Utility regulators in Kentucky recently rejected a proposal by the Kentucky Utilities Co. and Louisville Gas & Electric. Co. to deploy advanced smart meters and associated technology throughout their systems.
In an order issued Aug. 31, the Kentucky Public Service Commission stated that, although it “sees benefits in advanced metering,” the two utilities had failed to provide sufficient evidence to persuade the commission that the benefits of the advanced metering system proposal outweighed the costs.
KU had proposed to replace about 531,000 electric meters, while LG&E proposed to replace about 413,000 electric meters and to retrofit about 334,000 natural gas meters.
The utilities estimated that the total capital cost of the new meter systems would be $165.2 million for LG&E ($103.7 million for electric and $61.5 million for natural gas) and $146.7 million for KU.
The cost to deploy the new meters would have been an additional $13.3 million for LG&E and $15.2 million for KU.
In rejecting the application, the PSC cited what it said were several inconsistencies in the case presented by the utilities, including conflicting calculations of net savings and differing projections of the expected service life of the advanced meters. The utilities ultimately contended that the meters would last 20 years, but produced minimal evidence in support of that claim, the PSC said.
The PSC also rejected the argument made by the utilities that their reasons for moving to smart meters were substantially the same as those of other electric utilities that have had their applications for smart meter systems approved recently.
Unlike other applicants, KU and LG&E could not demonstrate that new meters were needed to insure adequate service, the commission said. “To the contrary, the utilities stated that their existing meters have an average remaining service life of 15 years or more and would continue to provide reliable service,” the commission said. Other utilities demonstrated that their current meters were obsolete and could not be properly maintained, the PSC noted.
It also said that given that customers were being asked to pay for both the new system and $52.9 million in unrecovered costs of the existing meters, KU and LG&E could not prove that their proposal was a reasonable least-cost option, as required by law.
Moreover, the utilities did not provide evidence that smart meters were needed in order to allow consistent reading of large numbers of meters located inside customer residences or businesses, as was the case with Duke Energy Kentucky, the PSC said.
The PSC said that the likelihood of realizing a net cost benefit from advanced meters “is too marginal and the risk to ratepayers is too great” to justify approving the KU/LG&E application.
However, the PSC said KU and LG&E could expand existing pilot programs that offer smart meters to customers on a voluntary basis, encouraging the utilities to consider making the pilot programs more user-friendly by providing usage data that is closer to real time and by offering rate options that utilize the meters’ capabilities. Under the terms of the order, the utilities may double the programs to serve up to 10,000 customers of each utility.
The KU/LG&E application was denied without prejudice, meaning that the utilities may submit a similar plan in the future.
The two utilities are units of investor-owned utility PPL Corporation, which is based in Pennsylvania.