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OPT-OUTALTERNATIVE COSTS &PROPOSAL
Advanced Smart Meter Alternatives,
Respective Associated Costs, and Cost
Recovery Proposal
PREPARED FOR
Southern Maryland Electric Cooperative
APRIL 2013
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Executive Summary 1-1
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Executive Summary 1-2
Table of Contents
1.0 Executive Summary ................................................................................................................................ 1-4
1.1 Opt-Out Scenario Summary of Results and Reccomendations........................................... 1-4
1.2 Proposal Key Assumptions .................................................................................................................. 1-61.3 Recommended Opt-Out Non-Standard Meter Installation.................................................. 1-6
2.0 SMECOS Opt-Out Proposal ............................................................................................................... 2-8
2.1 Impact Of An Opt-Out Option........................................................................................................ 2-8
2.1.1 What Opt-Out Means to SMECO............................................................................... 2-8
2.1.2 What Opt-Out Means to SMECOs Customer-Members.................................. 2-9
2.2 SMECOs Opt-OUt Meter Scenarios: Descriptions & Disadvantages............................... 2-9
2.2.1 Scenario 1: Analog Meter Installation......................................................................... 2-9
2.2.2 Scenario 2: Digital Meter Installation........................................................................ 2-10
2.2.3 Scenario 3: ERT/AMR Meter Installation.................................................................. 2-10
2.2.4 Scenario 4: Interval Data/Modem Meter (Telephone LinePOTS)................ 2-10
2.2.5 Scenario 5: Smart Meter: Limited Frequency ........................................................ 2-12
2.2.6 Scenario 6: Probe Digital Interval Meter .................................................................. 2-12
2.3 Approach to Estimate Opt-Out Costs Incurred by Scenario............................................... 2-13
3.0 SMECOs Proposed Opt-Out Service Charges .............................................................................. 3-14
3.1 Services Charges for An Opt-Out Option With A Legacy Meter - Scenario 1:
Analog, Scenario 2: Digital, and Scenario 3: ERT/AMR ............................................................ 3-14
3.2 Services Charges for An Opt-Out Option With Scenario 4: Interval
Data/Modem Meter (Telephone Line-POTs) .............................................................................. 3-15
3.3 Service Charges for An Opt-Out Option With Scenario 5: Smart Meter:Limited Frequency ............................................................................................................................... 3-16
3.4 Service Charges for An Opt-Out Option With Scenario 6: Probe A Digital
Interval Meter ....................................................................................................................................... 3-16
4.0 Impact to SMECO Business Operations With A No-Charge Opt-Out Option ......................... 4-18
4.1 Impact of A No Charge Opt-Out Option With A Legacy Meter Scenario 1:
Analog, Scenaro 2: Digital, and Scenario 3: ERT/AMR ........................................................... 4-18
4.2 Impact of A No Charge Opt-Out Option With Scenario 4: Interval
Data/Modem Meter (Telephone Line-POTS) .............................................................................. 4-20
4.3 Impact of A No Charge Opt-Out Option With Scenario 5: Smart Meter:
Limited Frequency ............................................................................................................................... 4-21
4.4 Impact of A No Charge Opt-Out Option With Scenario 6: Probe A Digital
Interval Meter ....................................................................................................................................... 4-23
5.0 Conclusion and Recommended Opt-Out Non-Standard Meter Installation .......................... 5-26
Appendix 1-1: Review of U.S. Opt-Out Programs ..................................................................................... 5-27
Appendix 1-2: Decreased Services for Opt-Out Customer-Members ................................................... 5-33
Appendix 1-3: Overview of Opt-Out Incurred Costs by Scenario .......................................................... 5-34
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Executive Summary 1-3
Table 1: Upfront & Monthly Costs for Scenario 1: Analog................................. 5-34
Table 2: Upfront & Monthly Costs for Scenario 2: Digital.................................. 5-34
Table 3: Upfront & Monthly Costs for Scenario 3: ERT/AMR............................ 5-34
Table 4: Upfront & Monthly Costs for Scenario 4: Interval
Data/Modem Meter (Telephone Line-POTS) ........................................................... 5-34
Table 5: Upfront & Monthly Costs for Scenario 5: Smart Meter:
Limited Frequency ............................................................................................................ 5-34
Table 6: Upfront & Monthly Costs for Scenario 6: Probe Digital
Interval Meter .................................................................................................................... 5-34
Costs Incurred for Scenario 1: Analog .......................................................................................... 5-35
Costs Incurred for Scenario 2: Digital ........................................................................................... 5-36
Costs Incurred for Scenario 3: ERT/AMR ..................................................................................... 5-37
Costs Incurred for Scenario 4: Interval Data/Modem Meter (Telephone Line-
POTS) ..................................................................................................................................... 5-38
Costs Incurred for Scenario 5: Smart Meter: Limited Frequency....................................... 5-39
Costs Incurred for Scenario 6: Probe Digital Interval Meter................................................. 5-40
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Executive Summary 1-4
1.0 Executive SummarySouthern Maryland Electric Cooperative (SMECO) is dedicated to providing its customer-members with
safe, reliable, competitively priced electricity service. SMECO also wants to ensure that its customer-
members have access to new tools and information, which will allow them to take greater control of
their energy use. Consistent with and in support of its mission, on June 13, 2012, SMECO proposed to
implement an advanced metering infrastructure (AMI) system for its entire service territory
(approximately 152,000 customer meters). This initiative builds on SMECOs AMI Pilot effort, a step
authorized by the Public Service Commission (PSC) on December 21, 20091. SMECOs AMI Pilot
commenced March 2011 and concluded March 2012. SMECO has submitted its conclusions from the
AMI Pilot including a detail analysis of the business benefits to the PSC. SMECO is currently awaiting PSC
approval before proceeding with system-wide AMI implementation.
