Smart Grid Food Fight in Illinois

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Smart Grid Chicago Style is a lot like roller derby of old—lots of elbows and an occasional bloody nose, but never a dull sport.

There is a smart grid ‘roller derby’ battle underway in Illinois today.  The battle is not whether smart grid and its smart meters are a smart idea but rather who should pay for the cost of smart grid and when. It is a battle being waged on many fronts from the regulatory process at the Illinois Commerce Commission, the courts and the State Legislature.

I know something about Illinois having served for five years as chief of staff at the Illinois Commerce Commission. I am no stranger to utility rate cases and rate case politics.  In Illinois Commonwealth Edison proposed a pilot project for smart grid and sought Federal stimulus money to support it. So far so good, Ameren based in St. Louis said me too.

The ICC approved ComEd’s one-year advanced metering infrastructure pilot designed to assess how technology can improve service, help customers make more informed decisions about energy use, lower energy costs and reduced carbon emissions. Since the request was made outside of a normal rate case the utility sought and the Commission approved a “rider” to allow recovery of some of the pilot costs with a surcharge on customer utility bills.  While not common, such an action is not unreasonable in a situation where the prudence of doing the pilot program is well established and, in this case, the Federal Government is paying for a portion of the program cost.

But later, the Illinois Court of Appeals overturned the ICC action approving the pilot program and the rider. This is a big deal since the courts do not typically substitute their judgment for the technical judgment of the Commission in such matters.  The court redefined the basis for granting relief through riders and the accounting treatment of asset depreciation essentially forcing a full blown rate case for any utility to get increased cost recovery.

Commonwealth Edison is not without influence in the Land of Lincoln.  It asked the ICC for a new regulatory order on the smart grid pilot program, filed a general rate case and got its friends in the State Legislature to sponsor a bill authorizing a surcharge precisely like the one the Appeal court overturned. And to further demonstrate that is did not like be trifled with the bill also proposed “reforms” of the rate case process to allow any proposed rate increase to automatically go into effect subject to refund at the end of the rate case process.

Since then the back and forth among utilities, politicians, regulators and consumer advocates has been a food fight with smart grid progress the hostage.  As I write this we still do not know how the story will end up but back room horse trading is narrowing the differences with the likely outcome being a bill approved by the Legislature that gives the utilities most of what they want in actual cost recover and return on investment while some of the “regulatory reforms” will be thrown out or watered down to create the appearance of compromise sufficient to get Governor Quinn to approve it.

Ah, laws and sausage. . .!

Just to keep it interesting as the legislative debate on House Bill 14 and alternatives goes down to the wire, the ICC approved a general rate increase for Commonwealth Edison but awarded it only about 40% of its $396 million rate request.  There is nothing unusual about either that rate case process or its outcome as utilities always ask for more rate relief than they expect to actually get so the ICC looks like its defending the public interest by beating back the utility request.  We know this game well.  But the Legislative opponents of the ComEd bill are using that decision to argue against the bill saying the ICC action proves that the bill is not needed.

What does this mean for smart grid?

This debate again highlights that most of the benefits for smart meters and smart grid deployment accrue to the utility and customers are almost certainly going to be stuck with higher costs to recover the smart grid investment and higher rates when dynamic pricing is imposed to make smart grid work.

Pay now, save later is more than just a slogan—it’s the way smart grid is being sold since customer benefits today are few and far between.  The promise of access to lower prices for off-peak power, to better control over energy use, more rate options and better information to make informed energy use decisions are touted as the customer benefits on the horizon.  The typical ComEd customer was estimated to save about $3 per month over the long term from smart grid customer benefits but the ICC rider and the legislatively authorized surcharge in the bill under consideration are also about $3 per month.

Customer benefits from smart grid are likely not worth the hassle. That is the other lesson as customers recognize the promise of smart grid is going to cost more to realize than the net savings it can reasonably be expected to produce.  The image of smart grid is being tarnished badly by these games all across the country.  Using riders, surcharges and other gimmicks seems like bait and switch to customers who know that rates are going up no matter what the press release says about the promise of future savings.

No wonder utilities are sitting on the smart grid sidelines watching this play out among their peer utilities are wondering if the smart grid hassle is worth it.  Just wait to see if the regulators lose interest in smart grid.  If they order action then the utility has cover to get cost recovery.  If no action is ordered the utility can keep on with business as usual—maybe with lower rates than its smart grid-enabled peer.

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3 Comments

  1. I live in Smart Grid City, aka Boulder, Colorado and I’ve got a Smart Meter on my house. Only problem is its connected to a Dumb Utility. The project was ferociously over budget, and so Xcel Energy kept stripping functions out left and right until about the only thing it does that my dumb meter didn’t is allow remote meter reading. So nothing in the article above surprises me.

    And you know what? I don’t care. I’ve wasted a lot more money than this by being an early adopter of other whiz-bang technology, and eventually all of these experiments are going to lead to something worthwhile. Very likely the hardware to implement SG 2.0 is going to obsolete everything I have today. I don’t care about that either.

  2. That is why you early adopters are important to technology progress. You have a risk taking view of technology learning curves and put up with the torment and disappointment of the scientific method of trial and error. For most customers it just will not be worth the hassle for a few years until the bugs are worked out. Better to be a 3G adopter than a 1G adopter.

  3. June 3, 2011. In the finest Illinois fashion a deal was struck in the Legislature allowing the General Assembly to pass the compromise smart grid bill and send it to Governor Quinn for signature.

    What did it cost ComEd and other utilities? The bill creates a $20 million Illinois Innovation fund to support job-creating business in the Land of Lincoln. So the price of getting Legislative approval for raising customer rates to pay for smart grid is a $20 million slush fund for politicians. The ICC ratemaking process survived unchanged.

    See: http://www.elp.com/index/display/article-display/5331333100/articles/electric-light-power/policy-and_regulation/2011/06/ComEd_applauds_passage_of_Illinois_grid_modernization_bill_.html

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