The PG&E Smart Grid Beatings Will Now Begin!

The California Senate Select Committee on the Smart Grid held the first meeting on April 26th[1] of this special wood-shedding committee set up by politicians running for election— and running for cover over customer complaints about smart meters.[2]

“This is a revolt.  The TEA Party has nothing on Smart Meters in the Central Valley.” —State Senator Dean Florez

PG&E was on the hot seat in Sacramento and Senator Florez was front and center.  You may recall, Florez was the politician, and candidate for Lt Governor in the November 2010 election, invited to the PG&E Bakersfield meeting where he was surprised and embarrassed to be confronted by PG&E customers waving their utility bills and complaining that smart meters were pretty dumb for raising their bills sky high.

The most important rule of survival for a regulated industry is to keep your regulators and politicians happy or at least neutral.  No good ever comes from having them mad at you. But PG&E is a well managed utility and has learned from previous experience that the best way to redemption is to confess your sins and get it over with quickly.

So PG&E Senior VP of Customer Relations Helen Burt confessed on Monday that more than 43,000 of its smart meters have problems, but insisted that these problems have had little impact on customers’ bills. But Senator Florez applied pressure—lots of pressure and the confession continued with information that 9,000 of PG&E’s smart meters have not communicated energy usage back to PG&E, 11,300 smart meters did not work after being installed and another 23,000 were installed improperly.

Face it, when you install any new equipment let alone millions of them stuff happens.  So these numbers of installation and defective equipment problems hardly sound like the major program failure smart meter opponents are trying to make them out to be.  But for politicians running for election this is a dream come true—and they took full advantage.

The California Public Utilities Commission, trying to evade any responsibility for the problems, told the Committee it has received about 1,000 consumer complaints about smart meters to date (April 26) up from 600 reported complaints a month earlier.

The Utility Reform Network, or TURN, the consumer advocacy intervener in utility rate cases continued its call for a moratorium on installing more smart meters until an independent audit being performed for the CPUC is completed in August 2010.[3] TURN jumped on the PG&E confession, but recognizes that the problems to date are not going to stop the smart meter program.

“PG&E is finally admitting for the first time that tens of thousands of its meters are not working properly, are not giving proper readings, and there are bills that they have to estimate and this is a really big problem.” —Mark Toney, Executive Director, TURN.

Separately, in what I consider a much more significant action, PG&E has proposed a revised tiered pricing plan to be filed with the CPUC for approval which would collapse the current five tier rate structure into three tiers.  PG&E says this plan will be fairer to customers in the Central Valley and other warm areas than the current plan.[4]

This move incenses environmental groups and challenges one of the cardinal principles that has driven California ratemaking for years.  That principle is the more you use the more you should pay.  Virtually every utility in the state has a progressive rate design structure that reflects that inclining block rate principle.

So What?

But no one—not the utility, not the politicians or regulators and not even TURN raised the issue of dynamic pricing at the hearing.  Maybe it will come up later but it represents the proverbial “third rail” of utility ratemaking transformation that no one wants to touch.

In short, there is little reason to spend all this money to install smart meters to give customers feedback about energy use every ten minutes unless we are going to move to a dynamic pricing rates structure that charges customers based upon the real time cost of producing the energy they consume.

And that is the elephant in the room no one wants to talk about—until AFTER the election.