Shocking Way Electric Utilities Are Making Us Pay for the Smart Grid
On July 20, 2006, California's Public Utilities Commission approved a proposal by Pacific Gas & Electric (PCG) to begin phasing out conventional electricity meters (those big gray boxes on the side of your house, with the dials that spin around) and replace them with "smart" meters.
Relaying data on electricity usage wirelessly and in real time, the devices should in theory help utilities such as PG&E charge consumers more when they use electricity at times of greatest demand. This would, for example, encourage users to dial back the A/C on hot summer days.
Conversely, consumers would get a break on their bills for smart electricity usage. You could pay lower rates for doing your dishes and drying your laundry overnight, and for charging your plug-in electric car at nonpeak hours as well.
It's all part of a $29 billion, nationwide plan to make electricity usage smarter, by helping to build the "smart grid."
And it's failing because of greed. Specifically, the greed of electric utility companies such as PG&E.
It's axiomatic that corporations don't do anything unless they see a profit in it -- or at least a savings.
Heads, Utility Companies Win
PG&E and utilities such as Central Maine Power and Central Vermont Public Service (CV) tout smart meters as a way to save their customers money. But what these companies are really interested in is saving themselves money.
As "public utilities," these companies are charged with making sure electricity users can flip a switch and turn on a light bulb any hour the day, or night. Of course, night's not so much of a problem. The real issue for these companies is daytime, and specifically, hot summer daytimes, when everyone's cranking up the air conditioners.
The utilities have to build coal, gas, and nuclear power plants or purchase energy on the market, in numbers sufficient to ensure there's enough power for everyone during such peak periods. At night, these plants often are underutilized as power demands dwindle.
Every hour a power plant sits idle is money wasted in their view. Hence, there's a real incentive for the utilities to finds ways to use their plants more efficiently, and save money by building fewer of them.
Smart meters, and the incentives they offer consumers to spread out electricity usage across the 24 hours, offer utilities a great way to do this. Because the devices are wireless, they also save utilities labor costs, by eliminating the need to send out neighborhood meter-readers to jot down the readings and prepare the bills.
Given all this, you'd think utilities would do all they could to sweeten the deal for consumers, and encourage adoption of smart meters, right? Actually, no.
Tails, Customers Lose
As it turns out, what the utilities are doing instead is trying to have their cake and eat it, too. As reported by Bloomberg, utilities in several states are asking regulators for permission to pass along the cost of buying the new equipment to consumers. They also want to charge for its installation.
Adding insult to injury, even consumers who balk at this tactic may not be able to avoid higher fees.
Meanwhile, consumers who have agreed to install the devices already complain that the promised savings aren't materializing. Try as they might to switch electricity consumption to odd hours of the day, their bills are actually going up. Some consumers argue the meters are in fact overcharging them for the electricity they use.
All this makes one wonder: Are utilities really as smart as their meters? By rationalizing energy usage, and lowering the cost of building power plants, these devices have the potential to save money for utilities and consumers alike. It's in the utilities' interests to share the wealth -- not hog all the savings for themselves.
Motley Fool contributor Rich Smith holds no position in any company mentioned. He does hold the position, however, that many electric utilities are acting like they're dumber than a fifth-grader.