Safeguarding the Rights of Vulnerable Populations During Modernization of Electricity Distribution

1. Safeguarding the Rights of Vulnerable Populations During Modernization of Electricity Distribution Sargent Shriver National Center on Poverty Law Dec. 1, 2010

2. Contact Information • Julie Nepveu • Sr. Attorney • AARP Foundation Litigation • jnepveu@aarp.org • I am primarily a legal advocate for low income people, not an energy wonk. • Views I express in this webinar and the accompanying article published in Clearinghouse Review are my personal views and should not be attributed to my employer.

3. Webinar Goals • Despite complicated and technical aspects of electricity distribution modernization, there are some basic low income legal advocacy strategies that may be effective in ensuring that low income people are not harmed by the modernization of the electricity grid. • Introduce the basic regulatory framework and key terms. • Discuss basic consumer protections needed and provide examples of successful advocacy.

4. Demand, climate change, oil depletion Driving up cost and environmental impact of generating electricity.

5. Basic Regulatory Structure • Only state regulatory commissions can review and approve filings of public utility investments, rate recovery policies, and utility pricing programs for retail customers. • States have jurisdiction over the regulation of intrastate monopoly functions and the rates that end-use customers pay for essential electricity and natural gas service.

6. Universal Service • Public utilities that enjoy the benefits of monopoly service areas must “serve on reasonable terms all those who desire the service it renders.” United Gas Co. v. R.R. Comm’n, 278 U.S. 300, 309 (1929). • Regulators are obligated to set “just and reasonable” rates.  Fed. Power Comm’n v. Hope Natural Gas Co., 320 U.S. 591 (1944).  

7. Federal Role: Guidance • Federal Energy Regulatory Commission (“FERC”) regulates interstate wholesale energy services and utility investments in the bulk transmission and natural gas pipeline systems, as well as regional energy markets. • The federal role in promoting Smart Grid investments is limited to guidance, assistance in national standards development, or contingent on federal grant authority, research and development.

8. Energy Independence and Security Act of 2007, Pub. L. No. 110-140, 42 U.S.C.S. 17001 (2007). Established national goal to implement smart grid, including installation of smart meters in all homes by 2030 (approximately 60 million). American Recovery and Reinvestment Act of 2009, Pub. L. No. 111-5, 123 Stat. 115 (2009). Provides $3.4 B to develop and implement smart grid. Federal Policies and Incentives

9. Utilities Follow the Money

10. What is the Smart Grid? • A technologically advanced transmission system designed to improve efficiency of electricity distribution and encourage conservation using detailed, real-time two-way communication over the internet.

11. Advanced Distribution Automation • “ADA” is a technologically advanced system to distribute electricity over the grid with greater efficiency and reliability.

12. ADA Goals and Benefits • Reduce environmental and financial impact of meeting peak electricity demand (“peaker plants” create more expensive, “dirtier” electricity); • Enable remote detection and repair of outages; • Permit contributions to grid from renewable but unreliable energy sources (wind, solar, hydro); • Postpone construction of generating plants necessary to meet increasing demand for electricity. • Integrate electric vehicles into grid structure.

13. ADA Cost Savings Projections • Reduce electricity usage by more than 4 percent by 2030: estimated total cost savings of $20.4 B.1 • Reduce peak electricity demand by 1,400 megawatts, saving rate payers more than $1.5 B in capital costs for new power plants.2 • Avoid overheated transmission lines and blackouts (cost $150 B annually).3 • Reduce labor costs through automation. • At state level utilities not yet focused on this aspect of grid modernization.

14. Advanced Metering Infrastructure • “Smart” meters provide real-time data over the internet to enable remote or automatic monitoring and control over electricity usage. • “AMI” is a platform that enables time-of-usage (“TOU”) pricing structure which more accurately reflects cost of generating electricity at time it is used. • Smart meters do not themselves conserve any electricity.

15. AMI Goals and Benefits • Demand response pricing structure ostensibly provides consumers with financial incentives to reduce usage during times of peak demand – less peak use theoretically provides savings on bills. • Conservation at peak demand, when cost and environmental impact of generating electricity is greatest offers correspondingly greater environmental and financial benefits.

16. Interests Overlap But Not Identical • “The utility is concerned about managing capital costs. They look at the interval data and the customer portal as a way to influence your time-of-use behaviors. They really don't care how much power you use, they just don't want your demand to be lumpy. On the other hand, we just want our bills to be low.” • Jim Stogdill, (http://radar.oreilly.com/2009/02/ googles-powermeter-its-cool-bu.html)

17. Jobs For Low Income People? • The Smart Grid will lead to a net job-loss because technology will automate operations. • Reduced labor costs are a primary source of utility operational cost savings. • $150 M provided for training programs by ARRA will be insufficient to prepare low income people for high tech smart grid jobs. • 10,000 temporary installation positions will likely be filled by currently employed maintenance employees who ultimately will lose their jobs.

