Case Study Of Smart Meter System Deployment

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Case Study of Smart MeterSystem DeploymentRecommendations for Ensuring Ratepayer BenefitsMarch 2012

About DRAThe Division of Ratepayer Advocates (DRA) is an independentconsumer advocacy division within the California Public Utilities Commission (CPUC)that represents the customers of California’s investor-owned utilities. DRA’s statutorymission is to obtain the lowest possible rates for utility service consistent with safe andreliable service levels. In fulfilling this goal, DRA also advocates for customer andenvironmental protections.AcknowledgementsWilliam DietrichCamille Watts-ZaghaChris Danforth – Supervisor/ManagerCheryl Cox – Policy AdvisorLinda Serizawa – Interim Deputy DirectorJoe Como – Acting DirectorCover Design by Karen Ng

Case Study of Smart MeterSystem DeploymentRecommendations for Ensuring Ratepayer BenefitsbyKarin HietaValerie KaoThomas RobertsMarch 2012

Case Study of Smart Meter System DeploymentTable of ContentsExecutive Summary .1I. Introduction and Overview . 4II. Background on AMI and SCE's SmartConnect . . .7III. Overview of SmartConnect Cost Recovery Process and Realization of Benefits .12IV. DRA Analysis Methodology . . 15V. Findings . .18VI. Recommendations .44VII. Conclusion . .50APPENDIX 1: Glossary .53

Case Study of Smart Meter System DeploymentExecutive SummaryThis case study is an examination of Southern California Edison’s (SCE) “SmartConnect”Advanced Metering Infrastructure (AMI), or smart meter program, to date. The report presentskey findings stemming from the Division of Ratepayer Advocate’s (DRA) review of costrequests thus far. DRA supported the use of AMI to the extent that it can provide net benefitsto customers as projected when approval was granted by the California Public UtilitiesCommission (CPUC). DRA intends for this report to alert the CPUC to the challenges oftracking AMI costs and benefits and recommends regulatory actions be taken, if necessary, toensure AMI systems statewide provide a net benefit to customers.DRA reviewed SCE requests for SmartConnect-related cost recovery in multiple CPUCproceedings and compared them to the costs and benefits estimated in SCE’s approvedSmartConnect business case, which forecasted costs for its AMI program.DRA alsoevaluated progress toward the CPUC-adopted estimate of 9 million in lifetime net benefits forSCE customers, which should result in a net reduction in customer bills as a result of smartmeter deployment.1 This version of the report contains confidential data which is blacked outin tables and text.SmartConnect was approximately 40% deployed during the discovery phase of this study,2and only three years of a 24 year program had been completed. Therefore, this report does1The 9 million figure is the result of a present value revenue requirement (PVRR) analysis. SCE also estimated 295 millionin societal benefits reflecting reduced energy theft and increased meter accuracy, which parties accepted as reasonable butagreed not to include in the business case (i.e., for purposes of determining cost-effectiveness).2As of January 31, 2012, deployment was approximately 78% complete.1 Page

Case Study of Smart Meter System Deploymentnot attempt to offer a conclusion as to the final net cost or net benefit of SCE’s program.Further, this report is not intended to propose disallowances of approved SmartConnect costs.However, data thus far does reveal trends and potential hurdles to achieving an overall netbenefit for customers. Based on the analysis in the case study, DRA offers recommendationsto regulators, policymakers, and utilities on ways to overcome those hurdles.Key Findings presented in Section V of this report include: According to SCE’s AMI business case, the total cost to customers will be greater than 5 billion, rather than the 1.6 billion cost explicitly approved by the CPUC, which onlyincluded nominal deployment costs; Many forecasted benefits have been delayed or reduced, which erases the projectedmargin of net benefits as calculated in SCE’s business case; SmartConnect-related costs not anticipated in SCE’s original business case havealready been approved by the CPUC in other proceedings, beyond the over 5 billioncost referenced above. In many cases, these costs were approved without a showingof incremental benefits, and DRA anticipates that more will be requested; SmartConnect features such as remote disconnect and SmartConnect-enabled timevarying rates have a high potential for adverse impacts for low-income and other “atrisk” customers; and Ascertaining SmartConnect net benefits is hampered by a complicated cost recoveryprocess.2 Page