On January 7, 2013, the Commission concluded that the public interest requires the Companies 2to offer
an additional option related to the installation of smart meters in their homes (Order No. 85294 and
respective Errata). As a result, the Commission ordered the Companies to submit to the Commission
proposals regarding a) overall costs associated with allowing customers to retain their current legacy3
meter, and b) proposals regarding costs related to offering customers different RF-free, or RF-minimizing options, related to the installation of their smart meters. Additionally, the Commission
asked the Companies to provide this information scaled for different levels of customer participation.
Opt-out is the term used to describe a customers request to decline the installation of a smart meter
as well as to forego the ability to receive the respective Advanced Metering Infrastructure (AMI)
benefits. In addition, the opt-out alternatives incur operational and maintenance costs; and
ultimately undermines the value of total AMI benefits enabled through installation of a smart meter.
This document describes SMECOs Opt-OutProposal including overall costs associated with allowing
customer-members to retain their current legacy meter and costs related to offering customer-
members different RF-free or RF-minimizing options related to the installation of smart meters. The
proposal includes scaled results for three potential levels of customer-member opt-out participation;e.g. 1%, 2% and 5%, respectively.
1.1 OPT-OUTSCENARIO SUMMARY OF RESULTS AND RECCOMENDATIONSSMECO conducted a detailed cost capture exercise to identify upfront and monthly costs incurred by the
cooperative should customer-members choose an opt-outalternative. The cost capture exercise
collected the full cost should a customer choose to opt-out of an AMI meter installation. For customers
1PSC Mail Log (ML) #119060, DS-302
2Order No. 85294 defined the Companiesto include Baltimore Gas and Electric Company, Potomac Electric
Power Company, and Delmarva Power and Ligth Company.While SMECO was not required to follow that Orders
directives, the Commission invited SMECO to participate in the future proceedings directed by Order No. 85294. 3SMECOs definition of a legacy meteris consistent with the utilities REQUEST FOR CLARIFICATION AND
EXPEDITED CONSIDERATION which states the Companies may have analog meters with remote reading devices
(also known as ERT modules), analog meters without ERT, and digital meters with and without ERT capability. The
Commissions clarification Order No. 85371 confirms the Commission intended to require the Companies to
provide cost information on the customers retaining their current legacy meter, whether such meter is analog or
not.
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Executive Summary 1-5
who choose to opt-out, such choice would require the use of a non-AMI4additional metering solution
that will raise significant cost to all customer members. The Commissions Order No. 85294 recognizes
the existence of potential costs associated with providing and maintaining multiple meter and meter
reading solutions in order to provide customers an opt-out option. To better determine the cost
considerations the Commission has requested additional information regarding the costs associated
with opt-out solutions.5
Detailed cost estimates have been developed in this costs analysis to cover areas of potential impact for
an opt-outoption. The viability and overview costs associated with non-standard metering
alternatives is discussed in section 2.5 Overview of Opt-Out Costs Incurred.
The cost estimates associated with each of SMECOs six opt-out scenarios are summarized below by
three opt-out participation levels, 1%, 2%, and 5% respectively.
The results show both an upfront one-time, and a recurring monthly, cost are fairly uniform for
Scenarios 1, 2, and 3. For Scenario 4, the upfront one-time fees are naturally higher since costs related
to establishing and maintaining this alternative is substantial. Under Scenario 5, the monthly costs are
reduced since the AMI meter would transmit information at a less frequent basis; thus manual meter
reading and other associated costs are not applicable as they would be in scenarios 1 through 3, due to
the installation of the AMI meter. Scenario 6 offers an RF-free alternative for the capture of interval
data; however, up-front costs and monthly costs are substantial.
Table 1-1 SMECO Opt-OutScenario Summary by Participation Level
4SMECOs intention is to install an AMI meter for all customer-member locations. Other types of required meter
installations would be considered non-standard meter installations.5Commission Order 9294 on or before July 1, 2013, the Companies shall submit to the Commission their
proposals regarding a) the overall additional costs associated with allowing customers to retain their current
analog meter, b) their proposals regarding cost recovery of these additional costs from customers, and c) their
proposals for recovery of costs related to offering customers different RF free or RF-minimizing options related to
the installation of their smart meters. Additionally, we ask the Companies to provide this information scaled for
different levels of customer participation
1% "Opt-Out" Participation Upfront One-Time Monthly
Scenario 1 - Analog $105.32 $34.94
Scenario 2 - Digital $105.32 $34.94
Scenario 3 - ERT/AMR $105.32 $34.94
Scenario 4 - Interval Data/Modem Meter (Telephone Line -POTs) $1,251.70 $30.47
Scenario 5 - Smart Meter: Limited Frequency $93.92 $1.37
Scenario 6 - Probe a Digital Interval Meter $427.12 $65.85
2% "Opt-Out" Participation Upfront One-Time Monthly
Scenario 1 - Analog $84.03 $31.68
Scenario 2 - Digital $84.03 $31.68
Scenario 3 - ERT/AMR $84.03 $31.68
Scenario 4 - Interval Data/Modem Meter (Telephone Line -POTS) $1,226.76 $27.06
Scenario 5 - Smart Meter: Limited Frequency $90.84 $0.68
Scenario 6 - Probe a Digital Interval Meter $387.44 $62.25
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Executive Summary 1-6
1.2 PROPOSAL KEY ASSUMPTIONSIn support of this proposal, SMECO identified the following key assumptions:
Only residential customer-members will qualify for the opt-outprogram6Each manual meter read requires a truck roll7Legacy meter definition is consistent with the utilities REQUEST FOR CLARIFICATION AND EXPEDITED
CONSIDERATION (see footnote 2)
Legacy meters removed during the AMI deployment will be refurbished and tested for use in the Opt-Out program1.3 RECOMMENDED OPT-OUTNON-STANDARD METER INSTALLATIONSMECO recommends customer-members select the opt-outoption to have a digital ERT/AMR(Scenario 3) meter installed.
SMECO agrees the additional option to opt-out of the installation of AMI meters should bear the extracosts. SMECO has reviewed the experiences of other utilitys opt-out programs8. Opt-outoptions arebeing adopted by less than 2% of customers9charged with the appropriate costs of having a non-standard meter installed.
