Howard A. Scott
Synergistic Systems Inc.
As the modern automatic meter reading (AMR) industry began growing in the mid-1980s, it had a clear vision for its future. AMR was expected to be the genesis of a whole new generation of smart systems, significantly automating utility operations and providing an information gateway to residential premises.
For utilities, AMR would provide a platform that could be used to support a new age of automation putting utilities along with communications companies in the forefront of using information technology. For residences, utilities would be providing the gateway for the new field of home automation.
The visionaries who started this business assumed that the major barrier to AMR would be labor unions fighting for the manual meter readers. They assumed utilities would welcome these products as a pathway to a great information age and many manufacturers of residential equipment (furnaces, washing machines, thermostats, stereos, for example) would welcome the opportunity to open a new market for residential customers.
Utility companies insisted that AMR products be no more expensive than meter reads. They were unwilling to attribute significant value to proposed automation benefits or to include indirect costs in their cost/benefit analyses. They only included the cost of the meter reader. It became difficult to justify AMR because the automation benefits were the “jewel” behind the vision, but difficult to quantify, and the indirect expenses were a significant part of the cost of existing processes, but would remain hidden. Thus, a groundswell for AMR could not be established with utilities.
Meanwhile, residential equipment providers were increasing their profits by significantly reducing their costs. Even a few cents worth of added components to allow future options were unacceptable. This essentially killed the opportunity to create a residential driver for the technology. In spite of many innovations, the home automation industry has not yet created a market driver to help it achieve its potential.
Despite these problems, the AMR industry has flourished, enjoying strong (though not meteoric) growth. The first American Meter Reading Association newsletter reported fewer than 20,000 AMR units deployed by January 1988 in a handful of projects. By January 1998, deployments had grown to 15.8 million units for 1,937 projects. Throughout this growth period, the utilities did not change their view of economic justification for AMR. So how did this growth appear? The credit goes to the marketing professionals who learned how to show the value of AMR.
Is the vision dead?
Ironically, the vision may still be alive. The credit goes to an unrelated activity-deregula- tion. First, in a deregulated environment, it is almost impossible to operate a whole indus- try of energy- related companies without tracking in detail how much energy usage of each company and end-user. Though other techniques exist to gauge customer usage (such as load profiles), they would probably not be widely accepted in the United States where distrust of major institutions is common.
Many utilities are still proceeding with the existing manual meter reading, but users are getting the opportunity to order their own meters and having someone else read them. Thus, the limitations of exiting procedures are increasing the opportunities for AMR. Still unclear is the role of the customer in this new market and the impact of their expectations.
Though deregulation is not ubiquitous in the United States, many of its lessons will be widely accepted. One little-known lesson involves the introduction of competitive meter reading agencies, which some regulators are advocating. For these companies to compete with the established utilities, the intrinsic advantage of the utility must be removed.
One such advantage is the historical cost accounting procedure that ignores indirect expenses. Without changes, existing utilities would be able to set prices based on below-market costs. Forcing them to do actual cost accounting will establish a level playing field. This introduces a second benefit of deregulation-when reported costs are raised to their actual values, the cost of AMR will be easier to justify.
It would be a mistake to attribute the actions of utilities and residential equipment vendors to anything other than good business practices. Prior to deregulation the utilities might not have been able to justify the expenditure to allocate the cost of indirect expenses. Some regulators might even have attacked such efforts as a waste of ratepayers` money. Similarly, residential equipment vendors have been answering the demands of the marketplace. They are not paid to show vision unless a proposal is supported by a business case.
As the following sections show, the vision is not dead. The data presented comes from the Scott Report on AMR Deployments, a comprehensive study of AMR deployments in North America. The report demonstrates the number of utilities using AMR and the number of AMR deployments are significantly growing.
Many vendors are adding access to local area networks (LANs) with their AMR products. As the boost from accurate cost accounting is added to the mix, AMR may still be the tool that lets utilities make inventive use of their data. Depending on which vendors flourish, AMR may even provide a ubiquitous gateway to customer premises.
To fully understand the growth of AMR, one must first answer the question, “what should we measure?” If only the number of units deployed are counted, one may skew the results to favor a handful of large projects and overlook a multitude of smaller projects. In contrast, if only the number of AMR projects are counted, one may skew the results to favor the small trials. Therefore, both the number of projects as well as the number of units deployed in them must be considered.
Another basic decision is the definition of the term AMR. Synergistic Systems includes all AMR units that are or could be remotely read. This definition does not include systems that are only hand-held and require an equipment at the customer`s premises to be remotely read. This definition of AMR includes systems that are mobile (walk-by, inbound-only and nonreal-time), as well as robust fixed-network, two-way systems.
A key indication of AMR success is its proliferation among utilities. Of the 15.8 million total AMR units in place in the United States and Canada by January 1998, 4.2 million units were deployed in just 1997. Thus, the base grew at a rate of 36 percent (annualized) during that year.
The growth for 1998 is projected to be approximately 30 percent. AMR was deployed to about 6 percent of all possible sites by January 1998. That number grew by about 1.5 percent during the year.
