Monday, June 28, the Maryland Public Service Commission rejected a multi-million dollar proposal by the Potomac Electric Power Company (Pepco) to install ‘smart’ LED lights in streetlights and wireless ‘smart’ nodes/sensors to expand their wireless AMI network.
Order No. 89868
Excerpts (emphasis added)
(5) That Pepco’s proposed Smart LED Street Lighting Initiative Program is rejected in this case, without prejudice to re-filing the proposal as an EmPOWER Maryland Program, as discussed in this Order“…
#122…The fact that these customers cannot opt-out of the streetlight conversion to avoid the rate increase, which could be up to 117% for some customers, goes against the stated purpose of EmPOWER Maryland funds, which should be used to incentivize customers to take action and engage in energy efficiency improvements when they otherwise would not have done so. The voluntary aspect of EmPOWER is key because the cost of an approved EmPOWER program is shared by all customers within the class.
123. As this proceeding has demonstrated, not all affected municipal customers are
friendly towards this Initiative. In fact, several municipal participants that have
submitted either evidence or comment on the subject take issue with one or more
elements of the Initiative as designed. The Commission finds there are shared themes
among the opponents of the Initiative. First, the Initiative lacks customer approval or sufficient customer choice. For example, the Initiative, as submitted, is not flexible
enough to accommodate customer options with regard to LED streetlight style, color,
temperature, and wattage. Second, the Initiative falls short in customer engagement.
Third, the direct benefit of the smart nodes to customers remains unclear. For example,
questions raised by Kensington concerning the value of the smart node to the Town, how
cost savings from the nodes will be passed on to ratepayers, and whether benefits of the
nodes outweigh their associated costs raise valid topics for discussion.
124. Given the concerns raised by the Parties, the Commission cannot approve the Smart LED Streetlight Initiative as part of this MRP. Pepco’s costs for the Initiative are not insignificant, and the “zero cost to customer” impact is necessarily tied to securing
EmPOWER Maryland funding for those customers who will experience cost increases.
As discussed, the proposal, as filed, runs counter to the spirit and intent of the
EmPOWER program. This is not to say, however, that the general idea of the Initiative
to convert company-owned streetlights to LEDs could not be submitted as a standalone
EmPOWER Maryland proposal. Should Pepco choose to do so, the Company should
take the following into consideration: (1) make the program voluntary to incentivize
customer action; (2) apply the incentive in a way that helps remove barriers to
participation (e.g., rebates that reduce CIAC payments or price differentials in lamp
styles); (3) proactively engage interested customers as part of program design; and (4)
include smart nodes as an optional technology
125. For the above reasons, the Commission rejects the Smart LED Streetlight Initiative, as submitted here as a component of the MRP, without prejudice to Pepco to modify and refile as an EmPOWER Maryland proposal for the Commission’s consideration in Case No. 9648.
126. Since the Commission does not approve Pepco’s Smart LED Streetlight Initiative
and pilot program in this case, the proposed tariff changes associated with the initiative,
recommended by Staff, also are not approved. Tariff changes will be addressed if and
when Pepco brings these proposals to an EmPOWER Maryland proceeding. The
municipalities have provided numerous concerns and recommendations regarding
Pepco’s proposed revised tariff, and the Commission therefore directs Pepco to continue
discussions with the municipalities regarding customer choice, purchase of the LED
streetlights, and tariff changes if it pursues an EmPOWER filing.
127. Regarding the Smart Sensor Pilot, the Commission finds that Pepco has not
demonstrated a sufficient nexus between the stated purpose of the Pilot and the
Company’s own electric distribution operations to justify approval in this case.
Throughout this proceeding, several parties raised credible concerns regarding the Pilot,
including its cost, the specific benefits to customers, its relevance to Pepco’s distribution
function, and the lack of sufficient details to assess its cost-effectiveness. Indeed, none of
the other parties openly support the Smart Sensor Pilot. Even Prince George’s, which
does not oppose the Pilot, questions the program’s cost and recommends conditions if the
Commission decides to approve the program. Although Pepco points us to several community-related functions and potential customer benefits that may be captured through smart sensor technology, such as gunshot detection, air quality and traffic monitoring, we find the connection between these “features” and the Company’s core operations tenuous at best. We agree with Staff, OPC, and Kensington that costs of this Pilot should not be recovered through rate base. Accordingly, the Commission denies the Smart Sensor Pilot Program for the MRP.
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 While Pepco contends that a number of localities have expressed excitement and enthusiasm about the value of the Initiative to their residents and businesses, it is unclear the extent to which this level of support is tied to the promise of using EmPOWER Maryland funds to ensure cost neutrality.
 The Company can also elect to proceed with the initiative as a traditional infrastructure replacement or improvement program at its own expense and seek cost recovery in a future rate case if it believes it can justify the cost.”