Because of limited participation levels, SMECO is recommending the ERT/AMR installation opt-outoption for all customers-members electing to opt-out of the installation of a standard meter. Thistechnology has been used successfully at SMECO since 1997.10 The technology meets the requirementof a RF minimizing solution, meets SMECOs standards for maintainigcustomer-member privacy and
provides an effective meter and meter reading solution for the utility. Unlike the analog meters, whichare no longer commercially available, ERT meters are still a viable commercial ready metering solution.
SMECO will not offer customers choosing to opt-outof AMI the ability to choose a TOU rate structure.TOU rate structures will only be offered to customers that have SMECOs fully functional AMI technology
6The Opt-OutCustomer Base is derived from total number of residential customers (139,163 as of Jan. 2013).
7Economies of scale have been applied in the calculation of the truck roll cost. These manual meter readings will
be incorporated with other system maintenance activities [where possible].8Refer to Appendix 1-1 Industry Study
9See Appendix 1-1 Industry Study, table Current Examples of Opt-Out Participation Levels
10The Encoder Receiver Transmitter (ERT) technology has been used by SMECO beginning in 1997. The current
commercially available production system consists of an ERT module installed in a digital meter. This combination
is in the electric industry known as an ERT meter. An ERT meter is a one-way RF device that only transmits the
meter read upon receiving a wakeup call from the collection unit. The unit remains dormant until the wakeup call
is received. The wakeup call is manually initiated by the meter reader once in close proximity to the meter. The
typical ERT meter has a range of approximately 800 yards.
5% "Opt-Out" Participation Upfront One-Time Monthly
Scenario 1 - Analog $71.27 $29.73
Scenario 2 - Digital $71.27 $29.73
Scenario 3 - ERT/AMR $71.27 $29.73
Scenario 4 - Interval Data/Modem Meter (Telephone Line -POTs) $1,211.80 $25.01
Scenario 5 - Smart Meter: Limited Frequency $88.99 $0.27
Scenario 6 - Probe a Digital Interval Meter $363.63 $60.10
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Executive Summary 1-7
meters installed. Fully functional AMI meters have no limits on the RF transmission rate.If required by the Commission to offer a TOU rate for opt-outcustomers, the customer will have an RF
free, interval data meter installed. The interval data will be obtained by physically visiting the meter on amonthly basis, manually connecting a read device to the meter, and performing a download of theinterval data to the back office systems.
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |SMECOS Opt-Out Proposal 2-8
2.0 SMECOS Opt-OutProposalThis section describes SMECOs Opt-OutProposal in accordance to the Commissions Order 85294 andrespective Errata, ordering the submission of a proposal regarding a) the overall additional costs
associated with allowing customer to retain their current legacy meter, b) their proposal regarding costrecovery of these additional costs from customers, and c) their proposals for recovery of costs related to
offering customer different RF-free or RF-minimizing options related to the installation of their smartmeters. Additionally, the Commission ordered the Companies to provide this information scaled fordifferent levels of customer participation.
2.1 IMPACT OF AN OPT-OUTOPTIONThis section describes the impact of an opt-out option to both SMECO and its customers-members
2.1.1 What Opt-OutMeans to SMECOAn opt-outoption at SMECO will require the utility to maintain software, hardware, labor, and
equipment for the management and maintenance of dual business processes supporting both the
standard and non-standard metering applications. SMECO will be required to maintain dual
informational programs, dual outage messaging, and different customer-member rate structures insupport of customer-members choosing to opt-outof an AMI meter installation.
SMECO agrees with the Commissions perspective that customers who are provided with an additional
option to opt-out of the installation of smart meters on their homes, should bear the extra costs
associated with such customer choice.
With any level of opt-outparticipation, SMECOsbenefits will be reduced and will continue to be
diminished as opt-out participation levels increase. Erosion of AMI benefits attributable to opt-out
include, but are not limited to the following:
Reduction of the operational savings (I.e. meter reading labor, respective truck rolls for systemmaintenance activities, maintenance of equipment, maintenance of vehicles and fuel costs).
Potential reduction in the supply-side savings due to less participation in the Demand ResponsePrograms, leading to the potential for reduced energy and demand savings, which leads to lower
capacity and price mitigation benefit. Through this analysis, SMECO determined that impacts to
supply-side savings are minimal at the 1%, 2% and 5% participation levels, resulting in little to no
impact to demand response. However, it is noted that participation levels beyond 5% can exhibit a
greater impact on the supply-side savings, with increasing impact as opt-out participation increases.
Potential higher project costs attributable to greater customer-member communication needs (e.g.,development of additional educational materials for opt-out communications).
Reduction in opportunity for SMECO to fully realize improved, outage and power quality monitoringbenefits.
Reduction in opportunity for SMECO to optimize benefits associated with the more effective theft ofservice monitoring.
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |SMECOS Opt-Out Proposal 2-9
2.1.2 What Opt-OutMeans to SMECOsCustomer-MembersCustomer-members electing to participate in an opt-outprogram potentially forego the many benefits
and functionalities obtained from the installation of AMI meters, including, but not limited to11:
higher quality of serviceimproved outage detection/restorationmonitoring of voltage to mitigate spikes, interruptions, and conditions where abnormal levels could
affect customer service
remote move-in/move-out functionalityparticipation in Demand Response Programscustomer-member energy usage advisory services2.2 SMECOS OPT-OUTMETER SCENARIOS: DESCRIPTIONS &
DISADVANTAGESSMECOs approach to identifying opt-outscenario options to the installation of smart meters was
based on the premise that the alternatives were technically viable solutions based on current meter and
meter support system functionality. The alternatives are described below and listed by scenarios. In
scenarios where a manual meter read is required, SMECOs intends to use SMECO employees for all
future system maintenance activities including meter reading, if required.12The respective
disadvantages are included within each scenario.
2.2.1 Scenario 1: Analog Meter InstallationScenario 1 involves the installation of an analog meter. Analog meters are no longer commercially
available. This requires the replacement of the existing meter with a tested analog meter. Due to the
lack of available replacement components the refurbishment of analog meters is not an option. Inaddition, Scenario 1 entails a visit to the premises for all ongoing meter reading, system maintenance
and business operation activities like move in/out.
