3. Automated Metering Infrastructure

3.1. Alco's Proposal

Alco proposed to develop and install an automated metering infrastructure to replace its current metering and billing. Alco notes that it serves approximately 8,800 customers across 10 square miles of service area. Currently all of its meters are read visually and keyed into electronic handheld devices. Data is then electronically transferred to the billing system computers. Alco argues that this method of meter reading has limitations: first, meters are only read every 30 days and, absent more frequent data, Alco cannot track leaks on customer and utility facilities; and second there is no usage data to help with reducing consumption. (Alco Opening Brief at 37.)

Alco originally requested funding, by expressing its intended use of the proceeds, in a recent debt authority application.2 The Commission noted: "Alco intends to install an automatic meter reading (AMR) system at a cost of $700,000. There is currently no Commission Decision or Resolution that authorizes Alco to install an AMR system or to recover the costs of an AMR system. Alco intends to use the proceeds of the debt and equity requested in this proceeding to pay for the AMR system." (Decision (D.) 08-11-035 at 6.) The Commission denied at that time the use of the proceeds from that application for an AMR system. (Ordering Paragraph 1(d).3) Alco made a new specific request in this general rate case.

Alco argues there are numerous benefits both tangible in monetary savings and intangible in improved customer satisfaction:

Quantifiable -

· Fewer misreads and re-reads

· Reduced time spent gathering meter reads

· Early notification of customer water leaks

· Improved conservation efforts

· Eliminating move-in/move-out special reads

· Increased service personnel safety (reduced risks)

Intangible -

· Customer awareness of water consumption and flow patterns

· Fewer billing disputes due to early leak detection

· Customer access to real-time water usage consumption tracking and the associated conservation impacts

· Fewer customer service calls once the system is established

· Detection of fraud and misuse of water

Other -

· Data on consumption to predict trends

· Etc. (Alco Opening Brief 37 - 42.)

Division of Ratepayer Advocates (DRA) opposes Alco's plan for installing an advanced metering infrastructure system. DRA asserts that Alco's arguments are "based on alleged benefits which are overblown and have not been quantified." (DRA Opening Brief at 35.) DRA also cites that Alco has claimed to have already installed new, accurate meters, in Alco's replacement program and has not justified the asserted savings. (Id.) DRA suggests the Commission undertake a more generic rulemaking to study the need for an advanced metering infrastructure system in any Class B water utility and that it should be considered in the context of conservation programs generally. DRA points out that D.08-11-035 did not direct Alco to file for an advanced metering infrastructure system in this proceeding, only that it needed specific authority in the future and could not use the proceeds from the debt authorized in that decision for such a system. (Id. at 34.)

DRA's final argument is that its own analysis of the need for an advanced metering infrastructure system refutes Alco's assertions on savings and other benefits. (Ex. D-1 at 17-40 - 17-42.) DRA calculates that there would be no savings for ratepayers and argues that meter readers would only be assigned other duties (not defined), and that the plan does not include all meters (and it is not clear whether the other customers have advanced metering infrastructure-ready meters). (Ex. D-1 at 17-41 and 17-39, respectively.) DRA calculates a negative net-present value of the cost to ratepayers (not savings) of $4.7 million. (Ex. D-1 at 17-42, Figure 17-I.) DRA further argues that advanced metering infrastructures have not been shown to be beneficial for water conservation and the Commission already has aggressive water conservation programs in place as an integral part of the Water Action Plan. (Id. at 17-40.)

3.2.1. Discussion

Alco is not persuasive that it adequately studied or quantified the true costs or benefits of an automated metering infrastructure (or the earlier entitled automatic meter reading system). Alco's asserted benefits are a recital of information available in the literature on the topic, are not sufficiently grounded in facts specific to Alco, and by Alco's own assessment the quantifiable benefits would fall significantly short of the system's costs. Alco has not met its burden to justify that it needs an automated metering infrastructure for safe and reliable water service at a reasonable cost.4 We will therefore deny the request.

We agree with DRA that there is not an adequate factual showing of benefits and savings for Alco from an advanced metering infrastructure system at this time. We also see no benefit to funding a study at this time for Alco, as we did for Golden State Water Company (Golden State), as discussed below. We also note that advanced metering infrastructure systems are more likely to be beneficial for conservation when the commodity has a significant time-value attribute, as does electricity, where accurate time of use information may both reduce and shift consumption. With water conservation we are less concerned with shifting consumption (as we strive to do with electricity) and much more concerned with an overall permanent usage reduction (although we also hope to achieve permanent reductions in energy consumption too). We find DRA persuasive that advanced metering infrastructure systems are more meaningful at this time for energy conservation and demand-side management goals.

We believe the smaller utilities and their customers will be better-served by waiting and following on the experiences of the larger Class A water utilities after they install advanced metering infrastructure systems. The Commission recently rejected a more robust proposal for Golden State in D.10-11-035. But even there, "Golden State acknowledges that it has not provided a detailed business plan or issued an RFP [request for proposal] for the implementation of its proposed AMI system." (D.10-11-035 at 70.) Golden State, one of the largest Class A water utilities, was authorized $341,292 in rates to hire a consultant for pre-deployment funding only. (Id. at 70-71.) Golden State had requested authorization of approximately $7 million to test, evaluate, and implement one phase of a $27 million advanced metering infrastructure system in its Region II. (Id. at 69.) Thus, even with one of our largest Class-A water companies its authority was severely restrained to a small fraction of the original request.

1 The above cost per customer is based on 9,039 customers estimated in year 2012 in Alco's filing (i.e. assumed customer growth by 2012).

2 Application (A.) 07-10-012 to issue notes in the principal amount of $8,000,000 and to execute a related agreement and supplemental security instruments.

3 "Alco shall not issue debt or equity to finance an Automatic Meter Reading System (AMR) or AMR meters until after Alco has received Commission authorization to install an AMR system."

4 Pub. Util. Code § 454. "(a) Except as provided in Section 455, no public utility shall change any rate or so alter any classification, contract, practice, or rule as to result in any new rate, except upon a showing before the commission and a finding by the commission that the new rate is justified.... ."

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