SMECO Advanced Smart Meter Alternatives, Respective Associated Costs, and Cost Recovery Proposal

8/12/2019 SMECO Advanced Smart Meter Alternatives, Respective Associated Costs, and Cost Recovery Proposal

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OPT-OUTALTERNATIVE COSTS &PROPOSAL

Advanced Smart Meter Alternatives,

Respective Associated Costs, and Cost

Recovery Proposal

PREPARED FOR

Southern Maryland Electric Cooperative

APRIL 2013


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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL

BLACK & VEATCH |Executive Summary 1-1

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Table of Contents

1.0 Executive Summary ................................................................................................................................ 1-4

1.1 Opt-Out Scenario Summary of Results and Reccomendations........................................... 1-4

1.2 Proposal Key Assumptions .................................................................................................................. 1-61.3 Recommended Opt-Out Non-Standard Meter Installation.................................................. 1-6

2.0 SMECOS Opt-Out Proposal ............................................................................................................... 2-8

2.1 Impact Of An Opt-Out Option........................................................................................................ 2-8

2.1.1 What Opt-Out Means to SMECO............................................................................... 2-8

2.1.2 What Opt-Out Means to SMECOs Customer-Members.................................. 2-9

2.2 SMECOs Opt-OUt Meter Scenarios: Descriptions & Disadvantages............................... 2-9

2.2.1 Scenario 1: Analog Meter Installation......................................................................... 2-9

2.2.2 Scenario 2: Digital Meter Installation........................................................................ 2-10

2.2.3 Scenario 3: ERT/AMR Meter Installation.................................................................. 2-10

2.2.4 Scenario 4: Interval Data/Modem Meter (Telephone LinePOTS)................ 2-10

2.2.5 Scenario 5: Smart Meter: Limited Frequency ........................................................ 2-12

2.2.6 Scenario 6: Probe Digital Interval Meter .................................................................. 2-12

2.3 Approach to Estimate Opt-Out Costs Incurred by Scenario............................................... 2-13

3.0 SMECOs Proposed Opt-Out Service Charges .............................................................................. 3-14

3.1 Services Charges for An Opt-Out Option With A Legacy Meter - Scenario 1:

Analog, Scenario 2: Digital, and Scenario 3: ERT/AMR ............................................................ 3-14

3.2 Services Charges for An Opt-Out Option With Scenario 4: Interval

Data/Modem Meter (Telephone Line-POTs) .............................................................................. 3-15

3.3 Service Charges for An Opt-Out Option With Scenario 5: Smart Meter:Limited Frequency ............................................................................................................................... 3-16

3.4 Service Charges for An Opt-Out Option With Scenario 6: Probe A Digital

Interval Meter ....................................................................................................................................... 3-16

4.0 Impact to SMECO Business Operations With A No-Charge Opt-Out Option ......................... 4-18

4.1 Impact of A No Charge Opt-Out Option With A Legacy Meter Scenario 1:

Analog, Scenaro 2: Digital, and Scenario 3: ERT/AMR ........................................................... 4-18

4.2 Impact of A No Charge Opt-Out Option With Scenario 4: Interval

Data/Modem Meter (Telephone Line-POTS) .............................................................................. 4-20

4.3 Impact of A No Charge Opt-Out Option With Scenario 5: Smart Meter:

Limited Frequency ............................................................................................................................... 4-21

4.4 Impact of A No Charge Opt-Out Option With Scenario 6: Probe A Digital

Interval Meter ....................................................................................................................................... 4-23

5.0 Conclusion and Recommended Opt-Out Non-Standard Meter Installation .......................... 5-26

Appendix 1-1: Review of U.S. Opt-Out Programs ..................................................................................... 5-27

Appendix 1-2: Decreased Services for Opt-Out Customer-Members ................................................... 5-33

Appendix 1-3: Overview of Opt-Out Incurred Costs by Scenario .......................................................... 5-34


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Table 1: Upfront & Monthly Costs for Scenario 1: Analog................................. 5-34

Table 2: Upfront & Monthly Costs for Scenario 2: Digital.................................. 5-34

Table 3: Upfront & Monthly Costs for Scenario 3: ERT/AMR............................ 5-34

Table 4: Upfront & Monthly Costs for Scenario 4: Interval

Data/Modem Meter (Telephone Line-POTS) ........................................................... 5-34

Table 5: Upfront & Monthly Costs for Scenario 5: Smart Meter:

Limited Frequency ............................................................................................................ 5-34

Table 6: Upfront & Monthly Costs for Scenario 6: Probe Digital

Interval Meter .................................................................................................................... 5-34

Costs Incurred for Scenario 1: Analog .......................................................................................... 5-35

Costs Incurred for Scenario 2: Digital ........................................................................................... 5-36

Costs Incurred for Scenario 3: ERT/AMR ..................................................................................... 5-37

Costs Incurred for Scenario 4: Interval Data/Modem Meter (Telephone Line-

POTS) ..................................................................................................................................... 5-38

Costs Incurred for Scenario 5: Smart Meter: Limited Frequency....................................... 5-39

Costs Incurred for Scenario 6: Probe Digital Interval Meter................................................. 5-40


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1.0 Executive SummarySouthern Maryland Electric Cooperative (SMECO) is dedicated to providing its customer-members with

safe, reliable, competitively priced electricity service. SMECO also wants to ensure that its customer-

members have access to new tools and information, which will allow them to take greater control of

their energy use. Consistent with and in support of its mission, on June 13, 2012, SMECO proposed to

implement an advanced metering infrastructure (AMI) system for its entire service territory

(approximately 152,000 customer meters). This initiative builds on SMECOs AMI Pilot effort, a step

authorized by the Public Service Commission (PSC) on December 21, 20091. SMECOs AMI Pilot

commenced March 2011 and concluded March 2012. SMECO has submitted its conclusions from the

AMI Pilot including a detail analysis of the business benefits to the PSC. SMECO is currently awaiting PSC

approval before proceeding with system-wide AMI implementation.

On January 7, 2013, the Commission concluded that the public interest requires the Companies 2to offer

an additional option related to the installation of smart meters in their homes (Order No. 85294 and

respective Errata). As a result, the Commission ordered the Companies to submit to the Commission

proposals regarding a) overall costs associated with allowing customers to retain their current legacy3

meter, and b) proposals regarding costs related to offering customers different RF-free, or RF-minimizing options, related to the installation of their smart meters. Additionally, the Commission

asked the Companies to provide this information scaled for different levels of customer participation.

Opt-out is the term used to describe a customers request to decline the installation of a smart meter

as well as to forego the ability to receive the respective Advanced Metering Infrastructure (AMI)

benefits. In addition, the opt-out alternatives incur operational and maintenance costs; and

ultimately undermines the value of total AMI benefits enabled through installation of a smart meter.

This document describes SMECOs Opt-OutProposal including overall costs associated with allowing

customer-members to retain their current legacy meter and costs related to offering customer-

members different RF-free or RF-minimizing options related to the installation of smart meters. The

proposal includes scaled results for three potential levels of customer-member opt-out participation;e.g. 1%, 2% and 5%, respectively.

1.1 OPT-OUTSCENARIO SUMMARY OF RESULTS AND RECCOMENDATIONSSMECO conducted a detailed cost capture exercise to identify upfront and monthly costs incurred by the

cooperative should customer-members choose an opt-outalternative. The cost capture exercise

collected the full cost should a customer choose to opt-out of an AMI meter installation. For customers

1PSC Mail Log (ML) #119060, DS-302

2Order No. 85294 defined the Companiesto include Baltimore Gas and Electric Company, Potomac Electric

Power Company, and Delmarva Power and Ligth Company.While SMECO was not required to follow that Orders

directives, the Commission invited SMECO to participate in the future proceedings directed by Order No. 85294. 3SMECOs definition of a legacy meteris consistent with the utilities REQUEST FOR CLARIFICATION AND

EXPEDITED CONSIDERATION which states the Companies may have analog meters with remote reading devices

(also known as ERT modules), analog meters without ERT, and digital meters with and without ERT capability. The

Commissions clarification Order No. 85371 confirms the Commission intended to require the Companies to

provide cost information on the customers retaining their current legacy meter, whether such meter is analog or

not.


