Smart electric meters offer way to cut costs

Electricity and natural gas are very unusual products. The end-use customers, homeowners, use these products without knowing how much they’ve used, or how much the products will cost, till they get the bills.

In our state, retail electric and gas prices don’t change quickly when wholesale prices change. Instead, wholesale price changes are absorbed by the retailer (the utility) in the short term. High wholesale costs do eventually get passed on to the customer, in increases that the utilities request when making rate cases.

Rarely, as in Texas, consumers can be exposed to changes in wholesale prices. However, those customers don’t have any way to know that wholesale prices changed until their next utility bill arrives, days or weeks later.

Wholesale prices can change dramatically within hours, especially electricity. Consumers often don’t know that retail bills can go up by a factor of 100 when they sign up for rates that expose them to wholesale prices. There have been several cases in which people who typically paid a few hundred dollars for electricity have been billed for tens of thousands of dollars.

Until the late 1990s, there wasn’t anything that could be done to address these issues. Utility meters were devices that recorded electric and gas use mechanically. They had to be manually read by a person every metering cycle.

Now, new meters that can be read electronically are widely available. These meters can communicate with the utility via a one-way data connection. One-way electronic meters eliminate the cost of manual meter reading. They can also be read at any time, thus enabling utilities to offer customers the option of receiving bills on any particular day of the month.

A newer generation of smart meters are being phased in. They’re capable of two-way communication. With smart meters, and appropriate utility regulations, utilities and energy consumers can work together so that customers can have more control over their energy bills.

For instance, a home with a smart meter could, if the utility was allowed to offer the option, add an in-house display that would show the customer how much energy has been used since the last bill and a close estimate of the current amount due.

About 20 years ago, independent studies in Newfoundland and Arizona found that consumers trained to use an in-house monitor permanently reduced their energy use by as much as 7% simply by changing the way they used energy once they tracked specific appliances costs.

Additional innovations are underway. Some utilities are experimenting with smart rates, which allow the meter communication circuit to automate the process of reducing consumer bills by enabling consumers to turn on appliances like water heaters preferentially during the hours when electric costs are lowest. Electric vehicle charging and whole-house batteries can also reduce consumer bills when appropriate rates and smart meters are available.