Summary of UCAN Testimony Relating to Expenditures for SDG&E's 2006 Advanced Meter Initiative Application

Date of Filing/Decision

Aug 14 2006
AttachmentSize
UCANamitestShames.pdf45.64 KB


Summary of UCAN Testimony and Selected

Issues Relating to Expenditures for San Diego

Gas and Electric Company’s 2006 Advanced

Meter Initiative Application


I. OVERVIEW


This testimony is presented by Michael Shames, Executive Director of

Utility Consumers Action Network (UCAN) for issues relating to San Diego Gas

& Electric (SDG&E). He has appeared before this Commission on numerous

occasions and have been recognized as an expert on matters relating to both

telecommunications and energy matters. His qualifications are attached in

Attachment “A” .

This testimony is presented to address three matters:

1. Offer a brief summary of the findings and recommendations offered by all

of the UCAN witnesses in this proceeding:

2. Provide a policy framework behind UCAN’s testimony that helps explain

UCAN’s support of distribution grid upgrades but its opposition to

SDG&E’s AMI application .;


II. SUMMARY OF EXPERT WITNESSES’ FINDINGS


UCAN retained the services of JBS Energy Inc to assess the details of

SDG&E’s AMI application. UCAN directed JBS’ experts to focus upon the costeffectiveness

of SDG&E’s specific plan to deploy electric real-time meters to

every customer in the SDG&E service area. Their findings are very

discouraging. UCAN has long supported the concept of upgrading the SDG&E

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distribution infrastructure so as to provide advanced energy services to

residential and small business customers, improve grid reliability and

maintenance and to facilitate deployment of distributed generation. SDG&E’s

application, which it first introduced in early 2005 and then resubmitted in

March 2006 and then revised again in July 2006 falls far short of what the

Commission requested and what SDG&E ratepayers could have reasonably

expected.

JBS’ experts found that SDG&E did not comply with the specific

guidelines established by the Commission for a advanced meter deployment

and, for that reason alone, should probably be rejected.

But beyond that fatal flaw, SDG&E’s own business plan doesn’t pencil

out. If the Commission were to apply an honest economic evaluation of

SDG&E’s AMI program, it would be hard-pressed to even want to hold

evidentiary hearings, let alone seriously consider project approval. JBS’ experts

found little that achieved UCAN’s objectives, but quite a bit that achieves

SDG&E’s financial objectives. William Marcus states in his testimony:

“While AMI is a terrible investment for SDG&E’s ratepayers, it is a

different story for SDG&E’s shareholders, who will receive a 10.7% return

on the equity share of approximately $350 million of assets initially

invested in the AMI project” (Marcus Testimony, p.9)

JBS Energy experts found that SDG&E has not developed a plausible and

cost-effective program. Under SDG&E’s “best-case scenario, it will take 25 years

to break even. Under almost any more reasonable scenario, the program will

lose money, and in all probability it will lose up to an astounding $328 million

NPV loss on a $350 million initial investment, with subsequent investments of up

to $600 million being similarly uneconomic. They also document how SDG&E’s

program is far less cost-effective than the PG&E program recently approved by

the Commission.

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A very important, if not critical, consideration that appears to be missed

by SDG&E and should not be missed by the Commission is the concept of a

missed opportunity or “opportunity cost” imposed by SDG&E’s ill-conceived

proposal.

Opportunity cost is a term used by economists to describe the cost of

something in terms of an opportunity forgone (and the benefits that could be receivedfrom that opportunity) or

the most valuable forgone alternative. For example, if

SDG&E sinks close to a $1 billion dollars into its AMI project over the 34 years,

the opportunity cost is some other thing that might have been done with that same

money. In deploying the ratepayer monies in the very cost-ineffective manner

proposed by SDG&E, those same monies will no longer be available to leverage

the very promising emerging Smart Grid functionalities or to justify investment

in other more economic peak shaving programs. SDG&E will have committed

its customers to a 34-year investment scheme is not only cost-ineffective as of its

conception, at the expense of comparable investment schemes that might require

only an 11-year commitment.

