October 23, 2009

Several utilities told us yesterday they are proceeding with smart grid projects or pilots, mostly metering, despite the recession.  These reports supplement study results released Tuesday indicating some utilities are postponing T&D projects including some smart grid due to revenue drops (SGT, Oct-22).

          “The top 10 manufacturers of T&D equipment have told me in personal interviews that business is down and they don't see it getting better until 2010,” said Charles Newton, President of Newton-Evans Research in Ellicott City, Md.

          For the Sacramento Municipal Utility District, the recession is a reason to hasten installing 615,000 smart meters, not to hold off, especially since it has plenty of funding through municipal bonds and other sources.  “If anything, the recession sped up our motivation to get the smart meters out there,” Erik Krause, senior project manager told us.  “The sooner we deploy them, the sooner we can recover the benefits related to ongoing operational savings.”

          Similarly, tough times are not fazing Long Island Power Authority in Uniondale, NY, that has underway a 250-customer smart meter pilot and a study of possible improvements to its T&D.

          “We're in the initial stages and we'll continue to invest, because we see smart grid as a very important component of what we want to do,” said Bruce Germano, vice president of retail services.  “The economy hasn't affected us.”

          Snohomish County PUD #1, serving 320,000 customers in western Washington, deferred multiple projects after the energy crisis of 2000-01.  Thus now, despite the recession, “we're in a period when we really need to move ahead,” said spokesperson Neil Neroutsos.

          The PUD applied for $15.8 million from DOE to fund half the cost of completing a 156-mile fiber optic network linking and automating its substations and buildings.  That work is under way.

          Bryan Texas Utilities, serving 46,000 customers in south-central Texas, said it is not postponing smart grid projects due to either the recession or the uncertainty of DOE funding.  Those factors don't have any bearing on the projects, spokesperson Bob Wheeler told us.

          But for Santee Cooper of Moncks Corner, SC “the economic climate is certainly a factor” in deciding whether to implement any smart grid improvements among its 163,000 customers, spokesperson Laura Varn told us.  The utility is imposing its first rate hike since 1996 and before committing to AMI, “we need to understand the costs and benefits, especially what costs customers are willing to bear.”

          Typical of several utilities is Memphis Light, Gas & Water.  It plans to seek $20 million in Phase II of the Smart Grid Investment Grant Program to cover AMI and distribution improvements for about 25% of its 420,000 customers.  But “in another month or so, if we don't get that grant, then we'll have to look to see if that's still cost-effective,” said spokesperson Glen Thomas.

          Study author Newton believes many utilities are in that same boat -- if grant money doesn't come through, many may have to find other means to proceed or they may choose not to proceed at all.

          “They're all fighting for that same money.  It will be interesting to see if those utilities that don't get funding can arrange independent financing,” Newton said.

          But DOE funding is not either/or, noted Corey Knutsen, strategic planning director for Seattle City Light.  Most applicants are seeking half the cost of their projects, planning to pay for the other half themselves.  But if DOE decides to fund more programs at smaller percentages, rather than fewer at 50%, many utilities could face the need to raise more funds than originally expected.

          Seattle City Light wants to implement AMI for all 400,000 of its subscribers plus automate its substations and distribution.  Like most utilities, it is asking the DOE for half the project's $102 million price tag.  But whether Seattle's city council would pay for more of the project if the DOE offers less than $102 million is an open question, Knutsen said.

          Seattle City Light made “small bets” on a meter pilot program and tests on substation automation, he added.

          “We haven't put off those expenses but we won't risk much more unless we know we're going to go in that direction,” he said.