Senator Thibodeau, Representative Fitts members of the Committee on Energy, Utilities and Technology, my name is Eric Stinneford and I am Vice President, Controller, Treasurer and Clerk of Central Maine Power Company. I’m here today to testify in opposition to these two bills. Thank you for this opportunity today to provide testimony regarding CMP’s Advanced Metering Infrastructure (AMI), or “Smart Meter” project and the important issue of whether customers should have the right to opt out of this program.
I have been involved in the development of CMP’s AMI project since its inception in 2006, through four years of regulatory proceedings and ultimate approvals and the Company’s application for, and award of, a $96 million federal stimulus grant to fund 50% of the project’s costs. More recently, I have participated in a Steering Committee of senior management that has provided executive oversight of the project, and I have also overseen the Company’s regulatory activities before the Maine Public Utilities Commission as the Commission and the Company have attempted to address the “opt-out” issue. CMP understands that some of our customers do not welcome this new technology and, for a variety of reasons, they desire to avoid the installation of a smart meter on their residence. The purpose of my testimony today is not to judge the validity of these reasons, but rather to help inform the Committee of the various opt-out options that have been considered, as well as their potential costs and implications. As the Committee is aware, the PUC has initiated an investigation into the opt-out issue in response to customer concerns. After a period of extensive study and analysis of the potential alternatives, CMP has been engaged for the past several weeks in confidential settlement discussions with the PUC Staff, the Office of the Public Advocate and representatives of the group of customers seeking an opt-out option, including Representative Sirocki. Without violating the confidentiality of those settlement negotiations, I will attempt to provide you with information regarding the various options that have been considered and CMP’s guiding principles as we have considered opt-out options in the discussions. At the request of the PUC Staff, the Public Advocate and Parties to the Commission’s investigation, CMP has considered, analyzed and provided substantial cost information relating to a variety of potential solutions or mitigation measures for customers seeking to opt out of CMP’s Smart Meter program. These include: * A “hard-wired” meter with either 1-way or 2-way communications by telephone line * A “hard-wired” meter communicating with power line carrier technology * A Smart Meter with the internal wireless transmitter removed or disabled (the “Radio Off” option) * Maintaining an existing electro-mechanical meter * Relocation of the Smart Meter on the customer’s property To different degrees, each of these options entails incremental costs, the loss of individual customer benefits and potentially serious risks to the broader benefits that CMP’s Smart Meter program will enable. Let me speak briefly to the costs of these options. Either of the “hard-wired” opt-out solutions will involve significant investment in additional, duplicative communications infrastructure and centralized data management systems. Each of these duplicative systems would require additional software licenses, maintenance contracts and support staff to operate and maintain a completely redundant platform to CMP’s AMI system. We have estimated these incremental infrastructure and support costs to be as high as $70 million over the life of the AMI project, assuming that 1-2% of our customers opt-out. At an opt-out level of 10%, these incremental costs grow to hundreds of millions of dollars – exceeding the costs of CMP’s smart meter project. The Radio Off smart meter or existing mechanical meter solutions would avoid much, but not all, of this infrastructure investment, but would alternatively require a manual process for reading customer meters. This would mean staffing each of CMP’s service centers with meter reading staff, vehicles and equipment that would not otherwise be required with CMP’s AMI system. These incremental costs also vary with the number of opt-out customers, but could range from $1.5 to $3.0 million per year or up to $60 million over the AMI project life. Obviously, some of the environmental benefits of the program, such as the elimination of driving miles to read meters, would also be diminished. The replacement of a Smart Meter with any of these alternatives potentially creates additional risks in terms of expense and operations. CMP’s AMI system operates as an integrated “mesh” communication network, with each meter serving as both a receiver and transmitter in the network. The removal of a communicating element in the mesh, such as a smart meter, particularly in more sparsely populated areas, can create “holes” in the network. In order to prevent these holes from reducing network communication performance, some percentage of removed meters must be compensated for with additional communication devices. If customers opting out of the smart meter program were uniformly distributed over CMP’s service territory, our engineers estimate that roughly 10% of the removed meters would require the installation of additional network devices. Taken to an extreme, there is obviously some level of opt-out at which it is no longer feasible to utilize the mesh network technology, and the nearly $70 million investment that CMP has already made in the program would be stranded. If the smart meter program has to be abandoned, it’s very likely that CMP would lose the Department of