Even though SDG&E’s AMI program is crushingly uneconomic and

poorly designed, UCAN supports Commission efforts to reduce peak load and

invest in SDG&E’s distribution grid. As discussed in Mr. Marcus’ testimony and

in my testimony below, UCAN supports an integrated and systems-wide

approach to address the peak load problem and increase technical capabilities of

addressing transmission and distribution operations (“Smart Grid”). Moreover,

UCAN believes that SDG&E overlooked the value of Smart Grid

communications to improve outage restoration and provide more information on

transmission and distribution operations.

UCAN also supports deployment of interval meters to a limited subset of

SDG&E customers – those SDG&E customers that are over 20 kW in size. It

encourages the Commission and SDG&E to expand the Comverge program so as

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to secure cost-effective and immediate peak shifting benefits amongst residential

customers. UCAN also encourages the Commission to direct SDG&E to

aggressively pursue air conditioner efficiency (for all sizes of customers) and

combined heat and power producing chilled water to reduce air conditioning

demand (for larger customers) Air conditioner efficiency will not only save

energy on the 13 days when a CPP program might be operated but would save

energy for an additional 50-100 days per year.

UCAN also urges SDG&E to re-assess UCAN’s 2000 proposal for a

gradual roll-out of cheaper time-of-use meters for residential customers –

starting at the end of the AB1X period, with meters required first in new singlefamily

construction and potentially later in customers above a certain size.

Finally, UCAN encourages SDG&E to take immediate steps to see that all

residential swimming pools are equipped with load control devices that the

utility can use at its discretion for up to 1000 hours per year through incentive

programs and local licensing/code strategies.


III. UCAN’S VISION FOR SDG&E INVESTMENT IN

DISTRIBUTION


A. SDG&E FAILED TO INTEGRATE EMERGING

SMART GRID TECHNOLOGIES INTO ITS

PROPOSAL


When SDG&E filed its initial AMI application in early 2005, UCAN was

concerned about the narrow scope of SDG&E’s plan. Rather than build a

platform that could take advantage of emerging communications and “smart

chip” technologies, the utility proposed a plan focused on a narrowband

communications platform and off-the-shelf real-time meters.

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UCAN’s general familiarity with emerging “Smart Grid” technologies

suggested that SDG&E’s plan was unduly limited in scope and vision. In order

to provide the Commission and policymakers with an alternative vision of grid

investment possibilities, UCAN initiated a study in early 2006, conducted by the

Energy Policy Initiatives Center (EPIC) located at the University of San Diego

that examined the deployment of an integrated “smart grid” in the San Diego

Gas & Electric service area. SDG&E later agreed to jointly fund the project with

UCAN and to participate in the development of this report. EPIC retained the

expert services of Science Applications International Center (SAIC) to perform

this analysis, with cooperation from SDG&E. The report is expected to be

released in early September and will be offered into the evidentiary record in this

application and in the Commission’s Long Term Resource Plan proceeding by

UCAN.

The genesis of the report was UCAN’s conviction that San Diego needs to

be thoughtful and farsighted about investing in its distribution system. UCAN

began investigating this issue in late 2004 and submitted substantial comments in

the Commission’s BPL OII (I. 05-09-006) about the potential benefits of an

advanced, high-tech upgrade of SDG&E’s distribution infrastructure. UCAN

initiated the EPIC report so as to provide the region and state’s policymakers an

objective and authoritative analysis of distribution infrastructure modernization.

The SAIC report, when released, is expected to confirm that a “smart

grid” modernization is cost-effective and practical for San Diego. However,

its preliminary findings reinforced UCAN’s conviction that SDG&E’s AMI

proposal is piecemeal and inappropriately limited. UCAN maintains that

SDG&E should have pursued distribution modernization in a more holistic or

systemic manner. SDG&E’s distribution grid is a system, not just in the

technical sense, but also in the geopolitical, regulatory, economic, and

consumer services aspects.