Case Study of Smart Meter System DeploymentThe report concludes with specific recommendations to assist the CPUC with ongoing reviewof AMI-related proposals by the utilities.A detailed discussion of the recommendations is in Section VI. They include:1. Track AMI benefits and cost impacts throughout the life of the investment;2. Require that any request for AMI-related incremental cost recovery includes a showingof increased cost-effectiveness;3. Ensure that realization of customer benefits are synchronized with recovery of costs;4. Condition approval of Demand-side Management expenditures on correspondingadjustments to supply-side procurement needs;5. Create an environment that fosters the development of new benefits from the sunk costof AMI; and6. Ensure the needs of low-income and other “at-risk” customers are considered inprogram development and implementation.3 Page

Case Study of Smart Meter System DeploymentIntroduction and OverviewAdvanced Metering Infrastructure (AMI) - also known as “smart meters” - is a metering andinformation technology (IT) system. “Smart meters”3 are the main, but by no means the only,component of an AMI system. AMI is intended to provide benefits to customers and serviceproviders by automating meter reading, optimizing utility resources, and reducing electricitydemand via customer response to more detailed energy usage information.This report provides the results of an extensive analysis of Southern California Edison’s (SCE)AMI system, which is known as “SmartConnect.”4 SCE’s AMI deployment was selected foranalysis with the intention that lessons learned might apply to the other California utilitiesdeploying AMI. SCE’s system was selected initially for this analysis because: It was perceived as a “simple case” with only electric smart meters; SCE benefited from lessons learned by being the last of the three largest California electricutilities to deploy an electric AMI system; SCE’s AMI deployment was not complicated by a meter upgrade proceeding, as wasPacific Gas and Electric Company’s (PG&E) AMI deployment; and SCE has a pending General Rate Case (GRC), in which it is requesting recovery of AMIrelated costs.3“Smart meter” has become a generic term for AMI.4SmartConnect is the trademarked term for SCE’s smart metering system. For ease of reading, we do not include thesuperscript “TM” in this report.4 Page

Case Study of Smart Meter System DeploymentIt is also important to note that, so far, SCE’s requests for AMI-related funding have been lowerthan such requests made by PG&E and San Diego Gas & Electric Company (SDG&E).The objectives of this report are to:1. Determine how the actual cost-effectiveness of SCE’s SmartConnect system comparesto the forecasted costs and benefits of the original business case; and2. Alert regulators to the risks and complications involved in actually realizing the benefitsof AMI systems, especially now that the three large investor owned utilities (IOUs) havebegun requesting AMI-related funding beyond that requested and approved in theiroriginal business cases.This report does not provide a definitive answer to the simple question “Does SCE’sSmartConnect Program provide a net benefit to customers?” Nor can it since deployment isnot yet complete, and the original cost/benefit analysis extends through 2032. Instead, thisreport provides specific examples of how SmartConnect-related costs are being requestedand/or how benefits are being realized in SCE regulatory filings, including Energy ResourceRecovery Account (ERRA)5 applications, Phases 1 and 2 of GRCs,6 Demand Response (DR)applications, Smart Grid proceedings, and the Long Term Procurement Planning (LTPP)5ERRA is discussed in Section III as well as Appendix 3.6For California IOUs, general rate cases (GRCs) are filed generally every three years and are typically divided into twodifferent proceedings, or “phases.” In Phase 1, the CPUC determines the revenue requirement that utilities will be authorizedto recover through rates. In Phase 2, the CPUC determines how to allocate the total revenue requirement among the differentcustomer classes, as well as rate design for specific customer classes. Separately, in the intervening years betweenGRCs, the utilities may file applications to propose new or modified tariffs – this interim process is referred to as the RateDesign Window (RDW).5 Page

Case Study of Smart Meter System Deploymentproceeding.Cost recovery requests in these proceedings were compared to the originalSmartConnect forecasts.DRA provides findings regarding AMI cost-effectiveness andrecommendations aimed at realizing the projected customer benefits through reduced rates.The exercise of performing a comprehensive analysis of AMI cost-effectiveness resulted inmany lessons learned and highlights areas for further consideration by the CPUC, and otherrelevant regulatory bodies, to actualize the potential of AMI. DRA intends this report to aidCPUC decision-makers in ensuring cost-effective AMI systems, as well as CPUC staff who willaddress AMI-related funding requests in future proceedings over the next two decades andbeyond.A glossary, including acronyms and key AMI terminology, is provided in Appendix 1.6 Page

