Shocking Way Electric Utilities Are Making Us Pay for the Smart Grid

electric meterAre you ready for the smart electricity revolution?

On July 20, 2006, California's Public Utilities Commission approved a proposal by Pacific Gas & Electric (PCG) to begin phasing out conventional electricity meters (those big gray boxes on the side of your house, with the dials that spin around) and replace them with "smart" meters.

Relaying data on electricity usage wirelessly and in real time, the devices should in theory help utilities such as PG&E charge consumers more when they use electricity at times of greatest demand. This would, for example, encourage users to dial back the A/C on hot summer days.

Conversely, consumers would get a break on their bills for smart electricity usage. You could pay lower rates for doing your dishes and drying your laundry overnight, and for charging your plug-in electric car at nonpeak hours as well.

It's all part of a $29 billion, nationwide plan to make electricity usage smarter, by helping to build the "smart grid."
And it's failing because of greed. Specifically, the greed of electric utility companies such as PG&E.

It's axiomatic that corporations don't do anything unless they see a profit in it -- or at least a savings.

Heads, Utility Companies Win

PG&E and utilities such as Central Maine Power and Central Vermont Public Service (CV) tout smart meters as a way to save their customers money. But what these companies are really interested in is saving themselves money.

As "public utilities," these companies are charged with making sure electricity users can flip a switch and turn on a light bulb any hour the day, or night. Of course, night's not so much of a problem. The real issue for these companies is daytime, and specifically, hot summer daytimes, when everyone's cranking up the air conditioners.

The utilities have to build coal, gas, and nuclear power plants or purchase energy on the market, in numbers sufficient to ensure there's enough power for everyone during such peak periods. At night, these plants often are underutilized as power demands dwindle.

Every hour a power plant sits idle is money wasted in their view. Hence, there's a real incentive for the utilities to finds ways to use their plants more efficiently, and save money by building fewer of them.

Smart meters, and the incentives they offer consumers to spread out electricity usage across the 24 hours, offer utilities a great way to do this. Because the devices are wireless, they also save utilities labor costs, by eliminating the need to send out neighborhood meter-readers to jot down the readings and prepare the bills.

Given all this, you'd think utilities would do all they could to sweeten the deal for consumers, and encourage adoption of smart meters, right? Actually, no.

Tails, Customers Lose

As it turns out, what the utilities are doing instead is trying to have their cake and eat it, too. As reported by Bloomberg, utilities in several states are asking regulators for permission to pass along the cost of buying the new equipment to consumers. They also want to charge for its installation.

Adding insult to injury, even consumers who balk at this tactic may not be able to avoid higher fees.

In Vermont and elsewhere, utilities plan to tack on a monthly fee to the bills of electric customers who opt out of the smart meter technology -- to cover the cost of manually reading their old meters. (A cost that, one presumes, is already covered quite well in the rates utilities charge for electricity.) In California, some utilities want to charge $75 upfront, plus an additional $10 a month, to keep an old-style meter.

Meanwhile, consumers who have agreed to install the devices already complain that the promised savings aren't materializing. Try as they might to switch electricity consumption to odd hours of the day, their bills are actually going up. Some consumers argue the meters are in fact overcharging them for the electricity they use.

All this makes one wonder: Are utilities really as smart as their meters? By rationalizing energy usage, and lowering the cost of building power plants, these devices have the potential to save money for utilities and consumers alike. It's in the utilities' interests to share the wealth -- not hog all the savings for themselves.

Motley Fool contributor Rich Smith holds no position in any company mentioned. He does hold the position, however, that many electric utilities are acting like they're dumber than a fifth-grader.

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Minnesota Dreaming

In addition to paying higher fuel costs during the day, utilities that are buying power need to pay for transmission rights to get the power from the power plant to their distribution network. When the network is more congested, these transmissions rights cost more. This is another reason to shift demand to off peak hours. And not only does better use of the transmission network save money, it also means there is less of a need for new transmission lines, which are never popular.

May 17 2012 at 1:57 PM Report abuse rate up rate down Reply

Dividends, dividends, dividends....

