“Energy efficiency” is the latest buzz phrase since the Energy Policy Act of 2005 (EPACT) was signed in August. Both short- and long-term projections indicate the era of "cheap energy" is gone in America and energy costs will continue to rise. Energy companies are now under even more pressure to manage increasing costs. In order to control costs in the long run, it will be imperative to make investments today that will move them into the future.EPACT will force many utilities to transform metering and demand response systems, but the key will be in developing a long-term strategy on an adaptable infrastructure.
EPACT has the following national and state implications related to automated meter reading (AMR) efforts.
EPACT’s National Implications:
EPACT’s State Implications:
Information and Customer Usage
Information management and customer- centric will be the first step in this evolution to “energy efficiency.”In this new era, enabling customers to manage their own usage and capturing customer usage information to match peak load conditions will become imperative. This means utilities will have to develop timely, user-friendly tools that provide consumer usage information (and its related pricing information) so consumers can make almost real-time decisions pertaining to their usage.
When consumers are in control, more effort will be given to decrease usage during peak hours. California's experience with its Critical Peak Pricing pilot proved that residential consumers respond to price incentives. Consumers were willing to curb their peak-hour usage for off-peak (cheaper) energy thus decreasing the risk of power outages and blackouts. However, we will begin to see even more granular customer information surface in this evolving market.
Today, new digital metering technology readily exists that can generate consumer usage data at a granular level.With this technology, consumers can not only monitor usage but can answer more specific questions like, "Should I run the dishwasher now or wait for an off-peak time when rates drop?" or "Should I replace my old furnace with a new high-efficiency one?"
Is AMI the Answer?
With so many options in the new technology, it is unclear to some which approach is best. Questions exist about which metering technology, meter management system, and communication technology are best, but the questions should not be about the technology. The key is to build an infrastructure that will automate existing manual processes, reduce operational costs, improve data quality and equip utilities with the flexibility needed to move into the future.
Advanced metering infrastructure (AMI) can provide the necessary information to help improve energy efficiency and bring other operational benefits that will help utilities manage costs more effectively and improve customer service.
Key Benefits of Implementing AMI
Managing Supply and Demand
AMI improves the process of managing demand for natural resources. The demand management savings are certainly well- documented. These savings result from selective load control, where the utility or the customer (manually or automatically) schedules a time to use energy (e.g. scheduling the dishwasher to run during off-peak hours). If specific capacity constraints exist, utilities can offer customers near real-time price incentives to reduce consumption. This leveling of demand in turn allows for greater management of the supply. This impact of more accurate management of peak loads can mean substantial improvements in the high costs of buying electricity on the open market where electricity costs might be two to three times higher than normal.
Distribution Network Management
Making educated assumptions about future usage is one the most important uses of the data collected by AMI. It provides extremely useful information that helps utilities to more accurately size new transformers and circuits to match peak load conditions. Utilities using AMR data to plan new distribution networks have cited savings of up to two percent of the total cost of the project. Additionally, it provides information about factors stimulating peak consumption, which can be translated into business strategies such as proactive load management, outage prevention and consumer incentive programs, as well as optimizing distribution network planning. By feeding the AMR data into the utilities outage management system (OMS), outages are detected more quickly, the source problem is identified faster and restoration efforts take less time.These benefits can be translated directly into cost savings (in overtime) and greater customer satisfaction.
Variable Pricing Structures
Ultimately, AMI enables price structures to better align to customer usage – so those consuming energy at peak times are charged more. This places the proper price incentives for the efficient use of energy. Monitoring energy usage electronically on a daily, hourly or almost real-time basis creates the opportunity for services like variable pricing to encourage off-peak usage with reduced rates to customers. Most current pricing schemes actually hurt the efficient energy users by forcing them to pay rates that essentially subsidize inefficient energy users. By using pricing structures that better reflect what the utility pays for the electricity, efficient energy users are rewarded and inefficient users are penalized.Thus, the incentives for efficient energy use by all consumers are in the proper place.
