Kentucky regulators reject two Smart Meter roll-outs; Attorney General supports denial

As posted here, two Kentucky utility companies tried for the second time in January to get their Smart Meter programs approved by the Kentucky Public Service Commission,

Once again, the PSC has said, “No”. — Order

One key issue:

  • These companies told the Public Service Commission there would be a net financial benefit to customers by switching to this Smart Meters/AMS system.
  • However, their business case of benefit over cost was based on a 20-year or more service life for these meters.
  • The two companies told the PSC the service life of these Landis & Gyr meters is 20 years, and used a 2-word email from their vendor as their only evidence to justify their claim of a 20-year service life.

Here’s the email
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  • The companies’ business case falls apart with less than a 20-year service life, and turns to a cost to customers: $18.1 million cost for an 18-year meter service life and $67.2 million cost for a 15-year meter service life.
  • Congressional testimony by an industry spokesman said Smart Meters’ service life is only 5 years, and companies continually report Smart Meters failing after a few years.

The Attorney General was an intervenor in this case, and recommended PSC denial based on several factors, including that benefits were overstated.

The Attorney General argues that the Companies failed to meet the burden of proof to justify approval of a CPCN. The Attorney General claims that the Companies failed to show a substantial inadequacy of service and failed to provide sufficient evidence that the AMS proposal will not result in wasteful duplication. Further, the Attorney General states that the cost-benefit analysis provided by the Companies supports the denial of the CPCNs because the analysis assumes that the AMS meters last longer than the case record supports, and the benefits are overestimated. The Attorney General recommends that the Companies’ request for approval of CPCNs should be denied.”

Here’s the story:

In January, two energy companies, Kentucky Utilities Company (KU) and Louisville Gas and Electric Company (LG&E), asked the Kentucky Public Service Commission for Certificates of Public Convenience and Necessity (CPCN) so that they could roll out Landis & Gyr Smart Meters — “Advanced Metering Systems (AMS)”– throughout their service territories. They also asked the Commission to “grant deviations from meter inspection and testing requirements” and approve opt-out charges for customers who didn’t want an “AMS” meter.

On August 30, 2018, the Public Service Commission denied their application.

The Commission found that the Companies

failed to present sufficient evidence to support a determination that there is a need for AMS at this time, and failed to demonstrate that a Companies-wide AMS deployment will not create wasteful duplication of facilities” p. 7

The Companies failed to present sufficient evidence in the record to demonstrate that there is a substantial inadequacy of existing service.” p. 8

[T}he Commission is not persuaded by the evidentiary record that the AMS proposed by the Companies is the reasonable, least-cost alternative.” p. 9

In support of their assertion that the meters have a 20-year service life, the Companies relied upon a two-word email from their vendor that read “20 years” in response to a question about the expected service life. p. 3

Excerpts, beginning on p. 11

“The Companies claimed that AMS would provide customers more control over their consumption by providing them timely usage data, but acknowledged that the data customers would receive would be 24 to 48 hours old

Moreover, the Companies operate a limited opt-in AMS pilot program that has yet to reach full capacity, and many of the pilot program customers do not regularly check usage data, which is 24 to 48 hours old. The lack of robust utilization of the usage data in the pilot program reflects on customers’ desire for the type of data that would be offered by AMS. Thus, based on the evidentiary record, the Commission is not convinced that customers will benefit substantially from the usage data as proposed by the Companies or that the failure to provide that data to all customers would result in inadequate service.

The Companies also claimed that AMS would benefit customers by allowing the

Companies to restore power more quickly during outages because AMS would allow them to know when a customer does not have service. The Companies currently rely on customer complaints and visual inspections to identify outages. However, there was no evidence presented in the record that would justify finding that the Companies’ current method for identifying outages results in a substantial inadequacy in service to customers.

Rather, the evidence in the record indicated that the Companies were generally providing adequate service with their existing meters and that they would continue to do so. For the reasons set forth above, the Commission finds that the Companies have not presented sufficient evidence on the record that established a substantial inadequacy of service at this time and, therefore, the Companies have not established a need for the proposed AMS.

Wasteful Duplication

The Companies similarly failed to present sufficient evidence to demonstrate that he AMS proposal would not result in wasteful duplication. As mentioned above, the remaining service lives of LG&E’s and KU’s electric meters are 17.4 years and 15.4 years, respectively. This accounts for $16.7 million and $36.2 million in undepreciated book value for LG&E and KU, respectively. Moreover, the Companies have offered no evidence into the record that indicates their current metering systems are failing to provide adequate service. Rather, the evidence indicates that the Companies are able to provide adequate service with their existing meters.

The Commission questions the soundness of the Companies’ cost-benefit nalysis, which was the Companies’ primary evidence in support of AMS. First, the NPVRR benefits calculation of $24.6 million is based on a service life in excess of 20 years, which is greater than the Companies’ asserted 20-year service life.40 Second, the Commission is not persuaded by the Companies’ assertion that the meters have a 20-year service life.

The Companies’ only evidence to support a 20-year service life of the Landis+Gyr meters is a two-word email from a sales representative that indicates a service life of “20 years.”…

The Companies offered no further evidence, explanation, or support for a 20-year service life. The Commission notes that the Companies propose to depreciate the AMS meters over 15 years, not 20 years, and that the Companies used a 15-year depreciable life in calculating the cost-benefit analysis

Even assuming all of the Companies’ other calculations and assumptions are accurate, the AMS proposal results in a net cost to customers if the meter service life is less than 20 years. The AMS proposal results in a net cost to customers of $18.1 million for an 18-year meter service life and [a net cost to customers of] $67.2 million for a 15-year meter service life.

Editor: What is the net cost to customers if the meters have a 12 year, 10 year, or less service life?

Besides the Congressional testimony, utility companies across the country are replacing meters because they fail long before their advertised service life.

It looks as if the only way any business case can be made for AMI/AMS meters, wherever they are installed, is to claim a much longer service life than what they really have.

If the two-word email is accurate and the proposed meters have a 20-year service life, the net benefit is $11 .6 million on a total capital and operations and maintenance cost of $339.9 million .

The probability of the AMS proposal having an actual net benefit of $11.6 million NPVRR, which is associated with the purported 20-year service life based on a two-word email, is too marginal and the risk to ratepayers too great to support a finding that the AMS proposal is a least-cost alternative. For the reasons discussed above, the Companies have failed to present sufficient evidence at this time to demonstrate that the AMS proposal is a least-cost alternative that will not result in wasteful duplication.”

From the Conclusion:

“…the Companies failed to provide sufficient evidence to persuade us that the AMS proposal satisfies the requirements of KRS 278.020(1) by demonstrating that the current meters are obsolete or that the benefits of the AMS proposal outweigh the costs here.”

– – – – –

The Commission denied this application “without prejudice”; these utility companies can file another application in the future. Each company currently has an “opt-in” pilot program, and the Commission increased the “opt-in” cap of 5000 residential and small commercial customers to 10,000 for each company. Duke Energy already received approval to install Smart Meters in Kentucky, so this is not a ban or moratorium.

Posts from January:

https://www.courier-journal.com/story/news/local/2018/01/03/opting-out-smart-meters-would-cost/1000201001/

https://smartmeterharm.org/2018/01/18/kentucky-utilities-try-again-to-get-approval-for-smart-meter-roll-out-attorney-general-calls-proposal-premature/

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