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who choose to opt-out, such choice would require the use of a non-AMI4additional metering solution

that will raise significant cost to all customer members. The Commissions Order No. 85294 recognizes

the existence of potential costs associated with providing and maintaining multiple meter and meter

reading solutions in order to provide customers an opt-out option. To better determine the cost

considerations the Commission has requested additional information regarding the costs associated

with opt-out solutions.5

Detailed cost estimates have been developed in this costs analysis to cover areas of potential impact for

an opt-outoption. The viability and overview costs associated with non-standard metering

alternatives is discussed in section 2.5 Overview of Opt-Out Costs Incurred.

The cost estimates associated with each of SMECOs six opt-out scenarios are summarized below by

three opt-out participation levels, 1%, 2%, and 5% respectively.

The results show both an upfront one-time, and a recurring monthly, cost are fairly uniform for

Scenarios 1, 2, and 3. For Scenario 4, the upfront one-time fees are naturally higher since costs related

to establishing and maintaining this alternative is substantial. Under Scenario 5, the monthly costs are

reduced since the AMI meter would transmit information at a less frequent basis; thus manual meter

reading and other associated costs are not applicable as they would be in scenarios 1 through 3, due to

the installation of the AMI meter. Scenario 6 offers an RF-free alternative for the capture of interval

data; however, up-front costs and monthly costs are substantial.

Table 1-1 SMECO Opt-OutScenario Summary by Participation Level

4SMECOs intention is to install an AMI meter for all customer-member locations. Other types of required meter

installations would be considered non-standard meter installations.5Commission Order 9294 on or before July 1, 2013, the Companies shall submit to the Commission their

proposals regarding a) the overall additional costs associated with allowing customers to retain their current

analog meter, b) their proposals regarding cost recovery of these additional costs from customers, and c) their

proposals for recovery of costs related to offering customers different RF free or RF-minimizing options related to

the installation of their smart meters. Additionally, we ask the Companies to provide this information scaled for

different levels of customer participation

1% "Opt-Out" Participation Upfront One-Time Monthly

Scenario 1 - Analog $105.32 $34.94

Scenario 2 - Digital $105.32 $34.94

Scenario 3 - ERT/AMR $105.32 $34.94

Scenario 4 - Interval Data/Modem Meter (Telephone Line -POTs) $1,251.70 $30.47

Scenario 5 - Smart Meter: Limited Frequency $93.92 $1.37

Scenario 6 - Probe a Digital Interval Meter $427.12 $65.85





Scenario 4 - Interval Data/Modem Meter (Telephone Line -POTS) $1,226.76 $27.06




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1.2 PROPOSAL KEY ASSUMPTIONSIn support of this proposal, SMECO identified the following key assumptions:

Only residential customer-members will qualify for the opt-outprogram6Each manual meter read requires a truck roll7Legacy meter definition is consistent with the utilities REQUEST FOR CLARIFICATION AND EXPEDITED

CONSIDERATION (see footnote 2)

Legacy meters removed during the AMI deployment will be refurbished and tested for use in the Opt-Out program1.3 RECOMMENDED OPT-OUTNON-STANDARD METER INSTALLATIONSMECO recommends customer-members select the opt-outoption to have a digital ERT/AMR(Scenario 3) meter installed.

SMECO agrees the additional option to opt-out of the installation of AMI meters should bear the extracosts. SMECO has reviewed the experiences of other utilitys opt-out programs8. Opt-outoptions arebeing adopted by less than 2% of customers9charged with the appropriate costs of having a non-standard meter installed.

Because of limited participation levels, SMECO is recommending the ERT/AMR installation opt-outoption for all customers-members electing to opt-out of the installation of a standard meter. Thistechnology has been used successfully at SMECO since 1997.10 The technology meets the requirementof a RF minimizing solution, meets SMECOs standards for maintainigcustomer-member privacy and

provides an effective meter and meter reading solution for the utility. Unlike the analog meters, whichare no longer commercially available, ERT meters are still a viable commercial ready metering solution.

SMECO will not offer customers choosing to opt-outof AMI the ability to choose a TOU rate structure.TOU rate structures will only be offered to customers that have SMECOs fully functional AMI technology

6The Opt-OutCustomer Base is derived from total number of residential customers (139,163 as of Jan. 2013).

7Economies of scale have been applied in the calculation of the truck roll cost. These manual meter readings will

be incorporated with other system maintenance activities [where possible].8Refer to Appendix 1-1 Industry Study

9See Appendix 1-1 Industry Study, table Current Examples of Opt-Out Participation Levels

10The Encoder Receiver Transmitter (ERT) technology has been used by SMECO beginning in 1997. The current

commercially available production system consists of an ERT module installed in a digital meter. This combination

is in the electric industry known as an ERT meter. An ERT meter is a one-way RF device that only transmits the

meter read upon receiving a wakeup call from the collection unit. The unit remains dormant until the wakeup call

is received. The wakeup call is manually initiated by the meter reader once in close proximity to the meter. The

typical ERT meter has a range of approximately 800 yards.





Scenario 4 - Interval Data/Modem Meter (Telephone Line -POTs) $1,211.80 $25.01




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meters installed. Fully functional AMI meters have no limits on the RF transmission rate.If required by the Commission to offer a TOU rate for opt-outcustomers, the customer will have an RF

free, interval data meter installed. The interval data will be obtained by physically visiting the meter on amonthly basis, manually connecting a read device to the meter, and performing a download of theinterval data to the back office systems.


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BLACK & VEATCH |SMECOS Opt-Out Proposal 2-8

2.0 SMECOS Opt-OutProposalThis section describes SMECOs Opt-OutProposal in accordance to the Commissions Order 85294 andrespective Errata, ordering the submission of a proposal regarding a) the overall additional costs

associated with allowing customer to retain their current legacy meter, b) their proposal regarding costrecovery of these additional costs from customers, and c) their proposals for recovery of costs related to

offering customer different RF-free or RF-minimizing options related to the installation of their smartmeters. Additionally, the Commission ordered the Companies to provide this information scaled fordifferent levels of customer participation.

2.1 IMPACT OF AN OPT-OUTOPTIONThis section describes the impact of an opt-out option to both SMECO and its customers-members

2.1.1 What Opt-OutMeans to SMECOAn opt-outoption at SMECO will require the utility to maintain software, hardware, labor, and

equipment for the management and maintenance of dual business processes supporting both the

standard and non-standard metering applications. SMECO will be required to maintain dual

informational programs, dual outage messaging, and different customer-member rate structures insupport of customer-members choosing to opt-outof an AMI meter installation.

SMECO agrees with the Commissions perspective that customers who are provided with an additional

option to opt-out of the installation of smart meters on their homes, should bear the extra costs

associated with such customer choice.

With any level of opt-outparticipation, SMECOsbenefits will be reduced and will continue to be

diminished as opt-out participation levels increase. Erosion of AMI benefits attributable to opt-out

include, but are not limited to the following:

Reduction of the operational savings (I.e. meter reading labor, respective truck rolls for systemmaintenance activities, maintenance of equipment, maintenance of vehicles and fuel costs).

Potential reduction in the supply-side savings due to less participation in the Demand ResponsePrograms, leading to the potential for reduced energy and demand savings, which leads to lower

capacity and price mitigation benefit. Through this analysis, SMECO determined that impacts to

supply-side savings are minimal at the 1%, 2% and 5% participation levels, resulting in little to no

impact to demand response. However, it is noted that participation levels beyond 5% can exhibit a

greater impact on the supply-side savings, with increasing impact as opt-out participation increases.

Potential higher project costs attributable to greater customer-member communication needs (e.g.,development of additional educational materials for opt-out communications).

Reduction in opportunity for SMECO to fully realize improved, outage and power quality monitoringbenefits.

Reduction in opportunity for SMECO to optimize benefits associated with the more effective theft ofservice monitoring.


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2.1.2 What Opt-OutMeans to SMECOsCustomer-MembersCustomer-members electing to participate in an opt-outprogram potentially forego the many benefits

and functionalities obtained from the installation of AMI meters, including, but not limited to11:

higher quality of serviceimproved outage detection/restorationmonitoring of voltage to mitigate spikes, interruptions, and conditions where abnormal levels could

affect customer service

remote move-in/move-out functionalityparticipation in Demand Response Programscustomer-member energy usage advisory services2.2 SMECOS OPT-OUTMETER SCENARIOS: DESCRIPTIONS &

DISADVANTAGESSMECOs approach to identifying opt-outscenario options to the installation of smart meters was

based on the premise that the alternatives were technically viable solutions based on current meter and

meter support system functionality. The alternatives are described below and listed by scenarios. In

scenarios where a manual meter read is required, SMECOs intends to use SMECO employees for all

future system maintenance activities including meter reading, if required.12The respective

disadvantages are included within each scenario.