Scenario 1 requires SMECO to manually retrieve monthly reads from the analog meter for billing by
performing a truck roll to each meter. Meter reading is no longer a contiguous function and will
potentially change month to month based on customer-member opt-outparticipation.
Disadvantages of this alternative are analog meters do not provide on-demand reads, notification of
power status, nor does it supply interval data information in support of future time-based rates. SMECO
will be unable to retire its current meter reading system, perform non-contiguous meter reads, and it
presents the added complexity of managing parallel smart meter and legacy meter reading processes.
11Refer to Appendix 1-3
12It is worth noting that Meter reading workforce has already been redeployed to other duties.
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |SMECOS Opt-Out Proposal 2-10
2.2.2 Scenario 2: Digital Meter InstallationScenario 2 involves the installation of a digital (Non-Radio Frequency) meter with no interval data
measurement capability. Scenario 2 results in the replacement of a customer-members existing meter
with a digital meter.
Scenario 2 requires SMECO to manually retrieve monthly reads from the digital meter for billing byperforming a truck roll to each meter. Again, meter reading is no longer a contiguous function and will
potentially change month to month based on customer-member opt-outparticipation.
Disadvantages of this alternative are digital (non-AMI) meters do not provide on-demand reads,
notification of power status, nor does it supply interval data information in support of time-based rates.
SMECO will be unable to retire the current meter reading system, and it presents the added complexity
of managing parallel smart meter and legacy meter reading processes. SMECO will be required to
operate parallel meter reading systems to support this function.
2.2.3 Scenario 3: ERT/AMR Meter InstallationScenario 3 involves the installation of an Encoder Received Transmitter (ERT)/Automatic Meter Reading
(AMR) meter. Scenario 3 results in the replacement of a customer-members existing meter with atested and refurbished ERT/AMR meter.13
Scenario 3 requires SMECO to manually retrieve monthly reads (via drive-by) using an ERT/AMR meter.
For the ERT, the advantages of this alternative are that the monthly retrieval of meter data can be
obtained by performing a drive-by read. This does result in an RF-minimizing alternative due to the AMR
technology requires a relatively local wake up call before the meter will transmit the meter read to the
collection device.
Disadvantages of this alternative are digital ERT/AMR meters do not provide on-demand reads,
notification of power status, nor does it supply interval data information in support of time-based rates.
SMECO will be unable to retire the meter reading system, and it presents the added complexity of
managing parallel smart meter and legacy meter reading processes.
2.2.4 Scenario 4: Interval Data/Modem Meter (Telephone LinePOTS)Scenario 4 involves the installation of an Interval Data/Modem meter with the feature set of an
interval data recorder and modem included with the purchase of an advanced meter. The cost of
the meter required for this solution is $767 based on SMECOs last Invoice. The interval recorder
allows the meter to capture and store interval data and communicate the information through the
use of a modem connected to a dedicated, Plain Old Telephone (POTS) line that SMECO would have
installed to support this meter reading function.14The system does provide remote daily interval
meter reads without the use RF. However, the customer would be required to pay all costs
associated with the installation and maintenance of this additional phone service or an AMI meterwould be installed.
13SMECO has currently has 7000 TS1 (turtle) meters in the field; however this is no longer a supportable
solution.
14 SMECO currently uses the POTS lines for reading interval data for commercial customers with installations that
exceed 500 kW in capacity.
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |SMECOS Opt-Out Proposal 2-11
SMECO, through previous experience with hundreds of similar telephone based meters, has found
the use of both shared and dedicated telephone lines as a method of reading mass amounts of
interval data meters for residential customers as unreliable and unsupportable due to problems
with the meters and problems with the POTS lines.
Problems with the meters included:
Meter not communicating as scheduledMeter modem failuresMeters receiving the wrong call scheduleMeter not calling as expectedProblems with shared phone circuits included:
Customer-member not paying for the phone serviceCustomer-member moves and the phone line disconnectedCustomer-member and phone company technicians disconnecting the phone line to the meterIntermittent phone service experience by the customer results in POTS disconnectedCorrosion in the connection circuitsWires cut due to home and building repairsFrom April 2002 through May 2004, SMECO had telephone lines connected to 412 data recorders
for the purposes of reading interval data over the telephone lines. During this timeframe, a total of
1491 field activities were issued in support of reading meters through the POTS line. Of the 1491
field activities issued, 1375 field activities were issued in support of customer shared POTS lines.
Field crews were required to travel to each site and perform troubleshooting to determine the
reason the collection system did not receive the information. Troubleshooting for the field
technician included making the determination if the bulleted reasons given above were the reason
the meter did not communicate as expected. These meters were read over the POTS lines on a
monthly basis to minimize the traffic on the customer-members phone service.
Problems may occur with dedicated phone circuits for reading mass amounts of residential meters.
SMECO would be required to perform a detailed analysis on the limitations of the software and the
equipment required to adequately support reading the interval data information from a large
amount of meters. Dedicated POTS lines are more reliable than shared lines but still would requirecareful coordination and specialized training for the installation and maintenance of this system.
The software used has a limited set of validation parameters. Meter alarms and data errors are not
communicated until the meter data is downloaded and requires manual intervention to review and
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |SMECOS Opt-Out Proposal 2-12
accept before a download to the billing system can occur. 15. The meters also require unique call-in
schedules to be programmed in the meters depending on the number of meters and the call-in
frequency . Each meter requires 3 to 5 minutes of time each call, or download, to obtain the
interval data from the meter. Any interruption in phone service during this timeframe will
disconnect the phone service from the meter. The meter will then follow a predetermined retry
sequence before becoming dormant for a period, after which it will perform another sequence.
2.2.5 Scenario 5: Smart Meter: Limited FrequencyScenario 5 involves the installation of an AMI meter with a limited radio transmission schedule.
Scenario 5 results in the replacement of a customer-members existing meter with an AMI meter in
which SMECO reconfigures the communication module so that it only transmits on a limited schedule.
