Chatting with Brian Pugliese
Brian P. Pugliese, CAE, joined KEMA, Inc. in February 2008. Most recently, he was the executive director of Utilimetrics (formerly known as the Alliance for Advanced Metering and Data Management Solutions in Northbrook, IL). As executive director of Utilimetrics, Brian led a number of initiatives including the development of an on-line tool designed to help utilities understand their AMR/ AMI technology needs, the delivery of AMR/ AMI information to members and stakeholders through association Webinars, and the publishing of monthly AMR/ AMI regulatory updates for members.
As Brian comes on board to KEMA, I wanted to take the opportunity to offer him a platform for sharing some of the industry insights he has formulated.
McNamara: Brian, first, a warm welcome to KEMA! We look forward to having your keen industry expertise now in the portfolio of services offered by our Intelligent Networks and Communications consulting group.
Of all the topics in AMI, what should be receiving more attention from the utility perspective?
Pugliese: Thanks, Will. I am excited about my new opportunities to work with utility clients.
The AMI technologies and what they can do continue to be very attractive. The possibilities for greater customer choice, increased operational efficiencies, and system reliability are very important. One area that I have heard about year after year is the degree of transformation these technologies will continue to have on the energy business.
When talking about AMR systems specifically, the basic business case typically centered on the metering operations and customer service. The levels of investment were significant, but might not involve other areas of the utility. With AMI, that changes. Because of increased data intervals and data granularity, utilities have the flexibility to generate new rates, the ability to detect tampering/ theft, shift loads, and improve on system restoration times.
As new and greater amounts of information become available, the traditional ways utilities get things done—and the people needed to address them—need to catch up with the technology. Work processes, procedures, and communications all will feel the positive impact that the technology will have on customer service, IT, rates, distribution operations, etc.
As utilities adopt AMI, they also will need modify their internal structures, workflows, business processes and to train or re-train personnel. I think to some degree this is understood, but it is given less attention than other issues like the choice of technology or the types of functions AMI can deliver that support business strategy.
McNamara: Great insights, Brian. From a regulatory perspective, what initiatives do you think will be necessary to drive the AMI sector forward?
Pugliese: To date, there have been three broad drivers: regulatory directives, a need for improved customer-focused information or control and, of course, operational efficiencies.
Drilling into the regulatory area, though, I think there were two items we focused on when I was with Utilimetrics: accelerated depreciation and what I’ll call “right-sizing AMI system requirements.”
Congress needs to approve a change in the IRS rules accelerating the depreciation of the metering asset. There are financial hurdles under the current depreciation scheme that, if removed, would help drive the adoption of smart metering systems. Meters have evolved from non-communicative consumption counters to intelligent communications devices which will enable a smart grid.
Under the current depreciation rules, the meter costs are recovered in a period of 20 years, when other sophisticated electronic devices have a cost recovery of five years.
McNamara: There were some key regulatory and legislative initiatives that were particularly significant, correct?
Pugliese: Yes. Last year, Utilimetrics supported the National Association of Regulatory Utility Commissioners (NARUC) on its resolution to remove barriers to smart metering. The NARUC membership recognized the importance of smart metering and the pace of change when they included, “provide depreciation lives for AMI that take into account the speed and nature of change in metering technology” as one of resolution statements.
During the year, there was also a U.S. House Bill, HR 2776, Renewable Energy and Energy Conservation Tax Act of 2007, calling for the accelerated depreciation of “smart meters” to five years from the traditional 20-year schedule. The bill's intent, following on a growing understanding of importance of smart metering, was to recognize that the environment for metering technologies is changing rapidly and significantly. If such a change had been passed, it would have allowed energy distributors an opportunity to better serve the ever increasing need by customers for more energy consumption detail. Ultimately, it has not been signed into law.
The second [initiative] that I think is important is that regulatory bodies should not get too far ahead of the industry in terms of what customers and utilities need from their smart metering provisions. In talking to industry leaders, particularly the Utilimetrics’ Board members, we see that five or so years ago, companies opted for AMR/AMI on their own initiative for concrete business reasons. With the passage of EPAct in 2005, the growing concern over system capacity and environmental issues, enthusiastic regulators are calling on AMI to address many issues, and might not be weighing the complexities of adopting all the possible solutions available. There has been a great deal of discussion about the many upside benefits of smart meters, which exist, but there has to be a step where regulators, stakeholders and the utility collaborate and determine what’s really needed and what is affordable.
Just like at a restaurant buffet, you don’t get everything that’s set out. Admittedly, there are a number of functions that are attractive for an AMI system – remote connect/ disconnect, load profiling, net metering, pre-payment, home area network, DR functionality, etc. Regulators have a number of information gathering tools before setting policy or regulation. I think it’s important for the regulatory community to not only gather information from utilities, vendors and customer classes, but also to arrive at requirements for AMI systems that provide for practical current and future benefits of these technologies to constituents, within a structure that is affordable.
McNamara: We’ve talked a great deal in this publication about interoperability, and it continues to be a concern for many utilities. What are your thoughts on requiring vendors to comply with open standards?
Pugliese: Obviously, vendors have marketplace decisions regarding standardization. Collectively, they have poured uncounted dollars of resources into the development of their own communications protocols. For them, it’s apparent they would like to recoup those investments because standardization creates at least two effects – one it takes away a unique selling proposition, and two, it does not allow them to fully recapture the costs sunk into their systems to date. Standardization takes away the ability to be a single source supplier of a technology platform.
On the other hand, a lack of standardization drives up the cost to utilities. Utilities invest a lot of time and resources in creating gateways or interconnection systems for data originating from different platforms. When information from proprietary systems are organized and sent in a variety of ways, utility programmers must write code to identify data sources and arrange the information so that it is properly placed in a database.
Fortunately, due to diligent efforts of vendors and utilities, ANSI is expected to issue C.12.22, Protocol Specification for Interfacing to Data Communication Networks. As I understand it, this new standard provides an application layer standard for network communications, designed to transport ANSI C12.19 organized data metering over any network. The open protocol proposed in ANSI C12.22 sets the stage for system interoperability regardless of the technologies used to communicate information.
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