2.2.1 Scenario 1: Analog Meter InstallationScenario 1 involves the installation of an analog meter. Analog meters are no longer commercially

available. This requires the replacement of the existing meter with a tested analog meter. Due to the

lack of available replacement components the refurbishment of analog meters is not an option. Inaddition, Scenario 1 entails a visit to the premises for all ongoing meter reading, system maintenance

and business operation activities like move in/out.

Scenario 1 requires SMECO to manually retrieve monthly reads from the analog meter for billing by

performing a truck roll to each meter. Meter reading is no longer a contiguous function and will

potentially change month to month based on customer-member opt-outparticipation.

Disadvantages of this alternative are analog meters do not provide on-demand reads, notification of

power status, nor does it supply interval data information in support of future time-based rates. SMECO

will be unable to retire its current meter reading system, perform non-contiguous meter reads, and it

presents the added complexity of managing parallel smart meter and legacy meter reading processes.

11Refer to Appendix 1-3

12It is worth noting that Meter reading workforce has already been redeployed to other duties.


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2.2.2 Scenario 2: Digital Meter InstallationScenario 2 involves the installation of a digital (Non-Radio Frequency) meter with no interval data

measurement capability. Scenario 2 results in the replacement of a customer-members existing meter

with a digital meter.

Scenario 2 requires SMECO to manually retrieve monthly reads from the digital meter for billing byperforming a truck roll to each meter. Again, meter reading is no longer a contiguous function and will

potentially change month to month based on customer-member opt-outparticipation.

Disadvantages of this alternative are digital (non-AMI) meters do not provide on-demand reads,

notification of power status, nor does it supply interval data information in support of time-based rates.

SMECO will be unable to retire the current meter reading system, and it presents the added complexity

of managing parallel smart meter and legacy meter reading processes. SMECO will be required to

operate parallel meter reading systems to support this function.

2.2.3 Scenario 3: ERT/AMR Meter InstallationScenario 3 involves the installation of an Encoder Received Transmitter (ERT)/Automatic Meter Reading

(AMR) meter. Scenario 3 results in the replacement of a customer-members existing meter with atested and refurbished ERT/AMR meter.13

Scenario 3 requires SMECO to manually retrieve monthly reads (via drive-by) using an ERT/AMR meter.

For the ERT, the advantages of this alternative are that the monthly retrieval of meter data can be

obtained by performing a drive-by read. This does result in an RF-minimizing alternative due to the AMR

technology requires a relatively local wake up call before the meter will transmit the meter read to the

collection device.

Disadvantages of this alternative are digital ERT/AMR meters do not provide on-demand reads,

notification of power status, nor does it supply interval data information in support of time-based rates.

SMECO will be unable to retire the meter reading system, and it presents the added complexity of

managing parallel smart meter and legacy meter reading processes.

2.2.4 Scenario 4: Interval Data/Modem Meter (Telephone LinePOTS)Scenario 4 involves the installation of an Interval Data/Modem meter with the feature set of an

interval data recorder and modem included with the purchase of an advanced meter. The cost of

the meter required for this solution is $767 based on SMECOs last Invoice. The interval recorder

allows the meter to capture and store interval data and communicate the information through the

use of a modem connected to a dedicated, Plain Old Telephone (POTS) line that SMECO would have

installed to support this meter reading function.14The system does provide remote daily interval

meter reads without the use RF. However, the customer would be required to pay all costs

associated with the installation and maintenance of this additional phone service or an AMI meterwould be installed.

13SMECO has currently has 7000 TS1 (turtle) meters in the field; however this is no longer a supportable

solution.

14 SMECO currently uses the POTS lines for reading interval data for commercial customers with installations that

exceed 500 kW in capacity.


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SMECO, through previous experience with hundreds of similar telephone based meters, has found

the use of both shared and dedicated telephone lines as a method of reading mass amounts of

interval data meters for residential customers as unreliable and unsupportable due to problems

with the meters and problems with the POTS lines.

Problems with the meters included:

Meter not communicating as scheduledMeter modem failuresMeters receiving the wrong call scheduleMeter not calling as expectedProblems with shared phone circuits included:

Customer-member not paying for the phone serviceCustomer-member moves and the phone line disconnectedCustomer-member and phone company technicians disconnecting the phone line to the meterIntermittent phone service experience by the customer results in POTS disconnectedCorrosion in the connection circuitsWires cut due to home and building repairsFrom April 2002 through May 2004, SMECO had telephone lines connected to 412 data recorders

for the purposes of reading interval data over the telephone lines. During this timeframe, a total of

1491 field activities were issued in support of reading meters through the POTS line. Of the 1491

field activities issued, 1375 field activities were issued in support of customer shared POTS lines.

Field crews were required to travel to each site and perform troubleshooting to determine the

reason the collection system did not receive the information. Troubleshooting for the field

technician included making the determination if the bulleted reasons given above were the reason

the meter did not communicate as expected. These meters were read over the POTS lines on a

monthly basis to minimize the traffic on the customer-members phone service.

Problems may occur with dedicated phone circuits for reading mass amounts of residential meters.

SMECO would be required to perform a detailed analysis on the limitations of the software and the

equipment required to adequately support reading the interval data information from a large

amount of meters. Dedicated POTS lines are more reliable than shared lines but still would requirecareful coordination and specialized training for the installation and maintenance of this system.

The software used has a limited set of validation parameters. Meter alarms and data errors are not

communicated until the meter data is downloaded and requires manual intervention to review and


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accept before a download to the billing system can occur. 15. The meters also require unique call-in

schedules to be programmed in the meters depending on the number of meters and the call-in

frequency . Each meter requires 3 to 5 minutes of time each call, or download, to obtain the

interval data from the meter. Any interruption in phone service during this timeframe will

disconnect the phone service from the meter. The meter will then follow a predetermined retry

sequence before becoming dormant for a period, after which it will perform another sequence.

2.2.5 Scenario 5: Smart Meter: Limited FrequencyScenario 5 involves the installation of an AMI meter with a limited radio transmission schedule.

Scenario 5 results in the replacement of a customer-members existing meter with an AMI meter in

which SMECO reconfigures the communication module so that it only transmits on a limited schedule.

Scenario 5 requires SMECO to reprogram the AMI meter to transmit meter reading data on a reduced

schedule.

The advantages of this alternative are that meter reads are possible with reduced RF, yet SMECO and

the customer-member can leverage the AMI system for remote connectivity functionality, move-

in/move-out functionality and outage management capabilities.

The disadvantages of this alternative are that it requires SMECO to reconfigure the AMI meter in a

different way than the standard meter, and thus actively track the meters assigned to these customer-

members. A limitation of this scenario is that customer-members would not have access to daily

interval data and web presentment, and have limited opportunities to participate in demand response

and time-based rate opportunities due to the reduce transmission rate.

2.2.6 Scenario 6: Probe Digital Interval MeterScenario 6 involves the installation of a digital meter with additional functionality to allow it to capture

interval data. Scenario 6 results in the replacement of a customer-members existing meter with a

tested and, when necessary, refurbished load research meter. In addition, Scenario 6 entails a premisesvisit to assess the condition of customer-member owned facilities for safety and tamper purposes.

Scenario 6 requires SMECO to manually retrieve/probe monthly interval data reads from the digital

interval meter via a probing processes. No remote data retrieval capability is provided.

The advantages of this alternative are that daily interval meter reads, retrieved monthly, for these

meters is possible without use of RF. SMECO can leverage existing software and hardware technology

to perform these functions.

The disadvantages to this alternative are that the probing processes are more costly. This alternative

requires that a SMECO technician take additional time to visit and manually probe each meter for

interval data. Customer-members will not benefit from the remote-connection functionality or benefitfrom access to near real-time data.

15Currently SMECO expends 35 hours monthly on the first day of the month reviewing and processing data for

billing accounts rated at 500 kW and above. Typical problems include missing interval data, meters not reporting,

or data edits due to zero intervals or power outages. Meters not reporting data require a truck roll to investigate

the issue and capture the interval data manually to be used for billing.