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SDG&E’s AMI proposal suffers from an unduly narrow focus upon

demand response and meter readings; it has not adequately applied a systemwide

view to its initiative. For example, SDG&E would have benefited

tremendously from having considered the findings of the EPIC study before

unveiling its AMI proposal, but it chose not to wait.1


As described in Mr. Marcus’ testimony on Integrated Resource

Planning and on my observations below, a systems view requires a balanced

approach that draws the best ideas from all stakeholders and operates in an

integrated fashion. The stakeholders of the grid should be the beneficiaries of

this approach. In so doing, policymakers, regulators and municipalities would

see substantial benefits from modernization. And the utility’s customers could

be part of designing enhanced performance on every level. Additionally, the

vendor community gains a clearer vision for product development.

SDG&E declined to pursue a systems view development of its

“initiative”. At a minimum, SDG&E should have availed itself of the EPIC

study before resubmitting its application. Had it done so, it would have

gained an appreciation into the value of an integrated Smart Grid pilot project

where multiple improvement initiatives can be brought together at

appropriate times in a controlled and deliberate environment. And as

explained by Mr. Marcus, SDG&E declined to avail itself of far more costeffective

options as precursors to a massive distribution grid upgrade.

Clearly, integration of multiple new technologies required to transform

the San Diego grid intelligence is a complex requirement. Admittedly, it is one

in which the industry has little experience in deployment. Thus, SDG&E

would have been well served to have sought funding for a Smart Grid pilot in

defined areas could serve to test and experiment with the emerging

1 I specifically drew the value of this report to the attention of SDG&E executives in a meeting I had with

them in March 2006, but my suggestion was rejected.


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technologies before tackling the entire region.2 This approach would also

provide value to the grid as new technologies and applications surfaced. Such

a “testbed” would demonstrate the integrated environment and results for

each new improvement initiative under the above priority scheme prior to

transitioning to a “production” mode.

Most importantly, had SDG&E attempted to integrate some of the new,

emerging grid technologies into a system-based grid upgrade, it might have been

able to overcome the serious cost-effectiveness problems that have doomed its

current initiative to being the grossly uneconomic, numbers-manipulation

exercise that has been submitted to the Commission.

As will become apparently upon the release of the EPIC study, an AMI

deployment serving as the foundation for other grid technologies could possibly

be cost-effective. The study identifies over a dozen emerging applications that

could offer three-five year paybacks; this compares favorably to SDG&E’s 34-

year payback proposal. For example, the EPIC report identifies some twelve

promising emerging technologies that it views as sufficiently mature to warrant

immediate investment and/or pilot projects. They include:

Dynflo distributed series impedance sensors - The Dynaflo distributed

series impedance device is expected to be low cost ($20 to $40/kVAr). It

injects or removes series impedance, controls the flow of power using

either wireless or power line carrier, is modular, and is coupled to the line

at a transmission or sub-transmission tower. It balances the flow between

phases and optimizes the use of T&D assets. Dynflo distributed series

impedance devices on each phase on each tower can also measure line

temperature and thus line sag. It is expected to be developed and tested

at 161 kV during 2007. It can also monitor line conditions like thermal

rating, vibrations, icing, etc

2 Notably, SDG&E’s initial 2005 application embraced a phased deployment approach but then abandoned it

in its next incarnation.


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I-Grid Monitoring System (by Softswitching Technologies) – This is a

wireless, intelligent system sensors for operating information (MW,

MVAR, Volts, Amps, PF, PQ, etc.). Can be used at key nodes in the

transmission system; and distribution system where load pockets are

dynamic. I-Grid now offers a national web-based power disturbance

monitoring and reporting system. Approximately 1500 power quality

monitors are installed nation-wide. This technology can provide analysis

of events in almost any given region

Consumer Portal - Emerging information-based solutions that improve

the efficiency, comfort and safety of businesses, buildings and homes and

integrate with power delivery system applications (Broadband Energy

Networks). Based on an open flexible architecture the portal can facilitate

the implementation of new services such as DR and real time pricing,

outage detection, remote connect/disconnect, support to distribution

operations, PQ monitoring and improved customer information (EPRI

Intelligrid). Integrated load controls using consumer portals will shed

load based on dispatch signals from the utility or based on parameters set

by the consumer.

Ethernet over Fiber - Ethernet over Fiber (IEEE 802.3z) is becoming a

common carrier service and in-expensive interconnection method as

multi-gigabit ethernet switches are being used for fiber terminations.