Improved Data Quality
Automated, remote data collection streamlines the back office processing for billing, asset management and outage management. Machine-to-machine data transfers increase the quality of data collected by eliminating misreads, transcription errors and data recording errors. With AMI, it is no longer necessary to manually access “hard to reach” meters or reschedule meter readings. Improved data integrity eliminates the need to investigate, correct and reissue disputed bills. This increase in meter reading accuracy significantly reduces billing errors and customer disputes.
Shorter Billing Cycle and DSO
Replacing the traditional meter reading with AMI shortens the billing process by reducing the time and the number of steps between consumer usage and bill distribution. Cash flow is increased by an average of two days, thus decreasing daily sales outstanding (DSO).
Reduced Load In Call Centers
Most incoming calls are about billing errors, rescheduling meter readings and/or reporting outages. Accurate remote data collection and interactive voice response (IVR) technology can replace long hold times with instant, automated information. Instead of customers waiting to report an outage, utilities can proactively tell customers which areas are affected and the estimated duration. These efficiencies reduce call center costs and allow staff to provide better customer service.
Customer Intelligence
Without AMI, most electric bills simply provide consumers with a rate and total usage. In contrast, most telephone companies offer customers online access to itemized bills, which include the number of calls made, the time, date and duration of every call, the names and numbers of the people that were called, and the tariff used for each call. AMI provides utility companies the opportunity to increase customer satisfaction and consumer confidence by providing this same level of detail on the customer’s energy usage.
AMI technology offers utility companies valuable insight into customer usage, including consumption behavior, effects of external variables and outages. Data collected at 15-minute intervals can be used for profiling usage, time-of-use data, demand management and phase-load balancing. Both the customer and the utility are able to find out how electricity is used within the home. The knowledge of the customer’s usage improves the call center agent’s ability to work with a customer to understand his or her bill, which in turn increases customer confidence in the billing process. Additionally, the customer has the tool to adjust their usage to minimize their charge for that usage.Those who take the time to understand their usage can be rewarded with lower energy bills. The overall results are improved quality of service and shortened response times to outages.
Revenue Protection
AMR data can be used effectively to reduce theft. Load profiling can identify “strange” usage patterns (e.g. zero usage on weekends). Meters that run backwards can be readily identified. Remote disconnects can guarantee there is no usage on meters. Pre-payment options can be put in place to control usage on poor credit risks. Meter measuring usage at substations can be compared to the aggregate load from all the meters served by the substation to identify significant energy losses. AMR provides many tools to protect the utilities’ revenue.
New Revenue Streams
AMI provides opportunities to turn knowledge into a competitive advantage. Energy and water providers need to look beyond their traditional roles as a conduit for utilities in order to generate new revenue streams. The right advanced metering infrastructure can be used to provide services for devices in the home. Examples include home security and appliance diagnostics, allowing the utility company to collect a fee from these other companies for usage of the infrastructure. There are several business models that can be employed here. The utility can enter into the new business themselves. They could also enter into a joint venture where they supply the network and the other company runs the business. Alternatively, the utility could “rent the network” from a current provider.All three business models offer opportunities for new revenue streams.
It’s All About the Data.
AMI will help in the short-term to meet EPACT regulations; however, it will be essential to understand the uses for AMI in order to improve overall business operations. In the longer-term, utilities that develop an AMI technology platform and use the new data to improve business will remain competitive.When implemented and used properly, an AMI solution can help a utility improve business operations management, better manage customer energy usage and manage energy resources. Those utilities that learn to use the data will have the competitive advantage in the future.
About the Author
EDS Energy industry executive Bill Zorn specializes in Advanced Metering Infrastructure (AMI). With more than 28 years of delivery, sales and consulting experience in systems and services, Zorn is considered a subject matter expert in Automated Meter Reading (AMR) and Advanced Metering Infrastructure (AMI). In addition to his expertise in the energy industry, he has considerable expertise in the manufacturing industry as well as experience in corporate and divisional business planning, management, sales, delivery and consulting.
EPACT has the following national and state implications related to automated meter reading (AMR) efforts.
EPACT’s National Implications:
- Demand response is official U.S. policy. The bill states that it is the official policy of the United States to encourage demand response and adoption of devices which enable it, including advanced metering.
