Kentucky regulators reject LG&E, KU proposal to deploy smart meters

The Kentucky Public Service Commission on Aug. 30 said that it has rejected a proposal by Kentucky Utilities (KU) and Louisville Gas & Electric (LG&E) to deploy advanced smart meters and associated technology throughout their systems.

The KU/LG&E application was denied without prejudice, meaning that the utilities may submit a similar plan in the future, the commission said.

As noted in the order, KU proposed to replace about 531,000 electric meters at the cost of $146.7m, while LG&E proposed to replace about 413,000 electric meters, as well as to install about 334,000 advanced metering systems (AMS) gas indices, at the cost of $103.7m for LG&E electric and $61.5m for LG&E gas. The companies selected Landis+Gyr to provide the meters, as well as the network to support AMS.

The companies provided a cost-benefit analysis to support their application in which they indicated, in their most recent update, that the net present value revenue requirement (NPVRR) benefit of the AMS proposal was $24.6m, the commission added.

In rebuttal testimony, the companies provided a cost-benefit analysis based on a 20-year, 18-year, and 15-year service life. The analysis results showed NPVRR benefits of $11.6m, NPVRR costs of $18.1m, and NPVRR costs of $67.2m, respectively, the commission added.

While the companies claimed that the NPVRR benefit calculation of $24.6m was based on a meter service life of 20 years, both the $24.6m NPVRR and the $11.6m NPVRR were ostensibly based on a 20-year service life, the commission said. When asked to reconcile the difference, the companies indicated that the $24.6m NPVRR benefit calculation was actually based on a longer period with the benefits exceeding the 20-year service life, and the $11.6m NPVRR reflected benefits attributed to an actual 20-year service life, the commission said.

The companies also acknowledged the NPVRR benefit of $24.6m was calculated using a depreciable life for the AMS meters of 15 years, the commission said.

The companies said that they have determined that now is the appropriate time to invest in full AMS deployment across their service territories due to cost savings. The companies also said that deployment of AMS would create operational savings, reduce non-technical losses, and provide customers with enhanced usage data, the commission added. The companies claimed that their AMS proposal meets the need criteria for a certificate of public convenience and necessity (CPCN) because their current meters are obsolete and AMS would improve customer service, enhance reliability, and reduce operating costs, the commission said.

However, the commission said that the companies failed to present sufficient evidence in the record to demonstrate that there is a substantial inadequacy of existing service. The existing electric meters have remaining service lives of 17.4 years and 15.4 years for LG&E and KU, respectively. Given the companies’ 15-year depreciation schedule for the proposed AMS meters, the AMS meters would be on a roughly parallel depreciation schedule with the existing meters, the commission added. Furthermore, the companies’ representative acknowledged that they are currently able to provide reliable service to customers using existing meters, the commission said.

Contrary to the assertions in the companies’ post-hearing brief, the commission said that it has never found that an AMS deployment was justified simply because of the superiority of new technology. The commission noted that in previous cases, it has found that the existing meters used by the electric cooperatives were either discontinued or in the near future would no longer be manufactured or supported, and thus the utilities established a need to upgrade the metering system in order to provide adequate and reliable service, and that the proposed AMI systems were the least-cost alternative to address the utilities’ metering needs.

In this proceeding, the commission said, the companies failed to provide any documentation in the evidentiary record to support the assertion raised in their post-hearing brief that their existing meters are no longer being manufactured.

Also, the evidence in the record indicated that the companies were generally providing adequate service with their existing meters and that they would continue to do so, the commission said.

While the companies argued that the proposed AMS would provide additional benefits to, and options for, their customers, the commission said that it has concerns regarding the claimed benefits and options for customers. For instance, the companies claimed that AMS would provide customers more control over their consumption by providing them timely usage data, but acknowledged that the data customers would receive would be 24 to 48 hours old, the commission said.

Among other things, the commission said that the companies included questionable savings in their cost-benefit analysis. For example, the commission said, the companies included about $158m in nominal benefits from conservation arising from customers’ use of ePortal to monitor their usage. However, the savings were based on current rates, in which 71% of the energy charge represents fixed costs. Customers will see a benefit only until the next rate cases, which will be filed this fall, the commission added, noting that with the base rate cases, those fixed costs will likely be shifted back to the customers through an increase in the customer charge or to other customers through an increase in the energy charge, which would substantially reduce the savings and was not accounted for in the cost-benefit analysis.

Natasha Collins, director, Media Relations, LG&E and KU, on Sept. 4 told TransmissionHub: “We are disappointed in the commission’s decision to deny our request to offer the benefits of advanced meters to all of our customers. We continue to believe the meters are an important investment for both enhancing service to our customers and helping Kentucky keep pace with other states and communities implementing technologies that improve quality of life and attract businesses.”

Collins said that the decision by LG&E and KU to file the request to deploy this technology was not one made lightly.

“Our request followed nearly two decades of study by our employees to gain experience on the technology’s capabilities as well as a four month AMS collaborative that addressed the questions and concerns of numerous parties including low-income groups, the Kentucky Attorney General’s office, Kentucky School Board Association, Kentucky Industrial Utility Customers, the Sierra Club, Louisville Metro Government and Lexington-Fayette County Government,” Collins said.

Noting that advanced meters are currently installed on nearly 50% of homes in the United States, Collins said: “As we evaluate the commission’s decision, we plan to continue looking for a future opportunity to expand the benefits of advanced meters to all of our customers. In the meantime, we will continue to offer the Advanced Meter Early Adoption Program to customers interested in learning more about their energy usage patterns and ways to be more energy efficient.”

She also said that LG&E and KU will continue to provide customers high-quality service, as well as to invest in infrastructure improvements and other technologies further enhancing the safety and reliability of their systems – including automated distribution system equipment aimed at reducing outages and creating greater efficiencies in service restoration.

About Corina Rivera-Linares 3058 Articles
Corina Rivera-Linares, chief editor for TransmissionHub, has covered the U.S. power industry for the past 15 years. Before joining TransmissionHub, Corina covered renewable energy and environmental issues, as well as transmission, generation, regulation, legislation and ISO/RTO matters at SNL Financial. She has also covered such topics as health, politics, and education for weekly newspapers and national magazines. She can be reached at clinares@endeavorb2b.com.