© 2005, Itron Inc.

APPA Uses, Costs, and Implementation of AMR/AMI Sharelynn Moore Product Line Manager, Energy Solutions September 24, 2007

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Topics of Discussion

   

Discuss Market & Business Drivers (Uses) Evaluation of AMR and AMI Review of what is being done today Key Concepts & Summary

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Market & Business Drivers

Traditional and Emerging Drivers

Traditional AMR & Metering Market Drivers



Primarily driven by Revenue Management & Customer Service

>

Meter Reading Cost & Efficiency -

• Increased read rates • Hard to access • • • Reduced Call Center activity Safety concerns Door Key management Cost per read >

Revenue Cycle Improvement -

• Reduced read to bill window Meter to Cash – Same Day Billing • Increased reading & billing accuracy – – Reduced manual data entry Electromechanical to solid state metering • • Reduced estimates Reduced rebilling and adjustments © 2005, Itron Inc.

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Traditional AMR & Metering Market Drivers



Secondary Market Drivers Have Included (Most require FN)

> > >

Deregulation (Daily settlement)

• • • PECO Duquesne United Illuminating

Operational Improvements

• Off Cycle Reads – – Turn on / Turn off Read On Request • • Forecasting Accuracy Potential Asset Value Improvements

Outage Management

> >

Revenue Protection / Theft Detection New Products & Services

• • • • Consolidated Billing Selectable Billing Cycles Energy Efficiency Reading for other Utilities © 2005, Itron Inc.

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  

Emerging Drivers

Supply Concerns:

Shifting generation strategies > > > >

Expiring Supply Contracts

• Transition structures and associated rate caps lapsing

Demand Response:

Peak load reduction • At both the residential and C&I levels

Net Metering:

Increased interest in distributed generation

Conservation:

• Establishment of a “culture of conservation” (Ontario) Heightened awareness of renewable generation

Reliability:

Highly visible and politically sensitive > >

Delivery Constraints Asset Management –

– Location Marginalized Pricing (LMP) Underinvested through deregulation activities >

Smart Grids:

Intelligent Grids to the meter level

Public Policy:

Still with no clear direction >

Energy Bill:

True impact to be determined at the state level. > >

Smart Metering:

California, Ontario, Texas, New York

Time Based Rates:

Directly linking price to generation cost © 2005, Itron Inc.

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    

Emerging Drivers

Security:

Heightened awareness and requirements >

Reduced or complicated site access

>

Increased internal security requirements M&A Strategies:

Automation key to achieving financial results >

National Grid

>

Progress Energy Increasing Uncollectible Revenues:

With Decreasing Rate Recovery >

Remote Disconnect

> >

Load Limiters Prepayment Deregulation:

Multiple energy market players require access to the consumption data for forecasting, scheduling and settlement > >

System Operators (ISO/RTO) / Choice of Energy Supplier Day Ahead Markets / Location Marginalized Pricing Meter Data Management:

Beginning to be seen as a key strategic resource > > >

Sarbanes Oxley – CapEx Planning –

Consistency of data and business rules Complicated by multi-jurisdictional asset

Emerging as an enterprise requirement

– Fundamental to deliver emerging drivers © 2005, Itron Inc.

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© 2005, Itron Inc.

Evaluation of AMR and AMI

What is the difference?

Differences between AMR/AMI

    Why does anybody care about the differences?

AMR as we’ve known it Origin and definitions of AMI Comparing AMR and AMI There isn’t a definitive answer – but maybe there are some useful differences © 2005, Itron Inc.

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Why Do We Care About the Differences?

    Lots of hype about AMI ...

... but a lack of clarity about how it differs from AMR Truth in advertising Tendency by some to equate “AMR” with “old” and “AMI” with “new” Important to define based on desired capability, not a simple label © 2005, Itron Inc.

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AMR As We’ve Known it

   Consisted of handhelds, mobile and “fixed networks” > Fixed networks one- or one-and-a-half way Increasing cost continuum; presumably increasing functionality All depended on traditional business drivers > Meter reading efficiencies, billing enhancements, reading flexibility, theft and tamper © 2005, Itron Inc.

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AMR As We’ve Known it, cont.

Annual AMR Shipments, 1997 - 2006

18 16 14 12 10 8 21.9% 40.0% 30.6% 24.3% 25.6% 20.3% 20.2% 30.0% 26.0% 20.0% 10.0% 6 4 0.0% -7.4% -10.0% 2 0 -16.9% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

-20.0% Units Growth Rate Source: “The Scott Report: AMR Deployments in North America,” 2005 and 4 th Quarter 2006

Growth in Cumulative AMR Shipments, 1996 - 2006

120 100 80 60 40 20 0 43.1% 50.0% 45.0% 40.0% 35.0% 25.0% 24.4% 25.6% 24.4% 30.0% 24.5% 23.6% 18.9% 17.7% 25.0% 20.0% 19.9% 15.0% 10.0% 5.0% 0.0% 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Year

Units Growth Rate © 2005, Itron Inc.

