Smart meters could cost $2.3 billion

All households to have one by 2010
No decisions yet on who will pay

Toronto Star - October 28, 2004
by John Spears

Installing sophisticated electricity meters in every home and small business in Ontario could cost up to $2.3 billion, according to the Ontario Energy Board.

The most expensive type of meter carries a price tag of $600, energy board briefing notes say, and the province must install more than 3.8 million to reach every customer. Putting the two figures together results in a total near $2.3 billion.

The cost estimate for so-called "smart meters" is contained in briefing notes prepared by an energy board working group. The working group doesn't tackle the question of how new meters will be financed. But if the cost of a $600 meter were billed over a five-year period, the monthly price tag excluding financing costs would be $10.

Energy Minister Dwight Duncan says he wants all households and small businesses to have some form of smart meter by 2010, to encourage conservation and discourage unnecessary power use at peak periods.

The working group notes say Ontario will need to install 3,846,000 new meters to meet Duncan's objective, starting with 60,000 in 2005.

Conventional residential meters measure only the total amount of power that a household uses over a one- or two-month period.

Smart meters record the time of day when the power is used. Utilities can then charge customers higher rates for power used when demand and prices are high, and lower rates for power used during off-peak periods.

Smart meters can have varying degrees of sophistication. "Interval meters" can track usage hour by hour, and match rates charged to customers with the varying prices on the wholesale electricity market. They may have a phone or Internet connection with the local utility, which can read the meter from a central office. Meters can also transmit information by local radio signal to small local receivers, or to vans driving through a neighbourhood. Some utilities hope to use their own power lines to transmit metering data.

Systems with two-way communication can be wired to appliances such as hot-water heaters, allowing utilities to switch the appliances off for short periods to curb demand if the power grid is overloaded.

"Time of use" meters are simpler. They generally divide the day into four to six time periods, and charge different rates during each period. Low rates might be charged from 11 p.m. to 5 a.m.; the highest rate might charged from 4 p.m. to 10 p.m. Intermediate rates could be charged during other times. The rates for each period are set every year, or every few months, rather than varying with each hourly fluctuation of the market.

Policy makers are still wrestling with the choice of which meter to install.

"The decision would likely be easy if cost wasn't an issue," say the briefing notes.

Interval meters are superior because they are far more flexible, and allow utilities to charge rates that closely track true market prices.

"Recent information suggests there is at least a three-fold differential in the installation costs: $600 (for interval meters) vs. $150-$200 (for time of use meters)," the notes say.

To offset the cost of the meter, a typical customer would have to reduce consumption by 5 per cent to 10 per cent. Alternatively, customers could track market prices on the Internet and take advantage of the opportunities to use power when prices are low.

The energy board is expected to release a discussion paper next month on the costs and benefits of the meter options.

Who will pay for installing the meters is a big question, as householders and small business owners may not welcome being forced to pay hundreds of dollars for a new meter.

Some large electricity users fear that utilities might be ordered to foot the bill for installing the meters. The utilities would then presumably apply to the energy board for rate increases to cover the cost — and might try to spread the rate increase across all customers, large and small. That would force large users to subsidize the cost of new meters for small customers.

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