BILL ANALYSIS
SB 837
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Date of Hearing: June 28, 2010
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Steven Bradford, Chair
SB 837 (Florez) - As Amended: June 22, 2010
SENATE VOTE : 21-11
SUBJECT : Utility service disconnections: smart meters.
SUMMARY : Creates privacy standards for smart meter data held
by third-party service providers, and requires the California
Public Utilities Commission (PUC) to ensure smart meter
technologies are properly tested prior to installation and
deployment. Specifically, this bill :
1)Requires the PUC to ensure that each smart grid deployment
plan authorized by the PUC after January 1, 2012, include the
following testing and technology standards:
a) Provision of the smart metering technology have a
comprehensive security audit and the auditing plan and
results be made publicly available upon approval by the
PUC;
b) Disclosure of the manufacturer to the investor owned
utility (IOU) whether it created a cryptographic protocol
for data encryption and specify the protocol used;
c) Submission of the manufacturers security audit
results as part of a direct access meter project
self-certification program;
d) Compatibility with other smart meter technologies;
and
e) Compatibility with the electrical corporation's
energy usage data collection and billing system.
2)Requires each electrical corporation to ensure that each
metering technology works properly in a field test in a real
home setting.
3)Makes a legislative finding that due to the importance of
having electrical service to one's residence, the issue of
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utility service disconnections requires careful scrutiny by
the PUC.
4)Makes a legislative finding that the PUC shall evaluate the
impact of advanced metering infrastructure technology on the
frequency of energy utility disconnections and adopt policies
to minimize any adverse impacts, and also consider requiring
electrical and gas corporations to evaluate their customer
communication policies relative to utility service
disconnections and share lessons learned and best practices.
5)Makes a legislative finding that a utility customer's energy
usage should be treated as confidential by the electrical and
gas corporations in light of the detailed information that
will be available to electrical and gas corporations after
smart meter deployment.
6)Makes a legislative finding to enact additional protections to
preserve the confidentiality of household energy usage
information and prevent its access and use by third parties
that provide equipment or software associated with deployment
and operation of the smart grid.
7)Makes legislative declaration that detailed and real-time
consumption data maintained by or accessible to electrical and
gas corporations, or third parties should be available to law
enforcement only with a warrant or in those circumstances with
a warrant is unnecessary to conduct a search of a residence.
8)Defines a demand-response provider and requires a demand
response provider that receives data from an IOU, with
customer consent, to also acknowledge in writing, that the
information is confidential and shall not be shared or
utilized by any other person, corporation, or entity without
the customer's express written consent.
9)States that IOUs and POUs shall not be responsible for a third
party's use or maintenance of utility usage data released to
the third party pursuant to the customer's written
authorization.
10)States that a customer may give a third party access to their
electric or gas consumption data by providing written
authorization to the customer's utility service provider to
release the usage data to the third party.
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11)Requires a demand-response provider, before providing
demand-response service to the residential customer, to adopt
a statement of privacy and security principles and make it
available on the demand-response provider's website or supply
it to customers in writing or as an electronic record.
12)Requires a demand-response provider to ensure that any
person, other than the customer, including a contractor,
equipment or software supplier of the third party provider is
aware of the third party's statement of privacy and security
principles and agrees accordingly.
EXISTING LAW:
1)Federal law requires each state regulatory authority, with
respect to each electric utility for which it has ratemaking
authority, to consider certain standards and to determine
whether or not it is appropriate to implement those standards
to carry out the purposes of the Public Utility Regulatory
Policies Act.
2)Authorizes the PUC has regulatory authority over public
utilities, including electrical and gas corporations.
3)Establishes smart grid as the policy of the state and requires
the PUC to determine the requirements for smart grid
deployment no later than July 1, 2010; subsequently, IOUs
would be required to adopt a plan for implementation of a
smart grid no later than July 1, 2011.
4)Restricts the termination of residential electrical or gas
service for nonpayment by an IOU unless the IOU conforms to a
specified notice and timeline requirements and restricts
termination of service in specified situations.
FISCAL EFFECT : Unknown.
Background : In the modernization of the national electricity
grid, the United States federal government and the states are
moving towards the creation of a Smart Grid. President Obama
signed into law in February 2009, the American Recovery and
Reinvestment Act (Recovery Act) which allocates $4.5 billion to
the Department of Energy's Office of Electricity Delivery and
Energy Reliability. These smart grid funds are coined to
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develop a nationwide plan to modernize the electric grid,
enhance security of the U.S. energy infrastructure, and ensure
reliable electricity delivery to meet the growing demand.
