Energy Choice
                            

Matters

Massachusetts Rejects Territory-Wide Implementation Of Smart Meters

Says Benefits Unlocked Mostly Through Dynamic Pricing, But With Load Migrating To Competitive Supply, Can't Guarantee Pricing Structure Or That Benefits Will Be Realized

Notes Barriers For Retail Suppliers To Offer TOU Rates, Will Examine Elimination Of Such Barriers

May 14, 2018

Email This Story
Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The following story is brought free of charge to readers by EC Infosystems, the exclusive EDI provider of EnergyChoiceMatters.com

The Massachusetts DPU has concluded that the territory-wide deployment of advanced meters is not appropriate at this time, stating that the costs outweigh the benefits, the latter of which are driven mainly by dynamic pricing, the offering of which the DPU cannot control as customers move to competitive supply

"Based on a review of the evidence in these proceedings, the Department has determined it must reassess a central objective of D.P.U. 12-76-B, namely strategies for the deployment of advanced metering functionality, in order to maximize the benefits for Massachusetts ratepayers. The Department does not make this decision lightly. The evidence in these cases revealed weaknesses in the business case for advanced metering functionality presented by each company and, therefore, we declined to preauthorize any customer-facing investments at this time. The Department weighed the significant costs associated with full achievement of advanced metering functionality using advanced metering infrastructure against the considerable uncertainty regarding benefits from reduced demand, capacity savings, and customer participation in time varying rates or other forms of dynamic pricing. We determined that the benefits of a full deployment of advanced metering functionality do not currently justify the costs," the DPU said in an order on the EDCs' grid modernization plans

"In particular, the Department found that the primary benefits of advanced metering functionality are derived from reduced peak usage as customers respond to pricing signals. Achieving this benefit requires customers to participate in time varying rates or other dynamic pricing programs. As more customers migrate off of basic service to alternatives, such as municipal aggregation, the Department would need the certainty of wide adoption of dynamic pricing products from the competitive supply market to maximize the benefits of advanced metering functionality. Without such wide adoption, the Department lacks the needed assurance that the benefits associated with advanced metering functionality will justify the substantial costs," the DPU said

"There are several issues that competitive suppliers face with regard to the decision to offer dynamic pricing products, including access to customer data, billing limitations, and the inherent risk of customer choice. Given the steep increase in the number of customers on competitive supply in recent years, particularly through municipal aggregation, the uncertainty of customer participation in dynamic pricing products has increased dramatically from when the Department released D.P.U. 12-76-B in 2014," the DPU said

"We emphasize that the Department is not moving away from the deployment of advanced metering functionality and remains convinced that it is an important tool in meeting our grid modernization objectives. The Department intends to engage stakeholders, including the electric distribution companies and competitive market participants, in a process to consider how to remove barriers to the implementation of dynamic pricing products for all customers. The goal of this investigation will be to enable a successful future deployment of advanced metering functionality where the benefits are certain and they justify the costs. As part of this investigation, we will consider whether an immediate targeted deployment of advanced metering functionality to certain customer groups will yield benefits that justify the costs," the DPU said

"The level of customer participation in TVR [time-varying rate] directly affects the cost effectiveness of the deployment of advanced metering functionality. As described below, the Department has identified several issues regarding the conditions needed to facilitate customer price-responsiveness and the ability to achieve widespread participation in TVR sufficient to ensure that the benefits of a full deployment of advanced metering functionality justify the costs. Nonetheless, the Department remains persuaded that advanced metering functionality is necessary to achieve our grid modernization objectives. The Department intends to work with stakeholders to investigate the best way to achieve a cost-effective deployment of advanced metering functionality. While we work towards this goal, the Department will also consider how a targeted deployment of advanced metering functionality may benefit ratepayers," the DPU said

"[T]he anticipated benefits of the Companies’ proposed customer-facing grid modernization investments are called into question by the increasing percentage of customers on competitive supply (including municipal aggregation). On a statewide basis, the number of customers receiving competitive supply (directly or through municipal aggregation programs) has increased significantly in recent years, from 31 percent in January 2016, to 48 percent in December 2017. It is reasonable to assume that this growth in participation, particularly with respect to municipal aggregation, will continue in coming years. This development affects our assessment of the estimated benefits of customer-facing investments because, as discussed below, it could significantly curtail the number of customers that can participate in dynamic pricing, such as TVR," the DPU said

The DPU noted that, "neither National Grid’s nor Eversource’s existing billing systems are able to accommodate a large number of TVR customers without large-scale, multi-year upgrades."