This technology aids in digital convergence when coupled with MPLS

potentially simplifying the need to use costly digital cross-connect

systems. Further use of optoelectronic technology allows operators to

drive fiber deep into the network more effectively, make better use of

existing bandwidth, economically increase bandwidth, target

programming to specific areas, and enable the efficient delivery of many

revenue-generating interactive services. Utilities can now cost-effectively

overlay video on fiber in the loop (FITL) architectures, efficiently carry

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analog video on synchronous optical network (SONET) backbones, and

solve the power challenge the dense wave division multiplexing (DWDM)

deployments impose on optical amplifiers in the long-haul network if

needed for substation monitoring and providing new services.

4G WiMAX Fixed - Private Wireless/ Zigbee / WiMedia / WiFi –Wireless - WiMax can provide the requisite long distance

communications up to 10 miles and in some instances beyond 30 miles at

data transfer rates of 75 Mbps. WiMax using IEEE 802.16D-2004 can

communicate between fixed sites in point to point and point to multipoint

configurations with different vendors. This standard will likely be used

for private fixed networks in the USA which will utilize super-cell (high

site) based deployments more focused on coverage than capacity.WiMax

can communicate our-of sight via IEEE 802.16E-2005 and can

communicate with moving trucks or cars. Mobile WiMAX products are

expected enter the market in late 2007 and is expected to be deployed by

major carriers such as Sprint (which announced its plans in early August

2006) and Covad. The availability and capabilities of WiMAX allow it to

be the backbone of a T&D communication system that will support WiFi

applications for substation or distribution automation. Zigbee Alliance's

Zigbee standard (IEEE 802.15.4) uses frequency hopping spread spectrum

(FHSS) radio technology, which offers reliable, low speed, long range

performance and immunity against jamming and interference. The

802.15.4 document provides a common standard for networking for

sensors and control devices common to modern grid elements. The

WiMedia Alliance is championing an Ultra-Wideband standard physical

layer to the existing IEEE 802.15.3 standard. The subcommittee working

on it is the 802.15.3a committee. The WiMedia solution can provide

higher data rate service and mesh networking capability with similar RF

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coverage capabilities as Zigbee. WiMedia UWB can expand grid control

to include complex monitoring and content distribution applications.

Semi-autonomous Agents - Collaborative agent societies with intelligent

user interfaces (e.g., MIT's Project Oxygen) using techniques from the field

of autonomous agents provides a new complementary style of humancomputer

interaction, where the computer becomes an intelligent, active

and personalized collaborator. Interface agents are computer programs

that employ Artificial Intelligence methods to provide active assistance to

a user of a particular computer application.

Advanced Visualization Methods (POM, ROSE, FFS, OPM, etc) – These

are a group of grid operating functionalities that improve operation and

troubleshooting. Physical Operating Margin (POM) for ultrafast load

flows (40,000 bus system solved in 0.5 seconds) with Boundary of

Operating Region visualization tools generating nomagrams for operators

showing regions of secure operations limited by voltage constraints,

voltage instability, thermal limits, and flow gate constraints. Optimal

mitigation measures can be applied on-line to expand the boundary of

operating region. Region of Stability Existance (ROSE) using phasor

measurement data can be plotted for the operator on-line using PMU data

in 1D or 2D space and show regions of secure operations limited by

voltage constraints, voltage instability, thermal limits, and flow gate

constraints. Optimal mitigation measures can be applied on-line to expand

the ROSE. POM/TS with FFS can quickly determine areas of the system

that can transient instabilities to support system planning and is fast

enough to be used for on-line systems. Integrated with OPM can support

CAPEX planning for minimal cost mitigation of transient instabilities, or

in operations can mitigate potential transient instabilities.

