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March 15, 2011

Advanced electric meter installations rising in homes and businesses

Electric meters with enhanced communication capabilities — an essential component of the smart grid — are becoming more prevalent. This offers the possibility that electric systems will become more reliable and efficient. In 2009, 39% of all U.S. electrical customers had advanced meters, up from 32% in 2008.

Advanced meters can use one-way communication (known as Automated Meter Reading, or AMR), which enables the utility to do remote meter reading, or two-way communication (Advanced Metering Infrastructure, or AMI). In 2009, 17% of advanced meters used two-way communication, up from 10% in 2008. These two-way meters are often referred to as "smart meters."

Utilities have an incentive to install advanced meters for residential customers because automated meter reading lowers costs. Commercial and industrial customers probably have lower penetration rates for these digital meters because they are more likely to have more sophisticated analog meters already in place, to be on a time-responsive tariff, and to be interruptible customers.

AMI technology can provide usage data to both the utility and the consumer. This capability, when combined with real-time prices, time-of-day, or other pricing options, gives consumers the information they need to alter their usage and lower their bills, should they be on such a tariff. Customers who can manage their energy use can save money and conserve energy, all of which can potentially contribute to reduced need for additional power plants (and the significant capital costs associated with new generating capacity).

Smart meter penetration rates vary widely by State, in part because rate-base funding for smart metering projects must typically be approved by State utility regulators. The rollout of AMI has been somewhat controversial, with some groups arguing that the net benefits of this technology to consumers remain unproven. During 2010, the negative reaction of some residential customers in California to newly-installed advanced meters underscored the importance of customer education and communications efforts on the part of utilities prior to deploying advanced metering programs.