Public Service Commission Denies LG&E and KU Application To Deploy "Smart Meters"


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In an Order entered on August 30, 2018, the Kentucky Public Service Commission (PSC) has rejected a proposal by the Kentucky Utilities Co. (KU) and Louisville Gas & Electric. Co. (LG&E) to deploy “smart” meters and associated technology throughout their systems.  The Metropolitan Housing Coalition, which opposed the utilities' request for approval of the full deployment of the Advanced Metering System (AMS) was represented by the Kentucky Resources Council.
 
In the ruling, the PSC noted that although it “sees benefits in advanced metering,” the two utilities had “failed to provide sufficient evidence to persuade us that the … benefits of the AMS proposal outweigh the costs here.”
 
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. In rejecting the application, the PSC cited 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 argued 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 by the PSC.
 
The PSC noted significant differences, including:
 
• That unlike other applicants, KU and LG&E could not demonstrate that new meters were needed to insure adequate service. 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. Other utilities demonstrated that their current meters were obsolete and could not be properly maintained, the PSC noted.
 
• 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, the PSC said.
 
• KU and LG&E 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.
 
• Also drawing comparison to its 2017 approval of Duke Energy Kentucky’s smart meter application, the PSC noted that, unlike Duke Energy Kentucky, KU and LG&E had not proposed any programs to take advantage of smart meters’ advanced capabilities.
 
• Unlike Duke Energy Kentucky, KU and LG&E did not commit to pass on savings from smart meters to their customers, the PSC said.
 
Noting those flaws and others, 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 LG&E/KU proposal had been opposed by the Kentucky Office of Attorney General; Metropolitan Housing Coalition; Community Action Council for Lexington-Fayette, Bourbon, Harrison, and Nicholas Counties, Inc.; and the Association of Community Ministries.  The Order is available here, and other documents, as well as a video of the hearing, is available on the PSC website, psc.ky.gov. The case number is 2018- 00005. 
 
A copy of the post-hearing brief filed by KRC on behalf of the Metropolitan Housing Coalition, is available here.
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