New Jersey’s biggest utility has gotten the go-ahead to deploy about 2.3 million smart meters — but with regulator insistence that it share the benefits of the data it will collect with its customers.
Thursday’s approval of Public Service Electric & Gas’s $778 million advanced metering infrastructure (AMI) plan marks the first big deployment for the state. The regulated subsidiary of Public Service Enterprise Group first submitted its plan to the New Jersey Board of Public Utilities in 2018, and under the plan approved Thursday will complete its rollout in 2024.
New Jersey is lagging behind in AMI compared to early adopter states such as California and Texas. Wood Mackenzie predicts that about 100 million smart meters will have been installed across the country as of the end of 2020, although the coronavirus pandemic has disrupted last year’s deployment schedules, making precise tallies difficult. That’s approaching two-thirds of the 159 million meters in the country.
The benefits of smart meters to automate meter reading and service requests, detect energy loss and theft, analyze customer energy usage for more accurate load forecasting and rate design, and inform management of power outages, voltage management and other edge-of-grid activities, has made them valuable sources for utility operations and maintenance improvements. Federal stimulus spending in the wake of the 2008-2009 financial crisis also helped boost early deployments.
But promised customer benefits from smart meters, such as real-time energy data sharing and services to help customers save energy, have been slower to materialize. That’s led regulators across the country to put new deployment plans under stricter scrutiny. Over the past few years, regulators in Massachusetts, Virginia, Kentucky and New Mexico have blocked multimillion-unit smart meter deployments, citing cost-effectiveness concerns and a lack of clear customer benefits.
At the same time, smart meters are seen as a key tool for utilities to enable customers to earn money for providing grid services from distributed energy resources (DERs) like rooftop solar panels, behind-the-meter batteries, electric vehicles and more advanced energy management systems. Capturing this full value of DERs will, in turn, play an important role in plans from many states to decarbonize their electric grids in the decades to come, including New Jersey.
Building customer and distributed energy values into AMI
The approval from the New Jersey Board of Public Utilities (BPU) on Thursday was influenced by a public AMI work session late last year to seek out stakeholder views on balancing the costs and functionalities of smart meters with their value to help the state meet its clean energy goals. The work session also delved into issues of customer data privacy and access, as well as giving customers an “opt-out” from receiving smart meters.
BPU’s Thursday’s approval came with a stipulation that sets up a separate docket to examine customer data access issues. Commissioner Dianne Solomon highlighted the importance of that process, which “is going to be very important to the board and all those interested in seeing that AMI reaches its full potential for the ratepayer, and not just the utility.”
“If we are going to achieve the full benefit of AMI, the data access is a huge piece of that,” she said before voting with the other BPU commissioners to approve the plan. This review will inform how PSE&G will be permitted to recover the costs of the AMI deployment from customers in its next rate case scheduled for 2024.
Francesco Menonna, analyst with Wood Mackenzie, said in a Friday interview that this step from New Jersey regulators “makes clear that advantages to the utility in terms of [operations and maintenance] are not sufficient to justify the deployment. There need to be plans that clarify the added benefits that consumers will receive.”
In other words, “AMI needs to be seen as [an] enabler of an ecosystem of solutions, a means rather than an end,” he said. Similar processes to examine the broader values of AMI for utilities and customers are underway in other states in the early stages of AMI deployments, including New York and Connecticut.
At the BPU’s November AMI workshop, a presentation from Chris Villarreal, president of Plugged In Strategies, noted that failure to set early targets for realizing the customer benefits available from AMI can undermine customer support for deployments.
“Commissions need to hold utilities’ feet to the fire,” he said. “Someone needs to be held accountable for the utilities to bring those customer programs up to closer to the beginning” of the process.
At the same time, Villarreal noted that AMI is a “transitional technology” for expanding the role of DERs in decarbonizing the electricity system. “It’s valuable to the utility as the network operator,” he said. “But it’s also valuable to the customer and the DER operator because they can now tailor the services that will work best for the network, and deliver value to the network.”
The challenge for utilities, regulators and other stakeholders is that many of those future values can be hard to quantify or prove out since they’re based on future levels of DER growth that haven’t happened yet. “How does a utility evolve along with this transition? That [is what] I think is going to be the hardest thing” for future AMI plans to work out.