Main Menu4/30/2001
Customers at Puget Sound Energy will have the ability to participate in the nation's largest Time-of-Day Rate Program beginning May 1. The program will be made possible by two enabling factors: a new Time-of-Day rate approved by the Washington Utilities and Transportation Commission (WUTC); and Schlumberger RMS's backbone for the delivery of the consumers' energy usage data.
Analysis: The 2/19/01 IssueAlert examined the possibility of software solutions existing on the market today aiding in California's summer supply problems. However, software is only one side of the equation. Proper rates are required for the software to work in the manner that it was intended. Schlumberger Resource Management Services, Inc. (RMS) has been automating Puget Sound Energy (PSE) residential customers with what was previously known as CellNet technology.
CellNet Data Systems originally developed a fixed wireless network that connects homes to the utility providing real-time load shape information. This information can be used for displaying the customer's load information on the Internet or it can be used in other ways. Many of the utilities employing the CellNet system have found tremendous value in gathering information about their distribution grid that they did not have before. Benefits include the proper sizing of distribution networks, proper placing of transformers, transformer load modeling, and the elimination of manual meter reading to mention a few. CellNet filed for Chapter 11 bankruptcy protection in February 2000 and Schlumberger RMS purchased them for a total of $235 million in May 2000.
As mentioned above, the technology is one thing, but having a block rate (or the real-time price of electricity) is required to encourage its use. The WUTC has approved 300,000 of PSE's customers to begin a block rate program in May that will consist of varying prices of electricity. According to a press release by PSE, under PSE's Personal Energy Management (PEM) program, customers will pay about 15 percent less than today's flat, fixed-rate for power consumed during low-demand, off-peak hours of the day. These "economy" hours are 9:00 p.m. to 6:00 a.m. Monday through Saturday, all day Sundays, and holidays. Power consumed when the overall demand for energy, and its wholesale cost, is highest will cost about 15 percent more than today's fixed-rate electricity. The daily peak periods run from 6:00 a.m. to 10:00 a.m. and 5:00 p.m. to 9:00 p.m., Monday through Saturday.
This development is the first large-scale Networked Time-of-Day Rate Program in the United States. The 2/19/01 IssueAlert references a small-scale pilot that was performed in Laredo, Texas a few years ago with success (success being defined as load curtailment by the end consumer). If the results of that small pilot hold true at Puget Sound, there should be a noticeable curtailment of load from these 300,000 customers. The major difference here is that customers will be encouraged to go online via the Internet to view their data and make changes accordingly, while in Laredo the customers were retro-fitted with "smart boxes" in the home for programming the control of their major appliances. Therefore, the next logical step for PSE to take would be to offer some sort of load control in the residence. Two such companies today working on building automation include Envenergy and MainStreet Networks.
Envenergy has produced an "energy gateway" to the home or business. They have developed an IP-enabled box that can gather electrical load data and in return control appliances within the residence. Based in Santa Barbara, California, they also have extensive experience in commercial building automation and are implementing their technology both domestically and internationally.
MainStreet Networks is based in San Jose, California, and their solutions bring the Internet to both PC and non-PC users in unconnected communities throughout North America. They are focused on small and rural communities. MainStreet's advanced Internet Gateway platform enables multiple applications and easy integration of local and wide area networks into one central access point to the home or business.
Apparently, investors also see the opportunity of energy management in the near future. Energy venture capital firm Nth Power has invested in MainStreet Networks and in software firm Silicon Energy. Silicon Energy develops enterprise-wide energy management software that integrates existing building control systems, meters and databases from any number of facilities onto a single database. They are focused on larger energy users as opposed to the residential consumer.
A critical enabler of the residential load management is metering technology. The metering market can be broken into five segments: manufacturing; reading; data management; value add; and customer services. Frost & Sullivan has predicted an increase in activity for the manufacturing segment. This is definitely true especially where volatile energy prices are driving the need to have "real-time" metering data. This segment is dominated by a few large manufacturers globally (GE, Schlumberger, ABB, Landis & Gyr, and the like) but is also being challenged by smaller manufacturers such as TransData.
The reading segment includes everything from manual meter reading to automated technologies, which is expected to see some growth. The costs and capabilities of communication technology will heavily influence this segment. While the manufacturers will make the meters, there has to be a way to communicate with them. Potential players in this segment will be AT&T/TCI or any major player that has a link into the home. IP-enabled meters would allow a meter to be accessed over the Internet thereby allowing Internet Service Providers (America OnLine and the like) to also be major players.
The data management segment originally evolved when California mandated certified Meter Data Management Agents (MDMAs) be responsible for managing the meter data under deregulation. Many other deregulating states have developed other models for managing meter data and thus the market segment has not grown as originally expected (note the demise of CellNet).
The value add segment is expected to see tremendous growth as those possessing detailed meter data attempt to enhance their business model with additional services. These will include energy management companies and potential meter data management agents looking to increase their earnings from a lackluster data-only business. This segment is highly fragmented with players from the high-end (Honeywell) all the way to new energy-related start-ups.
The final segment of customer service includes phone centers and customer care (billing) centers. It should be noted that PSE is utilizing its customer care service offering ConneXt to bill these complex solutions. PSE has already made significant investments to make their automated metering work within their billing solution. It should also be noted that utilities are coming under increased pressure to unbundle and outsource their metering and billing related functions to introduce competition and potentially lower the costs of these functions.
The Puget Sound / Schlumberger partnership plays in all five of these meter segments. If load curtailment occurs in any form, it may prove invaluable to solving the need for lowering on-peak energy consumption. There exists approximately 110 million residential electric meters in the United States today, most of them a traditional type meter, capable of totaling electric energy consumption over a given time period (normally one month). Converting these meters to be "real-time" and "internet" enabled, will require large scale projects, such as PSE's, and also players of a large scale to increase cost efficiency as many of the costs involved in meter data management are relatively fixed. Schlumberger RMS is proving itself a large enough player to potentially make this segment work.
SCIENTECH's IssueAlerts are compiled based on the independent analysis of SCIENTECH consultants. The opinions expressed in SCIENTECH's IssueAlerts are not intended to predict financial performance of companies discussed, or to be the basis for investment decisions of any kind. SCIENTECH's sole purpose in publishing its IssueAlerts is to offer an independent perspective regarding the key events occurring in the energy industry, based on its long-standing reputation as an expert on energy issues.
Copyright 2001. SCIENTECH, Inc. All rights reserved.
