Grid Modernization

Court turns aside challenge to Illinois city’s smart meter program

The U.S. Court of Appeals for the Seventh Circuit on Aug. 16 turned aside a challenge to the collection of energy consumption data through smart meters by the public power utility in Naperville, Ill.

While finding that collection of customer information through smart meters amounted to a “search” of the customers’ homes within the meaning of the U.S. and Illinois constitutions, the court concluded that such a search was reasonable, particularly in light of the substantial governmental interest in such data.   The court pointed, for instance, to the key role that smart meters play in grid modernization efforts.

The City of Naperville was sued in federal district court in 2011 over its rollout of smart meters throughout the city. The trial court dismissed the complaint. The plaintiff, a group called Naperville Smart Meter Awareness, then appealed the case to the Seventh Circuit.

The group alleged that the installation of an electric smart meter by a government-operated electric utility, and collection of electric usage data in 15-minute increments, constitutes an unreasonable search under the Fourth Amendment of the U.S. Constitution, as well as an unreasonable search and invasion of privacy under a section of the Illinois Constitution.

American Public Power Association supports Naperville

Naperville filed a brief with the Seventh Circuit on May 15, 2017, arguing that its use of smart meters is reasonable and does not violate the U.S. Constitution or the Illinois Constitution.

On May 19, the American Public Power Association, together with the Edison Electric Institute and the National Rural Electric Cooperative Association, filed a friend-of-the-court brief supporting Naperville.

The utility groups argued that smart meters have become pervasive in the electricity industry, provide substantial public benefits in the form of greater operational efficiency and lower costs, and have been strongly supported by federal statutes and policy.

"Smart meters have become an important tool in the broader effort to modernize the nation's energy infrastructure and improve U.S. energy efficiency," the Association, EEI and NRECA said in their joint brief. "Smart meters enable electricity consumers and utilities to monitor and manage electricity use by time of day.”

Court says data collection is a search, but is reasonable

In its ruling, the appeals court said that while the data collection constitutes a search under both the Fourth Amendment and the Illinois Constitution, the search is reasonable.

The court noted that at the core of the Fourth Amendment “stands the right of a man to retreat into his own home and there be free from unreasonable government intrusion.” The protection now encompasses searches of the home made possible by ever-more sophisticated technology, it said, citing a 2001 decision by the U.S. Supreme Court in Kyllo v. United States.

In the Kyllo case, law enforcement concluded that a home’s occupant was using halide lights to grow marijuana in his house based on an excessive amount of energy coming from the home. The technology in question was thermal imaging. The U.S. Supreme Court held that law enforcement had searched the home when they collected thermal images.

“The ever-accelerating pace of technological development carries serious privacy implications. Smart meters are no exception,” the appeals court said. “Their data, even when collected at fifteen-minute intervals, reveals details about the home that would be otherwise unavailable to government officials with a physical search. Naperville therefore ‘searches’ its residents’ homes when it collects this data.”

The appeals court rejected a number of arguments raised by the city and its supporters as to why the collection of customer data should not be deemed a search. The court disagreed, for example, that smart meters fit within an exception for technologies that are in general public use. The court also rejected the notion that no search occurred because customers had agreed to share their electric consumption information voluntarily. Customers, the court noted, did not have the ability to opt-out of using smart meters if they wanted electric service, and “a choice to share data imposed by fiat is no choice at all.”

Data collection is a reasonable search

Although finding that Naperville’s collection of customer information on 15-minute intervals through smart meters was a search, the court explained that “if Naperville’s search is reasonable, it may collect the data without a warrant.” The court found that Naperville’s data collection was reasonable.

The appeals court said that residents “certainly have a privacy interest in their energy consumption data. But its collection — even if routine and frequent — is far less invasive than the prototypical Fourth Amendment search of a home. Critically, Naperville conducts the search with no prosecutorial intent. Employees of the city’s public utility — not law enforcement — collect and review the data.”

The appeals court pointed out that Naperville’s amended “Smart Grid Customer Bill of Rights” clarifies that the city’s utility will not provide customer data to third parties, including law enforcement, without a warrant or court order. Thus, the privacy interest at stake here is yet more limited than that at issue in Camara.

“Of course, even a lessened privacy interest must be weighed against the government’s interest in the data collection,” the appeals court went on to say. “That interest is substantial in this case,” the court said, noting that the modernization of the electrical grid is a priority for both Naperville and the federal government.

Smart meters play a crucial role in this transition, the appeals court said, noting, among other things, that they allow utilities to restore service more quickly when power goes out precisely because they provide energy-consumption data at regular intervals. Also, the meters permit utilities to offer time-based pricing, an innovation that reduces strain on the grid by encouraging consumers to shift usage away from peak demand periods.

“With these benefits stacked together, the government’s interest in smart meters is significant. Smart meters allow utilities to reduce costs, provide cheaper power to consumers, encourage energy efficiency, and increase grid stability,” the court said.

“We hold that these interests render the city’s search reasonable, where the search is unrelated to law enforcement, is minimally invasive, and presents little risk of corollary criminal consequences.”

At the same time, the appeals court cautioned that its holding “depends on the particular circumstances of this case. Were a city to collect the data at shorter intervals, our conclusion could change. Likewise, our conclusion might change if the data was more easily accessible to law enforcement or other city officials outside the utility.”