Scenario 5 requires SMECO to reprogram the AMI meter to transmit meter reading data on a reduced
schedule.
The advantages of this alternative are that meter reads are possible with reduced RF, yet SMECO and
the customer-member can leverage the AMI system for remote connectivity functionality, move-
in/move-out functionality and outage management capabilities.
The disadvantages of this alternative are that it requires SMECO to reconfigure the AMI meter in a
different way than the standard meter, and thus actively track the meters assigned to these customer-
members. A limitation of this scenario is that customer-members would not have access to daily
interval data and web presentment, and have limited opportunities to participate in demand response
and time-based rate opportunities due to the reduce transmission rate.
2.2.6 Scenario 6: Probe Digital Interval MeterScenario 6 involves the installation of a digital meter with additional functionality to allow it to capture
interval data. Scenario 6 results in the replacement of a customer-members existing meter with a
tested and, when necessary, refurbished load research meter. In addition, Scenario 6 entails a premisesvisit to assess the condition of customer-member owned facilities for safety and tamper purposes.
Scenario 6 requires SMECO to manually retrieve/probe monthly interval data reads from the digital
interval meter via a probing processes. No remote data retrieval capability is provided.
The advantages of this alternative are that daily interval meter reads, retrieved monthly, for these
meters is possible without use of RF. SMECO can leverage existing software and hardware technology
to perform these functions.
The disadvantages to this alternative are that the probing processes are more costly. This alternative
requires that a SMECO technician take additional time to visit and manually probe each meter for
interval data. Customer-members will not benefit from the remote-connection functionality or benefitfrom access to near real-time data.
15Currently SMECO expends 35 hours monthly on the first day of the month reviewing and processing data for
billing accounts rated at 500 kW and above. Typical problems include missing interval data, meters not reporting,
or data edits due to zero intervals or power outages. Meters not reporting data require a truck roll to investigate
the issue and capture the interval data manually to be used for billing.
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |SMECOS Opt-Out Proposal 2-13
2.3 APPROACH TO ESTIMATE OPT-OUTCOSTS INCURRED BY SCENARIOThe detailed cost estimates were grouped into categories to develop two separate charges, namely .
the Upfront One-Time Costs and Monthly (on-going) costs.16 For the Upfront one-time cost, SMECO
proposes the customer-member pay this fee upon request to opt-out. The monthly (on-going)
charges would be in addition to a customer-members Basic Service Charge, as allowed under the
current tariffs.
Upfront One-Time Costs: Refers to the upfront costs that are reflected on a cost per customer-member basis for the specific scenario. These costs are the identifiable upfront one-time costs and
include: the non-AMI meter Installation costs, non-AMI meter reading equipment , removal of non-
AMI meter (exit fee), non-AMI meter storage and inventory costs, and the additional customer-
member communications costs. The costs also include the cost of returning SMECOs AMI network
back to the standard condition after the customer-member no longer requires the opt-outservices.
Monthly Costs (on-going): Refers to the identifiable on-going cost estimates that include theincremental cost of the non-AMI meter system for the specific scenario. These costs also include the
incremental non-AMI meter costs that have been defined in the respective scenario. These costs
include: non-AMI meter reads (based on a fully loaded truck roll cost which includes fringe benefitsand administrative and general (A&G) overhead), maintaining legacy meter reading system and
annual maintenance costs, and the cost of running parallel business processes post-AMI deployment.
16Refer to Appendix 1-3 for detailed breakdown of costs.
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |SMECOs Proposed Opt-Out Service Charges 3-14
3.0 SMECOs Proposed Opt-Out Service ChargesIn this section, SMECO presents service charges incurred by customer-members who elect to opt-out.
The section is divided into four sub-sections which detail service charges for each opt-outscenario
and also at the three estimated levels of opt-out participation; 1%, 2% and 5%, respectively.
3.1 SERVICES CHARGES FOR AN OPT-OUT OPTION WITH A LEGACY METER -SCENARIO 1: ANALOG, SCENARIO 2: DIGITAL, AND SCENARIO 3: ERT/AMR
This section describes SMECOs cost analysis for an opt-out option with either an Analog, Digital or
ERT/AMR meter. SMECO has consolidated the results of these three scenarios due to the following
reasons:
SMECO did not observe any differences in terms of required system costs between the threeproposed opt-out options
Opt-outcustomer-members would be required to incur identical service charges under all threeoptions
Table 3-1a depicts the upfront one-time and monthly costs incurred by customer-members who opt-out of the AMI meter. As illustrated in Table 3-1a, as participation increases in the "opt-out" program,
an individual customer-members upfront and monthly opt-out service charges decrease. Under these
scenarios a customer-member would not be charged for the non-AMI meter.17The largest components
of the upfront one-time charge are the two truck rolls required to install, and later, to remove (exit fee)
the non-standard meters (total cost of $53.58). In terms of the monthly fee a customer-member will
expect to incur a fixed meter read fee of $26.79 (fully loaded truck roll cost). SMECO does not expect to
be able to offer a customer-member a decreased meter read fee as its service territory is vast and
customer-member opt-outparticipation is not static month to month. In order to service the non-
contiguous service territory, SMECO will have to utilize a similar process to its current check read
services. The fees below are not meant to be punitive, but reflective of the true cost required to providethe customer-membersrequested opt-out option.
Table 3-1a SMECO opt-outservice charges for Scenario 1: Analog, Scenario 2: Digital, or
Scenario 3: ERT/AMR
The charges summarized in Table 3-1a are intended to alleviate any cost burden (results shown in Table
4-1a) being placed on AMI customer-members by customer-members choosing an opt-out option.
Unless mitigated, all customers-members would have to subsidize the cost for opt-out customer-
members though rates.
17SMECO intends to retain a supply of these meters retrieved during the AMI installation efforts.
