James StrappAssociate Partner,

IBM Business Consulting Services

 

Potential Smart Metering Issues for Ontario

Residential Customers

                                                               

1. Program Implementation2. TOU Rate Design3. Customer Choice

Customer Issues

Smart metering has a number of benefits for Ontario residential customers, but there are issues in:

0

1

2

3

4

5

0 2 4 6 8

Years of Installation

800K

Millions of Electric Meters

Ontario

Installation Schedule

Underway

CompleteSources: Chartwell AMR AMR Installations Database 2005 and IBM

0 200 400 600 800 1,000 1,200

Customers per square kilometre

Least Dense

Most Dense

Installation complete

Underway

Customer Density

Source: IBM

Ontario Average Hydro One

Toronto Hydro

Oth

er

Inst

alla

tions

>80 distributors Some centralization

- Planning and specifications - Common procurement of systems and

assets- MDM/R

Existing central agency roles to be defined

- OEB, IESO, OPA, Ministry- A new “Smart Metering Entity”

Structural Complexity

Ontario Situation

One of the world’s most aggressive schedules

Unique customer density challenges

New organizations and roles

Centralization / decentralization mix

Increased likelihood of

Billing errors Higher metering

costs Customer confusion

over responsibility

Issue 1: Program Implementation

17 programs by 15 utilities in 12 states

Residential programs Northern utilities Larger utilities

>100,000 customers Active and discontinued

programs Comprehensive, but not

exhaustive

TOU Rate Survey

Time of Day

Summer Winter

Com

ple

xit

y

(3)

(8)

Simple Peak

Seasonal Rates

Split Peak

Shoulder Periods

TOU Rate Profiles (1)

Source: IBM

(3)

(0)

Rat

e

# of Programs

PGE

Ontario

PEPCO

BGE

6 rates9 periods

6 rates8 periods

6 rates4 periods

3 rates8 periods

TOU Rate Profiles (2)

Source: IBM

Com

ple

xit

y

Summer Winter

0 5 10 15 20Savings for one kWh between peak and off-peak (US¢)

Active

Discontinued

Bill Impact

Source: IBM

Ontario

012345678

2 4 6 8 10 12 14Summer Base Rate (US¢ per kWh)

Summer Peak to

Off-Peak Ratio

Ontario Average

Peak to Off-Peak Ratio

Source: IBM

Active

Discontinued

Ontario Situation

Complex rate structure

- 6 different rates- 9 different periods

Comparatively little absolute consumer benefit to load shifting

No real rate trials and evaluation

Increased likelihood of

Customer confusion Savings not

exceeding the additional metering charge

Issue 2: TOU Rate Design

Puget Sound Energy April 2001 – 330,000 on TOU Rates By November 2002: 3.6% opted out At cancellation later in November: 8.0% opted

out Strong TOU customer retention over 18

years at PEPCO: 56,199 TOU customers BGE: 81,952 TOU customers

California SPP ~70% chose to stay on TOU/CPP rates even

after the addition of a $3 to $5 monthly metering charge

Low Opt Out Levels for “Mandatory” TOU Rates

Ontario Situation

Cannot opt out and remain with local distributor

Opt-out option with competitive retail contract

Increased likelihood of

Customer frustration

Retailers actively marketing against TOU rates

Issue 3: Customer Choice

1. A complex implementation program- Aggressive schedule- Difficult geography- Roles to be clarified

2. Complex TOU rate structure- Small differentiation in peak to off-peak

rates relative to many other programs3. Mandatory program

- With retailers opportunity to market an opt out option

4. Others- Lack of local TOU rate experience - History of political promises of savings

Summary of Residential Customer Issues

Clarify roles- Coordination of responsibilities deemed

to be central Pragmatic approach to rate design

- Trials and customer surveys Provide an opt out option with the

LDC - Encourage retailers to offer innovative

DR programs, not ‘backwards’ to a flat rate

Going Forward