Enforced Unbundling
Large competitive energy supply markets require a number of basic conditions to be met to ensure fair competition between suppliers. In particular, all suppliers must enjoy equal access to the transmission and distribution infrastructure, especially with regard to measurement information. There are two common approaches to unbundling, with widely different consequences for metering outsourcing. One approach completely unbundles metering from the distribution network operator and transfers metering responsibility to the energy providers, regulating the supply of competitive meter operation and data collection services by third-party companies through accreditation procedures. The other approach keeps the metering assets and data provision bundled to the distribution network operator and regulates the related distribution costs of sharing the metering information with the energy service providers.
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California was the first U.S. state to open its electricity market and, as such, serves as a model for the introduction of competitive markets across the United States. Here, the public utility commission elected to unbundle metering from the distribution utility as a precondition to the new competitive structure. Consequently, all metering and meter data management functions are now handled by third parties and existing distribution utilities, with third parties approved by the California Public Utility Commission (CPUC) and the utility distribution companies. The CPUC defined two types of service agents: meter service providers, who are in charge of the installation and maintenance of the meters and communication equipment, and meter data management agents (MDMAs), who are approved to collect and manage meter data and forward it to the energy service providers and utility distribution companies on mutually agreed schedules. Strict accreditation procedures are applied to both types of services.
New York, Pennsylvania, Michigan, Massachusetts, Rhode Island and New Jersey are also in the process of deregulating their energy markets. Although each state is approaching the issue differently, most state utility commissions are forcing distribution to be unbundled from supply, while at the same time defining rules for fair access to metering data. Many energy marketing companies in these states are consequently adopting something of a wait-and-see approach, checking potential profitability before deciding on their overall business strategies, as shown in Figure 1. However, it is widely predicted that a robust and competitive energy supply market will emerge across the United States over the next three to five years.
Major Cost Savings
Two U.S. utilities that have made major savings in their daily operational costs by outsourcing the drive-by automated meter reading function are Flint Electric Membership Corp. and Tri-County Electric Membership Corp. Even though the business drivers and meter populations of these two Georgia-based cooperatives are very different, both have been able to cut meter reading costs by 75 percent. As a result, Flint EMC is able to release cash for other projects, and Tri-County EMC has significantly improved the quality of its customer services.
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Flint EMC was founded in 1937 and has grown to become one of the top 25 electric cooperatives in the United States. The utility now operates more than 6,000 miles of distribution lines, serving a large rural and urban population. By 1996 the company had reached a stage in its development where it wanted to free up cash and staff to take advantage of new market opportunities and decided to trial remote meter reading as a possible alternative to traditional manual meter reading. Initially, Flint EMC deployed RF-equipped meters and hand-held reading devices, but as more and more meters were automated, Flint EMC chose to outsource the entire meter reading function.
“Flint EMC was looking to minimize its investment in the capital-intensive metering products-the RF handheld devices or meter-reading vehicle,” said Tommy Childress, Schlumberger’s data service operations director. “They were looking to get meter readings without a big investment in technology.” Using a specially equipped meter reading vehicle and RF-based drive-by technology, Schlumberger now reads 50,000 of Flint EMC’s residential electricity meters. The rest of the total 58,000 meter population will be converted and included in the service by the end of 1999.
Collected meter data is downloaded directly to Flint EMC’s system for processing. Julian Knight is the utility’s data processing and account manager. “So far the system is working fine, and there are significant cost savings,” he said. Asked about customer reaction to the new system, Knight said: “There hasn’t been any. It has gone really well with them. The bottom line with the customers is not so much how you read the meter, but rather whether you give them good service at a good price. This system helps us do that.”
Tri-County EMC had a different reason to consider outsourcing. The utility was suffering from a high number of incorrect meter reads-resulting in more than 200 service orders a week-and sought a more accurate and cost-effective means of delivering high-quality service to its customers. The solution has been to install some 15,000 RF-equipped meters and to outsource meter reading and data processing services. Like the Flint EMC solution, the meters are read using drive-by technology from a meter reading vehicle. After the meters are read, the meter data is processed and validated. Communication of the meter reading information between the utility and the service bureau is accomplished via a secure Internet site.
“The Tri-County service uses a route management system to work out the most efficient meter reading route,” said Rob Fox, Schlumberger’s marketing vice president. “Tri-County advises us which meters are to be read by posting a file on the secure Internet site. The file is downloaded, processed by the route management system, and put back on the Internet site. Technicians then download this information directly to the meter reading equipment in the vehicle. Meter reads are communicated back to the Internet site for the data center to perform verification and validation procedures. Finally the verified data is made available on the secure Internet site for Tri-County to download directly into its billing system.”
Service orders related to meter reading have been reduced to almost zero since meter reading has been outsourced. The follow-up work that Tri-County EMC customer service representatives were doing has been reduced, and since the utility is a not-for-profit cooperative, the resulting cost savings will be passed on to customers.
Value-Added Services
One of the most recent large-scale outsourcing projects in the United States involves the Pittsburgh Water and Sewer Authority, in Pittsburgh, Pa. In July, the utility awarded a major data management service contract, involving the provision of wireless fixed network automated meter reading services to approximately 83,000 residential, commercial and industrial customers across its entire service territory. When complete, this will be the largest fixed-network installation of its kind for water meters in North America.
Under the terms of this multi-year contract, Schlumberger will provide operation and maintenance services for Pittsburgh Water and is currently installing radio frequency interface units onto existing water meters. The RF devices use radio transmission technology licensed from CellNet Data Systems. Schlumberger will be responsible for integrating the collected data with Pittsburgh Water’s billing and customer information system.
According to John Hanna, Pittsburgh Water and Sewer Authority’s executive director, “As part of the initial planning phase of this project, we conducted an extensive evaluation of AMR systems and suppliers. We determined that a fixed network AMR system would provide the best solution for our current and future data collection needs. Through this system we will be able to offer our customers additional value-added services such as real-time consumption mapping, leak and theft detection, and on-demand reads.”
Tim Eskew is director of service marketing with Schlumberger Resource Management Services. He is based at the company’s facilities in Norcross, Ga., and can be contacted via e-mail at: [email protected].
The Total Cost of the Metering Point
Liberalization of energy markets puts considerable pressure on energy suppliers to reduce their internal costs and increases the minimum level of service they must offer to retain customers, build brand recognition and gain market share. It forces energy suppliers to focus on their core competencies and to seriously consider outsourcing non-vital processes such as meter and data management services to specialist third-party organizations. The key issues analyzed by utilities seeking to streamline their metering-related processes are the total cost of the metering point, access to reliable metering data and their relationship with customers. For most utilities, whereas the cost of the meter itself is fairly low compared with the total cost of customer management, the metering-related processes and the metering data have a direct cost impact on the complete customer management value chain, as shown in Figure 2.
Meter and data management service companies will have to rely on economies of scale, optimized logistics, and communication and information technology to provide adequate answers to these issues and bring real value to energy suppliers through outsourcing. They will have to provide integrated end-to-end metering services with continent-wide coverage, ensure reliable on-demand and real-time access to the metering data, and be able to provide value-added services based on their meter, data collection and processing infrastructures.
