NB Power's smart meters plan not so smart, 2 expert reviews find

NB Power's plan to spend $122.7 million over three years to deploy smart meters for all its residential and commercial customers is poorly thought out and should be rejected by the Energy and Utilities Board at hearings next month, according to separate experts hired to review the strategy.

"As currently proposed, the AMI [advanced metering infrastructure] project could commit NB Power and its customers to a heavy cost burden without fully defining and quantifying the future benefits to be gained," wrote Edmund Finamore, a smart meter consultant from Pennsylvania commissioned by public intervener Heather Black to scrutinize the plan.

"It is not clear that NB Power has implemented sufficient project management controls methods to execute a firm plan, achieve firm project milestones and control project costs."

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A second review of the proposal by a Boston-area energy consultant hired separately by the Energy and Utilities Board also found significant flaws.

"NB Power has significantly understated the costs and overstated the benefits of its AMI proposal," says the analysis by a group of five authors working for Synapse Energy Economics out of Cambridge, Mass.

"We recommend that the board reject the company's AMI proposal."

'Essential' to cleaner, more reliable grid

NB Power has been working toward upgrading its distribution system to a "smart grid" over the past six years and the wholesale installation of smart meters and other AMI to serve every customer has long been a centrepiece of the utility's plan.

Unlike current units that have to be physically visited to be read, smart meters will connect directly to NB Power computers, allowing individual customers to have electricity consumption tracked several times an hour instead of once a month.

The utility says this will allow it to charge a variety of rates for electricity — more when consumption is higher, such as in the mornings, on weekends and during winter — and less when consumption is lower.

That in turn will encourage consumers to shift demand to underutilized parts of the day, it says.

"We are going from reading a customer's meter once a month, so 12 times a year, up to 12 times an hour," former NB Power executive Neil Larlee said during testimony in front of the EUB last February.

The meters will also allow customers to sell electricity back to NB Power if they install solar or other power generating capability on their property and will give the utility instant information on outages, including the individual homes affected.

"This communication network along with the AMI meters is essential to a building smarter, cleaner, more reliable and efficient power grid and will lay the foundation for many of the long-term customer benefits that NB Power will deliver through its Energy Smart NB plan," said the utility in its application to the EUB to acquire the units.

Cost outweighs savings

But even NB Power acknowledges the cost of buying, installing and operating 355,000 new smart meters to blanket the province in a three-year rollout is high without enough savings to completely pay for it.

The utility has detailed 15 ways the new meters will cut expenses but the combined benefits total just $121.4 million  That's $1.3 million less than the program is budgeted to cost.

Spending so much money on an initiative that is not essential and not cost effective is unwise.- Synapse report

Both Finnamore and Synapse Energy disputed the value of several of the claimed savings as inflated and Synapse further argued since NB Power's own numbers show the investment in smart meters will cost money in the long run the case is too weak to proceed.

"The company's own analysis suggests that the proposal is not cost effective and that analysis suffers from some fundamental flaws," concluded the Synapse report.

"Spending so much money on an initiative that is not essential and not cost effective is unwise."

Proposal needs refining

Both consultants suggested if properly handled, the introduction of smart meters could benefit both NB Power and its customers, but each separately concluded the utility's plan lacks detail and a convincing rationale. 

Both called for the application to be denied so the utility can offer a more refined proposal.

NB Power is facing a 12-day hearing in front of the Energy and Utilities Board beginning Feb. 8.  

In addition to seeking permission to invest in smart meters, it is also attempting to win approval for an average two per cent rate increase it has proposed for April 1 and is asking for the flexibility to employ special rate increases when large unexpected weather or market events cause its costs to jump unexpectedly.