- Department of Energy (DOE) must report. The DOE must submit a report to Congress within 180 days that recommends how to achieve specific national levels of demand response by 2007.
- There's a national metering standard. There is a requirement that utilities provide customers with time-based rates within 18 months of enactment (August 8, 2005), or in the case of large customers, with capacity credits. In addition, the utility must provide a suitable meter to any customer requesting such a rate or demonstrate why compliance cannot be achieved.
- Federal Energy Regulatory Commission (FERC) must annually assess the barriers to advanced metering and demand response. Within one year of enactment, FERC must begin to conduct annual regional assessments of demand response resources and the penetration of advanced metering and other technologies, as well as identify any barriers to adoption.
EPACT’s State Implications:
- State public utility commissions must investigate advanced metering and demand response within two years. State commissions must conduct an investigative proceeding into demand response and advanced metering, initiating it within one year and completing it within two years.
Information and Customer Usage
Information management and customer- centric will be the first step in this evolution to “energy efficiency.”In this new era, enabling customers to manage their own usage and capturing customer usage information to match peak load conditions will become imperative. This means utilities will have to develop timely, user-friendly tools that provide consumer usage information (and its related pricing information) so consumers can make almost real-time decisions pertaining to their usage.
When consumers are in control, more effort will be given to decrease usage during peak hours. California's experience with its Critical Peak Pricing pilot proved that residential consumers respond to price incentives. Consumers were willing to curb their peak-hour usage for off-peak (cheaper) energy thus decreasing the risk of power outages and blackouts. However, we will begin to see even more granular customer information surface in this evolving market.
Today, new digital metering technology readily exists that can generate consumer usage data at a granular level.With this technology, consumers can not only monitor usage but can answer more specific questions like, "Should I run the dishwasher now or wait for an off-peak time when rates drop?" or "Should I replace my old furnace with a new high-efficiency one?"
Is AMI the Answer?
With so many options in the new technology, it is unclear to some which approach is best. Questions exist about which metering technology, meter management system, and communication technology are best, but the questions should not be about the technology. The key is to build an infrastructure that will automate existing manual processes, reduce operational costs, improve data quality and equip utilities with the flexibility needed to move into the future.
Advanced metering infrastructure (AMI) can provide the necessary information to help improve energy efficiency and bring other operational benefits that will help utilities manage costs more effectively and improve customer service.
Key Benefits of Implementing AMI
Managing Supply and Demand
AMI improves the process of managing demand for natural resources. The demand management savings are certainly well- documented. These savings result from selective load control, where the utility or the customer (manually or automatically) schedules a time to use energy (e.g. scheduling the dishwasher to run during off-peak hours). If specific capacity constraints exist, utilities can offer customers near real-time price incentives to reduce consumption. This leveling of demand in turn allows for greater management of the supply. This impact of more accurate management of peak loads can mean substantial improvements in the high costs of buying electricity on the open market where electricity costs might be two to three times higher than normal.
Distribution Network Management
Making educated assumptions about future usage is one the most important uses of the data collected by AMI. It provides extremely useful information that helps utilities to more accurately size new transformers and circuits to match peak load conditions. Utilities using AMR data to plan new distribution networks have cited savings of up to two percent of the total cost of the project. Additionally, it provides information about factors stimulating peak consumption, which can be translated into business strategies such as proactive load management, outage prevention and consumer incentive programs, as well as optimizing distribution network planning. By feeding the AMR data into the utilities outage management system (OMS), outages are detected more quickly, the source problem is identified faster and restoration efforts take less time.These benefits can be translated directly into cost savings (in overtime) and greater customer satisfaction.
Variable Pricing Structures
Ultimately, AMI enables price structures to better align to customer usage – so those consuming energy at peak times are charged more. This places the proper price incentives for the efficient use of energy. Monitoring energy usage electronically on a daily, hourly or almost real-time basis creates the opportunity for services like variable pricing to encourage off-peak usage with reduced rates to customers. Most current pricing schemes actually hurt the efficient energy users by forcing them to pay rates that essentially subsidize inefficient energy users. By using pricing structures that better reflect what the utility pays for the electricity, efficient energy users are rewarded and inefficient users are penalized.Thus, the incentives for efficient energy use by all consumers are in the proper place.
