The inconvenient truth about smart meters

What I'm about to write probably isn't going to be popular. But if we're going to get serious about energy conservation it's something that has to be considered by the people whose opinions really matter.

Sometime in the next couple of months my neighbourhood is scheduled to get the long awaited "smart" electric meters, the kind that can measure power consumption by the hour and can be read automatically from a central source (via WAN) rather than the mechanical meters that have to be read manually every two months and don't take into account time of day usage. This is part of the province-wide deployment in Ontario, whereby everyone will have to have a smart meter by 2010.

I'm not against this. Of course I'm for it. Having power rates charged to reflect the time of day used (higher during weekday peak periods, lower during the evenings and weekends) makes perfect sense. People who run their washers and dryers at 3 in the morning shouldn't have to pay the same rates as someone who runs them in the middle of the day.

The issue for me, however, is that even after time of day pricing takes effect there will be regulated rates for those who haven't been suckered into signing contracts; rates which are well below market.

This policy was put in place just a few months after deregulation happened in Ontario in 2001. The way it was implemented was a bad idea -- especially how Ontario Hydro was broken up -- but the Harris government was correct in requiring people to pay for the actual price of power and not a fixed price. This meant as overall demand went up so did the price per kilowatt hour.

Unfortunately people revolted at this concept, not understanding that during much of the 1990s they were paying way less than the real cost of production and that taxpayers were subsidizing the difference on their bi-weekly withholding tax and at the cash register. This was contrary to the concept of power in Ontario over a century ago when the monopoly was created; that the production, transmission and delivery of electricity should be in public hands and that people should pay the true cost -- not one penny more or less. That rule was followed until the recession of 1990-92 when a deal was made with the power workers to freeze rates for the rest of the decade -- a really bad deal as it turns out.

So the Harris government put a price cap back in place with the intention to reset the price every six months. That was fine except the fixed price was again below the wholesale cost -- the real, market price. It's no wonder why there was a blackout two years later on one of the hottest days of the year; Ontario like most of the northeast States were giving people a free and undeserved ride. There was no incentive to conserve.

As it is right now, households that use up to 600 kWh per month (and businesses using up to 750 kWh) pay 5 cents per kWh, after that it's 5.9 cents. For those on smart meters, it is 7.3 cents from 7 am to 11 am and again from 5 pm to 10 am; 9.3 cents from 11 am to 5 pm (all Monday to Friday). During off peak periods on weekdays and all weekend it's 2.7 cents.

The actual price for power, however, can range from just two cents to a buck fifty depending on how strained the system is and if we have to go to outside sources (the neighbouring jurisdictions) to cover the excess. Why aren't we being asked to pay that rate (as the largest businesses are required to)? In the end, it probably comes out in the wash (the weighted average is about four to seven cents, depending on the time of year).

However, since it is possible to monitor usage by the hour, we should be charged whatever the rate was for that hour. The current price is public information and can be broadcast on a variety of media; so we should do that on a regular basis. If it was three cents it should be three cents; if it was a buck it should be a buck. Since people will be able to access hourly usage data when the system is rolled out, it makes sense to charge the real price to give people an incentive to conserve power during heavy load periods -- during all periods, really. Those in really dire straits should get partial subsidies but not a free ride and it should be paid back when things improve for such households.

Two other things: First, smart meters won't do anything to address the fact that we still need a better mix of power sources. We need more water, geothermal, wind and solar sources. If coal plants are really going to be phased out, we really need to get cracking on getting the alternative sources onstream; this will mean land claims settlements with natives up north (particularly for water power) but it must be done.

Second, smart meters as currently designed still won't detect attempts to bypass them -- such as those who have marijuana grow operations in their basements. The designs need to be upgraded to prevent any leaks or bypasses and to alert the central terminal if any such attempt is being made -- after all we shouldn't have to pay for other people's theft. (Currently, the uplift charge in Hamilton to cover that theft is about 4¼% -- meaning if we're supposed to pay five cents we actually pay 5.2 cents.) It does add up over time and frankly we're sick and tired for paying for "leakage" that is not supposed to happen.

UPDATE (6:54 am EDT 05/05/08, 1054 GMT): Some spam comments had to be deleted but since you've asked, here's an FAQ on smart meters. There is some Hamilton-specific info regarding how data hops from one part of town to another; but the concept is similar for delivery utilities province-wide. Come to think of it, time-of-day pricing could work for other systems that have manual reads right now (i.e. water and natural gas).

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