BG&E Fallout: What’s the Take-Away for Other Utilities?

By Chris King

This week the Maryland PSC issued its order in BGE’s smart meter rollout application proceeding.  The MD PSC turned down BGE’s proposal.  Importantly, the order found that BGE’s proposal was cost-effective, with a societal benefit to cost ratio of 3.2 to 1 (i.e. $3.20 in savings for every dollar spent over the 15-year projected system life).  The PSC also concluded that the ZigBee standard proposed for use by BGE for the Home Area Network (HAN) interface is the “dominant technology in the AMI market” (the ZigBee standard, while not perfect, has been formally endorsed by the DOE Smart Grid standards effort being led by NIST and is the one in use in California and Texas, among other places).

So with all of this going for the application, why did the MD PSC say no?  Well, to begin, the order said: “We believe whole-heartedly in the intentions behind BGE’s Proposal. Nothing in this Order should be construed as a vote of ‘no-confidence’ in smart-grid technology’s ability ultimately to lower energy bills, improve customer service and relieve peak-time pressure on the transmission and distribution infrastructure.” 

In this positive spirit, the order went on to invite BGE to reapply, making three changes in its application.  The first is to propose a cost recovery mechanism that shares some of the project risk with shareholders, probably through a mechanism such as a regulatory asset.  The second is to eliminate mandatory time-of-use (TOU) rates for customers.  The PSC likes Peak Time Rebate (PTR), but the application linked PTR with mandatory TOU.  As I’ve said for many years, mandatory TOU is a bad idea; neither regulators nor consumers like mandatory programs.  PTR gets the peak reductions without forcing consumers one way or another.  The third is to propose a specific consumer education plan.

It’s unclear what BGE will do next, but submitting a revised proposal may be a reasonable solution – especially to keep the $136 million in Smart Grid Investment Grant funds awarded by DOE.

So what should the average utility do to avoid a similar result in its own jurisdiction?  First, communicate and educate; talk to your commissioners and staff; understand their concerns and respond to them.  You know this.  As for smart meters specifically, be sure to focus on consumers.  What benefits will they see and when?  What will change when their meter is installed?  How will it help them?  And please, propose only voluntary dynamic pricing.

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Chris King is Chief Regulatory Officer for eMeter Corporation and President of eMeter Strategic Consulting.

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Maryland PC Order Denying BG&E Application (pdf)

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