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Draft Would Deny Full AMI Roll-out at CL&P, Addresses Dynamic Generation Rate Options
August 30, 2011
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A draft Connecticut PURA decision would deny Connecticut Light & Power's application for full deployment of advanced meters, concluding such deployment would result in net costs to customers (05-10-03RE04).
"Due to the low benefit-cost ratio, low monthly savings over a 20-year meter life, risks to customers for achieving 20 years of savings, a 14-year payback period, and the uncertainty of customer desire for and use of dynamic pricing rates needed to achieve estimated savings, the PURA hereby denies the full implementation of the AMI meter system as proposed by CL&P at this time," the proposed decision would order.
The draft concludes that the Net Present Value net benefit for a full AMI meter deployment is negative $142 million with a benefit/cost ratio of 0.67.
"Although the Authority does not believe that full deployment should be aggressively pursued at this time, the implementation of smart meter technology by CL&P should not be abandoned," the draft continues.
"Meters must be installed for new customers and replaced for various reasons every day. Contrary to CL&P's conclusions in the Rate Pilot study, the Authority believes that smart meter deployment does not have to be an all or nothing proposition. Moving forward at a slower but deliberate pace would mitigate the risk associated with quickly changing technology and allow for mid-course corrections if necessary," the draft states.
Most notably, the draft notes that, "Voluntary programs for peak pricing and other new rate options could allow for more experimentation and provide valuable insight into customer acceptance. At the same time, mandatory TOU rates could be phased in to most, if not all customers."
As only noted by Matters, a PURA draft is pursuing mandatory TOU default service rates for all classes at United Illuminating (8/9).
The draft also includes the following discussion of retail choice:
"Retail Choice presents both challenges and opportunities in regards to the use of smart meters. All customers would benefit from operational efficiencies associated with smart meters. Mid cycle billing would be much quicker and less costly with the remote meter reading capabilities of smart meters. This would allow customers to switch suppliers much faster than today. Smart meters may also be useful by creating more defined pricing options to encourage cogeneration and renewable development. TOU pricing options, which would be readily available with the deployment of smart meters, would also help create the proper pricing incentives for the rollout of electric vehicles."
"The largest part of the electricity bill is the generation charge. This is generally the charge that is time differentiated when TOU or other dynamic rates are offered. It is PURA's hope that suppliers embrace smart meters and develop their own innovative pricing options. To date however, there appears to be little interest in time differentiated rates by suppliers in Connecticut. Suppliers have not offered any TOU or any dynamic rates options for residential customers in Connecticut since retail competition began in 2000. Customers therefore may switch to suppliers to avoid mandatory TOU or dynamic rates if the on-off peak differentials appear in the generation charges," the draft continues.
"Peak time pricing, peak rebates and hourly pricing, are based on generation costs. It may be possible to offer these types of rates by layering rates over those offered by suppliers. This would complicate rates for customers and may not be acceptable to the suppliers," the draft notes.
"Due to Connecticut's electric regulatory paradigm, customer engagement may be more restricted than what the total number of customers suggest if the distribution companies are the only suppliers that offer dynamic pricing options. This market could shrink more in the future if customers continue to move to competitive suppliers," the draft concludes.
Among the adjustments to CL&P's cost-benefit analysis which resulted in PURA's draft conclusion of a net cost to ratepayers is the exclusion of $149 million in projected benefits from energy reduction under advanced meters, as the draft finds such savings are not driven by advanced metering technology, but an OPower program whereby customers, regardless of meter type, are given more information about their usage.
Additionally, while PURA did not exclude the claimed capacity savings projected from the dynamic pricing options, the draft does find that overall capacity savings and associated benefits are, "not particularly impressive."
"Alternative conservation and load management actions could be deployed at lower cost and provide larger environmental benefits," the draft finds.
The draft notes that AMI capacity savings are estimated to be approximately 117 MW at a cost of $4,214/kW under an assumption in which 25% of residential and commercial & industrial customers are expected to participate in dynamic pricing programs. This compares to the estimated cost of CL&P's conservation and load management programs of $2,700/kW for 2011, under which CL&P is expected to save 30 MW or $82.4 million. In addition, the C&LM programs will save 2.2 million MWh over the life of the programs while the smart meter program is not anticipated to have any energy savings, the draft finds.
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