Case Study of Smart Meter System DeploymentII. Background on AMI and SCE’s SmartConnectIn California, the CPUC established requirements for AMI systems in response to the electricitycrisis of 2000-2001, which was a period of highly volatile wholesale electricity prices androtating outages resulting from partial deregulation of the electricity market and uncheckedmarket manipulation. The CPUC issued a Ruling ordering California’s large IOUs (Pacific Gasand Electric Company, San Diego Gas & Electric Company, and Southern California EdisonCompany) to file preliminary AMI deployment analyses, followed by applications containingAMI deployment strategies.7 Thus, the IOUs began to file applications for deployment of AMIbeginning in 2005. PG&E and SDG&E both filed their applications in March 2005.8SCE was the last electric IOU to file an AMI application.9 At the time that PG&E and SDG&Esubmitted their applications, SCE’s business case analysis, including multiple scenarios,showed that AMI deployment was not a cost-effective endeavor. Two of its scenario analysesshowed a positive Present Value Revenue Requirement (PVRR),10 largely due to the addedDemand Response from large customers11 that already had interval meters.12 SCE stated that7“Administrative Law Judge and Assigned Commissioner’s Ruling Adopting a Business Case Analysis Framework forAdvanced Metering Infrastructure,” R.02-06-001, July 21, 2004, pp. 2 and 4 (mimeo). See Attachment A and Appendix A.8“Application of San Diego Gas & Electric (U-902-E) for Adoption of an Advanced Metering Infrastructure DeploymentScenario and Associated Cost Recovery and Rate Design,” A.05-03-015; “Application of Pacific Gas and Electric Company forRecovery of Pre-Deployment Costs of the Advanced Metering Infrastructure (AMI) Project,” A.05-03-016.9SCE filed “Southern California Edison Company’s (U 338-E) Application for Approval of Advanced Metering InfrastructureDeployment Activities and Cost Recovery Mechanism,” A.07-07-026 on July 31, 2007. Southern California Gas Company filedits AMI application, A.08-09-023 in September 2008.10PVRR is a single calculated value that sums the time-discounted cost/benefit cash flows of SmartConnect (in terms ofrevenue requirements) for each year of the program.11Large customers are defined as having maximum demand 200 kW.7 Page

Case Study of Smart Meter System Deployment“the technology envisioned by the Ruling is unproven and not commercially available at thistime.”13Between 2005 and 2007, SCE requested funds to study and test AMI technology, and theCPUC approved 57.2 million for this purpose. Based on its preliminary findings, SCE filed anapplication in July 2007 (referred to in this report as the “SmartConnect Application”) seekingauthorization to spend 1.634 billion to deploy a specific AMI system it called SmartConnect.SCE initially estimated that this investment would result in 109 million in net benefits (PVRR)over the estimated 20-year project life. This estimate increased to 116 million in net benefits(PVRR) through a set of errata testimony and workpapers, submitted in December 2007.SCE’s business case continued to evolve through several iterations. SCE and DRA eventuallyreached a Settlement Agreement, which they petitioned the CPUC to adopt.14 In late 2008, theCPUC adopted the SCE – DRA Settlement Agreement in Decision (D.)08-09-039 (referred toin this report as the “SmartConnect Decision”), by which the parties estimated a finalquantifiable net benefit of 9.2 million (PVRR). The settlement also included 295 million(PVRR) in “societal” costs and benefits, though these societal costs and benefits were not12Following the California electricity crisis, the state legislature took immediate action to enable large customers (i.e.,customers with maximum demand of 200 kW) to reduce peak load by authorizing 35 million from the State General Fund tothe California Energy Commission (CEC) for meters that could measure energy usage in time intervals of one hour or less.Interval meters can store data for a defined time interval and contain electronic components enabling them to be read remotelyby the utility and then to communicate the collected energy usage data to a utility’s billing system. They are often considereda precursor to AMI, but include fewer capabilities. See CEC Report to the Legislature on Assembly Bill 29X, Real TimeMetering Program (June 2002), pp. 1 and 3 (mimeo). See http://www.energy.ca.gov/reports/2002-06-27 400-02-004F.PDF,accessed April 6, 2011.13“Southern California Edison Company’s (U 338-E) Revised Preliminary Analysis of Advanced Metering InfrastructureBusiness Case,” R.02-06-001, January 12, 2005, p. 17 (mimeo).14In addition to its motion for adoption of the Settlement Agreement, SCE filed jointly with the Utility Reform Network (TURN) amotion for adoption of stipulations, which are contained within the Settlement Agreement.8 Page

