Smart-Meter Defiance Slows $29 Billion U.S. Grid Upgrade

A growing consumer backlash against new wireless digital technology for measuring power usage is slowing U.S. utilities’ $29 billion effort to upgrade their networks.

States including California, Maine and Vermont have responded to customer concerns about higher bills and safety by offering them the option of keeping their conventional devices for an extra charge.

The fee may discourage drop-outs from the “smart-meter” program, in which household usage data is transmitted over radio waves to local utilities such as PG&E Corp. (PCG), Central Maine Power Co. and Central Vermont Public Service Corp., which can use the information to charge higher rates during times of peak demand.

“Charging fees for opting out is pretty outrageous,” Charles Acquard, executive director of National Association of State Utility Consumer Advocates, which represents 44 consumer groups in 40 states, said by telephone.

Escalating consumer opposition is delaying efforts to deliver power more efficiently because the gadgets anchor next-generation transmission grids. Several utilities, including one owned by Warren Buffett’s Berkshire Hathaway Inc. (BRK/B), are holding off on roll-out plans until regulators decide whether they can force consumers to pay costs for the technology that utilities also refuse to pick up.

Smart meters, so called because they allow real-time usage monitoring, originally were pitched by the industry as a boon to consumers for increasing control over consumption. While the effort won grants from the Obama administration, consumer advocates say benefits have yet to materialize as promised.

Rising Opposition

A minority of customers complained the devices instead raise their bills, compromise privacy and risk their health with electro-magnetic fields emitted by the wireless technology. In California, more than 50 local governments are opposing use of the smart meters, according to Joshua Hart, director of Stop Smart Meters, a Santa Cruz County-based consumer group.

At the behest of state regulators, utilities such as San Francisco-based PG&E and Edison International of Rosemead, California, plan to use the meters to offer plans that would charge higher rates during peak usage-times such as summer heat waves or winter storms. The devices also promise to save utilities money by eliminating meter readers, shortening response times to power failures, and allowing for remote switching when turning service on or off.

While the companies anticipate cost savings, they’ve pushed for the expense of buying and installing the new meters to be passed on through customer bills.

Holding Off Deployment

The meters are key to the “smart grid” being rolled out nationwide to increase delivery flexibility. Investment by utilities in the new grid has totaled $15.4 billion through the first quarter of 2012 and is projected to increase by another $13.4 billion through 2015, said Theodore Hesser, an analyst for Bloomberg New Energy Finance.

Not all companies are plowing ahead. In November, MidAmerican Energy Co., a utility owned by Buffett’s Berkshire Hathaway, told Iowa regulators it was waiting to deploy electric smart meters while it assesses how other power companies address complaints.

Alliant Energy Corp. (LNT)’s Iowa utility told state regulators that concerns about raising customer bills and rapidly changing technology were among the reasons keeping it on the sidelines.

Last fall, Connecticut delayed its decision on Northeast Utilities (NU)’ proposal to install 1.2 million smart meters, saying it needed time to establish a state policy on the technology.

How Consumers Benefit

Even if a minority of customers keeps their old meters, PG&E still will be able to realize savings from the upgrade, said Helen Burt, PG&E senior vice president and chief customer officer.

PG&E “wants to accommodate” residents who don’t want a wireless meter and is reaching out to inform residents about the benefits of tracking energy use on its website and signing up for energy conservation programs, Burt said.

Edison International (EIX)’s Southern California Edison, the state’s second-largest utility, said about 28,000 customers have asked for a delay of a smart meter installation out of 4.9 million customers, said Ken Devore, director of the utility’s smart grid program.

That will not interfere with its program that can offer benefits such as tracking and saving on energy use, he said. “These are safe, secure and high quality devices,” he said.

Allowing Meter Choice

An increasing number of states are moving to motivate consumers to go along by permitting utilities to charge those who refuse the meters to pay an extra monthly fee. State regulators see “smart” technology as a way of reducing power consumption during periods of peak demand, reducing the need to build expensive power plants and easing the potential for black-outs from capacity that can’t keep up with urban growth.

Nine U.S. states including Texas and Michigan are either considering allowing customers to decline a smart meter or are allowing for that option, according to state regulatory filings and an April 2012 report from the Edison Electric Institute, a Washington-based industry lobbying group.

In Vermont, the legislature passed a bill on May 4 that would eliminate a fee utilities may now charge to customers who refuse a wireless smart meter, according to Aaron Adler, counsel with the Vermont Legislative Council. The bill still needs the governor’s signature to become law.

In California, most customers will have to pay an initial fee of $75 and then a monthly charge of $10 to keep their traditional meter. At PG&E, fees could hike monthly power bills on average by about 12 percent, based on an average bill of $84, said Greg Snapper, a PG&E spokesman.

About 26,800 PG&E customers out of 5.4 million have decided to keep their mechanical meters, Snapper said in an e-mail.

More Accurate Measurement

More than 90 percent of PG&E customers now have a smart meter as part of a more than $2.2 billion program to deploy at least 9.7 million wireless electric and gas units, Burt said.

The utility’s roll-out of the devices, which started in 2006, has been fraught with complications including customer accusations that the smart meters were overcharging. In 2010, state regulators commissioned a study that found the measurements were reliable. Burt of PG&E said the devices are more accurate than traditional analog meters.

Regulators and utilities also point to government studies that say the devices are safe. In 2011, the California Council on Science and Technology, a state-created technology advisory board, said in a report it found no evidence from scientific studies that smart meters were harmful and the devices emit far less radio-frequency energy than microwaves or mobile phones.

Meeting Safety Guidelines

Smart meters must meet Federal Communications Commission guidelines on emission levels and those that meet the standards and are installed properly are safe, agency spokesman Neil Grace said.

California regulators have approved smart meter programs and decided households that don’t want a wireless unit should pay for the costs of continuing to use their old devices, said Terrie Prosper, a spokeswoman for the California Public Utilities Commission.

Utilities, which back the state-imposed fees, say charging consumers for keeping their old mechanical meters will pay for the workers dispatched to homes and businesses each month to record usage by hand, the old-fashioned way.

About 27 million smart meters have been installed as of September 2011, according to the Institute for Electric Efficiency, a Washington-based research group financed by investor-owned utilities. By 2015, about 65 million, or about half, of U.S. homes will have a wireless meter, according to the group.

‘Model for Broadband’

Those opposed to the state-driven mandates say forcing customers to use smart meters is like making someone pay to have a high-speed Internet connection.

“We kind of like the model for broadband, where nobody is forced to take it, but people see the value in it and are willing to pay more for it,” said Mark Toney, executive director of the Utility Reform Network, a San Francisco-based consumer advocacy group.

Catharine Gunderson, 59, a retired teacher, said she installed a cage around her traditional meter on her home in Santa Cruz, California, to prevent PG&E from swapping them for a wireless unit.

“I feel like it’s extortion,” Gunderson said about the opt-out fees. Gunderson said she’s concerned about the health effects of smart meters and recently paid to keep her traditional meter.

To contact the reporter on this story: Mark Chediak in San Francisco at mchediak@bloomberg.net.

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net.

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