DER-based Microgrids - A DER based micro-grid concept is an

aggregation of loads and resources, including DG and advanced energy

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storage resources that operates as a single system providing both power

and heat. The majority of the DER is power electronics based to provide

the required flexibility to insure operation as a single aggregated system

and to convert DER systems that are either high frequency AC (microturbines)

or DC systems (solar, fuel cells, etc.) into 60 Hertz AC. This

control flexibility allows the micro-grid to present itself to the bulk power

system as a single “control area” that meets local needs for reliability and

security. This application of distributed energy (DE) is minigrids, a set of

generators and load-reduction technologies that supply the entire

electricity demand of a localized group of customers. Power parks (also

called "premium power parks") are an alternative to the traditional

approach. They may include uninterruptible power supplies such as

battery banks, ultracapacitors, or flywheels. They typically include an onsite

power source to increase reliability. Pumped storage is used to even

out the daily generating load, by pumping water to a high storage

reservoir during off-peak hours and weekends, using the excess base-load

capacity from coal or nuclear sources. Grid energy storage method is to

use off-peak electricity to compress air, which is usually stored in an old

mine or some other kind of geological feature. Off-peak electricity can be

used to make ice from water, and the ice can be stored until the next day,

when it is used to cool either the air in a large building (thereby shifting

that demand off-peak) or the intake air of a combustion gas turbine

generator (thereby increasing the on-peak generation capacity). The

integration of plug-in hybrid electric vehicles, fuel cells and other forms of

DG and advanced energy storage are other options of reducing load on

the consumer side of the meter or contributing to microgrids.

Advanced Energy Storage Systems - These are emerging new storage

systems that can be used to supplement a grid. For example, NaS

batteries are now available for up to 8 hours for about $3500/kw for load

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follow and peak shaving the loads and can be used for voltage and

transient stability support and customer ride-through.Shaving the peak

can avoid need for new substations or second transformer banks. VRB

flow batteries for 8 hours of storage currently in small sizes for $2800/kw

for load follow and peak shaving the loads , frequency regulation and can

be used for voltage and transient stability support and customer ridethrough.

Shaving the peak can avoid need for new substations or second

transformer banks. Beacon 25kWh flywheels are available for frequency

regulation for $1000/ kw-15 minutes, and can be used for voltage and

transient stability support and customer ride-through.

Advanced Grid Control Devices - This class of devices include FACTS,

GridAgents, Distr Power Flow Controllers, Fault Current Limiters, Highspeed

Switches, D-VAR, DSTATCOM, and SuperVAR. Flexible

alternating current (AC) transmission systems, or FACTS, incorporate

high-current and high-voltage power electronic devices to increase the

carrying capacity of individual transmission lines and improve overall

system reliability by reacting very quickly to grid disturbances. Infotility's

GridAgents Framework has built-in capability for fast-switching

microgrid control but is being developed to integrate with Distribution

Automation. Solid State Transfer (SSTs) switches are available now to

provide customers uninterruptible power from two independent feeders.

Agent and Multi-Agent Systems - These systems integrate utility control

operations with mainstream web technologies and through multiple

independent computers communicating over a network accomplish a

common objective or task. This enables agent and multi-agent systems to

become adaptive, self-aware, self-healing and semi-autonomous control

systems. This technology is currently in the research and development

phase and projected to be commercially available in 1-5 years.

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Distribution (Feeder) Automation - Distribution automation control

utilizes the integration of Intelligent Electronic Devices with distribution

Supervisory Control and Data Acquisition Systems (SCADA) to provide

rapid reconfiguration of discrete devices such as switches, capacitor

banks, reactor banks, and tap changing transformers. DA objectives are to

improve reliability and power quality by maintaining bus voltages across

the system within specified voltage and power quality limits and

responding to disturbances on the distribution system to minimize

customer out of service time. It allows for coordinating the switching of

discrete devices such as capacitor banks, reactor banks, and tap changing

transformers as well as continuous control of generator high side voltage

settings. (objectives include maintaining bus voltages across the network

within specified voltage limits; minimize number of switchings, increase

voltage control reserves by keeping maximum number of devices offline,

mitigating circular reactive power flows, improve voltage security.