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2.3 APPROACH TO ESTIMATE OPT-OUTCOSTS INCURRED BY SCENARIOThe detailed cost estimates were grouped into categories to develop two separate charges, namely .

the Upfront One-Time Costs and Monthly (on-going) costs.16 For the Upfront one-time cost, SMECO

proposes the customer-member pay this fee upon request to opt-out. The monthly (on-going)

charges would be in addition to a customer-members Basic Service Charge, as allowed under the

current tariffs.

Upfront One-Time Costs: Refers to the upfront costs that are reflected on a cost per customer-member basis for the specific scenario. These costs are the identifiable upfront one-time costs and

include: the non-AMI meter Installation costs, non-AMI meter reading equipment , removal of non-

AMI meter (exit fee), non-AMI meter storage and inventory costs, and the additional customer-

member communications costs. The costs also include the cost of returning SMECOs AMI network

back to the standard condition after the customer-member no longer requires the opt-outservices.

Monthly Costs (on-going): Refers to the identifiable on-going cost estimates that include theincremental cost of the non-AMI meter system for the specific scenario. These costs also include the

incremental non-AMI meter costs that have been defined in the respective scenario. These costs

include: non-AMI meter reads (based on a fully loaded truck roll cost which includes fringe benefitsand administrative and general (A&G) overhead), maintaining legacy meter reading system and

annual maintenance costs, and the cost of running parallel business processes post-AMI deployment.

16Refer to Appendix 1-3 for detailed breakdown of costs.


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BLACK & VEATCH |SMECOs Proposed Opt-Out Service Charges 3-14

3.0 SMECOs Proposed Opt-Out Service ChargesIn this section, SMECO presents service charges incurred by customer-members who elect to opt-out.

The section is divided into four sub-sections which detail service charges for each opt-outscenario

and also at the three estimated levels of opt-out participation; 1%, 2% and 5%, respectively.

3.1 SERVICES CHARGES FOR AN OPT-OUT OPTION WITH A LEGACY METER -SCENARIO 1: ANALOG, SCENARIO 2: DIGITAL, AND SCENARIO 3: ERT/AMR

This section describes SMECOs cost analysis for an opt-out option with either an Analog, Digital or

ERT/AMR meter. SMECO has consolidated the results of these three scenarios due to the following

reasons:

SMECO did not observe any differences in terms of required system costs between the threeproposed opt-out options

Opt-outcustomer-members would be required to incur identical service charges under all threeoptions

Table 3-1a depicts the upfront one-time and monthly costs incurred by customer-members who opt-out of the AMI meter. As illustrated in Table 3-1a, as participation increases in the "opt-out" program,

an individual customer-members upfront and monthly opt-out service charges decrease. Under these

scenarios a customer-member would not be charged for the non-AMI meter.17The largest components

of the upfront one-time charge are the two truck rolls required to install, and later, to remove (exit fee)

the non-standard meters (total cost of $53.58). In terms of the monthly fee a customer-member will

expect to incur a fixed meter read fee of $26.79 (fully loaded truck roll cost). SMECO does not expect to

be able to offer a customer-member a decreased meter read fee as its service territory is vast and

customer-member opt-outparticipation is not static month to month. In order to service the non-

contiguous service territory, SMECO will have to utilize a similar process to its current check read

services. The fees below are not meant to be punitive, but reflective of the true cost required to providethe customer-membersrequested opt-out option.

Table 3-1a SMECO opt-outservice charges for Scenario 1: Analog, Scenario 2: Digital, or

Scenario 3: ERT/AMR

The charges summarized in Table 3-1a are intended to alleviate any cost burden (results shown in Table

4-1a) being placed on AMI customer-members by customer-members choosing an opt-out option.

Unless mitigated, all customers-members would have to subsidize the cost for opt-out customer-

members though rates.

17SMECO intends to retain a supply of these meters retrieved during the AMI installation efforts.

Scenario 1 Analog, Scenario 2 Digital and

Scenario 3 - ERT/AMR1% 2% 5%

Upfront One-Time $105.32 $84.03 $71.27

Monthly $34.94 $31.68 $29.73


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Southern Maryland Electric Cooperative | OPT-OUTALTERNATIVE COSTS & PROPOSAL


3.2 SERVICES CHARGES FOR AN OPT-OUT OPTION WITHSCENARIO 4:INTERVAL DATA/MODEM METER (TELEPHONE LINE-POTS)

This section describes SMECOs cost analysis for an opt-out program with an Interval Data/Modem

Meter. Table 3-2a depicts the upfront one-time and monthly costs to be incurred by customer-members

who opt-out of the AMI meter, should SMECO have to provide this option to its customer-members.

As illustrated in the table 3-2a, as participation increases in this option, an individual customer-

members upfront and monthly opt-out service charges decrease. Under this scenario a customer-

member would be charged for the non-AMI meter as SMECO does not currently supply this option to its

residential customer-member. Based on the last invoice SMECO received for this type of meter, the

anticipated price of a meter to offer this opt-out option is $767.00.

The meter cost is the largest cost component of a customer-member s required upfront one-time fee.

The two truck rolls required to install, and later, to remove (exit fee) the alternative meter are higher as

it requires a more technically advanced staff to install and remove a meter connected to a POTS line

(total cost of $112.98). In addition, this opt-out solution requires the installation of a dedicated phone

line jack. SMECO has been advised by the local phone service provider that the required costs to

provide the POTS line for this RF free solution includes $46.00 connection fee for the additional phone

circuit and an additional $95.00 fee for the phone technician to enable the physical jack at the property.

SMECO further estimates an additional fee for the installation of a phone wire from phone companys

jack to the meters phone connection pointrequires on average two hours of time ($121.67) plus an

estimated $50 in materials. In terms of the monthly fee, a customer-member will expect to incur a fixed

meter read fee of $22 (monthly phone bill). SMECO will have to purchase additional meter reading and

repair equipment to handle any failures with this non-manual solution. SMECO does not have a

measurement guideline for the maintenance required to maintain phone service for residential POTS

line used for billing grade interval data information. The experience characterized in the description for

Scenario 4 for residential POTS lines was based on shared POTS line. SMECO does feel the maintenance

of POTS lines used to read interval data for customer-member accounts will be substantial but has not

included these costs in an estimate. SMECO has the expectation that additional fees due to POTS line

maintenance would be charged directly to the customer-member. The fees below are not intended to

be punitive, but in fact reflective of the true cost required to provide opt -out customer-members the

services they are requesting.

Table 3-2a SMECO opt-out service charges for Scenario 4: Interval Data/Modem Meter

(Telephone Line -POTS)


4-2a) being placed on all customer-members due to customer-members choosing to opt-out. Unless

mitigated, all customer-members would have to subsidize the cost for opt-out options though rates.

Scenario 4 - Interval Data/Modem Meter (Telephone Line -POTS) 1% 2% 5%

Upfront One-Time $1,251.70 $1,226.76 $1,211.80

Monthly $30.47 $27.06 $25.01


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3.3 SERVICE CHARGES FOR AN OPT-OUT OPTION WITH SCENARIO 5: SMARTMETER: LIMITED FREQUENCY

This section describes SMECOs cost analysis for an opt-out program with an AMI meter in which the

frequency of the meters transmissions of RF signal have been programmatically limited. This option

does not decrease the level of the RF signal but limits the number a times the RF signal is transmitted.

For SMECOs AMI solution, the RF signal limit transmission rate is configurable from 0 84 hours. Table

3-3a depicts the upfront one-time and monthly costs incurred by customer-members should SMECO be

required to offer this option. As illustrated in the table below, as participation increases in the "opt-out"

program, an individual customer-members upfront and monthly opt-out service charges decrease.

Under this scenario a customer-member would not be charged for the cost of the meter as this solution

requires a remote configuration of an AMI meter to decrease the number of transmits. SMECO

anticipates, based on vendor discussions, that configuring the AMI meter to the limited frequency

setting will require hour per meter. Configuring the meter back to a standard AMI meter will also

require hour per meter. SMECO estimates these processes to cost a total of $78.28. This solution does

not require SMECO to maintain any duplicative meter reading systems or excess field activity. As a resultthe monthly charge for the meters will be minimal. The fees below are not meant to be punitive, but in

fact reflective of the true cost required to provide opt -out customer-members the services they are

requesting.

Table 3-3a SMECO opt-out service charges for Scenario 5: Smart Meter: Limited Frequency


4-3a) being placed on customer-members by customer-members choosing to opt-out. Unless

mitigated, all customer-members would have to subsidize the costs for opt-out customer-members

though rates.