May 17 2012 at 10:44 AM Report abuse +1 rate up rate down Reply

Regulated electric and gas utilities make most of their money by investing equity into their businesses. The regulatory scheme in most jurisdictions allows regulated utilities to recover all the costs of running their businesses including operating costs, interest expense and taxes. Customer rates are set at a level that should recover all of those costs and provide a return on the utility’s equity. (more)

May 16 2012 at 12:45 PM Report abuse +1 rate up rate down Reply
1 reply to imoftenright's comment

More equity invested in the company equals higher returns to the utility’s shareholders. Do utilities like smart meters? Sure they do. Equity invested in smart meters means more money for shareholders. Electric utilities also like to invest equity in infrastructure to “improve reliability.” Gas utilities like to invest equity in their infrastructure to “enhance safety.” (more)

May 16 2012 at 12:48 PM Report abuse +1 rate up rate down Reply
1 reply to imoftenright's comment

Regulated utilities particularly like to lower their costs right after new rates are put in place. Shareholders get to keep those savings. Utility costs of doing business typically increase just before the utility requests a rate increase. Those increased costs often get imbedded in the new rates approved by the regulators.

Ain’t monopolies sweet?

May 16 2012 at 12:48 PM Report abuse +2 rate up rate down

It costs no more to make electric at noon then it costs at midnight and demand metering is a marketing tool that benifits the utility companys and the government. When the idea was first purposed they called it demand metering and consumers rejected the policy so the utility companys opted for a name change to there pick pocket policy.There is no real grid its all a illusion. Yes there are wires switchs and transformers but most of them dead end somewhere and there are thousands of utility providers and the only connection they have is when there fixing the price.

May 16 2012 at 8:39 AM Report abuse rate up rate down Reply
1 reply to BUFFALO's comment

Buffalo said, “It costs no more to make electric at noon then it costs at midnight...” It is true that it costs the same to make electricity with coal at noon and midnight. Likewise with other types of plants. However, it costs much more to make electricity with natural gas or oil than it does to make electricity with coal or nuclear fuel. During the daytime, (particularly in the summer) all types of power plants run to meet demand for electricity. At night, only the plants with cheaper fuel (hydro, nukes, coal) are run. Thus, the cost per Kwh is much lower at night than during the daytime.

May 16 2012 at 12:16 PM Report abuse +1 rate up rate down Reply

Lets see - if you ran a small company and some of your relatives and friends were the only investors (expecting to make a few $), would you ask for more of your and their money because of new government regulations that said you had to use battery powered vehicles or would you charge your customers a few more $ for your product? Without the extra $ you would have to close your business and your investors would loose their money?
By the way, if you worked for less and they kicked in a few more $, the government WILL make more regulations (being ever greener) but you could work for even less or ask your customers and investors for more or else give up your business, declare bankruptcy and get a job with that evil utility who likes to make a profit.

What's your solution?

May 15 2012 at 8:10 PM Report abuse +1 rate up rate down Reply

With these computer based systems, it very easy for the utility, to punch a few keys, and overcharge the customer.

This system , is way too easy to cheat with, and very hard to track the cheater.

No wonder the unilities are changing the smart grid concept, as fast as they can. It is about the money

May 15 2012 at 7:16 PM Report abuse +3 rate up rate down Reply

Beat them at their own game & install solar panels. It's fantastic to watch that meter actually go backwards! It's nice to NOT have an electric bill! When you can't join them; BEAT them at their own games!

May 15 2012 at 5:49 PM Report abuse +2 rate up rate down Reply

I got a letter stating that BG&E got a $200 million grant, that's a gift, to put these smart meters in. So let me see, they are going to put something in that makes not a rats behind worth of difference to me and charge me through my taxes. They get 200 million and save on meter readers and we the tax payers again get the shaft. When my husband had a business, the federal government didn't hand him any free money to upgrade his equipment. The gas and electric companies make billions in profit and yet the tax payers have to pay for their upgrading of equippment. Something stinks in this picture.

May 15 2012 at 5:37 PM Report abuse +3 rate up rate down Reply
1 reply to Lin's comment

Lin, What you have described is a problem with government, not a problem with the utility.

May 16 2012 at 12:44 PM Report abuse -1 rate up rate down Reply

The electric companies are doing the same thing as the telecommunication companies are doing. Charging fees at will. Edison just added a competitive fee charge. What the hell is that and competition with who?

May 15 2012 at 4:54 PM Report abuse +4 rate up rate down Reply

Why am I not surprised to read this... Of course, SoCal Edison just switched my meter to a smart meter in the past month and admittedly my latest bill was less than the previous month's bill but that's could easily be because I haven't needed to use any AC due to the cool weather we've been having too. I'm glad I read this report so I can focus on future bills to see if this 'savings' continues or goes back up.

May 15 2012 at 4:39 PM Report abuse +1 rate up rate down Reply
1 reply to belledamnit's comment

Oops meant to type "that could easily"...

May 15 2012 at 4:40 PM Report abuse rate up rate down Reply