While I do not offer myself as an expert in these specific technologies, I

can report that very capable analysts are finding that Smart Grid technologies are

now reaching a level of maturity that they can and should be integrated into any

utility distribution upgrade plan. The EPIC study will specifically propose that

SDG&E develop research, development, and demonstration (RD&D) projects to

test some of these technologies, such as a two-phased test utilizing the SDG&E

XpertSIM suite to do a detailed real-time simulation of a defined DER-based

Microgrid pilot circuit /area examining potential benefits and trouble spots. It

also suggests an advanced energy storage system pilot designed to operate in

conjunction with a distributed generation unit, or other form of intermittent

generation to develop the test control schema to prove operational capabilities

and flexibility, as well as the value proposition. The lessons learned on this

project would additionally apply to the DER-based Microgrid project.

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The report authors also raise the “enormous” potential benefits of

autonomous monitoring and control and encourage SDG&E to seize upon the

California Energy Commission’s (CEC) expressed interest in developing

distribution level grid agent software. They also recommend that SDG&E

become engaged in a WiMAX pilot in conjunction with some local wireless

companies.

The study’s anticipated conclusion is an important one for this

Commission: there are sufficient benefits, as societal or systems and in total, to

justify a movement of the San Diego regional grid to a Smart Grid architecture.

It prudently recommends a phased integration of at least the twelve projects

discussed above as deployment programs. It is expected to offer at least one

deployment scenarios that generate a 3-5 year payback period, however it admits

that the sustained large benefits (> $50M/yr) do not occur until about a dozen

years later. While not an alternative proposal to SDG&E’s AMI initiative, the

study suggests that had SDG&E integrated its AMI initiative with integration of

Smart Grid technologies, the company could have created a far more robust,

beneficial and cost-effective proposal.


B. REAL RESIDENTIAL CUSTOMER BENEFITS CAN

BE REALIZED IN A SMART GRID PROPOSAL.


UCAN submits that SDG&E could have offered residential and small

customers far more useful benefits had it approached its initiative with a greater

awareness of Smart Grid applications. When UCAN submitted its 2005

comments to the Commission in I. 05-09-006, UCAN noted that broadband

communications capabilities, when added to an electric distribution grid, could

facilitate the offering of a number of very useful end-user products and services,

including:

o Automated monitoring and control of end-use equipment, including

demand response and load shedding

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o Billing data and energy consumption data


o Real-time building security monitoring/reporting


o Automated inventory tracking of various goods such as fuel stocks


o Dynamic price information


o Video on demand


o Streaming audio delivered through a stereo or computer


o Real-time, interconnected Internet-based games

o Transmission of data/telephone/fax without multiple fixed lines

Moreover, UCAN identified a number of utility operational benefits that

may be as important as end-user benefits listed above. Some of these are

incorporated into SDG&E’s AMI filing – such as automate meter reading and

some are not. The operational benefits identified by UCAN included:


o Power quality monitoring


o Distribution system data monitoring


o Load control/demand-side management


o Outage detection


o Lightning detection and notification


o Fault location


o Voltage control


o Staging area command center


o Distributed resource control and dispatch


o Crew management


o Security monitoring3


While broadband Internet access was the focus of the Commission’s

attention in that particular investigation, the range of potential applications using

such a communications network was enormous and needs to be also considered

in a utility business case for distribution grid upgrades.


3 Broadband Over Powerline 2004: Technology and Prospects, October 2004, An EPRI White Paper, at page 17.


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A 2004 NARUC Task Force report described the benefits of broadband

communication service, such as Broadband Over Powerline (BPL), if

implemented on its own or deployed as part of the Smart Grid.4 Of greater

relevance to this application, the Task Force found some observers who

suggested that BPL could prove to have more value as a means of enhancing

electric utility operations than as a means of extending broadband. Mike

McGrath, Executive Director of Retail Energy Services for the Edison Electric

Institute (EEI) is cited by the Task Force as saying that electric system

enhancement is the primary objective for roughly half of the investor-owned

utilities interested in BPL. He pointed out that other non-BPL communications

technologies can also contribute to electric system enhancement. Others at the

October 24, 2004 Task Force meeting asserted that every electric utility pursuing

BPL is actively interested in system enhancement, despite the apparent focus on

small-scale roll outs for revenue enhancement.5 Work by the EPRI IntelliGrid

Consortium has focused on an open-source communication architecture and how

communication between elements of the power supply system could be handled

so that smart devices can tie into any available communication medium.