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AMR As We’ve Known it, cont.

 About three years ago, momentum started to gather for greater functionality in fixed networks: © 2005, Itron Inc.

Outage notification and restoration Presentation to end users Innovative rates (TOU, CPP) Revenue assurance On-demand reads Remote connect / disconnect

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“Fixed Networks” V. Mobile AMR

All Utilities

100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 1997 1998 1999 2000 2001 2002

Year

2003 2004 2005

Gas Utilities

Mobile Fixed Misc.

Electric Utilities

100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 1997 1998 1999 2000 2001

Year

2002 2003 2004 2005 100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 1997 1998 1999 2000 2001 2002 2003 2004 2005

Year

Source: Howard Scott, Cognyst Consulting, July, 2006 © 2005, Itron Inc.

Mobile Fixed Misc.

Water Utilities

100.0% 80.0% 60.0% 40.0% 20.0% 0.0% 1997 1998 1999 2000 2001

Year

2002 2003 2004 2005 Mobile Fixed Misc.

Mobile Fixed Misc.

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“Traditional” AMR Benefits (Includes Fixed Networks)

 Mostly operational savings: > Reduces labor costs > > > > > > > > > > > > Eliminate manual data entry errors Eliminate missed reads and repeat meter reader visits Move-in, move-out reads (on demand reads) Improves billing accuracy Eliminates estimated meter reads Improves employee safety Reduces customer complaints Improves management of delinquent accounts Accelerates cash flow based on monthly billing Decreased outage response times Better detection of theft, outage, and leaks Can bring back TOU reads © 2005, Itron Inc.

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What is AMI?

   “Advanced Metering AMR” used in 2003 Frost and Sullivan report California used “Advanced Metering Infrastructure” when considering time-based rates in 2004 AMI = “smart metering” = “advanced metering?” © 2005, Itron Inc.

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What is AMI?, cont.

What is it, anyway?

What’s real? What’s it mean?

FERC says, “ ... a metering system that records customer consumption hourly or more frequently and that provides for daily or more frequent transmittal of measurements over a communication network to a central point.” It refers to “ ... the full measurement and collection system, and includes customer meters, communication networks and data management systems.” Less than 6% market penetration in the U.S. © 2005, Itron Inc.

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© 2005, Itron Inc.

What is AMI?, cont.

  IDC Energy Insights: > “A subset of AMR with three main characteristics: • Solid-state or computerized meters that collect time-series (interval) energy use data, programmable to support features like TOU rates • • Two-way communication between meters and utility Able to support applications beyond meter reading, such as demand response programs” Gartner, Inc.

> “ ... A composite technology made of several elements: consumption meters, a two-way communication channel and a data respository (meter data management).”

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AMR v. AMI Side-By-Side Comparison

Functionality

Communication Read Frequency Interval data and load profiling On-demand reads Outage notification and restoration Demand reset Support for time-based rates Revenue assurance Disconnect and load limiting Net metering Monitoring of meter quantities Remote device configuration Prepay metering HAN connectivity Meter data management

AMR

One way or one-and-a-half way Monthly (mobile); daily (FN) None (mobile) to hourly (FN) OOR (mobile); lag time of mmmm minutes (FN) Inferred or “last gasp” No TOU Basic Virtual disconnect 200 kw and above Only C&I Limited parameters No No No

AMI

Full 2 way Daily to hourly Hourly to 15 minute Yes; lag time of sss seconds Positive notification and restoration Yes CPP-F, CPP-V, RT Enhanced “Hard” c/dc +load limits All customers All customers Upgradeable firmware Yes, but not typical in U.S.

Yes, plus presentment Yes

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Cost Comparisons (per endpoint)

Category Mobile AMR Fixed Network All in costs AMI $1 - $2 per meter $5 - $20 per meter $60 - $90 per meter

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What is being done today?

AMI Activity

Current AMI Market Potential

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Over 30 million points represented; 20 million are “serious”

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 

Why AMI ?

Key Emerging Drivers

>

Energy Supply - Not enough in the right places

>

Reliability Resulting Public Policy

>

Energy Policy Act (“EPACT”)

• • • • • • • • Net Metering (Section 1251) Smart Metering (Section 1252) Time Based Rates (Section 1252) Demand Response (Section 1252) Electric Transmission and Distribution Programs (Section 925) Daylight Savings Time Change (Section 110) Technology Advancement Collaborative (Section 127) Consumer Education Programs (Section 132) © 2005, Itron Inc.

