POWER January 2011 - 43

2011 INDUSTRY FORECAST
Which Side of the Meter Are
You On?
Utilities have achieved success by supplying electricity from central
station plants (the supply side) to a grid that carries electricity to customers
(the demand side). One way to improve the efficiency of this
supply chain is by adopting smart grid technology. The weak link in
that chain is convincing customers to use, and regulators to invest in,
the smart grid.
By William J. Kemp and Andrew Trump, Black & Veatch
I
s the electric meter turning out to be the
great divide for the utility industry?
On the upstream side, utility executives
extol the efficiencies and overall benefits that
a smart grid brings to their operations. Downstream,
they talk about getting closer to their
customers, even though they're still not sure
what their customers want. Customers have
not exactly reciprocated in a warm and fuzzy
way to let them know-if, indeed, the customers
know themselves.
While smart grid programs and technology
continue to evolve, different utilities may
pursue differing visions for their smart grid
programs. Diverse strategies and implementation
flavors will emerge from each utility's
particular situation. A more standardized set
of smart grid solutions will no doubt gain acceptance
over time, as the set of technologies
progresses along its maturation curve.
The chief executive officers of some of
the largest U.S. utilities, during a panel discussion
at the Edison Electric Institute (EEI)
meeting last June, spoke highly of the tangible
value that smart meters and smart grid
initiatives have brought to their companies.
One CEO flat-out said, " Our smart meters
pay for themselves. " He pointed out that the
company saves on the cost of meter reading,
gets an early jump on energy theft schemes,
and, because his service area has a large transient
customer base, the utility saves a lot of
money on service connects and disconnects.
Other executives had the same view; one
said that " Operational benefits can justify the
system without even looking at the customer
side of the meter, " while another, whose company
has a major smart grid installation in
one city in its service territory, acknowledged
that the major benefits that he has seen so far
are on the company side (that is, " upstream " )
of the meter.
A presentation by Black & Veatch to
Wall Street utility analysts in August ar42
ticulated
a similar line of thought, citing
a dozen or so benefits that the smart grid
can bring to utilities in terms of operations
and maintenance, capital expenditures, and
revenue, including these:
■ Improved forecast processes for power
purchasing.
■ Improved transformer load management.
■ Assistance in rate design.
■ Reduced time for resolving billing issues
with customers.
■ More efficient management of service
outages.
■ Integration of renewable energy resources
(which are either intermittent
or highly variable, depending on your
point of view).
■ Elimination of manual meter reading expenses.
■
Faster detection of theft.
Yet, despite these widely acknowledged
advantages that yield significant cost savings
and have the long-term potential to
provide customers with better reliability as
the systems evolve, one of the EEI panelists
fretted that if his utility did not penetrate
the market downstream of the meter to the
retail customer level, it could be relegated
to being " just a commodity provider " while
losing opportunities for new markets to the
likes of Microsoft and Google.
This, in turn, generates the question,
What is wrong with being the provider of
an absolutely essential, ubiquitous commodity
if you can do it efficiently and reliably;
constrain customer rates; provide
thousands of local, high-quality jobs; enable
other market services; and provide
low-risk returns to shareholders? Beyondthe-meter
opportunities may generally be a
poor fit for utilities. And, after all, the No. 1
priority for any utility is keeping the lights
www.powermag.com
on, as Exelon CEO John Rowe reminded
everyone at the EEI meeting.
Should Utilities Be in the Home
Energy Management Business?
Do customers want utility involvement
down to the electricity usage level? Do
customers even care about being able to
finely slice their energy usage? Are utilities
better off leaving the day-to-day data
management to household-name technology
and service providers? And is home
energy management such a small part of
the future home area network that it does
not or should not matter?
The high-tech companies seem to be
positioning themselves to achieve large
shares of the behind-the-meter technology
market by way of smart in-home systems
and customer/utility interfaces. To avoid
compromising core capabilities, utilities
will most likely need to partner with
such companies to help improve customer
satisfaction and reliability, reduce costs,
minimize risk, and increase cash flow, Len
Rodman, Black & Veatch CEO, said at the
RMEL conference in September. In other
words, Rodman said, it's not a matter of
competing with the likes of Google, but
rather determining how to team up with
these new entrants to deliver higher levels
of customer service and reliability, without
assuming risks out of proportion to normal
utility returns.
Many utilities have little, if any, competitive
advantage in these markets-nor
should they. Electric utilities didn't compete,
for example, with General Electric
when it introduced its full range of thenhigh-tech
home electric appliances in the
1940s and 1950s, or with Carrier and Trane
for a share of the air conditioning market.
The power industry simply wanted to increase
energy sales. Similarly, why should
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POWER January 2011

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