Why Texas is the Smart Meter Market to Watch

When it comes to the future of smart meters, keep your eyes on Texas. The Lone Star State may lag behind California in its number of smart meters deployed, but it’s taken a lead in supporting them with regulations and funding, and brought different utilities’ smart meter systems together in a way no other state has yet managed. Just how consumers will react remains the biggest test, however.

Drivers for Smart Meter Deployments in Texas

There are several reasons for Texas’ role as a potential leader in smart meter deployment.

First, unlike most states, Texas’ investor-owned utilities and regulators have no choice when it comes to deployment. A 2005 state law orders the Public Utility Commission of Texas to move forward with smart metering projects. That law also allows utilities to pass the costs on to customers as a surcharge, rather than as a capital expenditure requiring a traditional rate case, which means faster payback for utilities.

Then there’s Texas’ deregulated energy market, where big power delivery utilities like Oncor, CenterPoint and AEP must open their end-customers to dozens of retail electricity providers (REPs). Such a practice is rare elsewhere in North America, though the United Kingdom and some Northern European countries are doing it. In Texas, the PUCT says smart meter deployments should make the process faster and easier for utilities, REPs and customers.

Finally, there’s renewable power to manage. Texas leads the nation in wind power and is growing its share of solar power, but that resource is wildly variable and could use a lot more demand response to manage it — a part of PUCT’s smart meter mandate. Most demand response isn’t done through smart meters, so Texas will be an interesting testing ground for this.

The Customers Pay, But Will They Buy In?

All this helps Texas utilities and regulators justify some hefty cost increases for consumers. Oncor, for example, charges $2.21 per customer per month, PUCT Chairman Barry Smitherman said in a press conference last week, while smaller Texas utility CenterPoint charges $3.24 per month increases for the first two years and $3.05 thereafter, he said.

By comparison, California’s Pacific Gas & Electric — a smart meter leader with 6.4 million deployments so far — sought average monthly increases of only 49 cents to 99 cents per customer; Chicago utility Commonwealth Edison is asking customers to pay about 42 cents per month.

But higher rates should equal more money to expand smart meter functionality into the home. While PG&E, for instance, has yet to turn on smart meter home area network (HAN) capabilities, a few Texas utilities have already begun controlling thermostats and offering pre-pay plans through smart meters. That, in turn, is made possible through the Smart Meter Texas Portal that went live earlier this year. That portal allows access to information on power usage, billing and pricing for customers, REPs and designated third parties. It’s perhaps one reason why Google, developer of home energy management platform PowerMeter, says it would like California and other states to emulate Texas.

Texas also seems to have weathered the consumer backlash against smart meters pretty well so far. A lawsuit accusing Oncor’s smart meters of jacking up customer bills has been sent back to the PUCT’s jurisdiction, a far more friendly venue. At the same time, a study by Navigant Consulting (pdf) reports that smart meters in Texas are working properly.

What’s yet to be seen is how Texas utility customers react to all this new home energy information. Utility consultancy KEMA reports that most Texas customers don’t want to pay for managing energy use. Utilities in every state must fight those trends if more advanced home energy management applications are to take root. In Texas, we might see how that shakes out a lot sooner.

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Question of the week

Will Texas be the national testing ground for smart meters and next-generation smart grid technologies?