18. AMI Cost And Hidden Expenses • Utilities may seek to transfer the cost of smart grid technology to consumers even before they are installed or provide any services/benefits. • Basic meters may cost over $600 and remote control features add $100’s more.4 • Cost for broadband, compatible appliances and devices may not be reflected in proposal but will increase costs for low income people.

19. To Do: Challenge Price Structure • Expose hidden expenses for low income people and ensure proposal accurately reflects full cost. • Ensure people are not charged for costs before they receive promised services/benefits. • Seek subsidies to pay for necessary meters and compatible devices and appliances. • Insist on complementary energy efficiency measures to help low income people reduce their usage, such as weatherization programs and affordable access to energy efficient appliances.

20. Advocacy Example: MD • Baltimore Gas and Electric (“BG&E”) wanted to pair a new surcharge for smart meters with mandatory time-of-use rates — paying more for usage during peak hours. • Advocates argued that meant higher electricity bills and additional costs, without any benefits. • Commission rejected BG&E’s pricing scheme, finding that BGE's promised benefits to consumers were not substantiated and could not be guaranteed.

21. Advocacy Example: PA • Office of the Consumer Advocate in Pennsylvania helped persuade one utility (Allegheny Power) to withdraw its initial smart metering plan, that would have cost residential customers $15 per month before services provided and included $100 million for unspecified "in-home devices.”

22. Demand Response Potential • To offset the cost of smart meters and increased electricity rates under TOU pricing, consumers will have to shift usage to off-peak times. • Where demand response potential is less than utility assumes in proposal, cost savings obtainable through shifting usage may be overstated. • People in single-family homes and homes with central air conditioning have greater responses to pricing signals than people in multifamily units and those without central air conditioning.5

23. Direct Load Control Alternatives • Feasible to provide cost effective and reliable methods of reducing peak demand without smart meters and associated costs. • Direct load control is an incentive-based demand response model in which the utility can briefly turn off a designated appliance to avoid a surge in power demand (AC, thermostat) without meter. • Customers generally volunteer to participate in direct load control programs, and most allow the customer to override the utility’s control of the appliance.

24. Disproportionate Burden • Smart meter costs and TOU pricing structure “incentives” ostensibly designed to encourage conservation will potentially drive cost of life-sustaining utilities out of reach for people who have low income, are older, have disabilities, or provide care for older or young people contrary to principles of universal service.

25. Low Income Vulnerability Various factors contribute to the vulnerabilities low income people face in responding to TOU pricing.

26. Nothing To Turn Off • Low income people have smaller homes. • Half as many low income households as higher-income ones have central air conditioning, and they use it less frequently. • 69% vs 91% have a clothes dryer.6 • 46% vs 86% have a dishwasher.7

27. Inelastic Demand • Older people, young children, caregivers, people with disabilities, those who use medical devices, or have temperature sensitive medical conditions have inelastic demand: they cannot shift or reduce peak usage.8 • People who have inelastic demand may be harmed by increased rates during peak usage and will not benefit from the promised savings on their energy bills.9

28. Smart Appliances Unaffordable • Automating conservation during peak demand using energy efficient and smart grid compatible devices is most effective in reducing usage. • Low income people are unlikely to be able to afford energy-efficient or smart grid-compatible appliances and devices.10 • They will have to carefully monitor and directly adjust their usage (if they can) compared with people who can automate usage reduction in order to avoid higher costs.11

29. Digital Divide • Low income people continue to lag behind their wealthier counterparts in internet technology uptake.12 • Broadband internet is not available and affordable for all.13 • Low-income people without internet and compatible monitoring devices will not have access to the benefits of automated monitoring and conservation capabilities.14

30. To Do: Get More Info • Insist on better data and analysis to understand how low income people will respond to and can be assisted in responding to pricing signals, including data collection if implemented. • Expose overstatements, inaccuracies, and data flaws in studies used to show support for poorly designed smart metering proposals. Use expert testimony. • Encourage regulators to test veracity of alleged benefits to low income people of smart meter deployment.

31. DOE Studies To Support TOU • Approximately 10 utilities are working with Lawrence Berkeley Lab and DOE to design and implement experiments in customer behavior response to dynamic pricing that involve pricing regimes, automation technology, and education/ motivation to fill the gaps in the current studies. • Ultimate goal is to implement federal policy to universal TOU pricing. • DOE Reports will be issued in late 2013.

32. To Do: Suggest Alternatives • Urge regulators to evaluate whether there are less expensive, less harmful methods of achieving desired benefits without exposing low income people to potential harms.

33. Advocacy Example: CA • The California PUC issued an order requiring disconnection data monthly reporting to monitor impact on low income people. • Disconnection benchmarks set by settlement agreement between Consumer Groups and San Diego Gas & Electric Company (SDG&E) and Southern California Gas Company (SoCalGas) – currently pending before the CPUC, with decision expected late 2010. • Extra protections kick in if benchmark exceeded.

34. Advocacy Example: MD • MD Public Service Commission rejected BG&E proposal finding, “We do not purport to know the extent to which ratepayers ultimately will participate in a dynamic pricing schedule such as the one BGE proposes, but we do not have a high level of confidence in BGE’s predictions on that score, and we do not believe BGE’s ratepayers should exclusively bear the risk that participation will fall far short of the Company’s projections.”