Scenario 1 Analog, Scenario 2 Digital and
Scenario 3 - ERT/AMR1% 2% 5%
Upfront One-Time $105.32 $84.03 $71.27
Monthly $34.94 $31.68 $29.73
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Southern Maryland Electric Cooperative | OPT-OUTALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |SMECOs Proposed Opt-Out Service Charges 3-15
3.2 SERVICES CHARGES FOR AN OPT-OUT OPTION WITHSCENARIO 4:INTERVAL DATA/MODEM METER (TELEPHONE LINE-POTS)
This section describes SMECOs cost analysis for an opt-out program with an Interval Data/Modem
Meter. Table 3-2a depicts the upfront one-time and monthly costs to be incurred by customer-members
who opt-out of the AMI meter, should SMECO have to provide this option to its customer-members.
As illustrated in the table 3-2a, as participation increases in this option, an individual customer-
members upfront and monthly opt-out service charges decrease. Under this scenario a customer-
member would be charged for the non-AMI meter as SMECO does not currently supply this option to its
residential customer-member. Based on the last invoice SMECO received for this type of meter, the
anticipated price of a meter to offer this opt-out option is $767.00.
The meter cost is the largest cost component of a customer-member s required upfront one-time fee.
The two truck rolls required to install, and later, to remove (exit fee) the alternative meter are higher as
it requires a more technically advanced staff to install and remove a meter connected to a POTS line
(total cost of $112.98). In addition, this opt-out solution requires the installation of a dedicated phone
line jack. SMECO has been advised by the local phone service provider that the required costs to
provide the POTS line for this RF free solution includes $46.00 connection fee for the additional phone
circuit and an additional $95.00 fee for the phone technician to enable the physical jack at the property.
SMECO further estimates an additional fee for the installation of a phone wire from phone companys
jack to the meters phone connection pointrequires on average two hours of time ($121.67) plus an
estimated $50 in materials. In terms of the monthly fee, a customer-member will expect to incur a fixed
meter read fee of $22 (monthly phone bill). SMECO will have to purchase additional meter reading and
repair equipment to handle any failures with this non-manual solution. SMECO does not have a
measurement guideline for the maintenance required to maintain phone service for residential POTS
line used for billing grade interval data information. The experience characterized in the description for
Scenario 4 for residential POTS lines was based on shared POTS line. SMECO does feel the maintenance
of POTS lines used to read interval data for customer-member accounts will be substantial but has not
included these costs in an estimate. SMECO has the expectation that additional fees due to POTS line
maintenance would be charged directly to the customer-member. The fees below are not intended to
be punitive, but in fact reflective of the true cost required to provide opt -out customer-members the
services they are requesting.
Table 3-2a SMECO opt-out service charges for Scenario 4: Interval Data/Modem Meter
(Telephone Line -POTS)
The charges summarized in Table 3-2a are intended to alleviate any cost burden (results shown in Table
4-2a) being placed on all customer-members due to customer-members choosing to opt-out. Unless
mitigated, all customer-members would have to subsidize the cost for opt-out options though rates.
Scenario 4 - Interval Data/Modem Meter (Telephone Line -POTS) 1% 2% 5%
Upfront One-Time $1,251.70 $1,226.76 $1,211.80
Monthly $30.47 $27.06 $25.01
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |SMECOs Proposed Opt-Out Service Charges 3-16
3.3 SERVICE CHARGES FOR AN OPT-OUT OPTION WITH SCENARIO 5: SMARTMETER: LIMITED FREQUENCY
This section describes SMECOs cost analysis for an opt-out program with an AMI meter in which the
frequency of the meters transmissions of RF signal have been programmatically limited. This option
does not decrease the level of the RF signal but limits the number a times the RF signal is transmitted.
For SMECOs AMI solution, the RF signal limit transmission rate is configurable from 0 84 hours. Table
3-3a depicts the upfront one-time and monthly costs incurred by customer-members should SMECO be
required to offer this option. As illustrated in the table below, as participation increases in the "opt-out"
program, an individual customer-members upfront and monthly opt-out service charges decrease.
Under this scenario a customer-member would not be charged for the cost of the meter as this solution
requires a remote configuration of an AMI meter to decrease the number of transmits. SMECO
anticipates, based on vendor discussions, that configuring the AMI meter to the limited frequency
setting will require hour per meter. Configuring the meter back to a standard AMI meter will also
require hour per meter. SMECO estimates these processes to cost a total of $78.28. This solution does
not require SMECO to maintain any duplicative meter reading systems or excess field activity. As a resultthe monthly charge for the meters will be minimal. The fees below are not meant to be punitive, but in
fact reflective of the true cost required to provide opt -out customer-members the services they are
requesting.
Table 3-3a SMECO opt-out service charges for Scenario 5: Smart Meter: Limited Frequency
The charges summarized in Table 3-3a are intended to alleviate any cost burden (results shown in Table
4-3a) being placed on customer-members by customer-members choosing to opt-out. Unless
mitigated, all customer-members would have to subsidize the costs for opt-out customer-members
though rates.
3.4 SERVICE CHARGES FOR AN OPT-OUT OPTION WITH SCENARIO 6: PROBEA DIGITAL INTERVAL METER
This section describes SMECOs cost analyses for an opt-out program with a process requiring a
manual probe of a digital meter in order to read interval data. Table 3-4a depicts the upfront one-time
and monthly costs incurred by customer-members should SMECO be required to offer this option. As
participation increases in the "opt-out" program, an individual customer-members upfront and monthlyopt-out service charges decrease. Under this scenario a customer-member would be charged for the
full cost of the meter as SMECO will not currently offer this metering function to its customer-members .
Based on the last invoice SMECO received for this type of meter, the anticipated price of the meter is
$285.00 per unit. The meter cost is the largest cost component of the upfront fee.
Two truck rolls are required to install, and later, to remove (exit fee) the meter. Because of the
technical requirements of this solution a higher classification of staff are required for the programming,
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Impact to SMECO Business Operations With A No-Charge Opt-Out Option 4-18
4.0 Impact to SMECO Business Operations With A No-ChargeOpt-Out Option
In this section, SMECO intends to demonstrate the cost of maintaining dual business processes to
accommodate customer-members electing to opt-out who are not responsible for their service
charges. SMECO plans to begin system-wide AMI implementation after the PSCs completes its review
process. When completed, the AMI system will deliver substantial value to SMECOs customer-
members by reducing operating costs, improving customer-member service and reliability, and
enhancing employee safety. These benefits will accrue through changes in operational activities and
business processes that are made possible by the technological attributes of AMI systems functionality.