Energy $96 million grant, $22 million of which has already been received. All of the costs, including removal of installed meters and related equipment and replacement with old mechanical meters, would all be borne by our customers. Aside from the risk of incremental costs, we also have concerns regarding the operational risks of a broad opt-out program. Among the many benefits of AMI, is the ability to gain real-time visibility into the operational status of CMP’s electrical distribution system. With a few key strokes, our operators will be able to determine which customers on a circuit have power and which do not. We expect this to greatly assist our crews in storm restoration efforts, allowing for more efficient dispatch of crews and more rapid service restoration for our customers. Similarly, Smart Meters will allow our operators and distribution engineers to remotely monitor transformer loadings and voltage levels along a distribution circuit. This will allow for more efficient operation of the system and quicker identification of overloads and voltage issues that must be addressed through line or transformer upgrades, distributed generation or concentrated energy efficiency efforts. If customers opting out of the Smart Meter program become clustered in certain areas or happen to be located in strategically important areas of the distribution system, the loss of this visibility could reduce these operational benefits – not only for the customers opting out, but for others as well. This point brings me to the issue of guiding principles that CMP believes are important for the PUC and this Committee to consider as each addresses the opt-out issue and evaluates potential solutions. First, we believe that no opt-out program, if there is to be one, should allow an opt-out customer to limit any other customer’s ability to have a Smart Meter and participate in the programs and benefits that it provides. At least one of the complainants to the commission has asked for the creation of smart-meter-free zones where no smart meters would be allowed in entire neighborhoods. Second, the opt-out program should not be allowed to jeopardize the overall functionality of the AMI system as designed, as approved by the PUC, and as funded by the U. S. Department of Energy. No opt-out solution should be considered if it jeopardizes our DOE grant. Third, customers voluntarily electing to opt out of the Smart Meter program should be responsible for the incremental cost of this decision. As we have discovered in our analysis of the various options, the potential exists for an opt-out program to generate tens to hundreds of millions of dollars in incremental costs. If there is no economic consequence to an individual customer’s decision to decline a Smart Meter, there will be no check on the growth of these incremental costs and all customers will bear the resulting burden. The Commission has wisely recognized this phenomenon in other instances where customers request non-standard installations and services, instructing utilities to charge customers for the incremental costs imposed by such requests. This policy currently applies in line extension pricing, non-standard metering options, and a variety of other utility services. Fourth, and perhaps most importantly, an opt-out program should not lose sight of the objectives embodied in the Smart Grid Policy Act adopted by this Committee just last year. Each of the opt-out options involves trade-offs in terms of cost, functionality and customer benefits. As the Commission and Committee balance these considerations, the Act should provide guidance in the decision making process. With respect to the two proposed Smart Meter opt-out bills before this committee, it should be apparent that each fails to comply with a number of these principles. If either of these bills passes as written, CMP’s entire smart grid/smart meter program will be put at risk. Irrespective of the reasons why customers may desire to opt out of CMP’s Smart Meter program, I hope I have demonstrated that the issues surrounding the availability of such an option are very complex, highly technical and carry great risks for our customers and the success of the AMI program. For the last several months, the Company, PUC Staff, the Public Advocate and customer representatives have been immersed in exploring these issues to reach a common understanding of the technology, the costs and the implications of various opt-out options. I urge you to let this process run its course. The PUC has been involved in CMP’s AMI project since 2007. Whether through a fully litigated proceeding or through consideration of a stipulated settlement, the Commission understands the complexities inherent in an opt-out program and they are best positioned to resolve them. Thank you for time today. I would be happy to answer any questions, either here today, at your work session or in writing. About CMP and Iberdrola USA: CMP, a subsidiary of Iberdrola USA, is Maine’s largest electricity transmission and distribution company, serving more than 600,000 customers. The company has been ranked #1 in customer satisfaction three times by J.D. Power and Associates. Iberdrola USA, a subsidiary of global energy leader Iberdrola, S.A., is an energy services and delivery company with more than 2.4 million customers in upstate New York and New England. We are a team of dedicated individuals working as one to deliver value to our customers, employees and shareholders. By providing outstanding customer service and exceptional reliability, while holding safety and the environment in high regard, we aspire to be a world-class energy company. For more information, visit www.cmpco.com and www.iberdrolausa.com.