Group Warns Of New York Utility's Control Over Smart Meter Distributed Intelligence "App Store", Says Oversight Needed To Prevent Competitive Harm To ESCOs, Other Providers

Likens Utility Control Over DI App Store To Big Tech, Risk Of Similar Abuses (Restricted Access, Crippling Features, Self-Preference)

November 30, 2020

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Mission:data Coalition has filed testimony with the New York PSC urging the PSC to exercise oversight, "over a novel and under-recognized technology that Niagara Mohawk Power Company ('NMPC' or the 'Company') proposes to install in its smart meters: distributed intelligence ('DI')."

In testimony filed in NiMo's current rate case, a witness for Mission:data warned that, absent PSC oversight, NiMo's distributed intelligence 'app store' under its advanced metering initiative could allow for the same abuses, against independent providers, practiced by various big tech firms in their app stores

"While DI capabilities could provide significant benefits to customers, they also present large risks to fair competition between distributed energy resources ('DERs'), energy service companies ('ESCOs') and NMPC. Achieving New York’s ambitious climate goals can be achieved only by harnessing the innovation available from non-utility providers of data-driven DER products and services. While I believe the Commission should approve the Company’s requested rate increase covering DI-capable meters and direct the company to move ahead with AMI installation, the Commission should simultaneously prohibit NMPC from utilizing the DI capabilities until the Commission has enacted safeguards and ensures fair competition with other service providers," a witness for Mission:data testified

"'Distributed Intelligence' ('DI') is a recently-developed capability of advanced meters that is defined as a generalized computing capability inside the meter itself. DI-capable meters are different from traditional smart meters because traditional smart meters are limited to collecting energy usage information on intervals ranging from 5 minutes to 60 minutes, and then transmitting that information back to the utility for processing. DI-capable meters, in contrast, have an on-board computer that allows for significantly enhanced information gathering at much shorter time intervals, providing insights into power consumption," a witness for Mission:data testified

"Major meter manufacturers, including Itron and Landis+Gyr, now offer DI-capable meters, which allow software applications, or 'apps,' to be deployed over the advanced metering infrastructure’s ('AMI') radio network and executed on the meter’s computer. For example, Itron’s website states that DI allows software apps to 'have access to the meter’s data, implement algorithms, and then send the results of these computations to a backend server for further analysis and/or display.' Third party app developers, such as Mission:data’s member companies, as well as others, can help unlock the technological potential of DI in the meters proposed by NMPC. DI apps could be both utility-facing and customer-facing. For example, utility-facing apps could provide high impedance detection, neutral line fault detection, or power theft detection. For customers, DI apps could provide highly-accurate load disaggregation, breaking down electricity usage by device or appliance, as I explain further below," a witness for Mission:data testified

"A DI App Store is just like Apple’s app store on iOS devices, or Google’s Play store on Android devices, except it operates on advanced meters. According to Itron, the DI App Store provides to the utility a listing of available software apps as well as a deployment mechanism for loading apps onto meters. The DI App Store manages the installation, configuration, licensing and monitoring of apps over time so that deployment of software apps are seamless," a witness for Mission:data testified

"Based on my experience in other states with DI-capable meters, the utility -- NMPC in this case -- will control the DI App Store, including what apps are loaded onto meters. This includes whether and how apps are allowed to communicate with devices inside the home using a wireless communications protocol such as Wifi. However, the meter manufacturer (Itron, Landis+Gyr, etc.) is involved in reviewing apps to ensure they do not damage the operation of the meter and to provide some level of technical support to app developers," a witness for Mission:data testified

"Failure to regulate digital markets according to these principles has resulted in harms to consumers and innovation in other sectors of the economy," a witness for Mission:data testified, noting that, last month, the U.S. House of Representatives Anti-Trust Subcommittee, chaired by Rep. David Cicilline, issued a report (the 'House Anti-Trust Report') describing how large technology firms have, in the words of the Mission:data witness, "abused their position of control over app stores to the detriment of the market as a whole."

According to Mission:data, the 449-page report stated, "By controlling access to markets, these giants can pick winners and losers throughout our economy. They not only wield tremendous power, but they also abuse it by charging exorbitant fees, imposing oppressive contract terms, and extracting valuable data from the people and businesses that rely on them."

