The Emergence of AMI

Technology can enable a utility”s contribution to the public good

by Guerry Waters

Should utilities move forward with plans to implement or expand automated meter reading? Or should they move immediately to advanced metering infrastructure? The answer may lie in an unexpected place: a utility’s view of the role it should play in environmental protection.

Automated meter reading (AMR) is a path not every utility has chosen. In its 2006 AMR report, Chartwell estimates that only a quarter of all North American electric, gas and water meters have AMR technology. The survey also revealed that the move toward automation is far from precipitous. A third of all respondents reported that they were merely “considering” AMR, and another 14 percent were not even at that stage. In other words, it appears that more than 40 percent of all utilities either cannot cost-justify or do not choose to make the capital investment in AMR.

While many utilities remain on the fence with regard to new metering technologies, others have leaped beyond mere AMR and moved whole-heartedly toward “smart meters” embedded in an advanced metering infrastructure (AMI). Spurred by potential cost savings and, in the case of California, regulatory mandates, these utilities are viewing AMI as a logical progression toward new benefits for customers and other stakeholders.

Cost Justification

While AMR has been around for more than 20 years, the change in the content of utility metering discussions–from AMR to AMI–has been relatively rapid.

Originally marketed as a way to reduce the costs of collecting consumption data, many early AMR systems had higher total costs of ownership than the alternative human meter readers. Only in recent years, as wages and insurance costs rose and technology costs dropped, have substantial numbers of utilities been able to cost-justify AMR.

Given the length of typical AMR amortization periods– 15 years–and the slow pace of change before 1990, it is likely that few utilities with AMR systems have completely amortized them. Utilities with non-amortized AMR may view the sudden emergence of AMI as a financial threat to full cost recovery. If a utility proposes to move to AMI in the near future, might regulators judge the AMR investment to have been imprudent and disallow it as a rate-based expense? On the other hand, might a delay in moving to AMI precipitate customer complaints about the lack of benefits like automatic outage notification and residential demand response programs?

Utilities that have not implemented AMR are no less challenged by the emergence of AMI. Will the promised benefits and potential cost savings turn into bottom-line realities? Can the utility afford the capital outlay AMI frequently demands without requesting a controversial rate or price hike? Will customers balk at the prospect of paying for a less than fully proven technology?

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AMI also presents an analysis challenge to utilities in the AMR planning or “serious consideration” stages. Like developing countries that have bypassed the landline telephone system and gone straight to cellular, should they bypass AMR altogether and move immediately to AMI? If so, does that mean plunging in now or waiting for the predicted 50 percent drop in the cost of advanced meters? If waiting seems financially prudent, will stakeholders respond positively to the delay of anticipated AMR benefits?

And what about the longer term? Does the rapid arrival of AMI pressage still more technological change? If AMI is good, might some new “AMB” or “AMZ” on the horizon be even better?

A Path Through the Maze

Utilities can find themselves paralyzed by what they don’t know about future metering technology costs and benefits. And there is a temptation to give into that paralysis–to wait until the metering fog clears and the market stabilizes.

If we step back from the metering unknowns for a moment, however, it is easy to see that, long-term, electromechanical metering is not an option.

The reason involves the public policy landscape in which utilities exist. If there is one certainty in our world, it is that, barring discovery of a non-polluting energy source that requires neither transmission nor distribution, the environmental costs of energy consumption will be a continuing and growing public concern.

It is also certain that utilities will be asked to help control the damage to air and land that energy generation causes. And the first step toward that control will involve gathering and analyzing detailed energy data–most likely on a per-customer basis. As public policy and planning grow more refined, data demands will quickly escalate from monthly to daily and possibly to hourly consumption figures–huge volumes of data further enlarged by demands for voltage and outage information. Moving from monthly to hourly billing, for instance, increases data reads from 12 to 8,760–a 730-fold increase.

Utility metering systems will be the basic source of this information. Thus, it is not necessary for utilities to weigh the costs and benefits of today’s specific AMR and AMI technologies to know that, at some point in a foreseeable future, the electromechanical meter will no longer be adequate to fulfill every utility’s obligation to contribute to the public good. Advanced metering is in all our futures. The status quo is not an option.

Given these realities, utilities need to consider today the best way to implement AMI and the timing of the change. Plans may have long or short horizons. They may involve meter retrofits or cutting-edge technologies. They may propose continuing use of existing metering and billing software, or they may advise moving data into a separate meter data management system that can more easily tailor output to the needs of different audiences.

The path to AMI may involve considerable discussion and controversy. But there is one aspect of this change for which we can all be grateful: AMI permits utilities to respond to society’s needs for detailed energy data and environmentally sensitive consumption options with a technology that also promises cost savings for both utilities and consumers. Utilities that start AMI planning now can maximize its benefits.


Guerry Waters joined SPL WorldGroup–now Oracle|SPL Utilities Global Business Unit–in 2000, where he is vice president, industry strategy and marketing. He focuses on customer-related, enterprise-wide IT strategies and business processes.

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