By Tim Eskew
On going liberalization of the USA's energy and water markets is compelling utilities to radically rethink their business objectives and internal structure. One effect of this market shift is that many energy and water suppliers -- despite having developed significant expertise for managing their own metering assets over the years --- are now seriously considering complete outsourcing of the metering point and related data management services to third party specialist organizations. A number of utilities in North America have already adopted this approach. Two key factors are driving this trend: utility commissions are forcing suppliers to unbundle metering, as part of the strategy for liberalizing the supply markets; and suppliers are seeking fresh ways of maintaining their competitiveness in a changing marketplace.
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. California was the first state in the United States to open its electricity market -- back in April 1998 -- and as such, serves as a model for the introduction of competitive markets across North America. Here, the public utility commission elected to unbundle metering from the distribution utility as a precondition to the new competitive structure. All metering and meter data management functions are consequently 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, and the first company to receive MSP certification from the CPUC was Schlumberger, which is currently one of only a handful of companies approved as both MSP and MDMA.
New York, Pennsylvania, Michigan, Massachusetts, Rhode Island and New Jersey are also now 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 strategy, as shown in Figure 1.
However, it is widely predicted that a robust and competitive energy supply market will emerge across the US over the course of the next three to five years.
Major cost savings
Two examples of US utilities that have made major savings in their daily operational costs by choosing to outsource the meter reading function using drive-by automated meter reading service are Flint Energies and Tri-County Electric Membership Corporation. Even though the business drivers and meter populations of these two Georgia-based co-operatives are very different, both have been able to cut meter reading costs by 75%. As a result, Flint Energies is able to release cash for other projects, and Tri-County EMC has significantly improved the quality of its customer services.
Flint Energies was founded in 1937 and has grown to become one of the top 25 electric co-operatives in the USA; the utility now operates more than 6,000 miles of distribution lines, serving a very 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 Energies 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 Energies was looking to minimize its investment in the capital-intensive metering products -- the RF handheld devices or meter-reading vehicle," explains Tommy Childress, Director of Data Service Operations for Schlum-berger.
"They were looking to get meter readings without a big investment in technology." Schlumberger, using a specially equipped meter reading vehicle and RF-based 'drive-by' technology now reads 50,000 of Flint Energies 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 direct to Flint Energies' 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." Asked about customer reaction to the new system he says: "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 for considering 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 a 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 Energies solution, the meters are read using 'drive-by' technology from a meter reading vehicle and 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.
Rob Fox, Vice President of Marketing of Schlumberger explains:"The Tri-County service uses a route management system to work out the most efficient meter reading route. 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 secure Internet site. Technicians then download this information directly to the meter reading equipment in the vehicle. Meter reads are communicated back to the secure 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 relating to meter reading issues have been reduced to almost zero since the meter reading has been outsourced. The follow-up work that Tri-County EMC customer service representatives were doing has been very much reduced, and since the utility is a not-for-profit cooperative, the resulting cost savings will be passed on to customers.
Added value services
One of the most recent large-scale outsourcing projects in the US involves the Pittsburgh Water and Sewer Authority, in Pittsburgh, PA. In July this year, 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 on to existing water meters; the RF devices use radio transmission technology licensed from CellNet Data Systems. Schlumberger will be responsible for the integration of the data collected and delivered to it via the CellNet network, with Pittsburgh Water's billing and customer information system.
According to John Hanna, Executive Director of Pittsburgh Water and Sewer Authority, "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.
"We concluded that Schlumberger not only provides the best technology and services on the market, but that it had also demonstrated a proven ability to deliver the fully integrated solution that we require."
Tim Eskew is Director of Service Marketing with Schlumberger Resource Management Services.