What the "smart grid" legislation means to your electric bills
What is the "smart grid" bill?
SB 1652 (the "Energy Infrastructure and Modernization Act" or the "smart grid" bill) allows ComEd and Ameren to make $3.2 billion in upgrades to Illinois' power grid over the next decade, and creates a new regulatory framework under which consumers pay for those upgrades. As part of the bill, Ameren and ComEd customers will receive new, digital "smart meters."
Why did CUB oppose the bill?
CUB is cautiously optimistic that high-tech upgrades, collectively called the "smart grid," could potentially save consumers billions of dollars through increased efficiency and decreased power outages. However, CUB opposed SB 1652 because it didn't have enough consumer protections. Now that legislators have overridden Gov. Pat Quinn's veto of SB 1652, CUB is focused on holding ComEd and Ameren accountable to make sure the companies build a smart grid that actually benefits consumers.
How will the "smart grid" legislation change my day-to-day electric service?
You may not notice a difference. Electricity will flow to your home, as it has before, but that power will be measured by new "smart meters," which are designed to be more accurate. Right now, the utility can only measure power usage in most homes by actually going to the meter in your basement or outside your home and reading the tiny mechanical dials of a typical electric meter.
What exactly is a smart meter?
A typical electric meter has tiny mechanical dials that someone—you or a utility worker—has to read each month in order to measure a home's power usage. There are no dials on a "smart meter." It has a digital face, and unlike traditional meters, it can send—automatically and almost instantly—your power usage to the utility.
A digital smart meter, however, registers your power usage automatically and almost instantly. These meters aren't brand new to Illinois. About 130,000 Chicago-area homes have already had them installed, without major problems, as part of a ComEd pilot program. Customers should probably begin to see new smart meters in late 2012, early 2013.
How much will it cost?
ComEd and Ameren have said the upgrades will cost customers an average of $36 and $3.40 a year, respectively. However, Crain's Chicago Business has reported that those estimates are not comprehensive and the bill's total cost to ratepayers may well be higher.
When will I see new rates?
New electric rates go into effect in June of 2012 (October for Ameren) and each January thereafter. These changes impact "delivery" rates, what the companies charge to deliver power to your home. Delivery charges take up a third of your bill. The cost of the actual electricity makes up the other two-thirds, roughly.
CUB is focused on maximizing the potential smart grid benefits for Illinois consumers, such as:
• Eliminating operating inefficiencies that CUB has complained about for years. A smart grid can spark
immediate savings without customers having to do anything. ComEd released a study claiming that "smart grid" improvements could save customers $2.8 billion over 20 years, not counting increased energy efficiency in homes. How? Electricity theft and unpaid bills—costs that the utilities spread to all customers—could be more easily detected. So could unaccounted energy—when customers move into a new home and use electricity before an account has been started.
• Preventing widespread outages. Currently, utilities don't even know there's an outage unless a customer calls them, but a smart grid can automatically alert the power companies of problems and pinpoint the exact location where there is a problem. Although power outages won't be eliminated, these upgrades
allow the utilities to isolate outages, reroute power, and prevent problems from becoming widespread.
• Eliminating estimated billing. One of the biggest frustrations of Illinois consumers is when the utility estimates their power usage rather than reading their meter. That's because the utility often makes mistakes that lead to customers suddenly gett ing hit with huge make-up bills. With a smart grid, estimated billing should be eliminated, and customers should receive an accurate bill every month.
• Launching "peak-time rebate" programs so customers get discounts on their power bills for avoiding heavy power usage at certain times. A smart grid pilot program conducted by ComEd found that up to 7 percent of people notified of a period of high prices reduced their usage by about 35 percent. Even if a small percentage of consumers reduce their power usage during peak times, that helps lower power costs for everyone.
• Building a more efficient grid. Environmental groups estimate that a smarter grid could save 1.5 million megawatt-hours of electricity, enough to power about 150,000 homes for a year.
• Expanding "net metering." A smarter grid allows consumers and municipalities to sell power back to utilities from small-scale wind and solar projects.
• Allowing consumers to monitor their energy usage more accurately. A smarter grid opens the door for money-saving innovations, such as smart appliances that can be automatically powered down when not in use, reducing "vampire power"—costly power from plugged-in appliances that still eat electricity even though they're turned off . Estimates are that such "phantom load" can cost customers up to $100 a year.
Does SB 1652 address privacy concerns with "smart meters"?
Consumers rightfully want to protect their private information. SB 1652 mandates that utilities "secure the privacy of the customer's personal information," such as name, address, telephone number, and data about electricity usage. Under the bill, utilities, their contractors or agents, and any third party are prohibited from using such information for mailing lists or other commercial purposes.
Fundamental to any smart grid is that it is embedded with sensors to constantly monitor the grid for any outages or potential cyber-attacks. Illinois is a national leader in cybersecurity. The National Center for Supercomputing Applications (NCSA) at the University of Illinois at Urbana-Champaign, focuses on developing cutting-edge software to improve that aspect of the smart grid.
Will the utility have more control over my power usage and shutting my power off?
The smart grid is about giving customers more—not less—control over their power bills. A smart grid does make it easier to shut off power to customers who are stealing electricity or not paying their bills. It also helps identify customers who are simply not being billed, as well as vacant offices where the power has yet to be turned off. If such costs remain undetected, all customers must cover them, and that's one way a smart grid can make the system more fair and save consumers billions of dollars. (See: How can a "smart grid" benefit customers
How SB 1652 works and what's next:
SB 1652 sets ComEd and Ameren delivery rates not in a traditional 11-month case before state regulators—but based on a formula that locks in Return on Equity (ROE), the shareholder profit rate.
• CUB's next key battle is before the Illinois Commerce Commission (ICC), which will rule on some of the spending categories Ameren and ComEd can include in the new rate-making formula. Those cases, to be decided later in 2012, could alter utility rates by tens of millions of dollars.
• New rates go into effect around June of 2012 for
ComEd, October for Ameren, and each January thereafter.
• Around the spring of each year, utilities submit reports on "smart grid" investments, expenses, and improvements in reliability and estimated billing. A "Smart Grid Advisory Council," which includes CUB, recommends appropriate spending.
• By mid-June of each year, the ICC either will investigate the utilities' costs, or deem the rates prudent and reasonable. CUB will, if necessary, propose an investigation.
• By January of each year, rates submitted by utilities about six months earlier take effect, unless consumer advocates uncover improprieties.
Will I be forced to pay high rates for using power at peak hours?
No, you will pay the same type of charges you do now, under the same or a similar billing format. Most customers pay a flat per-kilowatt-hour charge for their electricity, with that price changing only in the summer (June-September). However, smart meters give more customers easier access to programs—voluntary programs—that allow them to save money, through lower rates or a rebate, by avoiding heavy use of electricity during what the industry calls "peak" hours, when power demand and prices are high. (See: How can a "smart grid" benefit customers
Will there still be meter readers?
True, a smart grid allows the utility company to read your meter remotely, which eliminates the need for meter readers. Even with meter readers in the field, a constant complaint from consumers in recent years has been that electric utilities don't read the meters enough—and are sending out bills often based on inaccurately estimated electric usage. A smart grid has the potential to save consumers a lot of grief. Technological advances that save people money are not the problem, and if done right, the smart grid should create
new employment opportunities. Good customer service and maintenance of the power grid requires a substantial workforce.