more advanced electronics or would we do them more good by putting the same money into replacing more old cable? To me that's an unknown answer. If I had to choose, I'd bet on the cable. ¹⁵

He went on to say that the utility companies are reluctant to install smart meters without government subsidy. ¹⁶

Representative Paul Opsommer of Michigan asks:

Why are we rushing into statewide installation and turning consumers' homes into guinea pigs just so we can quickly spend federal stimulus dollars or impose higher rates?  It makes no sense.

We must ensure Michigan citizens' rights are protected and that we don't allow monopoly utilities to impose on people untested technologies that are connected to security, health and privacy concerns. ¹⁷

Illinois Attorney General Lisa Madigan notes:

Consumers don't need to be forced to pay billions for so-called smart technology to know how to reduce their utility bills. We know to turn down the heat or air conditioning and shut off the lights. ¹⁸

 

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Footnotes

¹ eenews.net/tv/transcript/1293  The pertinent part states: “Buddy Kilpatrick: Buddy Kilpatrick of Econ Policy. Could you speak a little bit about the smart grid and maybe explain why utilities are so reluctant to embrace it without subsidy? John Rowe: Smart grid we are reluctant to embrace because it costs too much and we're not sure what good it will do. We have looked at most of the elements of smart grid for 20 years and we have never been able to come up with estimates that make it pay. Now, in Pennsylvania we will have full smart grid, first because it's because it's required by Pennsylvania statute and, second, because as you suggest, we got one of the subsidies under the bill a year and a half ago. So in Pennsylvania our PECO subsidiary will have full smart grid. We know some of the things that will do that are good. It will help in storm recovery. It will help telling customers how long they will be out of service. It will allow us to have even less meter readers than we do now and PECO has a primitive smart grid now. We don't know how much effect it will have on demand and energy use, which is the prime driver behind it. In Illinois we're doing pilot projects on smart grid, which I think is a better way to do it. The real issue is are we doing the customers more good by putting money into more advanced electronics or would we do them more good by putting the same money into replacing more old cable? To me that's an unknown answer. If I had to choose, I'd bet on the cable.”

² eenews.net/tv/transcript/1293 

³ Electric Light & Power, a publication for the utility industry: elp.com/index/display/article-display/5755345949/articles/electric-light-power/volume-89/issue-1/sections/the-smart-meter-opportunity-threat.html 

⁴ smartgrid.gov/recovery_act/overview

⁵ vaultelectricity.com/texas-electricity/tag/time-of-day/

⁶ vaultelectricity.com/texas-electricity/tag/time-of-day/

⁷ abcnews.go.com/Business/story?id=87865&page=1

⁸ ontarioenergyboard.ca/OEB/Consumers/Electricity/Smart+Meters; torontosun.com/comment/editorial/2010/09/17/15392101.html

⁹ media.mlive.com/business_impact/other/U-17000%20-%20AG%20Comments-Final.pdf

¹⁰ crainsdetroit.com/article/20120411/FREE/120419965/appeals-court-rules-against-public-service-commission-over-detroit-edison-smart-meter-rate-increase#  ; freep.com/article/20120411/NEWS06/120411033/Appeals-court-DTE-Energy-smart-meters.  In April, the state Court of Appeals ruled that the Michigan Public Service Commission should have not allowed DTE Energy a rate increase of nearly $37 million to pay for smart meters (total cost is $584 million). Nonetheless, consumers are still paying and the installation has not been halted because the MPSC is not acting. The court stated that the $37 million rate increase was unreasonable because there was no evidence to show that the program  provided any benefit to customers.

The court wrote, “We will not rubber stamp a decision permitting such a substantial expenditure—a cost borne by the citizens of this state—that is not properly supported.”  The court has remanded the matter for the MPSC to conduct a full hearing on the cost benefits of the program. The MPSC is in DTE’s pocket and unlikely to do anything. Until it does, the rate increase remains in effect. Write the MPSC and Attorney General.

The case was brought to the Court of Appeals by the Association of Businesses Advocating Tariff Equity and the Michigan Attorney General's Office.

¹¹ articles.chicagotribune.com/2011-06-21/news/ct-oped-0621-madigan-20110621_1_smart-grid-ameren-comed

¹² media.mlive.com/business_impact/other/U-17000%20-%20AG%20Comments-Final.pdf

¹³ Personal communication.

¹⁴ Consumer’s Digest

¹⁵ eenews.net/tv/transcript/1293 The pertinent part states: “Buddy Kilpatrick: Buddy Kilpatrick of Econ Policy. Could you speak a little bit about the smart grid and maybe explain why utilities are so reluctant to embrace it without subsidy?  John Rowe: Smart grid we are reluctant to embrace because it costs too much and we're not sure what good it will do. We have looked at most of the elements of smart grid for 20 years and we have never been able to come up with estimates that make it pay. Now, in Pennsylvania we will have full smart grid, first because it's because it's required by Pennsylvania statute and, second, because as you suggest, we got one of the subsidies under the bill a year and a half ago. So in Pennsylvania our PECO subsidiary will have full smart grid. We know some o the things that will do that are good. It will help in storm recovery. It will help telling customers how long they will be out of service. It will allow us to have even less meter readers than we do now and PECO has a primitive smart grid now. We don't know how much effect it will have on demand and energy use, which is the prime driver behind it. In Illinois we're doing pilot projects on smart grid, which I think is a better way to do it. The real issue is are we doing the customers more good by putting money into more advanced electronics or would we do them more good by putting the same money into replacing more old cable? To me that's an unknown answer. If I had to choose, I'd bet on the cable.”

¹⁶ eenews.net/tv/transcript/1293

¹⁷ gophouse.com/readarticle.asp?id=9058&District=45

¹⁸ articles.chicagotribune.com/2011-06-21/news/ct-oped-0621-madigan-20110621_1_smart-grid-ameren-comed

“The $63 million smart grid pilot program consumers are currently paying for has turned in disappointing results that reinforce what Rowe already knows. On hot summer days, people continue to run their air conditioners no matter how much information they have from their smart meter. Consumers don't need to be forced to pay billions for so-called smart technology to know how to reduce their utility bills. We know to turn down the heat or air conditioning and shut off the lights. The utilities have shown no evidence of billions of dollars in benefits to consumers from these new meters, but they have shown they know how to profit.”

 

 

 

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