The four sub-sections below also depict the overall impact of an opt-out program on SMECOs post-
AMI business operations if opt-out customer-members are not responsible for their service charges.
These customer-members will not only forgo many of the tangible benefits that AMI can provide but
also impact the business case analysis SMECO performed on its AMI program.
4.1 IMPACT OF A NO CHARGE OPT-OUT OPTION WITH A LEGACY METERSCENARIO 1: ANALOG, SCENARO 2: DIGITAL, AND SCENARIO 3: ERT/AMR
This section describes SMECOs cost analysis for an opt-out option with either an Analog, Digital or
ERT/AMR meter. SMECO has consolidated the results of these three scenarios due to the following
reasons:
SMECO did not observe any differences in terms of required system costs between the threeproposed opt-out options
The cost impact for SMECO is also identical if opt-outcustomer-members are not responsible fortheir service charges
SMECO analyzed the effect that these three opt-out options would present to SMECOspost-AMI
business operations if the customer-members choosing to opt-out were not responsible fortheir
service charges. Table 4-1a depicts the financial impact to SMECOs business processes post-AMI
deployment at the 1%, 2% and 5% opt-out participation levels. If customer-members electing to
choose an opt-out service were not responsible for their service charges (as depicted in Table 3-1a),
SMECO anticipates a total impact range from an opt-out program in Year 1 to be between roughly
$730,000 and $3,000,000.
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Impact to SMECO Business Operations With A No-Charge Opt-Out Option 4-19
Table 4-1a Impact to SMECO Operations from a no charge opt-out optionwith Scenario 1:
Analog, Scenario 2: Digital, or Scenario 3: ERT/AMR
Table 4-1b presents the results of SMECOs Operational AMI Business Case analysis, reflecting the
impact of a no charge opt-out option with an Analog, Digital or ERT/AMR meter would have on
SMECOs AMI Business Case. Specifically, the effectto both SMECOsAMI operational benefits and
operational costs.
Table 4-1b Impact of a no charge opt-outoption to SMECOsAMI Business Case with Scenario
1: Analog, Scenario 2: Digital, or Scenario 3: ERT/AMR
Element
Total AMI Benefits CurrentBusiness Case
1% Opt-OutParticpation
2% Opt-OutParticpation
5% Opt-OutParticpation
CurrentBusiness Case
1% Opt-OutParticpation
2% Opt-OutParticpation
5% Opt-OutParticipation
Avoided Capital $1,652.7 $1,611.0 $1,600.7 $1,569.6 $3,844.0 $ 3,756.8 $3,732.4 $3,659.4
Avoided O&M $36,256.3 $30,952.6 $25,967.7 $11,013.0 $73,152.4 $ 62,399.9 $52,316.6 $22,066.6
Increase Operating
Revenue
$7,392.5 $7,345.4 $7,298.3 $7,157.0 $15,079.6 $14,980.1 $14,880.5 $14,581.8
Avoided Purchase Power
Costs
$1,438.5 $1,424.9 $1,411.2 $1,370.3 $2,947.3 $ 2,918.5 $2,889.6 $2,803.0
Total $46,740.0 $41,334.0 $36,277.9 $21,109.9 $95,023.3 $ 84,055.3 $73,819.1 $43,110.8
Total AMI Costs Current
Business Case
1% Opt-Out
Particpation
2% Opt-Out
Particpation
5% Opt-Out
Particpation
Current
Business Case
1% Opt-Out
Particpation
2% Opt-Out
Particpation
5% Opt-Out
Participation
Capital $21,607.3 $22,395.7 $22,405.4 $22,434.5 $41,138.2 $ 42,754.5 $42,767.6 $42,807.1
Amortization of ExistingMeter Assets (net) $2,199.1 $2,199.1 $2,199.1 $2,199.1 $0.0 $0.0 $0.0 $0.0
O&M $16,489.1 $16,489.1 $16,489.1 $16,489.1 $28,259.8 $ 28,259.8 $28,259.8 $28,259.8
Total $40,295.5 $41,083.9 $41,093.6 $41,122.7 $69,397.9 $ 71,014.2 $71,027.4 $71,066.9
Total Resource Cost (TRC)
(Operational) 1.16 1.01 0.88 0.51 1.37 1.18 1.04 0.61
Total Resource Cost (TRC)
with DR1.70 1.54 1.42 1.09 2.07 1.88 1.74 1.34
Net Present Value ($ millions) Total $ (nominal)
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Impact to SMECO Business Operations With A No-Charge Opt-Out Option 4-20
As shown in Table 4-1b, these three opt-out options, if offered at no charge to customer-members,
would decrease the AMI programs value. The decrease in the AMI programs value is the result of
lower realized operational AMI efficiencies due to the opt-out program. SMECO will not be able to
fully realize the elimination of its meter reading activities or excess truck rolls. Moreover, faced with a
non-contiguous meter reading process, SMECOs per meter read cost would increase substantially.
However, the AMI program enables SMECO to absorb the impact of even a 5% opt-outparticipation
level and still justify its AMI investment as the TRC ratio remains above 1 in both NPV and nominal
terms.
4.2 IMPACT OF A NO CHARGE OPT-OUT OPTION WITH SCENARIO 4:INTERVAL DATA/MODEM METER (TELEPHONE LINE-POTS)
SMECO analyzed the effect that Interval Data/Modem Meter opt-out options would present to
SMECOs post-AMI business operations if the customer-members choosing to opt-out were not
responsible for their service charges. Table 4-2a depicts the financial impact to SMECOs business
processes post-AMI deployment at the 1%, 2% and 5% opt-out participation levels. If customer-
members electing to choose an opt-out service were not responsible for their service charges (as
depicted in Table 3-2a), SMECO anticipates a total impact range from an opt-out program in Year 1 to
be between roughly $2,250,000 and $10,500,000.