California has been a national leader in its deployment of smart
grid infrastructure. Last year, SB 17 (Padilla, Chapter 327,
Statutes of 2009) required the PUC to consider policies for IOUs
to develop a smarter electric grid in the state.
Smart meters : A smart meter is a two-way communication device
which transmits data back to the utility and negates the need
for manual meter readings. Also, smart meters enable a utility
to provide customers with detailed information about their
energy usage at different times of the day, which in turn
enables customers to manage their energy use more proactively.
Smart meters allow the utility to remotely read the meter and
disable and enable supply and are the foundation for
demand-response programs, such as critical peak pricing, which
is designed to reduce electrical consumption during times of
peak demand.
Benefits of smart meters : According to the PUC, the benefits of
smart meters to customers, the state and utilities: 1) allows
for faster outage detection and restoration of service by a
utility when an outage occurs and therefore, less disruption to
a customer's home or business,
2) provides customers with greater control over their
electricity use when coupled with time-based rates, 3) allows
customers to make informed decisions by providing highly
detailed information about electricity usage and costs, 4) helps
the environment by reducing the need to build power plants, or
avoiding the use of older, less efficient power plants as
customers lower their electric demand, 5) increases privacy
because electricity usage information can be relayed
automatically to the utility for billing purposes, and 6)
deploying smart meters are the first step toward creating a
smart grid in California.
Demand response : Demand response is a resource that allows
end-use electric customers to reduce their electricity usage
(via smart meter device) in a given time period, or shift that
usage to another time period. This is usually done in response
to a price signal, a financial incentive, an environmental
condition or a reliability signal. Demand response can save
ratepayers money by lowering peak time energy usage, which is
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priced higher than off-peak usage. This lowers the price of
wholesale energy, and in turn, can lower retail rates.
Smart meter deployment : Smart meters are being rolled out
nationwide and internationally. The Edison Foundation reports
more than 8 million smart meters have been deployed by electric
utilities in the U.S. and nearly 60 million should be in place
by 2020. The PUC has authorized the state's IOUs to replace
conventional customer meters with smart meters in order to give
consumers greater control over their energy use. Southern
California Edison (SCE) has been authorized to install
approximately 5.3 million new smart meters, San Diego Gas and
Electric (SDG&E) 1.4 million electric smart meters and 900,000
natural gas meters, and Pacific Gas and Electric (PG&E)
approximately 5 million electric meters and 4.2 million natural
gas meters.
Although millions of smart meters have been installed by the
three IOUs without incident, last summer PG&E began to receive a
significantly high number of complaints from customers in the
San Joaquin Valley who experienced excessively high billing
statements. These complaints coincided with the installation of
smart meters in the region by PG&E and very high summer
temperatures. At the same time, the PUC was also receiving a
substantially high number of customer complaints from the same
region concerning billing statement and questioning the accuracy
of smart meters.
This bill requires the PUC to evaluate the impact of smart
metering technology on the frequency of utility disconnections
and to adopt policies to minimize adverse impacts. However,
most of these issues are currently being addressed by the PUC.
For example, in response to the complaints and communications
from Senator Dean Florez, the PUC contracted for a third party
evaluation of PG&E's smart meters. According to the PUC, the
results from the evaluation should be released by the end of
August. The evaluator will include the following issues: 1) an
analysis of whether PG&E smart meter systems are measuring and
billing electric usage accurately, both now and since meter
development began, 2) an independent analysis of high bill
customer complaints, and 3) an analysis of PG&E's smart meter
programs, past and current operational and deployment processes,
and policies and procedures.
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In addition, the PUC is planning to review consumer complaints
and the overall accuracy of smart meters. The review will focus
first on complaints from the San Joaquin Valley are and cover
deployment policies, procedures and broader issues depending on
findings. According to the PUC, a total of 1,348 complaints
regarding smart meters, were called into their Consumer Affairs
Branch (CAB). Thus, it should be noted that these numbers may
not reflect the total number of actual smart meter problems due
to how the PUC categorizes complaints in their database. For
instance, if a customer suggests that they believe their billing
issue is related to the smart meter, the CAB representative will
categorize the complaint as a smart meter complaint in the PUC's
database. It was later discovered by the PUC that many of these
complaints involve other issues unrelated to smart meters but
the PUC database system will retain the customer's complaint in
part about the smart meter.
Customer privacy : When fully deployed, the smart meter is
intended to allow the customer to view their data online, in
real-time, through the IOUs website or through a third-party
application such as Google Powermeter. The question of how
these data streams are monitored and secured to ensure customer
privacy is a primary concern of many. Additional software is
available that could enable the smart meter data to show a
customer's sleep, work, travel habits, when appliances are used,
and the likeliness of when a customer is home or not. While
this data can be a useful tool to manage peak electrical load
and achieve greater energy efficiency, it can also be of a great
interest to third parties for commercial purposes. The ability
of third parties to use utilities as conduits for customer
information or, from the home and bypassing the utilities is
innovative and introduces new challenges to privacy with respect
to energy consumption.