"The concerns stated above in the House Anti-Trust Report are directly analogous to NMPC’s proposed DI capabilities. By virtue of NMPC’s control over a DI App Store, NMPC will be in a position to charge exorbitant fees, impose oppressive contract terms, and extract valuable data from app developers, harming energy innovation in New York. It is imperative that the Commission intercede before this proverbial train leaves the station and NMPC embraces an unregulated line of business built upon ratepayer-funded assets," a witness for Mission:data testified

"Specifically, I have three concerns about DI capabilities. First, critical information about the DI App Store is not included in NMPC’s testimony. Negative outcomes for ratepayers and unnecessary costs are likely to result if the Commission does not quickly address questions such as who is eligible to make an app; how customers can load an app of their choice on their meter; and what are the associated costs to customers and, potentially, app developers of using DI capabilities. Second, DI capabilities provide fertile new ground for NMPC to engage in anti-competitive activity such as self-dealing, crippling features for competitors, and surveillance of competitors. The Commission must dedicate itself to becoming a savvy digital platform regulator prior to allowing NMPC to move forward with DI capabilities. Third, existing Commission policies established in the Reforming the Energy Vision ('REV') proceedings regarding access to, and the costs of, customer data are rendered obsolete by the advent of DI capabilities. For all of these reasons, I conclude that the Commission is currently unprepared to effectively oversee the use of DI capabilities and should therefore institute a temporary moratorium unless and until the Commission comprehensively addresses the myriad issues raised by this novel technology, including, but not limited to, the treatment of costs and revenues; eligibility criteria of app developers; terms and conditions for app developers; and preventing NMPC from acquiring confidential and proprietary business information of app developers merely through operation of the DI App Store," a witness for Mission:data testified

The witness for Mission:data testified that:

"Operating a DI App Store gives NMPC new and incredible power over energy markets adjacent to the traditional wires-and-poles monopoly. Without rigorous oversight by the Commission, it is not only possible but likely that fair competition among NMPC, ESCOs, DERs and others will become difficult or impossible. For example, NMPC will have the power to do the following:

• "Restricting: Restrict access to the DI App Store to only those apps or app developers who align with NMPC’s strategic interests, preventing customers from accessing those products and services. Restrictions could be arbitrary and capricious.

• "Crippling: Cripple competitors’ access to certain meter features. For example, NMPC could restrict access to voltage information on the meter, making third party apps’ load disaggregations less accurate, thereby reserving superior disaggregation functionality for NMPC’s apps.

• "Self-preferencing: Grant special treatment to certain apps that 1 align with NMPC’s competitive position by pre-installing them on customer meters, while disadvantaging other apps by making the customer take additional steps to complete an app installation."

"All of the above issues are not hypothetical; in fact, they have been seen in several app stores in other contexts, notably on mobile devices, as documented in the House Anti-Trust Report," a witness for Mission:data testified

"Moreover, self-preferencing is of particular concern given that one of NMPC’s affiliates, National Grid Partners, is a 9.4% owner in a venture capital fund whose holdings include at least one firm that has publicly announced they are building software apps for smart meters. This raises the possibility that NMPC will spend ratepayer funds in order for its affiliate to profit. Energy Impact Partners ('EIP') markets itself as an investor that helps 'shape the energy landscape of the future' by making strategic investments on the part of electric utilities such as Xcel Energy, National Grid, Ameren, Southern Company, and many others. EIP portfolio company Sense has announced a partnership with Landis+Gyr to offer Sense’s load disaggregation technology as an 'app' on Landis+Gyr meters. If NMPC chooses Landis+Gyr for its metering deployment, this clear conflict of interest could arise in the absence of the Commission having a thorough understanding of how the DI App Store will operate, which app developers are allowed to commercialize their products using DI, and who is getting paid for deployment of their apps. The potential for self-dealing is yet another reason for the Commission to issue a moratorium on the use of DI until these issues can be comprehensively addressed," a witness for Mission:data testified

"There could be irreparable harm to DERs and ESCOs if NMPC is allowed to move forward with DI in the absence of ground rules established by the Commission. For example, NMPC could proceed to deploy advanced meters with their own customer-facing apps pre-installed on meters, creating an asymmetry and barrier to entry that cannot be undone. NMPC has already stated that it intends to use load disaggregation apps; however, once NMPC’s own app is installed by default on the meter, it creates a competitive disadvantage to other providers of disaggregation apps, even if they are superior and more accurate. NMPC could take months or years to offer the functionality for customers to authorize the installation of third party apps on their meter via NMPC’s customer web portal, further entrenching NMPC’s market position in a non-monopolistic market. Put simply, it is very difficult to 'unscramble the omelet' once NMPC begins using the DI capabilities to its advantage, no matter how diligent the Commission’s decisions in the future may be. For these reasons, a temporary moratorium is both warranted and necessary so that the Commission can ensure a level playing field at the outset between regulated utilities and ESCOs and DERs," a witness for Mission:data testified

"I recommend that the Commission allow NMPC to move forward with AMI deployment, but that the Commission should institute a temporary moratorium on the use of DI capabilities pending Commission resolution of the topics I have addressed. The Commission must consider, either in this docket or another one, issues including: is the DI App Store within the Company’s certificated monopoly; who is eligible to make an app; how customers can load an app of their choice on their meter; what are the associated costs to customers and, potentially, app developers of using DI capabilities; and how should NMPC’s activities be restrained to prevent anti-competitive activity such as self-dealing, crippling features for competitors, and surveillance of competitors," a witness for Mission:data testified

Case 20-E-0380

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