3.4 SERVICE CHARGES FOR AN OPT-OUT OPTION WITH SCENARIO 6: PROBEA DIGITAL INTERVAL METER

This section describes SMECOs cost analyses for an opt-out program with a process requiring a

manual probe of a digital meter in order to read interval data. Table 3-4a depicts the upfront one-time

and monthly costs incurred by customer-members should SMECO be required to offer this option. As

participation increases in the "opt-out" program, an individual customer-members upfront and monthlyopt-out service charges decrease. Under this scenario a customer-member would be charged for the

full cost of the meter as SMECO will not currently offer this metering function to its customer-members .

Based on the last invoice SMECO received for this type of meter, the anticipated price of the meter is

$285.00 per unit. The meter cost is the largest cost component of the upfront fee.

Two truck rolls are required to install, and later, to remove (exit fee) the meter. Because of the

technical requirements of this solution a higher classification of staff are required for the programming,


18/41


19/41


BLACK & VEATCH |Impact to SMECO Business Operations With A No-Charge Opt-Out Option 4-18

4.0 Impact to SMECO Business Operations With A No-ChargeOpt-Out Option

In this section, SMECO intends to demonstrate the cost of maintaining dual business processes to

accommodate customer-members electing to opt-out who are not responsible for their service

charges. SMECO plans to begin system-wide AMI implementation after the PSCs completes its review

process. When completed, the AMI system will deliver substantial value to SMECOs customer-

members by reducing operating costs, improving customer-member service and reliability, and

enhancing employee safety. These benefits will accrue through changes in operational activities and

business processes that are made possible by the technological attributes of AMI systems functionality.

The four sub-sections below also depict the overall impact of an opt-out program on SMECOs post-

AMI business operations if opt-out customer-members are not responsible for their service charges.

These customer-members will not only forgo many of the tangible benefits that AMI can provide but

also impact the business case analysis SMECO performed on its AMI program.

4.1 IMPACT OF A NO CHARGE OPT-OUT OPTION WITH A LEGACY METERSCENARIO 1: ANALOG, SCENARO 2: DIGITAL, AND SCENARIO 3: ERT/AMR

This section describes SMECOs cost analysis for an opt-out option with either an Analog, Digital or

ERT/AMR meter. SMECO has consolidated the results of these three scenarios due to the following

reasons:

SMECO did not observe any differences in terms of required system costs between the threeproposed opt-out options

The cost impact for SMECO is also identical if opt-outcustomer-members are not responsible fortheir service charges

SMECO analyzed the effect that these three opt-out options would present to SMECOspost-AMI

business operations if the customer-members choosing to opt-out were not responsible fortheir

service charges. Table 4-1a depicts the financial impact to SMECOs business processes post-AMI

deployment at the 1%, 2% and 5% opt-out participation levels. If customer-members electing to

choose an opt-out service were not responsible for their service charges (as depicted in Table 3-1a),

SMECO anticipates a total impact range from an opt-out program in Year 1 to be between roughly

$730,000 and $3,000,000.


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Table 4-1a Impact to SMECO Operations from a no charge opt-out optionwith Scenario 1:

Analog, Scenario 2: Digital, or Scenario 3: ERT/AMR

Table 4-1b presents the results of SMECOs Operational AMI Business Case analysis, reflecting the

impact of a no charge opt-out option with an Analog, Digital or ERT/AMR meter would have on

SMECOs AMI Business Case. Specifically, the effectto both SMECOsAMI operational benefits and

operational costs.

Table 4-1b Impact of a no charge opt-outoption to SMECOsAMI Business Case with Scenario

1: Analog, Scenario 2: Digital, or Scenario 3: ERT/AMR

Element

Total AMI Benefits CurrentBusiness Case

1% Opt-OutParticpation



CurrentBusiness Case



5% Opt-OutParticipation

Avoided Capital $1,652.7 $1,611.0 $1,600.7 $1,569.6 $3,844.0 $ 3,756.8 $3,732.4 $3,659.4

Avoided O&M $36,256.3 $30,952.6 $25,967.7 $11,013.0 $73,152.4 $ 62,399.9 $52,316.6 $22,066.6

Increase Operating

Revenue

$7,392.5 $7,345.4 $7,298.3 $7,157.0 $15,079.6 $14,980.1 $14,880.5 $14,581.8

Avoided Purchase Power

Costs

$1,438.5 $1,424.9 $1,411.2 $1,370.3 $2,947.3 $ 2,918.5 $2,889.6 $2,803.0

Total $46,740.0 $41,334.0 $36,277.9 $21,109.9 $95,023.3 $ 84,055.3 $73,819.1 $43,110.8

Total AMI Costs Current

Business Case

1% Opt-Out

Particpation

2% Opt-Out

Particpation

5% Opt-Out

Particpation

Current

Business Case

1% Opt-Out

Particpation

2% Opt-Out

Particpation

5% Opt-Out

Participation

Capital $21,607.3 $22,395.7 $22,405.4 $22,434.5 $41,138.2 $ 42,754.5 $42,767.6 $42,807.1

Amortization of ExistingMeter Assets (net) $2,199.1 $2,199.1 $2,199.1 $2,199.1 $0.0 $0.0 $0.0 $0.0

O&M $16,489.1 $16,489.1 $16,489.1 $16,489.1 $28,259.8 $ 28,259.8 $28,259.8 $28,259.8

Total $40,295.5 $41,083.9 $41,093.6 $41,122.7 $69,397.9 $ 71,014.2 $71,027.4 $71,066.9

Total Resource Cost (TRC)

(Operational) 1.16 1.01 0.88 0.51 1.37 1.18 1.04 0.61


with DR1.70 1.54 1.42 1.09 2.07 1.88 1.74 1.34

Net Present Value ($ millions) Total $ (nominal)


21/41



As shown in Table 4-1b, these three opt-out options, if offered at no charge to customer-members,

would decrease the AMI programs value. The decrease in the AMI programs value is the result of

lower realized operational AMI efficiencies due to the opt-out program. SMECO will not be able to

fully realize the elimination of its meter reading activities or excess truck rolls. Moreover, faced with a

non-contiguous meter reading process, SMECOs per meter read cost would increase substantially.

However, the AMI program enables SMECO to absorb the impact of even a 5% opt-outparticipation

level and still justify its AMI investment as the TRC ratio remains above 1 in both NPV and nominal

terms.

4.2 IMPACT OF A NO CHARGE OPT-OUT OPTION WITH SCENARIO 4:INTERVAL DATA/MODEM METER (TELEPHONE LINE-POTS)

SMECO analyzed the effect that Interval Data/Modem Meter opt-out options would present to

SMECOs post-AMI business operations if the customer-members choosing to opt-out were not

responsible for their service charges. Table 4-2a depicts the financial impact to SMECOs business

processes post-AMI deployment at the 1%, 2% and 5% opt-out participation levels. If customer-

members electing to choose an opt-out service were not responsible for their service charges (as

depicted in Table 3-2a), SMECO anticipates a total impact range from an opt-out program in Year 1 to

be between roughly $2,250,000 and $10,500,000.

Table 4-2a Impact to SMECO Operations from a no charge opt-out option with Scenario 4:

Interval Data/Modem Meter (Telephone Line -POTS)


impact of a no charge opt-out option with an Interval Data/Modem Meter (Telephone Line-POTS)

would have on SMECOs AMI Business Case. Specifically, the effect to both SMECOs AMI operational

benefits and operational costs.

1% 2% 5%

Meter Reading $1,828,922 $1,376,320 $1,004,153 -$112,347

Meter Operations $1,037,679 $1,030,010 $1,022,342 $999,335

Revenue Protection $1,219,160 $1,212,892 $1,206,623 $1,187,818Load research $483,135 $483,135 $483,135 $483,135

Credit Collections $482,489 $479,990 $477,492 $469,996

Billing $74,180 $72,848 $71,516 $67,519

Customer Care $3,585 -$17,800 -$30,595 -$69,015

Distribution and Outage Management $537,745 $532,822 $527,898 $513,127

Total AMI Benefits $5,666,896 $5,170,217 $4,762,564 $3,539,569

Erosion of AMI Benefits -$496,679 -$904,333 -$2,127,328

Additional Costs of Opt-Out Solution 1 -$1,754,119 -$3,413,846 -$8,393,029

Total Opt-Out Solution Impact - Year 1 -$2,250,797 -$4,318,179 -$10,520,356

Scenario 4 - Interval Data/Modem Meter (Telephone Line -POTs)

Current Business CaseParticipation Levels

Note: 1) Additional Costs include Cost to Purchase Meter, Installation of Non- AMI Meter Removal of Non-AMI Meter (Exit

Fee), Additional requirements for system functionality, Meter Inventory/Facility, IT Storage &Hardware, Customer Education

Materials and Mailings, IT - MVRS/MV90 Maintenance and application integration, Operation of System (upload/download)

and Changes to Rate/Revenue to track separate billed revenues.