Case Study of Smart Meter System Deploymentincluded in SCE’s final business case for determining cost-effectiveness.15In theSmartConnect Decision, the CPUC authorized SCE to spend up to 1.634 billion (nominal) inAMI deployment costs, over a deployment period extending through 2012.16The SmartConnect Decision explicitly authorized a deployment period budget of 1.634 billionand, by finding the SmartConnect program cost-effective over its entire lifecycle, implicitlyadopted forecasted post-deployment costs of 1.582 billion and lifetime benefits of 7.4 billion(nominal).17One complexity of analyzing AMI business cases comes from the fact that, on a nominal basis,costs are highly “front loaded” and benefits are “back loaded.” In other words, the majority ofthe estimated costs will be incurred early in the program (i.e., during deployment), whilegreater benefits were estimated to occur during the later years of the business case. This isshown in the following table.15The adopted settlement included 352 million (PVRR) in societal benefits associated with reduced energy theft detectionand increased meter accuracy, as well as 57 million (PVRR) in societal costs associated with higher energy usage.16Contingency costs of approximately 130.1 million were implicitly adopted and are included in the final authorized amount of 1.63 billion. The settlement generally shielded SCE shareholders from potential cost overruns by enabling SCE to record 100 million more than the authorized amount before the program is subject to an after-the-fact reasonableness review. Tenpercent (10%) of this additional amount would be borne by shareholders.17D.08-09-039, Findings of Fact 2, 4, 6, 9, and 10.9 Page

Case Study of Smart Meter System DeploymentTable 1: Nominal Costs and Benefits of SmartConnect Program( millions)DeploymentPost-Deployment2007-20122013 - 2032BenefitsCostsNet BenefitsTotal 437.6 6,999.7 7,437.3 1,633.518 1,582.1 3,215.6- 1,195.9 5,417.6 4,221.7The table shows 4.2 billion in net benefits based on a comparison of nominal dollars. Incontrast, as stated above, SmartConnect was adopted based on an estimate of 9.2 million innet benefits on a PVRR basis owing to the time-discounted value of money.19 In SCE’s PVRRanalysis, all costs and benefits were converted to “revenue requirements” and discounted to2007 as the present value year.SCE began mass deployment of SmartConnect in September 2009 and, according to a recentSCE quarterly Technical Advisory Panel (TAP) report, it had completed approximately 78% ofprojected installations as of January 31, 2012. SCE reports that all expenditures recorded to18Note that the deployment cost adopted in the SCE business case is 47.4 million greater than the 1.634 billion authorizedfor cost recovery by D.08-09-039. The difference includes 45.2 million of pre-deployment costs and 2.2 million of Phase IIIpower procurement costs, which the settling parties used to calculate the final net benefit of the project but were notauthorized for recovery in D.08-09-039.19It is important to note that SCE used a discount rate of 10%, which was significantly higher than SDG&E’s and PG&E’sdiscount rates of 8.23% and 7.6%, respectively (see D.07-04-043, p.25 (mimeo) and D.06-07-027, p.49 (mimeo)). The effect ofSCE’s higher discount rate was to reduce the net benefit of SmartConnect in present value terms. Regardless of the discountrate used, the benefits forecasted in the SCE business case still must be reflected as rate reductions, or decreased rateincreases, in order to ensure AMI is cost-effective overall.10 P a g e

Case Study of Smart Meter System Deploymentthe Edison SmartConnect Balancing Account (ESCBA)20 are within budget, and it anticipatescompleting mass deployment by the end of 2012 with 105 million of the authorized 130.1million contingency funding remaining as of January 31, 2012.21 However, it should be notedthat incremental funding requests are being made that are not recorded to the ESCBA, asdiscussed further below.Appendix 2 contains a more detailed background.20A balancing account is an account established by a utility to record, for recovery through rates, certain authorized amountsand to ensure that the revenue collected is neither less than nor more than those amounts.21All data from the TAP quarterly report.11 P a g e

Case Study of Smart Meter System DeploymentIII. Overview of SmartConnect Cost RecoveryProcess and Realization of BenefitsUtility expenditures for programs, equipment, plant, and expenses are authorized in CPUCdecisions, but authorization does not directly result in rates increasing or decreasing.Additional mechanisms are used to ensure the utility collects these authorized costs throughcustomer bills. The SmartConnect Decision explicitly provides for recovery of deploymentcosts and a limited portion of the estimated benefits. Post-deployment program costs and avast majority of program benefits will impact rates through a wide range of routine CPUC costrecovery processes.Ultimately, customer rates are directly changed through a CPUC-approved utility advice letter, which modifies rate tariff sheets.The following is a briefsummary of how SmartConnect deployment will impact customer rates (additional details areprovided in Appendix 3).SCE cost recovery for AMI deployment costs from 2008 through 2012 can be summarized asfollows:22 The forecasted SmartConnect deployment revenue requirement is added to customerrates before expenses are incurred; SmartConnect costs and some benefits are recorded in the ESCBA as they are incurredor realized; and Rates are subsequently adjusted for any differences between forecasted and actualrevenue requirements.22Recovery of AMI pre-deployment costs of 12 million are not addressed here.12 P a g e

