Prepaid and "smart" meters let you see how much electricity you use—and how much you might save

Consumer Reports News: November 30, 2007 03:53 PM

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Call your utility company to see whether it offers prepaid plans or smart meters. If it doesn't, contact your state public utility commission to see where it stands on the issue. (You'll find a state-by-state listing of commissions on the Web site of the National Association of Regulatory Utility Commissioners.)

Back in the day, as they say, the only way to find out how much electricity you used and how much you spent on it each month was to review the statement from your utility. Not only could that monthly bill provide quite a shock—"We spent how much on A/C in August!?!"—but traditional electrical meters also wouldn't provide you with a sense of how much power you were using each day.

Today, two increasingly-common types of electrical meter—prepaid and "smart"—might eliminate the surprise of a steep bill and lower your electricity use by allowing you to measure your usage in real time or even set limits on how much power you buy. The technologies could be a boon for consumers and utility companies nationwide. Still, you might not be turned on by all aspects of these kilowatt-hour counters.

PLUG AND PAY The Salt River Project's user display terminal plugs into a standard wall outlet.

Prepaid meters: Pay-as-you-use consumption
Prepaid, or pay-as-you-go, meters were the first of these kilowatt-counting devices to reach the U.S. residential market. A half dozen or so utility companies nationwide currently offer the service to customers. Here's how they work for customers of the Salt River Project, a utility that serves more than 900,000 customers in the Phoenix area and whose M-Power plan is the biggest prepaid-electricity program nationwide, with about 50,000 customers, a figure that climbs each month:

After a customer contacts SRP to sign up for M-Power, a field worker replaces his standard electrical meter with one that communicates with a small in-home "user display terminal." That LED device (shown) plugs into a standard wall outlet.

The customer uses a smart card—which closely resembles a credit card—to purchase power remotely, either by charging the card at an ATM-like kiosk in SRP customer-service centers or many area supermarkets. The customer pays for electricity with cash or an EChex virtual check.

When the customer inserts the card into the display unit (shown) at home, the energy purchase amount on the card is transferred to the meter and is added to whatever is left on the meter. The display terminal indicates how much money is on the account, how many kilowatts the household consumed in the last hour, day, and month, how much that power cost in dollars and cents, and when, approximately, the account will need replenishment.

Prepaid services offer some clear benefits, but those programs are not without drawbacks. Having to purchase power remotely, possibly a car ride away, is inconvenient. There's also the possibility of a sudden, untimely cut-off of power if a homeowner forgets to "feed" the meter. Power is restored once the customer recharges the card and reinserts it into the display unit, but that could mean waiting until a customer-service center opens. (Those shutoffs can, of course, happen to utility customers who fall too far behind on their bills.)

SRP and other utilities with prepaid meters have tried to address service cutoffs. With the M-Power program's "friendly credit" feature, if a customer runs out of purchased power after 6 p.m. on weekdays or over a weekend or holiday, the power will not be shut off. The customer will retain normal service and the meter will record how much energy he used during the credit period. That amount will be deducted when the customer makes a subsequent energy purchase.

Prepaid plans can be a boon for credit-challenged. Not only does the plan eliminate a security deposit (for one utility, installation of a prepaid meter costs $99 compared with a $240 deposit for traditional service) and late fees, but it also forces customers to use only as much power as they can afford. During cash-strapped months, they'll have no choice but to cut back on consumption, where before they might have ignored how much electricity they were using, only to be hit with a bill they can't afford.

One of the unexpected benefits of prepaid meters has been decreased energy consumption, according to Jennie King, a principal planning analyst at SRP. "Conservation was not the primary driver, but a lot of customers have told us that the program helps them manage their energy usage," she says. She points to the fact that M-Power customers used on average 12.8 percent less electricity annually than regular customers in 2003, 2004, and so far in 2007.

Other utility companies with pay-as-you-go plans have reported similar conservation. Peter Price, a retired computer programmer from Sacramento, Calif., enrolled last year in the prepaid program offered by the Sacramento Municipal Utility District. "I like knowing where we stand with electricity consumption," he says, adding that his wife uses the clothesline more often now that she knows just how much running the dryer costs.

Even with the conservation benefits, prepaid meters are unlikely to pop up in many Americans homes. The concept, common practice in the United Kingdom and South Africa, for example, is just too alien to Americans. "Americans seem to like their convenience," says Edward Pollock, a residential team leader in the building technologies program of the Department of Energy's Office of Energy Efficiency and Renewable Energy. But for homeowners who will put up with the hassle if it means avoiding the shock of a higher-than-anticipated monthly utility bill, prepaid meters are worth a look.

Smart meters: Can they generate more savings?
Advanced meters, commonly called smart meters, stand a chance to achieve widespread use in the U.S. marketplace, and they have even greater potential to generate energy savings. The devices are currently offered by very few of the 3,170 utility companies nationwide, but that number is expected to increase significantly in the next few years.

Smart meters also take the place of standard electrical meters and can send consumption data by radio signal directly to the utility company. That two-way capability eliminates monthly visits from a meter reader. More important, it also means power companies will be able to monitor consumption as it rises and drops throughout the day, which in turn will let them introduce dynamic pricing based on simple supply and demand economics. "There's no point in having smart meters if you're going to have dumb rates," says Rick Morgan, a commissioner with the Public Service Commission of the District of Columbia. Customers will be able to track those variable rates and their daily consumption on their utility company's Web site or by requesting a display unit.

Demand-response pricing, also known as time-based or dynamic pricing, is common in the industrial sector, but it's only now reaching residential and commercial markets. That's due largely to the Federal Energy Policy Act of 2005, which directed state utility commissions to consider implementing demand-response pricing programs. Utilities are planning to deploy more than 40 million smart meters throughout the country from 2007 through 2010, according to a report published by Federal Energy Regulatory Commission.

The hope is that smart meters will encourage homeowners to use less electricity during peak periods. "Utility bills used to come 30 days after the fact," says Lynda Ziegler, a senior vice president of customer service at Southern California Edison, which is currently testing smart meters in 5,000 homes. "Now customers can access a Web site to track usage and pricing. If prices are high, they can turn up the thermostat on their air conditioner. If all the lights are on in their house, they can see how much that's costing them."

Still, not everyone is gung-ho about smart meters paving the way for demand-response pricing. "Customers have to foot the bill for these meters, but the broad benefits aren't clear, since they're about shifting loads during peak periods, and not conservation," says Mindy Spatt, communications director the California-based consumer advocacy group TURN. Spatt prefers clear-cut conservation programs—offering incentives for air-conditioner cycling, for example—coupled with tiered pricing, whereby consumers pay the lowest price for what's deemed an essential amount of electricity.

But for now, smart-meter technology seems to be moving forward, with companies like SCE leading the way. By 2012, SCE hopes to have 5 million customers using smart meters. That level of deployment would reduce consumption by 1,000 megawatts each year, equal to the total annual output of a major power plant.

You don't have to be Al Gore to appreciate how that's good for the planet.—Daniel DiClerico


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