The Great Meter Ownership Debate

The Great Meter Ownership Debate

By Dr. Stephen George

Meter ownership remains a key issue in electric industry restructuring. The policy under debate concerns whether metering should remain a monopoly, bundled service provided by local distributors; or be opened up to competitive supply by energy retailers or specialist metering providers. At least some aspects of metering service for selected customer segments have been unbundled in England and Wales, Australia, New Zealand and California. The Ontario Market Design Committee recently recommended that metering be unbundled for large customers in Ontario. Other jurisdictions, such as Massachusetts, New York, Pennsylvania, Rhode Island and Norway have elected to keep metering bundled with distribution, at least for now.

Proponents of meter unbundling argue that competitive supply will lead to lower costs and, more importantly, to greater customer choice and product/service innovation. Some competitive retailers even say that unless metering is unbundled, they are unlikely to market electricity to mass-market customers because they need control of the meter and meter-related information in order to differentiate their service bundles. Proponents also argue that if metering remains a monopoly service, utilities will likely invest in “one-size-fits-all” technologies soon outdated.

Opponents of meter unbundling point out that, while competition is possible, the benefits are unproven, and there are many implementation difficulties that could slow the pace and increase the cost of completing the transition to retail competition. There are also legitimate concerns about stranded metering costs, information security and the possibility that deep-pocket retailers can use metering as a means of constructing switching barriers for small consumers. Finally, and perhaps most significant, is opponents` argument that the large scale, scope and density economies associated with metering mean that it is a natural monopoly business–that is, a single supplier will provide the lowest cost service. Continuing this line of thinking, distributors contend that if they don`t retain a monopoly over metering services, they cannot take the risk of investing in the advanced metering and meter-reading technologies.

This debate over meter unbundling is typically based on the premise that either all meter-related activities should be competitive, or none of them should be. However, metering is comprised of numerous activities, many of which could, at least theoretically, be provided by different suppliers. Metering activities include ownership, installation, maintenance, meter reading, data communication, data validation, storage and provision of data to billing agents. A potential “win-win” policy might be to keep meter ownership, installation and maintenance bundled with the distribution business, while opening up to competition meter reading and the data provisioning activities outlined above. This approach has potentially significant benefits if it is combined with a phased transition to a mandatory change in basic meter functionality.

Suppose, for example, distribution companies operating in competitive markets were required to replace their existing meter stock over some reasonably short time period with meters capable of generating pulse output according to a standard protocol. These new meters would be required to have a standardized, meter-to-communications interface. Given that utilities typically replace between five and 10 percent of their meter stock each year the primary incremental cost of this new requirement would result from accelerating normal replacement and from the incremental cost of the advanced meters relative to standard metering. While the cost of such a change would be large, it would be much less than the cost of a fully automated metering reading system, with communication, data processing and data provisioning capability. Distributors would be guaranteed cost recovery for the new meters, as well as for any undepreciated value of existing meters, through network charges as long as they provided retailers, meter data management agents and end-use customers open access to the new meters.

Once meters with such standardized, “communications-ready” capability were in place, competitive meter reading and communications companies could compete to provide meter reading, data processing and other information services to end-use customers, retailers and distributors. This approach opens up the entire customer base to meter reading and data management competition. Today, even where metering has been unbundled, there is very limited competition for metering services because the only real market is for customers who switch electricity suppliers and, therefore, are either required to install interval data recording meters or do so in order to optimize energy use. The cost of such on-off metering and data management services is high and can only be afforded by large customers. Virtually nowhere in the world where metering is unbundled are competitive services being provided to mass-market customers because meter service providers cannot compete against the installed meter base and the manual meter reading capabilities of distributors. However, by having access to the entire customer base and to a meter that provides pulse output and a standardized communications interface, real competition is possible.

Too often, all-or-nothing policy decisions are made. What is required is careful benefit-cost analysis of a middle ground that redefines standard, distributor-supplied meter functionality to provide pulse output so data can be obtained through a variety of communications technologies by multiple stakeholders on an open-access basis.

The electric utility industry will spend billions of dollars over the next decade on new billing systems and other software to support wholesale and retail competition. Without careful analysis and thoughtful decisions about metering, many of the potential benefits that could derive from this huge investment in new information systems and from competition as a whole could be lost because of an antiquated measurement system.

Dr. Stephen George, a PHB Hagler Bailly vice president, has more than 20 years of experience assisting electric and gas utilities in the areas of electric industry restructuring, strategic and marketing planning, market research and energy demand modeling and forecasting. Throughout his career, his primary focus has been on the retail and distribution areas of the utility industry. In recent years, Dr. George has helped utilities, energy service companies, governments and other market participants throughout the world develop effective policies and rules for implementing retail competition.

Previous articlePOWERGRID_INTERNATIONAL Volume 4 Issue 3
Next articleELP Volume 77 Issue 5

No posts to display