Case Study of Smart Meter System DeploymentIn practice, this is a complicated process that involves multiple balancing accounts and adetailed understanding of the multifaceted Energy Resources Recovery Account (ERRA)proceedings, where balances in these accounts are reviewed. Going forward, the processdescribed above will be modified in two ways.First, beginning in August 2011, SCE’sSmartConnect costs will not be recovered through the ERRA proceedings, but rather throughan advice letter filing.23 DRA requested this change because review of advice letter filings willallow greater scrutiny of SmartConnect costs that are eclipsed by the larger fuel and powerprocurement costs reviewed in the ERRA proceedings.24 Second, in SCE’s pending 2012GRC application (A.10-11-015), SCE requests authority to keep ESCBA open, with certainlimitations, through 2014.25ESCBA was approved to permit recovery of the 1.634 billion of deployment period costs, and 151.5 million in deployment period benefits, as discussed in Finding 1 in Section V below.The only deployment period benefits that are captured in the ESCBA are those associated withmeter reading labor cost reductions. Thus, the following costs and benefits are not recoveredthrough ESCBA and must be recovered through alternative means:1. Additional deployment period benefits, including all capital benefits;2. “Avoided cost” benefits due to Demand Response programs;23“Decision Approving a Consolidated Revenue Requirement Increase of 403.8 Million, But a Rate Level Increase of 183.4Million,” D.11-04-006 in A.10-08-001, April 14, 2011, p. 10 (mimeo), Finding of Fact 9. Also see discussion at p. 7.24Ibid.25“Application of Southern California Edison Company (U 338-E) for Authority to, Among Other Things, Increase its AuthorizedRevenues for Electric Service in 2012, and to Reflect That Increase in Rates,” A.10-11-015, 2012 General Rate Case –Customer Service Volume 1 – Policy, November 23, 2010, p. 30 (mimeo).13 P a g e

Case Study of Smart Meter System Deployment3. All post-deployment period costs and benefits; and4. Costs and benefits that are, or will be, incremental to the SmartConnect Decision.In addition to the general summary of these cost recovery mechanisms in Appendix 3, SectionV discusses how these costs and benefits are actually being realized to date.The benefits defined in the SmartConnect business case should be realized as a ratereduction, or reduced rate increase, which applies to all customers. In addition, individualcustomers can realize benefits through reduced electricity bills if they use feedback from theirSmartConnect meter to reduce their consumption, or to shift their usage to times when it isless expensive when they are on a time-varying rate tariff.The 295 million of societalbenefits included in the SmartConnect Settlement relate to increased meter accuracy andreduced theft, but neither the settlement nor the SmartConnect Decision specify how thesebenefits could be realized.14 P a g e

Case Study of Smart Meter System DeploymentIV. DRA Analysis MethodologyDRA’s review of the SmartConnect program included four major analytical steps:1. Review and summarize pertinent sections of SCE’s AMI business case submitted inApplication (A.)07-07-026 (“SmartConnect Application”);262. Analyze SCE’s recorded AMI costs and benefits and pending AMI-related cost recoveryrequests;3. Compare steps 1 and 2 above; and4. Investigate and explain the cause of any deviations found in step 3 above.Although SCE updated the SmartConnect business case and workpapers through severaliterations of testimony, SCE never updated its workpapers to reflect the final settlementadopted by the SmartConnect Decision.27 In order to review and summarize SCE’s adoptedAMI business case, DRA developed its own workpaper which quantifies the final set of costsand benefits adopted in the SmartConnect Decision through the following:26SCE’s AMI business case for SmartConnect is a detailed analysis of whether the proposed program will provide netbenefits, on a present value basis. See “Southern California Edison Company’s (U 338-E) Application for Approval ofAdvanced Metering Infrastructure Deployment Strategy and Cost Recovery Mechanism,” A.05-03-026, March 30, 2005;“Southern California Edison Company’s (U 338-E) Application for Approval of Advanced Metering Infrastructure PreDeployment Activities and Cost Recovery Mechanism,” A.06-12-026, December 21, 2006; and “Southern California EdisonCompany’s (U 338-E) Application for Approval of Advanced Metering Infrastructure Deployment Activities and Cost RecoveryMechanism,” A.07-07-026, July 31, 2007. Also see dustry-resourcecenter/regulatory-filings.htm, accessed June 28, 2011.27In at least one data request response, SCE stated that it did not update its workpapers to reflect the final settlement adoptedby the SmartConnect Decision. See SCE response to DRA data request (DRASmtCnt-SCE-KAR-002 question 2), receivedApril 29, 2011.15 P a g e

