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The potential benefits include greater consumer choice through innovative price offerings and lowering overall consumer costs by improving how customers change their electric usage in response to changes in real-time wholesale electricity prices. This will lead to a more efficient wholesale market because the meters will provide the data needed to link real time energy prices to customer consumption, which in turn will enable customers to make more useful energy management and purchasing decisions. These are deregulation benefits long enjoyed by large commercial and industrial customers who have interval meters already in place.

Texas Retail Energy Providers (REPs) will also soon benefit, and not just by enabling REPs to offer new innovative programs such as real-time pricing products. Metering data offers REPs the opportunity to reduce a serious financial risk such as Unaccounted for Energy (UFE). UFE is a result of the financial settlement of a customer's (or group of customers') actual and the original estimated energy consumption. Without advanced meters, REPs in ERCOT must use “average” or “deemed” load profile estimates for managing their customer accounts. When the customer meter is read at the end of the month, a customer's actual consumption is then compared to the estimate and any differences are settled, which creates financial risk exposure for retailers. Now retailers will be able to use actual metered interval data, which in turn means “Smart REPs” can deploy innovative pricing strategies based on the new settlements processes to lower their financial risks.

Several UtiliPoint IssueAlert articles written over the years about innovative price offerings for retail customers offer more detail about the advantages and disadvantages of various strategies. (These articles can be found at www.utilipoint.com/issuealert and searching for keywords such as “innovative” or “pricing”) All manner of diverse price offerings can now be offered using interval readings and settlements. As stated in the ERCOT press release, “… actually settling the customer on that usage at the wholesale level is the catalyst for retailers to provide incentives and tools for those customers to use their energy more efficiently and lower their electric bills.” By 2014, it is expected that seven million of the total 22 million customers in ERCOT will be settled using interval data.

As these small residential and commercial customers are able to obtain their interval usage they will become interested in ways to reduce their expenditures for electricity. Smart REPs that market in-house displays of usage—interval by interval, month-to-date usage—will move ahead in the race for market share and increased margins. Why? Customers will want to know the price of electricity before they use it. Couple that with usage information and customers will make more informed more “elastic” purchasing decisions.

All this change does come with a cost. Texas is spending over $1.3 billion to deploy the Smart meters, and Smart REPs will need to invest in new back office systems to handle the anticipated explosion in available customer data and new service offerings. These systems include risk management, customer information, accounting, billing and databases for marketing and load research.

With the implementation of advance metering, UtiliPoint expects ERCOT, Smart REPs, and customers will realize financial benefit by improving the linkage between the real-time costs of electricity generation with customer consumption decisions. The metering data gives retailers the opportunity to differentiate themselves from the competition by offering new products and services while giving Smart REPs new risk management tools. Smart REPs and “Smart Customers” will thrive in this new environment.