"The need to bill customers separately could create a barrier to participation in dynamic pricing for competitive supply customers which, in turn, will lower the potential benefits to be gained from the deployment of advanced metering functionality," the DPU said

"In sum, there are several issues that affect competitive suppliers’ interests and ability to offer dynamic pricing products, including access to customer data, billing limitations, and the uncertainty of customer willingness to participate in dynamic pricing products. As more customers migrate from basic service to competitive supply alternatives such as municipal aggregation, the Department will need the certainty of widespread adoption of dynamic pricing products from the competitive market to maximize the benefits of the deployment of advanced meter functionality. As discussed below, the Department intends to work with the Companies and other stakeholders to identify ways to allow all customers, regardless of supplier, to have the opportunity to benefit from dynamic pricing," the DPU said

"[T]he cost of a full statewide deployment of advanced metering functionality would be in excess of $1.5 billion. Before preauthorizing the expenditure of ratepayer funds for investments of this magnitude, the Department would need to have a high degree of certainty that the benefits of such deployment would justify the costs. Our review of the record in the instant proceedings has identified several challenges with respect to achieving the benefits of customer-facing grid modernization investments. TVR has the potential to deliver significant benefits to reduce peak demand, leading to lower bills and lower emissions from peaking generation. However, questions regarding significant variations in Companies’ estimates of customer participation in TVR as well as unresolved challenges related to the ability of the growing number of competitive supply customers to access TVR make achievement of these benefits uncertain. Further uncertainty is associated with the achievement of anticipated benefits associated with the forward capacity market. In addition, AMR meters are in widespread use in Massachusetts and the change from manual meter reading to remote meter reading has already occurred. Any decision to prematurely retire these meters and replace them with other advanced metering infrastructure would come at a significant cost," the DPU said

"Given our assessment of the benefits discussed above, the Department finds that the anticipated benefits of the Companies’ proposed customer-facing grid modernization investments do not justify the costs. Therefore, the Department will not preauthorize any of the Companies’ proposed customer-facing investments at this time," the DPU said

"The Department remains fully committed to the goal of optimizing system demand by facilitating consumer price responsiveness. Recent technological advances and changes in the market regarding the deployment of advanced metering functionality lead us to conclude that it is in the public interest to identify ways in which we can achieve this objective in a more cost-effective manner than the short-term full deployment of advanced metering functionality contemplated in D.P.U. 12-76-B or the various alternatives proposed by the Companies in this proceeding," the DPU said

"We intend to open an investigation to consider the next steps for cost-effective deployment of customer-facing investments," the DPU said

"While the Department’s ultimate goal is to ensure that all customers have the opportunity to realize the benefits of dynamic pricing, we conclude that, as a transitional strategy, a targeted approach to the deployment of advanced metering functionality may be appropriate. Accordingly, as part of our investigation, the Department will consider whether a targeted deployment of advanced metering functionality to certain customer groups (for example, new net metering and electric vehicle customers), is cost-effective and otherwise in the public interest. The Department’s initial focus will be on customer groups that are likely to be engaged and participate in dynamic pricing, and have the greatest potential to use these technologies to benefit themselves and the system as a whole to lower system costs and offset peak generation. As part of this investigation, the Department will consider the technical specifications required to deploy advanced metering functionality to these customers," the DPU said

"In addition, given recent technological advances, the Department finds that it is appropriate to investigate technology options that could enable a cost-effective deployment of advanced metering functionality without resorting to a costly replacement of existing AMR infrastructure. In particular, the Department intends to explore whether there are alternative solutions that could enable the Companies to collect and communicate interval data without the need to prematurely retire the AMR meters that are in wide use," the DPU said

Finally, the Department identified a number of issues regarding the ability of competitive supply customers, including municipal aggregation customers, to participate in offering dynamic pricing. A high level of participation in dynamic pricing, such as TVR, is needed to maximize the benefits of customer-facing technologies as a growing number of the Companies’ customers receive competitive supply. The ability of the competitive market to develop and offer dynamic pricing products depends in large part on: (1) the capability of the Companies to bill for a variety of dynamic pricing products; (2) the ability of suppliers to access interval usage data; and (3) customers to be engaged and knowledgeable about energy pricing. In light of these issues, the Department intends to investigate the most appropriate ways to enable competitive supply customers, including municipal aggregation participants, to participate in dynamic pricing programs. A focus of the investigation will be specific solutions in metering, data access, and billing that would enable customers on competitive supply to participate in dynamic pricing programs as effectively as customers on basic service," the DPU said

The DPU authorized other grid modernization initiatives for the EDCs, such as advanced distribution management system, automation, and Volt/VAR optimization, as well as measures to integrate and address distributed resources, EVs, and microgrids

"To maximize benefits from dynamic pricing, we need an inclusive deployment strategy for competitive supply, municipal aggregation, and basic service customers. While that is developed, the electric distribution companies will begin making the foundational investments needed to modernize the electric grid and achieve our grid modernization objectives," the DPU said

D.P.U. 15-120 et. al.

ADVERTISEMENT
NEW Jobs on RetailEnergyJobs.com:
• NEW! --Director - Sales Management & Strategy -- Retail Supplier
• NEW! -- Operations Analyst -- Retail Supplier
• NEW! -- Sr. Business Development Manager -- Retail Supplier
• NEW! -- Sales Support Specialist -- Retail Supplier
• NEW! -- Natural Gas Operations Manager -- Retail Supplier
• NEW! -- Energy Consultant
• NEW! -- Director, Retail Energy Supply & Pricing -- Retail Supplier -- Houston
• NEW! -- Sales and Channel Partner Manager -- Retail Supplier