35. Utilities Already Unaffordable • Low income and older households spend a greater proportion of their income on energy. • use older, less efficient appliances. • rising energy costs also consume a greater percentage of stagnant monthly income. • Households below the federal poverty level receiving LIHEAP assistance may spend over 16% of their monthly income on energy while wealthier households spend only 3.6% of their income on energy bills.15

36. Worse Than Dark Homes • People may resort to heating or illuminating their homes with candles, ovens, or kerosene heaters, which poses a greater risk of fire, air quality issues and the risk of carbon monoxide poisoning. • With 14.3% of the population (43.6 M people) currently living below poverty levels, the impact of unaffordable utilities poses a significant threat not only to individuals but also to the public’s health and safety.16

37. Worsened Health • People who can’t afford utilities may inadequately heat or cool their homes, which may create or exacerbate health conditions prevalent among low income population. • Cardiovascular • Respiratory • Diabetes • Stroke • Death

38. Temperature Related Risk • The very young, very old, and people with medical conditions or taking certain medications may have difficulty maintaining their normal body temperature.17 • Inadequate heating and cooling poses particular risk to their health, including death. • Lower socioeconomic status means greater risk of temperature-related death, especially for older adults.18

39. Hunger • People who cannot afford their utilities may be forced to choose whether to “heat or eat.” • The relationship between hunger and utility costs is predictable: • Northern states - late winter and early spring • Southern states - late summer • Food insecurity may cause developmental delays in children and increase the use of public health services.19

40. To Do: Educate Regulators • Team with health professionals and others to educate regulators about the significant societal costs posed by setting unaffordable utility rates. • Seek to preserve and bolster energy assistance programs for low income people. • Simplify subsidy programs with onerous application and certification requirements to encourage greater participation and protect against loss of essential utility service.

41. Advocacy Example: CA • In June 2009, The Utility Reform Network (“TURN”) filed a Petition for Rulemaking, asking the CPUC to consider changes to utility practices for the purpose of reducing disconnection for nonpayment and lowering customer arrearages. • The CPUC opened a rulemaking, recognizing that “utility service is a matter of health and safety” and seeking “to identify more effective ways for the utilities to … develop solutions that avoid unnecessary disconnections without placing an undue cost burden on other customers.”

42. Advocacy Example: MA • Advocates reached agreement in principle with at least one utility to use their smart meter pilot to obtain detailed data concerning low-income usage and impacts of dynamic pricing.

43. Advocacy Examples: NV • Commission opened a docket on consumer protections and shut-off protections even though it approved the utility's smart grid project. • Commission ordered the utility to refile its compliance plan, and to hire expert to conduct a statistical study of low-income energy usage and demand (utility claimed it did not know how to identify low income customers for such a study). 

44. Advocacy Examples: NY • In response to an earlier effort to mandate time of use rates for residential customers in New York, the New York Legislature has prohibited time-based rates for residential customers except upon affirmative and voluntary selection.

45. Prepaid Meters, Service Limiters • Smart meters may include capacity to require pre-payment or have service limiters, which trip a circuit breaker when usage exceeds a certain limit. • Electricity rates for prepay meters are higher because they include costs related to reloading meters (smart cards, kiosks, etc).

46. Circumventing Protections • Utility companies favor pre-paid meters and service limiters because they make it easier to collect outstanding debt and prevent customers from accumulating additional debt while also saving on labor costs.20 • The use of pre-paid smart meters and service limiters enables utilities to circumvent important — albeit limited — procedural protections designed to prevent disconnections.21

47. Eliminating Customer Contact • New York, Maryland, Ohio, and Illinois are examples of state utility consumer protection regulations that require the utility to attempt contact at the customer’s premises prior to physical disconnection of service. • Smart meter business models typically predicated upon operational cost savings, including the ability to disconnect service automatically, without incurring labor costs of a home visit.

48. Tragic Consequences • In January 2009, a 93-year-old man froze to death when his service limiter tripped over the weekend, cutting off his electricity. The victim apparently was never told how the service limiter worked. When a neighbor discovered him, money evidently intended to pay the utility bill was found stacked on the kitchen table.22 • Over the years, there have been numerous reports of people dying in fires caused by candles in homes without electricity.

49. To Do: Ban Mandatory Prepay • Mandatory pre-paid or service-limiting metering programs, including for renters or customers with outstanding debts, should be prohibited. • Ensure that procedural protections against disconnection are not circumvented simply because people who cannot afford utilities are forced to disconnect when they run out of money to reload a prepay meter.

50. To Do: Ban Remote Disconnection • Ensure vulnerable people are not remotely disconnected without a site visit made with the goal of avoiding the loss of service. • Ensure people facing disconnection know their options to seek payment plans, obtain energy assistance, benefit from conservation or energy efficiency programs, or obtain protection for those with certain health conditions. • Ensure any notice requirements are met.