Case Study of Smart Meter System Deployment Adjusting for the terms of the Settlement Agreement; 28 Combining and reformatting SCE’s original workpapers into a single spreadsheet whichshows the nominal value of each cost and benefit for each year, (2007 – 2032); Categorizing costs and benefits as capital or Operations & Maintenance (O&M); and Categorizing costs and benefits as either operational or demand response related.The resulting workpaper was cross-checked against the Settlement Agreement and originalworkpapers to ensure it was accurate within 0.05 million.29 The final DRA workpaper allowsfor easy review, sorting, and charting of summary data, or annual data for any year, for eachcost and benefit. Table 2 provides a summary of DRA’s workpaper.Table 2: SmartConnect Costs and Benefits( millions, &MTotal 1,187.9 258.3 1,446.2 410.2 823.1 1,233.3 86.5170.7257.1 341.6 3,704.4 4,046.0 70.3110.2180.5 161.8 2,792.0 2,953.8 156.8 280.8 437.6 7,437.3 503.4 6,496.3 6,999.7DemandResponseTotal(Operations l 38.8148.5187.3 1,226.7 406.8 1,633.5 3,215.616.3332.6348.8 426.4 1,155.7 1,582.128D.08-09-039, Appendix A.29Figures in the adopted settlement were rounded to the nearest 0.1 million.30This is based on DRA workpapers that estimate the adopted costs and benefits of the SmartConnect decision; original datais from SCE’s workpapers in the SmartConnect Application.16 P a g e

Case Study of Smart Meter System DeploymentAnalysis of the recorded and requested costs required extensive discovery with SCE. WhileSCE was cooperative and timely in providing responses, discovery and analysis wascomplicated by the fact that the cost categories in the AMI business case were not perfectlyaligned with those used in subsequent proceedings. Note that DRA’s analysis is based onnominal values for each year of the business case, since there was insufficient time orresources to operate SCE’s revenue requirement model.31 Small, but noteworthy, errors maybe encountered where costs and benefits calculated in different years are compared.Comparing actual SCE cost requests with the SmartConnect business case requires cleardefinitions of the following terms: Deployment costs/benefits; Post-deployment costs/benefits; Incremental costs/benefits; Capital costs/benefits; O&M costs/benefits; Operational costs/benefits; and Demand Response-related costs/benefits.Each of these terms is defined in Appendix 1.31In its workpapers, SCE provided annual itemized cost data in nominal terms and separately provided a “revenuerequirement model” by which (nominal) cost categories could be translated into revenue requirements. While it is moreaccurate to analyze revenue requirements, as these are the real costs to ratepayers, DRA did not have sufficient informationto be able to calculate revenue requirements for each individual cost/benefit item.17 P a g e

Case Study of Smart Meter System DeploymentV. Findings1. Without Effective Regulatory Oversight of AMI Costs and Benefits, itis Unlikely that Projected SmartConnect Benefits will be Fully Realized.It is challenging to monitor AMI-related costs, as discussed further below. It is even morechallenging, however, to ensure estimated benefits are realized, since in most cases benefitsare actually a reduction in costs, compared to a scenario without SmartConnect. Trackingbenefits requires analysts to be knowledgeable of the more than 130 different costs and 50projected benefits; this knowledge needs to be maintained and applied through 2032, unlessSmartConnect is replaced before this time.As noted previously, the SmartConnect Decision established a recovery mechanism for only alimited set of deployment benefits. Specifically, 151.5 million in operational O&M benefits32during the deployment period, which amounts to less than 2% of the total benefits estimated inthe bus

Case Study of Smart Meter System Deployment 4 Page Advanced Metering Infrastructure (AMI) - also known as “smart meters” - is a metering and information technology (IT) system. “Smart meters”3 are the main, but by no means the only, component of an AMI system. AMI

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