News: CJ Exclusives

Smart Meters Could Raise Costs for Consumers Using Less Electricity

S.B. 75 would subsidize devices; scheduled for floor vote in House today

The N.C. House of Representatives may take a final vote today on a bill requiring all customers of Duke Energy and Progress Energy to pay more per kilowatt — because they’ll use less electricity.

Sen. Fletcher Hartsell, R-Cabarrus, has sponsored Senate Bill 75, Promote Electricity Demand Reduction. The bill gives utilities a new way to meet mandates set up in Senate Bill 3, Renewable Energy Portfolio Standard, a law enacted in 2007 requiring utilities to get 12.5 percent of their energy from renewable sources including solar and wind.

Hartsell and many others argue that the 12.5-percent mandate is tough to meet, even though utilities have three ways to satisfy the requirement: produce their own renewable energy; purchase renewable energy from another producer; or reduce energy consumption through energy efficiency measures (although only a portion of the requirement can be met through efficiency).

S.B. 75 would introduce a fourth alternative: reducing “demand” for electricity by implementing “smart meter” programs.

Smart meters are similar to traditional electric meters, except they measure electricity usage in real time, enable two-way communication between the customer and the utility, and are under the control of both the customer and the utility.

The idea, Hartsell said, is to make it easier for utilities to meet the REPS requirement, to help customers save money on their electric bills, and to promote smart grid technology.

Helping utilities

“I think the REPS requirement at 12.5 percent over time is a rather bold goal,” Hartsell said at a House Committee on Public Utilities meeting April 13. “This gives folks the time to meet the renewable requirement.”

“The higher cost of solar and wind can be offset by the use of this technology,” he said later.

It is much easier for utilities to reduce overall energy consumption than it is to increase renewable energy production, said Daren Bakst, director of legal and regulatory studies for the John Locke Foundation. It also is more profitable.

It seems counterintuitive that utility companies would like laws that cause consumers to conserve energy. Every kilowatt the customer saves is money the utility loses, right? Wrong, said Bakst.

The North Carolina Utilities Commission allows utility companies to charge higher rates to customers to make up for their lost revenue.

Similar to farmers who get paid not to produce corn, “utilities actually get paid a lot of money for not generating electricity,” Bakst said.

“It costs utilities very little to run these type of programs, and they have much to gain in avoided costs — the electricity they’re not generating,” he said. “It’s an incredible profit margin. They don’t get that kind of profit margin with solar and wind.”

Helping consumers

Hartsell said the bill also would help business and residential customers by helping them monitor their electricity usage and showing them where they could cut back.

He said a pilot smart meter program in Fayetteville saved residential customers between 15 and 20 percent on their electric bills. He said Rep. Rick Glazier, D-Cumberland, who volunteered to test the smart meter in his home, also has saved 20 percent on his monthly bill.

Rep. Hugh Blackwell, R-Burke, called it “a pro-job development bill,” saying reducing energy costs would help businesses grow.

But businesses don’t need incentives to save energy, said Roy Cordato, vice president for research and resident scholar at the John Locke Foundation.

“Businesses are going to do what’s most efficient,” Cordato said. “You don’t have to tell them to do it.”

Residents also have reason enough to conserve, Bakst added. “The reason smart grids probably aren’t very popular is people don’t like the privacy implications and they’re kind of creepy.” More important, Bakst said, customers won’t end up saving money by using Smart Grid. As electricity usage goes down, rates will go up.

Cordato said anytime energy efficiency or energy conservation programs are adopted customers can expect higher rates.

“That’s the bargain the utility companies struck with the enviros with their support for S.B. 3,” Cordato said. “That’s the deal they always strike with enviros — ‘we’ll go along with what you want us to do so long as we can pass on the costs to the customer.’”

Helping the technology

“What we’re trying to do is to help give this in-between kind of technology the opportunity to make its face in the market — just as we have with others,” Hartsell said.

“There’s a vendor for it that exists in Raleigh right now and has committed some fairly sizable sums in manufacturing the equipment that’s used,” he added.

The vendor Hartsell was referring to is called Consert, an energy management company that provides smart grid technology. The company’s slogan is “Communicate. Control. Conserve.”

Consert’s Chief Operating Officer Joseph Forbes told the committee, “without some sort of incentive for the utilities to adopt new technologies,” energy conservation efforts never would move forward.

Representatives of the solar and wind industries also spoke at the committee meeting, saying they feared adding the smart grid option to the REPS requirement would “crowd out” solar and wind.

Neither solar, nor wind, nor smart grid should be subsidized, Bakst said.

“When Hartsell says we need to help the technology, he’s basically saying there’s no demand for the technology,” Bakst said. “That’s what subsidies do – help businesses that otherwise would fail.”

“If Hartsell wants to invest in it, he should go for it,” Bakst said.

Repealing REPS

“We shouldn’t be focusing on how we can make it easier to comply with a terrible law,” said Bakst, referring to S.B. 3, “we should be focusing on repealing the law.”

That’s exactly what House Bill 431, from Rep. George Cleveland, R-Onslow, would do. His bill repealing S.B. 3 hasn’t moved as quickly as S.B. 75, however. S.B. 75 passed the Senate by a unanimous 49-0 vote March 16. It’s on the House calendar for second and third readings on the floor today.

Sara Burrows is an associate editor of Carolina Journal.