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Interval billing is crucial to realize smart meter benefits

For any big project, details always matter, even if they look arcane. This is especially true for smart grid and smart meter rollouts. One issue that sounds obscure, but which actually is quite important, is whether to bill customers based on interval data from their energy use.

The U.K. is facing this issue right now as that nation continues to make good progress on rolling out smart meters. This includes addressing several important policy issues related to functional standards.

U.K. policymakers could choose to prohibit interval billing. However, that would be an expensive mistake — and it would significantly reduce the benefits that consumers would realize from smart meters.

To understand why interval billing is so important, it helps to understand how utilities have historically read meters and billed customers for energy use — and how smart meters revolutionize these functions.

Utilities can calculate electricity bills using either “register reads” from older meters, or “interval data” from smart meters.

Register reads go back to the invention of the electricity meter in 1873. The first electromechanical meters — which incidentally are still used by most customers — accumulated consumption (kWh) in the same way a car odometer accumulates miles. The “register” is the meter’s memory, in the form of a mechanical display. It shows only one value: total cumulative consumption from date the meter was installed.

A “register read” is the number that human meter readers manually record when they visit the customer’s premises each month (or quarter, or other period). Meter readers used to write those numbers down by hand; today, they enter readings into a handheld computer.

Interval data is time-based information about a customer’s energy use. In addition to recording a customer’s cumulative energy consumption, smart meters also record energy usage every fifteen minutes or hour. This interval data can support billing for time-based electricity rates (time-of-use, critical peak pricing, peak time rebates, hourly pricing, peak demand, etc.).

Interval billing isn’t new. Utilities have collected this type of interval data and used it to bill large commercial and industrial customers since the 1950s. But smart meters make interval billing available and cost-effective for any customer, even residential users.

Some policymakers are debating whether interval data should be allowed for billing domestic customers who have smart meters installed.

Relying on register reads poses many operational and policy problems. However, utilities can’t be expected to change overnight. Since register reads have a long tradition in the industry, their continued use should be permitted.

At the same time, not permitting the use of interval data (which also has a long history) causes problems for both utilities and customers.

If utilities are not allowed to generate bills based on interval data, then inconsistencies will arise between consumer bills and other data uses such as web presentment, load forecasting and settlement. This, in turn, leads to higher bills, more estimated bills, reduced flexibility, increased complexity and other serious problems.

Why would policymakers NOT want to allow interval billing? Their main concern is transparency. Customers should be able to look at their meter’s display, and thus validate the values shown on their bills — even though it is impractical to view interval data on a meter’s display.

In the U.S., regulators have addressed this issue by requiring the cumulative register value to be displayed on both the meter and the bill. The bill also offers more details. Of course, very few customers actually check their meter’s display, but at least they can do this if they want to.

The benefits of interval billing far outweigh this concern. The key arguments in favor of interval data billing are that it is significantly less expensive and much more flexible.

If interval billing is not permitted, extra costs and lost benefits could reach billions of dollars for both utilities and consumers — primarily because both meters and back-end software systems would have to be far more complex. For example, meters would have to store tariff information and aggregate interval data into pricing periods. Back-end systems would have to manage synchronization of tariff and other details between the billing system and millions of individual meters, each acting like a cash register.

For more details on the importance of interval billing, see the new white paper by Siemens AG unit eMeter: Interval Billing for Smart Meters: A Policy Imperative for Regulators and Utilities.

Policymakers have a simple solution: Permit both options and allow the market (electricity retailers) to decide whether to use register reads or interval data for billing. We’re confident that the market will select the optimal solution.