22/41



Table 4-2b Impact of a no charge opt-out option to SMECOsAMI Business Case with Scenario

4: Interval Data/Modem (Telephone Lines-POTS)

As shown in Table 4-2b this opt-out option, if offered at no charge to customer-members, would

decrease the AMI programs value. The decrease in the AMI programs value is the result of lower

realized operational AMI efficiencies due to the opt-out program. Though SMECO will be able to fully

realize the elimination of its manual meter reading activities, the Cooperative will be required to

maintain dedicated phone lines at $22 per month to read meters and perform excess truck rolls not

needed by AMI. However, the AMI program enables SMECO to absorb the impact of even a 5% opt-

out participation level and still justify its AMI investment as the TRC ratio remains above 1 in both NPV

and nominal terms.

4.3 IMPACT OF A NO CHARGE OPT-OUT OPTION WITH SCENARIO 5: SMARTMETER: LIMITED FREQUENCY

SMECO analyzed the effect an opt-out option with a Smart Meter: Limited Frequency would present

to SMECOs post-AMI business operations if the customer-members choosing to opt-out were not

responsible for their service charges. Table 4-3a depicts the financial impact to SMECOs business

processes post-AMI deployment at the 1%, 2% and 5% opt-out participation levels. If customer-

members electing to choose an opt-out service were not responsible for their service charges (asdepicted in Table 3-3a), SMECO anticipates a total impact range from an opt-out program in Year 1 to

be between roughly $150,000 and $640,000. The impact of this opt-out solution is minimal when

compared to the other opt-out scenarios as SEMCO is able to eliminate dual meter reading systems

and maintain singular business processes post-AMI.

Element

Total AMI Benefits Current

Business Case

1% Opt-Out

Particpation

2% Opt-Out

Particpation

5% Opt-Out

Particpation

Current

Business Case

1% Opt-Out

Particpation

2% Opt-Out

Particpation

5% Opt-Out

Participation

Avoided Capital $1,652.7 $1,602.7 $1,592.3 $1,561.2 $3,844.0 $3,740.1 $3,715.8 $3,642.7

Avoided O&M $36,256.3 $32,319.7 $28,752.1 $18,049.2 $73,152.4 $65,013.1 $57,395.8 $34,924.0

Increase Operating

Revenue

$7,392.5 $7,345.4 $7,298.3 $7,157.0 $15,079.6 $14,980.1 $14,880.5 $14,581.8


Costs

$1,438.5 $1,424.9 $1,411.2 $1,370.3 $2,947.3 $2,918.5 $2,889.6 $2,803.0

Total $46,740.0 $42,692.7 $39,054.0 $28,137.8 $95,023.3 $86,651.7 $78,881.6 $55,951.5


Business Case

1% Opt-Out

Particpation

2% Opt-Out

Particpation

5% Opt-Out

Particpation

Current

Business Case

1% Opt-Out

Particpation

2% Opt-Out

Particpation

5% Opt-Out

Participation

Capital $21,607.3 $23,305.1 $24,217.4 $26,954.6 $41,138.2 $44,508.6 $46,099.4 $51,118.0

Amortization of Existing

Meter Assets (net)

$2,199.1 $2,199.1 $2,199.1 $2,199.1 $0.0 $0.0 $0.0 $0.0

O&M $16,489.1 $16,489.1 $16,489.1 $16,489.1 $28,259.8 $28,259.8 $28,259.8 $28,259.8

Total $40,295.5 $41,993.2 $42,905.6 $45,642.7 $69,397.9 $72,768.4 $74,359.2 $79,377.8


(Operational) 1.16 1.02 0.91 0.62 1.37 1.19 1.06 0.70


with DR1.70 1.54 1.43 1.13 2.07 1.91 1.74 1.36



23/41



Table4-3a Impact to SMECO Operations from a no charge opt-out option with Scenario 5:

Smart Meter: Limited Frequency


impact of a no charge opt-out option with an Smart Meter: Limited Frequency would have on

SMECOs AMI Business Case. Specifically, the effect to both SMECOs AMI operational benefits and

operational costs.


24/41



Table 4-3b Impact of a no charge opt-out option to SMECOs AMI Business Case with Scenario

5: SMART METER: Limited Frequency to SMECO AMI Business Case

As shown on table 4-3b Scenario 5 does not materially impact SMECOs AMI project value. Even with a

5% opt-out participation level the TRC ratio remains consistent with the original estimated project TRC

in both NPV and nominal terms. This scenario would require minimum adjustments to the proposed

business processes under AMI in the previously filed business case. Moreover, a singular meter reading

system will be maintained under this option.

4.4 IMPACT OF A NO CHARGE OPT-OUT OPTION WITH SCENARIO 6: PROBE ADIGITAL INTERVAL METER

SMECO analyzed the effect a Probe a Digital Interval Meter opt-out option would present to SMECOs

post-AMI business operations if the customer-members choosing to opt-out were not responsible for

their service charges. Table 4-4a depicts the financial impact to SMECOs business processes post-AMI

deployment at the 1%, 2% and 5% opt-out participation levels. If customer-members electing to

choose an opt-out service were not responsible for their service charges (asdepicted in Table 3-4a),

SMECO anticipates a total impact range from an opt-out program in Year 1 to be between roughly$1,700,000 and $7,550,000.

Element


Business Case

1% Opt-Out

Particpation

2% Opt-Out

Particpation

5% Opt-Out

Particpation

Current

Business Case

1% Opt-Out

Particpation

2% Opt-Out

Particpation

5% Opt-Out

Participation

Avoided Capital $1,652.7 $1,652.7 $1,652.7 $1,652.7 $ 3,844.0 $3,844.0 $3,844.0 $3,844.0

Avoided O&M $36,256.3 $36,256.3 $36,256.3 $36,256.3 $73,152.4 $73,152.4 $73,152.4 $73,152.4

Increase Operating

Revenue

$7,392.5 $7,392.5 $7,392.5 $7,392.5 $15,079.6 $15,079.6 $15,079.6 $15,079.6


Costs

$1,438.5 $1,438.5 $1,438.5 $1,438.5 $ 2,947.3 $2,947.3 $2,947.3 $2,947.3

Total $46,740.0 $46,740.0 $46,740.0 $46,740.0 $95,023.3 $95,023.3 $95,023.3 $95,023.3


Business Case

1% Opt-Out

Particpation

2% Opt-Out

Particpation

5% Opt-Out

Particpation

Current

Business Case

1% Opt-Out

Particpation

2% Opt-Out

Particpation

5% Opt-Out

Participation

Capital $21,607.3 $21,683.0 $21,752.2 $21,959.7 $41,138.2 $41,269.5 $41,392.0 $41,759.5


Meter Assets (net)

$2,199.1 $2,199.1 $2,199.1 $2,199.1 $0.0 $0.0 $0.0 $0.0

O&M $16,489.1 $16,489.1 $16,489.1 $16,489.1 $28,259.8 $28,259.8 $28,259.8 $28,259.8

Total $40,295.5 $40,371.2 $40,440.3 $40,647.9 $69,397.9 $69,529.3 $69,651.8 $70,019.3


(Operational) 1.16 1.16 1.16 1.15 1.37 1.37 1.36 1.36


with DR1.70 1.69 1.69 1.68 2.07 2.07 2.06 2.05



25/41



Table 4-4a Impact to SMECO Operations from a no charge opt-out option with Scenario 6:

Probe a Digital Interval Meter

Table 4-4b evaluates the impact that a no charge opt-out option with probing a digital interval meter

would have on its AMI Business Case. Below, SMECO presents the impact of an opt-out program to

both AMI operational benefits and operational costs if customer-members electing to opt-out were

not responsible for their service charges.

