The Kentucky Public Service Commission, in a recent order, conditionally approved a stipulation between Duke Energy‘s (NYSE:DUK) Duke Energy Kentucky (Duke Kentucky) and the state attorney general involving the company’s advanced metering infrastructure (AMI) Project.
As noted in the order, Duke Kentucky in April 2016 filed an application requesting a certificate of public convenience and necessity (CPCN) to replace and upgrade its current electric and gas metering infrastructure to a digital AMI for its electric and combination customers, and an automated meter reading (AMR) infrastructure for its gas-only customers, collectively, AMI Project.
Duke Kentucky also sought approval of new depreciation rates for the new metering equipment, and to establish a regulatory asset for the retirement of its existing electric metering equipment, associated inventory, and inventory of existing gas modules, the commission said.
Duke Kentucky proposes to install about 143,000 electric AMI meters, about 82,500 gas AMI modules for its combination customers, and about 20,500 gas AMR modules for its gas-only customers, at an estimated cost of $49m, the commission said.
The company “is conditionally granted a CPCN to install AMI … for its electric and combination customers and AMR infrastructure for its gas-only customers subject to Duke Kentucky and the [attorney general] jointly or individually filing within seven days of the date of this order a statement accepting the commission’s modifications to the stipulation,” the commission said.
The company described several issues with its current metering system, which consists mainly of electromechanical meters, the commission noted, adding that Duke Kentucky also has a small number of early generation smart meters that were deployed as part of a pilot Power Line Carrier (PLC) system. Due to the limited bandwidth on the PLC system, the company’s existing smart meters are unable to obtain daily electric usage data, the commission said.
Furthermore, the company discovered that its PLC meter system had limited ability to retrieve meter readings during circuit re-routing events, such as substation maintenance, the commission said.
Duke Kentucky asserts that with the new metering system, customers will benefit by having greater and more detailed access to their usage information, the commission said.
Discussing the stipulation between Duke Kentucky and the attorney general, the commission said that the stipulation’s major provisions include that:
- The parties agree that the company’s application be approved as filed, except as modified by the stipulation
- The parties agree that the company should be authorized to establish a regulatory asset for the actual costs of the balance of the undepreciated value of the existing metering infrastructure upon retirement, including related inventory, as a result of the AMI Project. In its next base rate case, Duke Kentucky will propose an amortization period of 15 years for that regulatory asset, without carrying charges, for inclusion in the revenue requirement in Duke Kentucky’s electric base rates. Duke Kentucky reserves the right to request carrying costs if the commission approves an amortization period that is greater than 15 years
- Duke Kentucky anticipates filing a base electric rate case no later than Dec. 31, 2019. While the company does not anticipate any cost over-runs during the deployment of the AMI Project, in the event such cost over-runs occur at the time Duke Kentucky seeks recovery in that future rate case, the company commits that it will specifically identify any such cost over-runs on an itemized basis that is consistent with the itemization contained in certain direct testimony in this proceeding
- Duke Kentucky agrees to implement an Electric AMI Opt-Out Program Tariff for residential customers to be effective at the time of initial AMI Project deployment. The Advanced Meter Opt-Out (AMO) – Residential Tariff includes a one-time initial set-up fee of $100 and a $25 per month ongoing charge for manual meter reading. Customers who notify Duke Kentucky before an AMI meter is installed on their premise will not incur the $100 initial set up fee, but will be subject to the $25 monthly charge
“Having reviewed the record and being otherwise sufficiently advised, the commission finds that Duke Kentucky has established a need to upgrade its metering system in order to enhance its ability to serve its customers by providing them with innovative programs and services to have greater access to data and better control over their energy consumption as well as to improve the reliability of Duke Kentucky’s distribution system,” the commission said. “We note that electro-mechanical meters are no longer being manufactured, and Duke Kentucky’s current AMI meters are limited in [their] capabilities with respect to data collection and communication.”
The commission said that it further finds that the benefits from the proposed AMI Project outweigh the cost, noting that Duke Kentucky performed a cost-benefit analysis, which showed that the proposed AMI Project would result in a net benefit of about $7.4m, on a net present value basis over a 17-year study period. The commission noted that the main benefits identified and quantified by Duke Kentucky include the elimination of monthly and off-cycle manual meter reads, reduction of underperforming meters, and the availability of interval usage data the can empower customers to better understand their energy usage and save energy.
The commission noted that it finds that, with the exception of a gas cost/benefit tracker provision, the stipulation is reasonable and should be approved. As part of the stipulation, Duke Kentucky commits to submitting an application to establish a tracking mechanism designed to enable the company to timely recover the deployment costs related to the gas portion of the AMI Project, the deferral of natural gas metering infrastructure included in the regulatory asset established in the proceeding, and take into account the appropriate level of ongoing operational savings attributed to reductions in meter reading and other O&M expense that is allocable to natural gas metering operations and attributable to the AMI Project, the commission said.
The commission said that it finds that there will be large upfront capital costs in years one through three for the natural gas portion of the AMI Project, and the net benefits will not be achieved until year four. As a result, the commission said that it is not convinced that a gas tracking mechanism is in the best interest of Duke Kentucky’s ratepayers.
Among other things, the commission said that the company is to use a 15-year depreciable life for its gas modules; is not authorized to file a gas cost/benefit tracker mechanism prior to filing its next gas base rate case; and is to file, within 20 days of the order’s date – May 25 – its Electric AMI Opt-Out Tariff Rider AMO, setting out the rates approved in the order and reflecting that they were approved under the order.