Five Ways to Avoid a Smart Grid Bad Hair Day

By Guerry Waters, Oracle Utilities

The smart grid transition is underway. Utilities are reporting remarkable progress, but all is not well when it comes to consumers and smart meters.

Most consumers and regulators appear open to the idea that utilities must keep pace with advancing technology. Charges of meter inaccuracy seem to have been put to rest.

Nevertheless, many remain unconvinced smart meters are a wise investment. A few fear utilities will collect and possibly resell their consumption information. A larger group fears smart meters will usher in new rate structures that will disadvantage the poor, elderly, those whose landlords or builders saddle them with inefficient appliances, those at home during the day, etc. Many think less costly measures could do more to save energy or lower bills.

When combined, these objections can give forward-looking utilities more than a few bad hair days.

Communicating with customers is one step in taming objections. Utilities, however, are finding that traditional approaches to consumer education are not enough and might even become part of the problem. They are considering new rules that, while not without risk, might turn consumer complaints into consumer support.

Rule One: Don’t Underestimate Consumer Brainpower

Utility announcements about smart metering initiatives are full of rosy predictions of consumer benefits. Bill stuffers feature headlines such as “Smart Meters Save Energy.” Press releases describe “money-saving” smart metering pilots.

Meters do not save energy or reduce bills. At best, they give consumers information that, used well, can help interested, willing consumers change their consumption.

It does not take consumers long to realize that reducing energy use means they must do something. They might have to buy new appliances. They might need to add attic insulation or, as we did in the ’70s, put on a sweater. A smart meter is like the scale in a weight-loss program. Used daily, it helps gauge progress. It can motivate. But only consumers can reduce energy use.

Rule Two: Be Realistic About Pilot Results

It can be perilous to gloss over unfavorable results from smart metering pilots or exaggerate the positives.

Initially, few consumers read the fine print in a utility’s hundred-page pilot report. But at some point, some enterprising reporter discovered that, for instance:

  • Year-over-year “savings” resulted from a decline in electricity prices during the recession,
  • Consumers would “recommend the program to their friends” because they got freebies such as smart thermostats or $50 “survey completion” bonuses, freebies that would not be typical in a mass smart metering deployment,
  • Results included only participants who remained in the program for its duration, not those who dropped out because they found they were paying more than they expected, and
  • “Success” equals favorable responses to “Do you believe you saved energy during the pilot?” not on a measure of whether consumers used less than in previous years or similar neighbors.

Consumer disappointment when their results do not match expectations is a sure prelude to backlash. 

Rule Three: Anticipate Utilities, Consumers Will Have Different Points of View; Reconciliation, However Necessary, Might be Painful

Months ago, Oracle’s Smart Grid Challenges & Choices survey asked utility executives about their primary smart grid implementation concerns. Forty-three percent cited customer reaction to costs.

Customers also cite costs as a concern. But utility attempts to communicate with customers about costs do not always address consumers’ underlying issues and perceptions.

Utility executives see rising costs as a given. Pressures that make electricity price hikes all but inevitable include a lack of new generation plants, rising demand, renewables mandates and possible new emissions regulations. To a utility, a smart meter offers consumers a way to monitor and control consumption and thus guard against large, unexpected bills.

Customers have a different view. Many see price hikes as their utilities’ fault and blame them for not doing more to reduce costs. Others see the large capital investments required for smart meters as opportunities for investor-owned utilities to enjoy new profit opportunities at consumers’ expense. Some consumers look at reports that smart meter costs are falling and conclude smart metering programs should not entail extra costs. Some think the best approach would be to replace analog meters with smart meters only at the end of the analog meter’s useful life.

Discussing these views is perilous. There is room for both sides to take remarks out of context and assume the worst. But utilities ignore or discount consumer perceptions at their peril. Moving forward before issues such as these are resolved threatens the kind of plan-stopping backlash we witnessed during deregulation.

Rule Four: Metering is Not Infallible

Utilities in California and Texas largely have put to rest the idea that many smart meters report consumption incorrectly. This perception will linger with consumers, however. Utilities must address this issue when it crops up again.

Patti Harper-Slaboszewicz from Bass Consulting, for instance, recommends utilities prepare by performing rigorous advanced metering infrastructure (AMI) testing. Meters should be able to send seven consecutive days of perfect data over a 14-day period before utilities start to bill on their basis.

Utilities also must use exception processing to catch unusually high or low bills before they go out. Even better are meter data management or customer information systems (CISs) that scan consumption to date for patterns likely to lead to unusually high bills. By identifying high consumption before a billing period ends, utilities can contact customers, ask about unusual consumption patterns, and deploy service technicians if appropriate.

Rule Five: Surprise is Not an Asset

Many in the industry initially expected to implement smart meters and interval billing programs simultaneously. From an efficiency point of view, that made sense. Once the smart meter is in place, using it for its intended purpose appears, from the utility perspective, like a no-brainer.

That does not work. Too much simultaneous change confuses customers. It might lead them to suspect their utility of deceit.

Experts recommend utilities operate smart meters for three to 12 months before changing rates. During this period, utilities should show customers what their bills would be if the new programs or rate structures were in place. Even if the reality is unpleasant, customers will be far less upset about a high bill they do not have to pay as opposed to one they did not know was coming but now owe.

Utilities already are taking steps to bolster their business cases and make them easier to understand. Equally important is a commitment to realism in customer communications. For many consumers, smart metering will not be a completely positive experience. Acknowledging that from the outset can prevent media crises and customer backlash.

Guerry Waters is vice president, industry strategy at Oracle Utilities.

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