Internet Meter Reading and the Price of Cabbage

By Jim Cunningham

For all the talk about automatic meter reading (AMR), there is relatively little discussion of the technology’s truly valuable aspects. The “experts” seldom mention the important technical issues surrounding AMR or analyze the technology’s appropriate business justifications. Rarely do they focus on the continuous visibility into a customer’s gas and electrical usage as the basis for discovering customer demand.

To realize AMR’s true benefits, one must look beyond the billing data collected to the ways energy providers and energy consumers could use the data after it has been collected. Too many people focus on traditional meter-reading technology when they should really focus on TCP/IP communications, new information services, the Internet and the possibilities presented by data portals.

But what few in the industry realize is that AMR’s real benefit is not about technology at all. It’s about the price of cabbage.

Why cabbage? For hundreds of years, farmers have gone to a marketplace to find buyers. There, they discover supply and demand points that ultimately determine the price of their cabbage. Growers couldn’t sell their product and buyers couldn’t eat without the marketplace to bring them together. The need and use of a marketplace for energy is the same as the need for a cabbage market. And AMR is the catalyst that makes this marketplace possible.

In these terms, AMR presents a different perspective on the value and use of measurement data. This perspective gains its vantage point from deregulation, which brings classical market forces into the energy supply game. Deregulation gives AMR an opportunity to expand its venue and places AMR in the potential position of supplying information to help energy providers balance customer supply and demand. As a result of deregulation, AMR becomes the tool that helps determine the price at which buyers and sellers want to do business. Consequently, deregulation changes the entire premise of AMR-making the technology a tactical marketing tool, not simply an operational mechanism for measuring usage.

Using AMR as a tactical marketing tool enables local distribution companies (LDCs) and energy service providers (ESPs) to use collected data to discover each customer’s demand. Energy management firms, meanwhile, can use it to discover energy usage patterns, and customers can discover which energy suppliers are capable of delivering their daily energy requirements. Not only is this kind of discovery process part and parcel of any marketplace, it is exactly the kind of data AMR is intended to collect. Many of today’s AMR users are missing out on this incredible market opportunity simply because most AMR vendors don’t do anything with the data once they collect it.

If we are to gain the full value the technology affords, AMR vendors must engage in an entirely new way of thinking and embrace a new set of technologies. Simply put, AMR users should demand far more than mere data acquisition.

The focus for AMR should shift from “how to collect the data” to “how to make the data work” in the essential process of market discovery. AMR vendors who know how to utilize data once it has been collected can empower LDCs and ESPs by providing a new business case and financial model that opens the door to a whole new suite of services. These services encompass not only Internet-based data collection, but Internet-based products that provide effective market discovery. These new value-added services can justify the technology that would be required to build such an infrastructure.

Those meter-reading vendors that embrace this new perspective on the use and value of energy measurement systems propel AMR to its next generation-otherwise known as Internet Meter Reading or “IMR.”

So how does a mundane, plodding technology, like meter reading, suddenly find itself enabling the free market enterprise? The answer, of course, is the Internet.

No doubt, the Internet is the cyber marketplace of the 21st century. It exhibits the two main characteristics of any marketplace: First, it has to convey a presence, known by everyone, where buyers and sellers can come together. Second, it has to be a place that makes supply and demand positions (i.e. usage information) available for all to see. This is where the price of cabbage comes back into the story. The only difference between energy and cabbage is that energy providers can’t afford to go to every town square. Instead they have to exploit the universal accessibility of the cyber-marketplace-the Internet.

The Internet, primed with near real time gas and electric measurement data, is the marketplace that energy providers and users need to exert market forces and make business decisions. The marriage of the Internet and IMR creates a well-informed marketplace. In this environment, the industry has the important tools needed to deal with shortages and brownouts. Additionally, deregulation depends on the industry’s ability to exploit this marketplace-building aspect of the Internet.

The importance of the Internet’s IMR-bolstered cyber-market will be significant: IMR means energy users will go online to meet their needs. The “energy net” will be the industry tool used to manage the business of energy sales-just like the farmers’ market was the means to manage the price and delivery of cabbage.

In summary, the energy provider whose business model does not center on IMR and the cyber-marketplace is not meeting the customer in the marketplace. There is no access to the customer’s supply and demand posture. Consequently, there is no ability to operate one’s business efficiently. The tremendous opportunities of the Internet cyber-market are totally missed.

In this virtual marketplace, LDC’s will discover their customers’ demand and match that demand with the amount of energy supplied by ESP’s. ESPs will discover how much to supply each customer and ensure they are not falling short or exceeding demand. Customers can present their usage requirements and discover suppliers who can meet and want to meet their needs. Energy management providers, meanwhile, will be able to discover customers whose energy usage patterns afford them the opportunity to offer energy services.

Simply put, the energy industry should demand more of its AMR vendors and shift the dialogue from AMR to IMR. Rather than simply talking, AMR vendors should demonstrate to energy users how they could enable cyber-markets.

It is time to expand AMR beyond the billing and operations function by recognizing how absolutely vital meter reading is in the day-to-day open retail energy marketplace. In today’s cyber-marketplace, meter reading has much greater value than we readily embrace. The real value of AMR lies not within billing and operational efficiencies, but rather in how we determine the price of cabbage.

Jim Cunningham is president of Internet Telemetry Corp. (iTC), a company offering Internet-based meter reading services to energy service providers and local distribution companies. ITC manufactures a low-cost gateway that connects meters via a wireless connection to public network access points. The company also operates an Internet Service Center that manages the collection of meter information through its various networks and Internet Service Providers and then presents that information to all parties involved in the energy transaction. For more info, contact www.iTelemetry.net

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