In preparing for the PBL OII, UCAN came to appreciate the Task Force’s

conclusion that a communications system that enables better management of

power use and demands could be worth many times the initial expenditure, if

designed and integrated properly.6


The EPRI study attempted to roughly quantify the net benefits from

investing in a Smart Grid. The required applications, included automation,

communication architecture (a key foundation), distributed resources, electronic

4 Unfortunately, most of the presentations and literature reviewed by the Task Force focused on BPL as a

communications technology that would enable electricity customers to obtain broadband service, thus

artificially limiting the scope of the study.


5 Report of the NARUC Broadband over Power Lines Task Force, February 2005, at page 14.


6 Ibid, at page 15.


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based controllers, consumer portals, and more. Over and above the investments

needed to meet load growth and correct existing limitations, the costs of

implementation was estimated at $165 billion over 20 years. This constitutes an

annual investment of $8.3 billion above the approximately $18 billion in current

annual investment. According to the study, the investment would yield a 20-

year net benefit of between $638 billion and $802 billion, or a benefit-cost ratio

ranging from about 4:1 to 5:1. Importantly, most the benefits are attributable to

reliability and security. 7 This rough estimate is somewhat consistent with the

PG&E initiative and it is also somewhat affirming of the anticipated EPIC study

findings. However, comparison of SDG&E ‘s proposed 25-year payback for a

relatively dumb grid upgrade far exceeds the ballpark costs offered by EPRI for a

far smarter system investment.

UCAN believes that the communication component of a Smart Grid

investment is essential for effective functioning of the grid. Various

communication technologies can be used for smart grid applications. The

Commission was overly focused on BPL, primarily because of its interest in

accelerating broadband deployment by electric utilities. However, websites on

GridWise by Pacific Northwest National Laboratory (PNNL) and IntelliGrid by

EPRI, they don’t talk about BPL, but just talk about the idea of using

communication technologies for smart grid concept. BPL is not an essential

communication technology. What is essential is high-speed communication.

And, in all likelihood, a Smart Grid deployment will build upon a combination

of various communications platforms.

Most analysts surveyed by UCAN found that BPL and WiMax may be too

expensive to justify as the sole basis for developing delivery of broadband

communication at the end-users’ location. However, if when the utilities factor

7 Ibid, at page 16. (The EPRI benefit/cost study cited by the NARUC Task Force is “Power Delivery System

of the Future: A Preliminary Estimate of Costs and Benefits,” EPRI 2004.)


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in the benefits of a smart grid and advanced metering combined with the

attendant energy services that might be available, using these advanced

communication platforms could turn out to be hugely prudent investments for

today’s utility and for future ratepayers.

Another important, but underappreciated, benefit of deploying

broadband communications services is that it increases the potential for small

customer acceptance of real-time meters. The Commission will be making

decisions about AMI deployment that should include opt-in customer acceptance

of real-time rate schedules. If broadband Internet service is included as a utilitydeployed

service, it would serve as an important tool in ubiquitous acceptance

of real-time meters and rate schedules. In sum, a well-designed, customeroriented

Smart Grid investment scheme could serve as the “carrot” used to

attract customers to what is an otherwise unwelcome regulatory change for most

residential customers.

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ATTACHMENT “A”


QUALIFICATIONS OF MICHAEL SHAMES


Michael Shames was the co-founder of Utility Consumers' Action

Network and is currently UCAN's Executive Director. A 1978 graduate of

UCLA, Mr. Shames received his Bachelor of Arts in Public Administration and

went to receive a Juris Doctorate in 1982 from the University of San Diego School

of Law. During his studies at the University of San Diego, Mr. Shames

developed the model for UCAN. From the outset, UCAN was designed to

represent residential and small business consumers in the highly technical areas

of utility rate regulation.

