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Illinois Smart Grid bill remains in limbo; New benefits calculations under scrutiny

Not much has happened this summer regarding the Smart Grid bill in Illinois.

It’s been pretty much a case of “sit around and wait,” with Gov. Quinn doing most of the waiting for a bill that he has vowed to veto (see my previous blog for some background). A motion to reconsider the vote on the bill in the state Senate, where it already passed in June, may be a political maneuver to keep the bill outside the realm of veto possibility, while ComEd and others continue to lobby in support. Until the motions are withdrawn, the Senate hasn't officially finished its work on the bill and it remains under consideration in the Illinois Legislature.

Meanwhile, ComEd is making the most of a new study they paid for (in compliance with an Illinois Commerce Commission mandate related to ComEd’s pilot that ended in May) in which it was concluded that its customers will end up saving about $2.8 billion and the utility is allowed to pursue its smart grid endeavors, which again is contingent on passage of the aforementioned bill (SB 1652).

The benefits claimed by ComEd are above and beyond any energy savings customers might obtain from using smart meters to manage their own energy usage. So it’s mostly operational benefits that comprise the $2.8 billion figure. Specifically, ComEd referred to: elimination of manual meter reading, increased accuracy of bills and reduced need for customer service support; improved electricity theft detection; and enhanced disconnection and reconnection of electric service, minimizing collection costs. What this means, in its claim that its SG program costs will be far outweighed by the benefits, is that ComEd did not include things such as customer-generated savings derived from improved access to information on energy use; direct load control savings; or the ability of customers to opt into a CPP program.

This approach is fairly consistent with the position of utility executives, who generally see benefits that fall under the category of “keeping the lights on” as being the most important of all. For instance, Duke Energy, also emphasized the operational benefits in discussions with regulators—specifically, direct expense reductions like meter reading, avoided costs, and some increased revenues. In its original filings, Duke also referenced some customer societal benefits, including customer outage costs, potential PHEV demand increases, and less usage because customers would have more timely and more detailed usage information. However, in more recent filings these benefits were excluded due to concern that these benefits are generally more difficult to quantify.

But from a regulatory strategy perspective, is this the best approach? Although I am not in a position to evaluate the specific numbers that ComEd is claiming, the $2.8 billion figure does seem reasonable given ComEd's size. What I think is an interesting subject for debate is where ComEd is placing its emphasis…and what is not included in the $2.8 billion figure that is quoted. Put another way, estimates I’ve seen suggest that the potential for consumer-driven savings could be much greater than the operational benefits such as the ones mentioned above, if a smart grid / meter effort is tied to a dynamic pricing program, which in the long-term creates an environment in which customers adapt from passive engagement in energy management to more active behavior modification strategies.

What are your thoughts on the benefits claims made by ComEd?