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   

California –

Does this model apply in other markets?

June 2002: The CPUC issued its Order Instituting Rulemaking (OIR) on advanced metering, demand response, and dynamic pricing (all combined = AMI).

>

Goal of OIR is to determine whether the use of AMR and Demand Response can help the state avoid another energy crisis. A Statewide Pricing Pilot (SPP) was implemented by the three IOUs (SCE, SDG&E, and PG&E) in the summers of 2003 - 2005. The pilot consisted of 2500 electric meters statewide, divided into 25 groups of differing customer “treatments”, 100 customers per group.

>

PG&E piloted 1000 points, SCE tested 1000 points and SDG&E 500 customers. The various treatments included Load Profile (LP) information only, LP info and TOU rates, LP info and Critical Peak Pricing (CPP) rates, LP info with load control and CPP rates, etc.

>

For the most part, the SPP proved that a decent level of customer price elasticity exists. The debate continues about the magnitude and sustainability of the load reductions elicited, and the value ($/kW). December 15, 2004: “Preliminary” AMI business cases from each of the three IOUs were filed.

>

Seventeen different business case “scenarios” (ranging from total saturated AMR, to surgical/partial deployments, to load control only) were evaluated and submitted by each utility. The state’s AMI requirement is for hourly interval data on mass mkt, and 15-min interval data on C&I customers. March, 2005: Official AMI business cases (aka “applications”) were filed by each of the utilities.

>

PG&E’s and SDG&E’s recommending full deployment, while SCE’s recommended development of new Advanced Integrated Meter (AIM for AMI). The AMI applications of the utilities have since been separated into three different regulatory proceedings, each with unique schedules.

© 2005, Itron Inc.

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  

Ontario –

A “Culture of Conservation”

Not enough Energy Supply:

> > > >

Have not built a power plant since early 1980s Theoretical generating capacity of 26,000 megawatts Practical generating capacity of 21,000 megawatts Summer peak 26,000 megawatts, winter peak 25,000 megawatts Election spring of 2008:

>

Rolling brownouts summer of 2005, very close to blackout

• If they have BO during the election period they will not be re-elected

Bill 100 & Bill 21:

> > >

Introduction of Flexible TOU pricing Targeted reduction in Energy Consumption by 2007 Commitment to Install 800,000 in 2007 and in every home by 2010 (5M)

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So Just What is Being Done Today?



Views of Energy Bill vary significantly by region depending on:

>

Generation and delivery capacity relative to demand

>

Reliability of regional transmission grid



Approaches vary by state

>

New York: embraces advanced metering for Time Differentiated Rates

• ordered Time Of Use (“TOU”) rates to “largest” C&I at each utility >

New Jersey: emphasizes load control through addressable thermostats



State Commissioners and Staff are devoting time and energy to implementing the new rulings

>

Texas: PUC commission hosted a workshop on Sept. 16 for developing a rule on advanced metering and demand response, in accordance with recent state law regarding advanced metering

>

Oregon: Holding a series of presentations about AMI technology and the demand response capabilities of smart meter

>

New York : Calling for “Automation Plans” in the next 6 months

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

Many States Already Pursuing Demand Response

Nearly half of all U.S. states are implementing or piloting technology for demand response and advanced metering

%Load Change NY Capital Region = -3.2% © 2005, Itron Inc.

Results in -20.1% LMP

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Key Questions

   

What is/should be your generation/supply approach?

> > Wholesale Market Design?

Retail Mass Market Reality?

To what extent will functionality and technology be defined and compensated by the Regulator?

> > Low Cost: Driven by Operations Savings High Function: “Smart” meter / preparing for the future

Will Time Based Rates and Demand Response be:

> Mandated / Opt Out?

> Voluntary / Opt In?

• Anticipated penetration rates?

What is / will be your approach to reliability and asset management?

> Where do you see constraints / challenges around delivery congestion > To what extent do you subscribe to the concept of an intelligent / smart distribution grid?

© 2005, Itron Inc.

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© 2005, Itron Inc.

Key Concepts & Summarization

In closing

Key Concepts

     The cost of traditional AMR solutions continues to come down while functionality continues to incrementally improve The delta between mobile and fixed solutions continues to close > The cost reduction of FN is accelerating faster then the more mature mobile solutions Likely two distinct markets going forward (AMR/AMI) > Sometimes they may exist within the same utility AMI depends on operational savings for much of its economics, just like AMR. > Additional cost for AMI has to be justified by added benefits like demand response and remote connect/disconnect.

AMI is a public policy issue > That means we must partner with our customers to command mindshare and formulate aligned concepts © 2005, Itron Inc.

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© 2005, Itron Inc.

Thank You.

To know more, start here: www.itron.com

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