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Sector Name:Power Delivery & Utilization
Document Type:Technical Update
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Smart Metering can reduce labor requirements and other costs inherent in non-automated processes, but it can also produce benefits that accrue directly or indirectly to electricity consumers and societal in general, which is why they are referred to as societal benefits. Because they accrue to consumers, rather than show up as cost savings on the utility ledger, identifying and monetizing these benefits in a business case can be a challenging task. This report reviews how utilities have estimated societal benefits in regulatory filings and develops a framework that describes how societal benefits could be characterized and quantified systematically and thoroughly.
The installation of Smart Metering technology by itself does not produce societal benefits. Rather, Smart Metering serves an enabling role when combined with other initiatives, such as the implementation of demand response programs, revised outage restoration practices, and the adoption of devices that communicate consumption and price/event information to consumers and the utility. Additional benefits may be attributable to the energy and demand changes that result from these initiatives, including lower environmental impacts and improvements in employment and wages in the local economy. Quantifying societal benefits requires sorting these benefits streams in a way that characterizes them by source and initial manifestation of the benefits so that an appropriate value transformation function can be applied. If this characterization is accomplished, benefits emanating from different changes in the physical nature of electric service can be potentially monetized and therefore added together.
To characterize and quantify the societal benefits that result from Smart Metering.
The project team reviewed pilots and state jurisdictional filings to study how utilities have estimated the societal benefits of Smart Metering and justified these estimates. They also reviewed a wide range of subject matter and topical material to synthesize economic principles and identify analytical practices for measuring societal benefits. The team then developed a framework for identifying and monetizing societal benefits using well-understood economic methods.
The report identifies and discusses six potential sources of societal benefits that may accrue from Smart Metering:
1. Demand response programs that provide consumers with inducements to modify their electricity consumption through price or other incentives, thus providing them with a opportunity to reduce their electricity costs
2. Feedback made available to consumers about electricity consumption in an actionable and timely fashion that may result in reduced electricity consumption and bill savings
3. New products and services that can create opportunities to use electricity more efficiently and effectively
4. Service quality enhancements that may reduce the duration of outages
5. Macroeconomic benefits may arise from changes in the expenditure patterns of utilities and consumers that can enhance regional employment and raise wages
For each of these benefits, the report describes one or more transformation functions, protocols, or algorithms that convert the physical manifestation of benefits into monetary terns. Examples of the application of these functions, not all of them associated with Smart Metering business case analyses, are provided to illustrate the effort required and the results each produces. In most cases, the benefits generated by Smart Metering extend beyond the consumers that undertake behavioral changes.
EPRI PerspectiveEPRI prepared this study for a consortium comprised of four Ohio utilities: American Electric Power, Dayton Power and Light, Duke Energy and FirstEnergy. Although the members of the Consortium agree in principle with the goals of this study and view it as helpful in illustrating generic methodologies that can be used to assist individual Consortium members in quantifying the societal benefits associated with Smart Metering, nothing in this report should be construed as the position that an individual Ohio Consortium member would necessarily take; and, therefore, none of the contents of this report is to be viewed as binding upon any member in any current or future proceeding.
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