The U.S. electric industry is embarking on the greatest customer revolution since the early days of electrification. Subtle changes in the industry’s cash register – the meter -- coupled with the empowerment of the consumer in virtually every buying decision, will result in profound changes.  But this shift is being misunderstood and sold the wrong way.

Selling It Wrong

In California, all the major investor owned utilities are embarking on exciting roll outs of advanced meters. These projects will cost in excess of $4B over the next 5 years. And yet the real message about these projects is missing. Utilities continue to talk about eliminating meter reader jobs, raising rates (to cover costs) and lessening future shortages. This position further separates utilities from their customers and stirs up consumer activists, unions and environmentalists. 

Selling advanced metering on the basis of job reduction, increased costs and helping the utility is like selling a computer to reduce the cost of typewriter carbon paper and ribbon, to make the room quieter and help the company’s (not the secretary’s) efficiency. Not a very compelling argument and one which ignores the real benefits.

Selling It Right

The real story about advanced metering is a positive one that can bring all these constituencies together. The message lies in customer engagement in the electricity market; and in the integration of technology to improve the robustness, flexibility and security of the power system. These beneficial activities will ultimately lead to reduced cost, improved reliability and reduced energy use while allowing for intelligent, feature-rich system operations.

The industry is missing a huge opportunity to take the high-ground -- to position itself as a leading-edge force, investing in the future to the benefit of all stakeholders including customers, the public, regulators, the financial community, employees, environmentalists and potential partners. The benefits can be positioned in two, complementary ways:

1. Economic benefits and added functionality for consumers

§         Lower cost

§         Services

§         Comfort and Convenience

§         Safety

2. System and societal benefits

§         Load control and management

§         Real time forecasting

§         Flexibility

§         Security

New Business Opportunities

The move to sophisticated, intelligent devices – and the eventual build out of an active customer portal -- will also bring significant business opportunities (despite current wisdom that customers only care about price and reliability). This massive technology deployment can expand opportunities for both the utility and its customers. A recent study in Chicago found consumers lowered their bills by nearly 11% once aware of their consumption and time of use. Other studies have found that demand response is effective if it can influence 5-7% of load. The new tools of advanced portals will make these numbers look very small.

The utility business has been engaging customers for more than 40 years through metering technologies.  Most amounted to no more than a dumb cash register. The amazing thing is that it has taken so long to realize the tremendous opportunities that lie waiting for customer engagement.  Additional business opportunities will explode onto the scene: Load aggregation, outage management, customer services such as security and comfort, appliance control and management.

In the 1970’s AT&T introduced the now ubiquitous RJ11 connector/plug for telephones. It did so not with a grand vision of the future, but rather to reduce technician installation time. That single device linked the nation together in a huge, simplified way and spawned untold technical and business changes such as the Internet. So, too, will the “smart meter.” This will be a huge transformation for traditional utilities and regulators, one they will most likely approach with much caution. Yet utilities will find that this is a natural progression that can lead to tremendous positive change for the consumer, the business and the industry. To fail to take advantage of technology and to create the “Call Waiting of the electricity sector” is to be left in the dust.

Mark Gabriel is President of Positive Energy Directions, a management consulting firm focused on the electricity and gas industry. Prior to founding Positive Energy Directions, he was a senior officer at the Electric Power Research Institute where he led the nationwide effort known as the Electricity Sector Framework. Copies of Mark’s presentations and papers can be found at www.positiveenergydirections.com