During his 21 year tenure serving as Executive Director, Mr. Shames has

participated in numerous regulatory proceedings before the PUC. In addition to

all SDG&E general rate cases since 1986 and most major state-wide electric utility

proceedings, Mr. Shames has played a major role in telecommunications issues

before the PUC. He prepared expert testimony in each of SDG&E’s last two

Cost of Service proceedings and authored UCAN’s comments in the

Commission’s investigation into Broadband over Power Lines. Mr. Shames has

also sponsored testimony in a number of electric and telephone cases before the

Commission, including more recent submissions in SDG&E’s application for an

Otay Mesa Purchase Power Contract, the Warmline complaint brought by

UCAN against AT&T, the MCI-Sprint merger case, the Pacific Bell Marketing

Case and the Cingular Investigation of 2003. He served on Pacific Bell's

Consumer Advisory Panel from 1988-1991. Served for four years on Pacific Bell

Mobile’s Access Task Force. And, in 1995, he was appointed as a consumer

20

representative to the Commission's SB600 Task Force on Telecommunications

Ratesetting by the CPUC Executive Director, Neal Shulman.

In addition to his work before the PUC, Mr. Shames has also participated

in several regulatory hearings on behalf of UCAN before the California

Department of Insurance. He presented expert testimony on the use of

telecommunications technologies in insurance redlining in RH-292, which

investigated "redlining" in the insurance industry and RH-313. These

proceedings determined timelines for prior approval rate regulations

procedures.

Because of his advocacy experience, Mr. Shames was hired by the

California Department of Insurance to instruct and train CDOI employees on

consumer advocacy strategies and legal analysis and was appointed to the

California Automobile Assigned Risk Advisory Committee by Commissioner

Garamendi.

Mr. Shames has repeatedly appeared before the California Energy

Commission and California Legislative Oversight Committee on Energy and

Public Utilities as a recognized consumer representative. He has spoken on

assorted utility consumer issues at the National Association of State Utility

Consumer Advocates (NASUCA) and the National Association of Regulatory

Utility Commissioners (NARUC) conferences as well as a number of other

conferences. He has testified in hearings before the Public Utilities Commission

on cellular and electric regulation cases. And he was selected to serve on the

Advisory Board of the Competition Policy Institute based in Washington DC.

In 1997, Mr. Shames was appointed by the California Public Utilities

Commission to serve on two advisory boards: The California Board for Energy

Efficiency and the Consumer Education Advisory Panel. And the California

Senate appointed Mr. Shames to serve on the Joint Task Force on Privacy

Reform.

21

In addition to his work for UCAN, Mr. Shames has served as an adjunct

professor at University of San Diego, School of Business, where he has taught

since 1994. His articles on utility issues have been published in most of the

state's major newspapers and scholastic journals, including the Energy Law

Journal on California’s Electric deregulation in Summer 2003. He has published

articles in Public Utilities Reports, Harvard Business Review and has contributed

chapters to two books on deregulation. [“Preserving Consumer Protection and

Education in a Deregulated Electric Services Industry”, Who Benefits From

Privatization, Hossain & Malbon, eds. (Routledge, 1998) and"ConsumerPrinciples for Electric Utility Reform", in

Electric Utilities Moving into the 21st

Century, Enholm & Malko, eds. PUR Inc. (1994)]

22


TABLE OF CONTENTS


I. OVERVIEW............................................................................................................... 1

II. SUMMARY OF EXPERT WITNESSES’ FINDINGS............................................ 1

III. UCAN’S VISION FOR SDG&E INVESTMENT IN DISTRIBUTION........... 4

A. SDG&E FAILED TO INTEGRATE EMERGING SMART GRID

TECHNOLOGIES INTO ITS PROPOSAL................................................................ 4

B. REAL RESIDENTIAL CUSTOMER BENEFITS CAN BE REALIZED IN A

SMART GRID PROPOSAL....................................................................................... 14

23


Summary of UCAN Testimony and Selected

Issues Relating to Expenditures for San Diego

Gas and Electric Company’s 2006 Advanced

Meter Initiative Application


EXHIBIT _____


Prepared Testimony of

Michael Shames


UCAN


3100 Fifth Ave #B

San Diego

California, USA 92103

619-696-6966


on behalf of


The Utility Consumers Action Network


California Public Utilities Commission

Application 05-03-015


August 14, 2006

AttachmentSize
UCANamitestShames.pdf45.64 KB
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