Table 4-4b Impact of a no charge opt-out option to SMECOs AMI Business Case with Scenario

6: Probe a Digital Interval Meter to SMECO AMI Business Case

Element


Business Case

1% Opt-Out

Particpatio

2% Opt-Out

Particpation

5% Opt-Out

Particpation

Current

Business Case

1% Opt-Out

Particpation

2% Opt-Out

Particpatio

5% Opt-Out

Participation

Avoided Capital $1,652.7 $1,526.8 $1,474.0 $1,315.7 $3,844.0 $3,573.3 $3,449.4 $ 3,077.9

Avoided O&M $36,256.3 $25,602.3 $15,309.9 ($15,567.2) $73,152.4 $51,565.1 $30,743.7 ($31,720.6)

Increase Operating

Revenue

$7,392.5 $7,345.4 $7,298.3 $7,157.0 $ 15,079.6 $14,980.1 $14,880.5 $14,581.8


Costs

$1,438.5 $1,424.9 $1,411.2 $1,370.3 $2,947.3 $2,918.5 $2,889.6 $ 2,803.0

Total $46,740.0 $35,899.4 $25,493.5 ($5,724.1) $95,023.3 $73,036.9 $51,963.2 ($11,258.0)


Business Case

1% Opt-Out

Particpatio

2% Opt-Out

Particpation

5% Opt-Out

Particpation

Current

Business Case

1% Opt-Out

Particpation

2% Opt-Out

Particpatio

5% Opt-Out

Participation

Capital $21,607.3 $22,658.7 $22,924.6 $23,722.5 $41,138.2 $43,238.0 $43,722.3 $45,175.3


Meter Assets (net)

$2,199.1 $2,199.1 $2,199.1 $2,199.1 $0.0 $0.0 $0.0 $0.0

O&M $16,489.1 $16,489.1 $16,489.1 $16,489.1 $28,259.8 $28,259.8 $28,259.8 $28,259.8

Total $40,295.5 $41,346.8 $41,612.8 $42,410.7 $69,397.9 $71,497.7 $71,982.1 $71,982.1


(Operational) 1.16 0.87 0.61 (0.13) 1.37 1.02 0.72 (0.16)


with DR1.70 1.41 1.17 0.47 2.07 1.72 1.44 0.60



26/41



As shown on table 4-4b the Probe the Digital Interval Meter opt-out option decreases the AMI

programs value, and at a 5% opt-out participation level the TRC ratio falls below 1 in both NPV and

nominal terms. The decrease in the AMI programs value is the result of lower realized operational AMI

efficiencies due to the opt-out program. Specifically, the extensive labor required to probe meters to

enable customer-members with TOU rates will erode most of the operational AMI benefits.


27/41


BLACK & VEATCH |Conclusion and Recommended Opt-Out Non-Standard Meter Installation 5-26

5.0 Conclusion and Recommended Opt-Out Non-StandardMeter Installation

SMECO agrees with the Commissions perspective that customer-members who are provided with an

additional option to opt-out of the installation of smart meters on their homes, should bear the

appropriate costs. SMECO understands the rationale for investigating an opt-out option for itscustomer-members. SMECO has reviewed the experiences of other utilities18opt-outprograms andhas the expectation that a small number of customer-members will choose to out-out of an AMI meterinstallation. An architected service charge schedule which will ensure the viability of SMECOsAMIproject as well as prevent all customer-members from subsidizing customer-members who are electingan opt-outoption.

SMECO assessed the opt-out impacts to its AMI Business Case19, the impacts to the operational business

processes, as well as the potential opt-out service charges to customer-members electing to opt-out. Asa result, SMECO recommends to offer the most viable option available, Scenario 3, an ERT/AMR meter,which has been in use within the SMECO territory for over 10 years.

SMECO is recommending Scenario 3, an ERT/AMR meter, as it fulfills the Commission srequest toprovide a RF-minimizing option related to the installation of a smart meter. 20This alternative also allowscustomer-members who choose to opt out to retain a legacy meter as defined by the Commission.21

SMECO proposes that a standard meter for its customer-members be the AMI meter, however

customer-members who elect to opt-out will have an ERT/AMR meter installed(Scenario 3).

If required by the Commission to offer a TOU rate for opt-outcustomer-members, the customer-

member will have an RF-free, interval data meter installed (Scenario 6). The interval data will be

obtained by physically visiting the meter on a monthly basis, manually connecting a read device to the

meter, and performing a download of the interval data to the back office systems.

18Refer to Appendix 1-1: Review of U.S. Opt-Out Programs.

19AMI Business Case was submitted in June 2012

20PSC Order 85371

21PSC Order Granting Request for Clarification 85371


28/41


BLACK & VEATCH |Appendix 1-1: Review of U.S. Opt-Out Programs 5-27

Appendix 1-1: Review of U.S. Opt-OutProgramsAs SMECO investigates implementing an Advanced Metering Infrastructure (AMI) program, one

important consideration is the potential impact of an opt-out option. SMECO must anticipate

concerns raised by opponents of the AMI technology. As smart meter deployments have reached an

estimated one in three households in the United States, utilities have faced increasing opposition during

the past two years from those who believe the meters present a danger to health, safety, privacy, the

economy or national security.22 A recent study conducted by Chartwell indicated that within the last

few years the number of active smart meter [AMI] opt-out programs offered by utilities in the U.S. and

Canada has grown from zero to more than a dozen.23 The table below lists the limited number of states

which have addressed the question of an opt-out option:

SUMMARY ANALYSIS OF AMI OPT-OUT PROGRAMS BY STATE

Number of states where a docket or Bill has been

opened to discuss an AMI opt-out alternative

14 States24

and District of

Columbia

States where utilities were ordered to provide an

AMI opt-out program by a regulatory commission

or state legislature

California, D.C., Georgia, Maine,

Maryland, Michigan, Nevada,

Oregon, Pennsylvania and

Vermont

States where an opt-out program is being

considered by their regulatory commissionArizona and Texas

States where utilities have offered an opt-out

program prior to a request by a regulatory

commission (not included in 14 states mentioned

above)

Colorado and Illinois

States where opt-outconcerns were dismissed Idaho, New Hampshire, and

Wisconsin

DESPITE MEDIA ATTENTION OF OPT-OUTPROGRAMS, PARTICIPATION RATES REMAIN LOW

Efforts to oppose advanced metering programs have garnered significant publicity in the media, though

it appears that these claims represent the opinion of a vocal minority as opposed to a concept

22Smart Meter Opt-Out Programs 2013, Russ Henderson

23Smart Meter Opt-Out Programs 2013, Russ Henderson24

14 states - Arizona, California, Colorado, D.C., Georgia, Idaho, Illinois, Maine, Maryland, Michigan, Nevada, New Hampshire,

Oregon, Pennsylvania, Texas, Vermont, Wisconsin


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advocated by the mainstream public. The figures in the chart below imply that the opt -out option is

not as prevalent as the magnified media coverage would lead the public to believe.25

CURRENT EXAMPLES OF OPT-OUT PARTICIPATION LEVELS

UTILITY OPT-OUT

PARTICIPATION

UPFRONT FEE MONTHLY FEE

Central Maine Power (ME) 1.40% $40 $12

Green Mountain Power (VT) 2.03% None None

Portland General (OR) .0004% $254 $51

Pacific Gas & Electric (CA) .55% $75 $10

San Diego Gas & Electric (CA) .08% $75 $10

The basic premise of an opt-out option is to accommodate individuals who refuse an upgraded AMI

meter. In instances where customers do not want an AMI meter in their homes, the opt-out option

relies primarily on maintaining a legacy electromechanical meter. Research indicates that when utilities

offer opt-out customers the choice between the legacy electromechanical meter and the smart meter

with its communications module switched off, the legacy meter is the more popular option.

CUSTOMER RATIONALE FOR OPTING-OUT

Resistance to AMI has the attention of utilities and regulators. Some utilities have initiated their own

smart-meter opt-outprograms, while other utilities have been ordered to do so by regulators. The

proportion of utility customers opting out has remained relatively low. This vocal minority has espoused

a strong apprehension regarding the new advanced meter and its implications for personal privacy or

public health which are summarized below.