Improved Data Quality
Automated, remote data collection streamlines the back office processing for billing, asset management and outage management. Machine-to-machine data transfers increase the quality of data collected by eliminating misreads, transcription errors and data recording errors. With AMI, it is no longer necessary to manually access “hard to reach” meters or reschedule meter readings. Improved data integrity eliminates the need to investigate, correct and reissue disputed bills. This increase in meter reading accuracy significantly reduces billing errors and customer disputes.
Shorter Billing Cycle and DSO
Replacing the traditional meter reading with AMI shortens the billing process by reducing the time and the number of steps between consumer usage and bill distribution. Cash flow is increased by an average of two days, thus decreasing daily sales outstanding (DSO).
Reduced Load In Call Centers
Most incoming calls are about billing errors, rescheduling meter readings and/or reporting outages. Accurate remote data collection and interactive voice response (IVR) technology can replace long hold times with instant, automated information. Instead of customers waiting to report an outage, utilities can proactively tell customers which areas are affected and the estimated duration. These efficiencies reduce call center costs and allow staff to provide better customer service.
Customer Intelligence
Without AMI, most electric bills simply provide consumers with a rate and total usage. In contrast, most telephone companies offer customers online access to itemized bills, which include the number of calls made, the time, date and duration of every call, the names and numbers of the people that were called, and the tariff used for each call. AMI provides utility companies the opportunity to increase customer satisfaction and consumer confidence by providing this same level of detail on the customer’s energy usage.
AMI technology offers utility companies valuable insight into customer usage, including consumption behavior, effects of external variables and outages. Data collected at 15-minute intervals can be used for profiling usage, time-of-use data, demand management and phase-load balancing. Both the customer and the utility are able to find out how electricity is used within the home. The knowledge of the customer’s usage improves the call center agent’s ability to work with a customer to understand his or her bill, which in turn increases customer confidence in the billing process. Additionally, the customer has the tool to adjust their usage to minimize their charge for that usage.Those who take the time to understand their usage can be rewarded with lower energy bills. The overall results are improved quality of service and shortened response times to outages.
Revenue Protection
AMR data can be used effectively to reduce theft. Load profiling can identify “strange” usage patterns (e.g. zero usage on weekends). Meters that run backwards can be readily identified. Remote disconnects can guarantee there is no usage on meters. Pre-payment options can be put in place to control usage on poor credit risks. Meter measuring usage at substations can be compared to the aggregate load from all the meters served by the substation to identify significant energy losses. AMR provides many tools to protect the utilities’ revenue.
New Revenue Streams
AMI provides opportunities to turn knowledge into a competitive advantage. Energy and water providers need to look beyond their traditional roles as a conduit for utilities in order to generate new revenue streams. The right advanced metering infrastructure can be used to provide services for devices in the home. Examples include home security and appliance diagnostics, allowing the utility company to collect a fee from these other companies for usage of the infrastructure. There are several business models that can be employed here. The utility can enter into the new business themselves. They could also enter into a joint venture where they supply the network and the other company runs the business. Alternatively, the utility could “rent the network” from a current provider.All three business models offer opportunities for new revenue streams.
It’s All About the Data.
AMI will help in the short-term to meet EPACT regulations; however, it will be essential to understand the uses for AMI in order to improve overall business operations. In the longer-term, utilities that develop an AMI technology platform and use the new data to improve business will remain competitive.When implemented and used properly, an AMI solution can help a utility improve business operations management, better manage customer energy usage and manage energy resources. Those utilities that learn to use the data will have the competitive advantage in the future.
About the Author
EDS Energy industry executive Bill Zorn specializes in Advanced Metering Infrastructure (AMI). With more than 28 years of delivery, sales and consulting experience in systems and services, Zorn is considered a subject matter expert in Automated Meter Reading (AMR) and Advanced Metering Infrastructure (AMI). In addition to his expertise in the energy industry, he has considerable expertise in the manufacturing industry as well as experience in corporate and divisional business planning, management, sales, delivery and consulting.
