OPAE has signed off on a settlement with Dayton Power & Light Company regarding their proposed Smart Grid deployment. The stipulation covers Phase 1 of the deployment with 95% of customers receiving smart meters; 20% of distribution circuits being automated; 30% of substations being automated; and, Volt Var Optimization being deployed on 30% of all circuits. The latter reduces energy use by around 3% by stabilizing voltage, allowing the system to run at a lower overall voltage. The automation of distribution circuits and substations should increase system reliability. Frankly, DP&L’s distribution system has not seen adequate investment for years, so there was a need and you might as well deploy state-of-the-art technology.
The smart meters are problematic. They have the potential to save customers money, but not much, and are extremely expensive. Smart meters also create consumer protection issues, as outlined below.
Overall, the Stipulation caps the cost of the four-year Phase 1 deployment at $267 million. This investment will ultimately become part of base rates. During the first four years of deployment an average residential customer using 800 kWh per month will pay the following per year: Year 1 — $9.48; Year 2 — $18.00; Year 3 — $42.60; and, Year 4 — $61.68.
Prior to agreeing to sign the Stipulation, OPAE was able to negotiate some key consumer protections. The Company agreed not to implement mandatory time-of-use (TOU) rates. Several jurisdictions, including much of California, now mandate rates that vary over three or four periods of a day. The differential in price can be staggering. There are winners and losers; those that reduce usage or shift usage to off-peak times can save money (a max of around $25/month) while those that don’t respond to the price signals wind up paying more. So, no mandates in Ohio thanks to OPAE.
OPAE also obtained agreement from the Company not to use smart meters as service limiters. This is something that doesn’t occur in Ohio presently, so it was more of a preventative move. Service limiters, as the name implies, cap the amount of electricity a customer can consume in a month and are generally used to limit the consumption of people who are not paying timely. Unfortunately, this practice has resulted in the death of elderly individuals who forget to pay bills and had a limiter attached. No heat in the winter or AC for cooling in the summer can kill you. OPAE wants to ensure this never happens in Ohio.
Third, we put off an attempt from the Company to deploy prepaid metering. In prepay, a customer buys a card that entitles them to a certain amount of electricity (normally at a price higher than regular customers pay). Problem is, this is a second-class service because all consumer protections go away – no more due process prior to shut-off; no more payment plans; no PIPP; no HEAP – when you’re off, you’re off until you refill the card. Prepay is a cousin of the service limiters described above.
Needless to say, low-income customers get pushed onto these prepaid plans to retain service. They pay for two weeks and then get shut off. I’ve studied these plans across the country and they are horrible for customers; at one utility, customers averaged 8 disconnections a month. And, when marketers start offering them, as in Texas, they add numerous fees that further drives up the cost of power for those who can least afford it. This issue will come back when DP&L files its Phase II plan.
We also put off the waiver of the rule that requires a personal visit on the day of disconnection. DP&L proposed a waiver similar to those granted to AEP and Duke that allow customers with smart meters to be disconnected remotely. Customers receive a text message or robocall two days before providing notification. (Utilities are also required to provide a written notice on the bill and a 14-day written notice.) AEP data indicates that disconnections have increased, particularly in areas where smart meters have been installed. We will litigate the issue later this year when DP&L files for the waiver and maybe we’ll win this time.
OPAE also negotiated funding to continue the DP&L low-income efficiency program. Funding will be $450,000 per year for two years, allowing local agencies to provide services to 250-300 customers. The funding comes from shareholders, not ratepayers, and will be paid directly to OPAE.
DP&L indicates it will file a rate case early next year, and the process takes a year, but will give us the opportunity to raise the funding for the low-income weatherization program back up to $1 million annually. It will also give us the chance to restart the fuel fund DP&L agreed to in its third Electric Security Plan (ESP). The Supreme Court declared part of the third plan an illegal subsidy, so the Company withdrew the plan. Since it had also withdrawn ESP II for much the same reason, the Company is now operating under ESP I from 2008. That settlement did not include a fuel fund. We’ll be working to get all the resources needed to serve low-income families back in the rate case.
The stipulation is subject to Commission approval. We hope the case can be completed by the end of the year so we can kick off the energy efficiency program on time.