The PUC initiated a rulemaking (R.08-12-009) to consider
policies for IOUs to develop a smarter electric grid in the
state. The proceeding will consider setting policies, standards
and protocols to guide the development of a smart grid system
and facilitate integration of new technologies, such as
distributed generation, storage, demand-side technologies, and
electric vehicles. The rulemaking will also examine the contact
between the smart grid and consumers, including residential,
commercial, industrial, and agricultural consumers.
Cyber-security issues, which include policies to ensure customer
privacy, will also be included.
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Disconnections : Smart meter installation will allow a utility
to remotely connect and disconnect utility services
instantaneously. This service can be beneficial for customers
changing service due to residence relocation and could
potentially lower operational costs for the IOUs, which could
translate into savings for ratepayers for the cost of service.
In other words, the IOU would no longer need to send a
representative out to the customer's residence to terminate or
reestablish utility service. The smart meter will also allow a
utility to more quickly detect service outages and restore
service.
Ratepayer advocates are also concerned that the ability to
remotely disconnect service will increase the number of
disconnections and reduce the ability of customer's to make-up
arrearages and avoid a loss of service.
As the economy has continued to decline, utility disconnections
have been on the rise. In response, on February 4, 2010, the
PUC issued a Rulemaking (10-02-005) to establish ways to improve
customer notification and education to decrease the number of
gas and electric utility service disconnections due to
nonpayment by improving customer notification and education.
The PUC noted that the economic crisis currently existing in
California and a recent increase in utility service
disconnections has led it to reexamine utility disconnection
rules and practices.
The PUC's goal was to identify more effective ways for the
utilities to work with their customers and develop solutions
that avoid unnecessary disconnections without placing an undue
cost burden on other customers. The PUC focused on
incorporating the productive and effective practices that each
utility can share so that all gas and electric utilities have
the benefit of implementing best practices in its service
territory.
Under that order, the PUC required PG&E, SCE, SDG&E, and
SoCalGas to implement interim practices by February 11, 2010, or
no later than five business days from the mailing of the order.
The utilities and parties have been submitting comments on these
interim practices and their efficacies, as well as sunset
provisions if appropriate, while the parties continue to explore
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and dialogue about other solutions to assist customers to pay
their utility bills and avoid disconnection of service.
This bill compels the PUC to require the IOUs to report best
practices in their customer communication policies on
disconnections of service. On May 17, the PUC issued their
proposed decision which immediately instituted certain cost
effective measures to reduce disconnections, while also
recognizing there are potentially many other practices which
might prove useful in reducing utility disconnections.
Furthermore, in the second phase of this proceeding, the PUC
will address whether the utilities should establish a uniform
protocol for remote disconnections and other issues related to
smart meters and disconnections.
Testing and technology standards : This bill requires the PUC to
adopt testing and technology standards for the IOUs as part of
the smart grid deployment plan. The PUC claims this provision
could potentially overlap or conflict with requirements already
underway in the smart grid proceeding. This bill also directs
the PUC to ensure that each meter technology has been field
tested and according to the PUC staff analysis, this provision
may be obsolete in that each of the three IOUs have already
completed such field tests as part of their procurement process
and are currently in full-scale deployment of smart meters in
their service territory.
Security auditing plan : This bill requires the PUC to make
publicly available the IOU's security auditing plan and the
results of the security audit. Given the highly sensitive and
confidential information that may be contained in the security
audit plans, it may not be appropriate nor is it in the PUC's
purview to determine what information should be disclosed to the
public. The author and the committee may wish to strike this
provision in the bill and instead require the Department of
Justice to make recommendations on public disclosure of private
information .
Deal or no deal : This bill was held on suspense in the Senate
Appropriations Committee because the previous version required
the PUC to enforce third-party privacy standards. In order to
get the bill off suspense, the author agreed to remove the
provision from the bill.
Conversely, the bill was amended to reinstate third-party
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privacy standards that were removed by the Senate Appropriations
Committee. To uphold the agreement made with the Senate
Appropriations committee, the author and committee may wish to
strike the provision requiring demand-response providers and
other third parties to adopt privacy and security policies .
REGISTERED SUPPORT / OPPOSITION :
Support
American Civil Liberties Union (ACLU)
Opposition
California Public Utilities Commission (CPUC) (unless amended)
Analysis Prepared by : DaVina Flemings / U. & C. / (916)
319-2083