Even more significant, was the growth of AMR projects. By January 1998, 1,551 utilities had AMR deployments. During 1997, the number of AMR projects grew at the rate of 47 percent (annualized).
Equally interesting is the distribution of projects across the United States and Canada (see figure). Except for those states that have low population or are poor, AMR is widely used in the United States. The Canadian map shows even wider use, with AMR being used in each of its southern provinces. AMR is used little in Mexico, so its map is not given.
A variety of vendors are offering AMR systems that can connect to a local area network (LAN). For this discussion, consider a LAN to be within the customer`s premises (as is commonly defined in the home automation industry). Table 1 shows the system vendors currently serving the AMR industry. Also noted is the type of communications used and whether they offer LAN access.
CellNet, Innovatec, Itron and Whisper sell systems that connect to non-AMR devices on the customer`s premises. Some of these vendors refer to this neighborhood link as a LAN.
Table 2 shows the AMR vendors with the most deployments. Badger is listed twice because it sells American Meter`s Trace system as well as its own phone-based system.
In the past three to four years, several new vendors have entered the AMR business. They are listed in the list that follows. Some (like Hunt Technologies and Whisper Communications) have developed new communications systems. Others (such as eT Communications, Energy Connections and NEXSYS) have provided new products by repackaging existing communications systems in innovative ways.
– Energy Connections (Lombard, Ill.)
– eT Communications (San Jose, Calif.)
– Greenland Corp. (San Diego, Calif.)
– Hunt Technologies, Inc. (Pequot Lakes, Minn.)
– Innovatec (Milwaukee, Wis.)
– ITI (North St. Paul, Minn.)
– NEXSYS Commtech (Waterloo, ON Canada)
– Scientific Atlanta (Norcross, Ga.)
– TeCom (Tampa, Fla.)
– Telemonitoring Mfg. Corp. (Dieppe, NB Canada)
– UTICS (Las Vegas, Nev.)
– Whisper Comm. (Santa Clara, Calif.)
The following list shows new products offered by existing vendors. ABB sold its powerline communications product to Cannon, and then increased the visibility of other new products. Hexagram, NERTEC and Sensus have been in the business, but introduced totally new product lines. RAMAR introduced in North America a version of the product it offers in Europe.
– ABB (Raleigh, N.C.)
– Cannon (Wayzata, Minn.)
– Hexagram (Cleveland, Ohio)
– NERTEC (Granby, PQ Canada)
– RAMAR (Croydon Surrey, UK)
– Sensus (Uniontown, Pa.)
The introduction of so many new products in such a few years shows that many vendors find the AMR market attractive and are willing to make sizeable investments into their products. Each new entry has added variety and choice for the AMR marketplace.
Several of these vendors have enjoyed early successes. Hunt Technologies has become the dominant provider of AMR systems to rural electric utilities. eT Communications recently won the Northern Indiana Public Service Company (NIPSCO) AMR contract and Whisper (along with Schlumberger) won the Illinova contract. Meanwhile, TeCom, Hexagram and Sensus have also been able to generate significant new business. Several of the other new vendors are also enjoying high visibility because of their innovations.
As the AMR marketplace has matured, vendors have sought to provide complete solutions to meet the needs of all customers. The types of offerings have varied among the different vendors and are too numerous to list for each of them. However, a few of them provide insights into the direction of the industry.
Schlumberger has recently redefined its full product line. It is now a “solutions provider.” This means that they plan to tailor their offerings to each customer. To achieve this, they have been signing agreements with a variety of different AMR vendors to offer a full range of products. They have already announced agreements with CellNet, Itron and Whisper. They are not abandoning their older products, just selling them as a possible part of the solution. They have already had one big success-a large contract with Illinova, which they partnered with Whisper.
Teldata has taken a similar tack. They announced a partnering deal with CellNet Data Systems, to whom they will provide telephone-based AMR products, and SCT Utility Systems, Inc., which will offer a customer information system (CIS) for utilities less than 100,000 meters in size. In addition, they did their own product development for an Internet-oriented energy information system and they recently acquired FirstPoint Utility Solutions Inc. to become a meter data management and meter services provider.
Thus, internal development and acquisition, the traditional ways to introduce new AMR offerings, has been augmented by the art of partnering.
Back to the future
AMR is clearly an industry in transition. It has succeeded in establishing its viability with a 6 percent market penetration that is now growing at 1.5 percent per year. As of January 1998, 1,551 utilities had some form of AMR deployment. AMR is now in use throughout the United States and Canada.
The established vendors have matured and expanded their product lines, and many new vendors have entered the business. Several vendors have learned the value of partnering, which is activity growing in the industry.
An interesting new capability is the addition of LAN functionality to various product lines. Not only does this add additional product options, it provides a link to the original vision of the industry. There is no reason to believe the original vision of any industry is its correct path forward, but it does offer an approach that can attract a broad industry following.
Howard A. Scott, Ph.D., is president of Synergistic Systems Inc., author of the Scott Report on AMR Deployments, a charter member of AMRA and one of the founders of SCC31, the AMR standards-setting committee. He can be reached at (973) 696-5793.