Feature Article: Smart electricity meters – pros and cons for consumers

City Power is installing smart meters in Johannesburg suburbs as part of a R1.25 billion expenditure programme. What is the purpose of the smart meter? What are the benefits to the consumer? What is government policy regarding privacy of information? Do customers have a choice in switching to smart meters? Who is carrying the cost? What happens in other countries?

Smart meters are linked to a remote computer system (meter data management system). They measure in real time and report at 30 minute intervals the amount of electricity consumed during a particular period. The utility thereby is able to determine exactly when and where energy has been used. It can even send an alarm when power is interrupted. The system also makes it possible for technicians to read meters without having to physically visit properties; for smart meters to be switched remotely between credit or pre-payment mode; for credit tokens purchased at vending outlets, via the internet or cellphone to be transferred to the meter directly or manually through the keypad on the Customer Interface Unit (CIU), a display and keyboard installed in a customer’s residence. Complex tariffs such as the TOU (Time of Use) tariffs that allow the utility to offer new energy products to customers can also be implemented, as well as emit pricing signals to manipulate the consumption pattern of consumers to promote energy efficiency.

The rollout of 50,000 smart meters is anticipated to be completed by October 2014. According to general manager of City Power, Sol Masolo, employees and emerging micro enterprises have been trained to deploy, operate and maintain the smart meters.

The pros of the smart meter system

1.         Increased consumer controlover consumption and cost of power through:

·           Real-time information on energy use.

·           End to estimated billing – people will be billed for the energy they actually use.

·           TOU (Time of Use) tariff structures enabling consumers to reschedule loads and save on electricity costs. (Not yet relevant in South Africa as the actual cost of electricity is unknown and fair tariff structures are impossible to calculate)

·           Easier switching of suppliers to get the best deals. (Not yet relevant in South Africa – retail competition is not allowed).

·           Facilitating the selling of micro-generated electricity e.g. from home solar panel to the grid. (Not yet relevant in South Africa –there is no open access to the grid).

2.      Improved revenue managementfor distributorsdue to accurate meter readings, timeous billing, remote warnings, and disconnect/connect services when bills are unpaid.

3.      Maintenance and planningof upgrades and extensions to the distribution network can be identified through data collection.

4.      Improved customer service delivery through prompt reaction to failures in the distribution system.

          5.     System optimisation with better co-ordination of supply to meet demand.

6.      Keeping customers informed on consumption patterns, cost and tariff information, outage warnings, bill payment information, pre-payment options and remote connect/disconnect which will eliminate any need to revert to call centres.

7.      Theft reduction. Smart meters will deter electricity theft through better detection of unmetered electricity losses.

8.      Reduced site visits and further cost savings as meter readings and connection/disconnection services will be carried out remotely.

The Cons of the smart meter system

1.         Direct demand controlby utilitiesduring high demand/supply shortage situations. The utility is able to switch off the supply to non-critical appliances such as air conditioners, pool pumps and hot water geysers, as well as other residential loads.

2.      Possible violation to privacy rights, depending on the regulatory protection and enforcement of rules in the country. Information on when you are away from home, how much electricity you use, and when your alarm is on can be sold to corporations, marketers or government. Josh del Sol, producer and director of the eye-opening film ‘Take Back Your Power’, shows how freedoms and liberties are being diminished in the United States as big government continues to grow, and, through technology, tramples on your right to privacy.

3.      Susceptibility to hacking through the mobile network and through the hardware installed by meter operators.

4.      Claimed radiation hazard: Smart meters emit at the frequency of radio waves and according to Dr Don Maisch, an expert on radiation, are not regulated adequately.

5.      High up-front costs and ratepayer risk. Expensive equipment could already be out-of-date. The Dutch have been trailing the move to get the information on their smartphones.

6.      Benefit vs cost: Consumers/ratepayers will be carrying most of the cost while distributors reap the benefit.

In South Africa, it would seem that the motivation for the installation of smart meters lies in the benefits that accrue to the distributor (municipalities), combined with the need for demand control due to insufficient electrical capacity. Most of the benefits smart meters typically afford the consumer cannot be realised in South Africa as yet because of the industry structure: there is no competition in distribution, no open access to the grid, no market price can be established for electricity and hence no real means to calculate a fair “time of use” (TOU) tariff structure.

In the long term, everyone will benefit from the efficiencies that smart technologies will bring to the grid as a natural part of the digital evolution. Distributors will be able to collect and manage vast amounts of system data. The cost savings and improved efficiency, once they become evident, will incentivise consumers to change their lifestyle and purchasing habits and be more active in the promotion of energy efficiency.

Source: This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and may not be shared by the members of the Foundation.

Help FMF promote the rule of law, personal liberty, and economic freedom become an individual member / donor HERE ... become a corporate member / donor HERE