Personal PrivacyThe issue of privacy involves the collection and use of energy consumption

information with enough granularity to determine activities going on within the premise. This general

issue of privacy surrounds what information is collected about a person that is not in the public domain,

who is privy to that information, and what is done with the information after it is collected. However,

SMECO wishes to reaffirm to its customer-members that the cooperative is committed to keeping its

customer-member data private. Customer-members can be assured that the cooperative will use

customer-member usage data only for legitimate utility-related business activity. The cooperative takes

very seriously its privacy policy and safeguards the confidentiality of its customer-members that it is

entrusted with. SMECO possesses a comprehensive data privacy protection policy that covers the

energy use and operational data collected by AMI meters as well as other metering devices. SMECOs

25Smart Meter Opt-Out Programs 2013, Russ Henderson


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AMI program will make significant investments in encryption technology and security practices. Usage

data coming over the network will be encrypted using the latest technology and has no customer-

member identifiable information associated with it. All data being sent to and from the meter will be

encrypted to ensure security and accuracy.

Public HealthThe potential health effects of advanced meters is one of the most difficult issues to

address as it is quite difficult to persuade concerned parties categorically that smart meters have no

health impacts. Opponents take issue with the notion that advanced meters are safe because they

operate within the RF radiation requirements of the Federal Communications Commission (FCC) which

regulates wireless devices. Critics argue that the duty cycle assumptions underlying the standards are

different than the actual operational characteristics of advanced meters and that the FCC regulations

are designed for intermittent exposure not long-term exposure. However, SMECO has not discovered

any credible reports which affirm these claims.

SMECOs AMI meters will use very low power radio-frequency (RF) signals to communicate energy use

information back to the cooperative. The respective RF exposure from an AMI meter is minimal

compared to other household products. Additionally, AMI RF signals are of much shorter duration,

typically less than 1 second for every emission. Further, SMECO reviewed the extensive research that

has been provided during AMI opt-out debates across the U.S. and concluded that several studies

demonstrate that consumers will experience no increased health risk with an AMI meter. In 2010, the

California Council of Science and Technology (CCST) evaluated over 100 publications and postings about

smart meters and other devices in the same range of RF signals and consulted with over two dozen

experts in the field. The CCST released its findings in 2011. The CCST found that RF fields from smart

meters are much lower than the RF exposure limits established by the FCC and that scientific research

has not confirmed any adverse effects caused by RF fields below those exposure standards.26The CCSTs

2011 results concluded that, when properly installed and maintained, wireless AMI meters result in less

RF exposure than other household appliances.

The Edison Electric Institute, Association of Edison Illuminating Companies, and the Utilities Telecom

Council published a white paper, which complements the findings of the CCST in concluding that the RF

exposure effects of AMI meter are very small compared to exposure from other sources in the home

and that AMI meters operate significantly below FCC exposure limits. 27The Electric Power Research

Institute (EPRI), after analyzing AMI meter RFs, affirmed that the RF field levels from the AMI meters are

26California Council on Science and Technology, "Health Impacts of Radio Frequency from Smart Meters available athttp://www.ccst.us/publications/2011/2011 smartA.pdf ("CCST Report").27A Discussion of Smart Meters and RF Exposure Issues, an EEI-AEIC-UTC White Paper, March 2011.


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below the exposure limits stipulated by the FCC.28As a result of this thorough review, SMECO does not

believe that AMI RF exposure poses a threat to the health of its customer-members.

Becoming familiar with the respective arguments in each of these areas is important because SMECO

may face questions on these topics and should be prepared to appropriately respond and educate its

customer-members, as necessary. In many cases resistance stems from a customers perspective that

the advanced meter and advanced metering program are typically compulsory for them without their

direct acceptance. Without a basis to personalize the potential benefits, coupled with the natural

perception that this technology will cost the consumer money, customers have a tendency to revert to

objecting to the advanced metering program. However, studies conclude that relatively low

participation in opt-out options indicates that, if educated and engaged; customers recognize and

value the benefits that AMI can enable. SMECO would seek to elucidate the numerous benefits that AMI

provides to its customer-members.

OPT-OUTPROGRAM COST RECOVERY

Despite the nuances of these programs, both regulators and utilities have made an effort to maintain

the economic viability of pursuing an advanced metering program. Regulators and utilities in other

states have had to consider opt-out programs and recognize that an opt-out option may erode the

viability of an advanced metering program as it is difficult to justify the large scale investment without

knowing the number of customers choosing advanced meters. In the few locations where there is an

opt-out option, customers who do not want an upgraded AMI meter are required to cover at least a

portion of the additional on-going operational costs incurred by the utility as a result of the opt-out

option. These additional costs may initially be borne by the utility but they will ultimately become the

burden of the other ratepayers who will be subsidizing the limited number of opt-outcustomers.

Therefore, the issue for the utility to address with its regulator is how to balance individual rights with

the overall economic and societal benefits offered by the advanced metering program. Though there is

not a defined allocation, customers who opt-out of an AMI meter are required to pay an initial upfront

fee and cover at least a portion of the additional on-going operational costs incurred by the utility. The

fees are not an attempt to punish customers who seek to avoid the AMI meter, but are recognition by

regulators and utilities of the impending operational changes. The fees represent a means to alleviate

some of the financial burden imposed on the utility in having to perform distinct dual processes to

accommodate a small minority in the utilitys service territory.

Specifically, an opt-outoption for an advanced metering program has the following results:

28Electric Power Research Institute (EPRI). 2011. Characterization of radiofrequency emissions

from two models of wireless smart meters.


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1) Additional capital costs incurred to enable alternate technologies required and additional

Operation and Maintenance costs to maintain that alternate technology, and

2) Additional Operating and Maintenance costs to support the unique, small scale meter reading

costs associated with the opt-outcustomers.

Below are examples of existing AMI opt-out programs across the U.S.: 29

CURRENT EXAMPLES OF OPT-OUT PROGRAMS

STATE UTILITY PROGRAM

California Pacific Gas & Electric

San Diego Gas & Electric

1. PG&E and SDG&E Customers who want to opt out of advanced

meters will be required to pay a one-time $75 fee and a monthly

charge of $10. Low income customers will pay an initial fee of $10 and

a monthly charge of $5.

Illinois City of Naperville 1. One-time installation fee of $68.35 to install the alternative meters,

and an additional monthly charge of $24.75 to have them read.

Maine Central Maine Power 1. CMP installs an AMI meter with full capabilities, including interval

data, etc.

2. CMP installs an AMI meter with radio turned off

a. Initial charge $20

b. Monthly charge $10.50

3. CMP does not install an AMI meter; leaves legacy meter in place

a. Initial charge $40

b. Monthly charge $12

Michigan Consumers Energy

Detroit Edison

1. CE customers electing to opt out would be subject to initial charge

of $69.39 and monthly $11.12 fee

2. CE customers who elect to have an installed smart meter removed

must pay upfront fee of $123.91 plus monthly $11.12 fee

3. DE customers electing to opt out would be subject to initial charge

of $87 for costs of special infrastructure and metering changes and

monthly $15 fee to cover incremental costs of manual meter reading

infrastructure and other services

Oregon Portland General Electric 1. PGE customers incur one-time installation charge of $254 for the

installation of a non-network meter, labor and vehicle expenses in

addition to a monthly meter reading charge of $51 per month based

upon labor, mileage and vehicle expenses

29This summary is based on an Edison Electric Institute Summary of State Regulatory Actions on Smart Meter Opt-out and

preliminary research of AMI opt-out programs .


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CONCLUSION

An assessment of SMECOs service base will enable the cooperative to provide appropriate messaging

regarding its advance metering program which will aid in assuaging concerns. SMECOs research of the

opt-outdebate across the U.S. enables the cooperative to conclude that there is not any reliable

scientific basis to conclude that there are health risks related to RF exposures at the levels emitted bythe cooperatives AMI meters. In addition, the cooperative values its customers privacy and an AMI

meter will not undermine the security of its customer-members privacy. Moreover, the Maryland

Public Service Commission PSC staff indicated last April that based on several studies; most of these

concerns are unfounded. As a result, SMECO believes that an AMI meter will provide benefits for all of

its customer members in terms of managing their bills and usage. However given the nature of concerns

raised by those opposed to AMI, SMECO understands the rationale for an investigation of an opt-out

option for its customer base. For the small base of consumers still wishing to choose a non-AMI meter

solution, SMECO has reviewed the experiences of current utilities and architected an opt-out fee

schedule which will ensure the viability of its AMI project as well as preventing customer-members

choosing AMI from subsidizing customer-members who do not seek an AMI meter.

8/12/2019 SMECO Advanced Smart

Documents

SMECO Advanced Smart Meter Alternatives, Respective Associated Costs, and Cost Recovery Proposal