Table 4-2a Impact to SMECO Operations from a no charge opt-out option with Scenario 4:
Interval Data/Modem Meter (Telephone Line -POTS)
Table 4-2b presents the results of SMECOs Operational AMI Business Case analysis, reflecting the
impact of a no charge opt-out option with an Interval Data/Modem Meter (Telephone Line-POTS)
would have on SMECOs AMI Business Case. Specifically, the effect to both SMECOs AMI operational
benefits and operational costs.
1% 2% 5%
Meter Reading $1,828,922 $1,376,320 $1,004,153 -$112,347
Meter Operations $1,037,679 $1,030,010 $1,022,342 $999,335
Revenue Protection $1,219,160 $1,212,892 $1,206,623 $1,187,818Load research $483,135 $483,135 $483,135 $483,135
Credit Collections $482,489 $479,990 $477,492 $469,996
Billing $74,180 $72,848 $71,516 $67,519
Customer Care $3,585 -$17,800 -$30,595 -$69,015
Distribution and Outage Management $537,745 $532,822 $527,898 $513,127
Total AMI Benefits $5,666,896 $5,170,217 $4,762,564 $3,539,569
Erosion of AMI Benefits -$496,679 -$904,333 -$2,127,328
Additional Costs of Opt-Out Solution 1 -$1,754,119 -$3,413,846 -$8,393,029
Total Opt-Out Solution Impact - Year 1 -$2,250,797 -$4,318,179 -$10,520,356
Scenario 4 - Interval Data/Modem Meter (Telephone Line -POTs)
Current Business CaseParticipation Levels
Note: 1) Additional Costs include Cost to Purchase Meter, Installation of Non- AMI Meter Removal of Non-AMI Meter (Exit
Fee), Additional requirements for system functionality, Meter Inventory/Facility, IT Storage &Hardware, Customer Education
Materials and Mailings, IT - MVRS/MV90 Maintenance and application integration, Operation of System (upload/download)
and Changes to Rate/Revenue to track separate billed revenues.
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Impact to SMECO Business Operations With A No-Charge Opt-Out Option 4-21
Table 4-2b Impact of a no charge opt-out option to SMECOsAMI Business Case with Scenario
4: Interval Data/Modem (Telephone Lines-POTS)
As shown in Table 4-2b this opt-out option, if offered at no charge to customer-members, would
decrease the AMI programs value. The decrease in the AMI programs value is the result of lower
realized operational AMI efficiencies due to the opt-out program. Though SMECO will be able to fully
realize the elimination of its manual meter reading activities, the Cooperative will be required to
maintain dedicated phone lines at $22 per month to read meters and perform excess truck rolls not
needed by AMI. However, the AMI program enables SMECO to absorb the impact of even a 5% opt-
out participation level and still justify its AMI investment as the TRC ratio remains above 1 in both NPV
and nominal terms.
4.3 IMPACT OF A NO CHARGE OPT-OUT OPTION WITH SCENARIO 5: SMARTMETER: LIMITED FREQUENCY
SMECO analyzed the effect an opt-out option with a Smart Meter: Limited Frequency would present
to SMECOs post-AMI business operations if the customer-members choosing to opt-out were not
responsible for their service charges. Table 4-3a depicts the financial impact to SMECOs business
processes post-AMI deployment at the 1%, 2% and 5% opt-out participation levels. If customer-
members electing to choose an opt-out service were not responsible for their service charges (asdepicted in Table 3-3a), SMECO anticipates a total impact range from an opt-out program in Year 1 to
be between roughly $150,000 and $640,000. The impact of this opt-out solution is minimal when
compared to the other opt-out scenarios as SEMCO is able to eliminate dual meter reading systems
and maintain singular business processes post-AMI.
Element
Total AMI Benefits Current
Business Case
1% Opt-Out
Particpation
2% Opt-Out
Particpation
5% Opt-Out
Particpation
Current
Business Case
1% Opt-Out
Particpation
2% Opt-Out
Particpation
5% Opt-Out
Participation
Avoided Capital $1,652.7 $1,602.7 $1,592.3 $1,561.2 $3,844.0 $3,740.1 $3,715.8 $3,642.7
Avoided O&M $36,256.3 $32,319.7 $28,752.1 $18,049.2 $73,152.4 $65,013.1 $57,395.8 $34,924.0
Increase Operating
Revenue
$7,392.5 $7,345.4 $7,298.3 $7,157.0 $15,079.6 $14,980.1 $14,880.5 $14,581.8
Avoided Purchase Power
Costs
$1,438.5 $1,424.9 $1,411.2 $1,370.3 $2,947.3 $2,918.5 $2,889.6 $2,803.0
Total $46,740.0 $42,692.7 $39,054.0 $28,137.8 $95,023.3 $86,651.7 $78,881.6 $55,951.5
Total AMI Costs Current
Business Case
1% Opt-Out
Particpation
2% Opt-Out
Particpation
5% Opt-Out
Particpation
Current
Business Case
1% Opt-Out
Particpation
2% Opt-Out
Particpation
5% Opt-Out
Participation
Capital $21,607.3 $23,305.1 $24,217.4 $26,954.6 $41,138.2 $44,508.6 $46,099.4 $51,118.0
Amortization of Existing
Meter Assets (net)
$2,199.1 $2,199.1 $2,199.1 $2,199.1 $0.0 $0.0 $0.0 $0.0
O&M $16,489.1 $16,489.1 $16,489.1 $16,489.1 $28,259.8 $28,259.8 $28,259.8 $28,259.8
Total $40,295.5 $41,993.2 $42,905.6 $45,642.7 $69,397.9 $72,768.4 $74,359.2 $79,377.8
Total Resource Cost (TRC)
(Operational) 1.16 1.02 0.91 0.62 1.37 1.19 1.06 0.70
Total Resource Cost (TRC)
with DR1.70 1.54 1.43 1.13 2.07 1.91 1.74 1.36
Net Present Value ($ millions) Total $ (nominal)
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Impact to SMECO Business Operations With A No-Charge Opt-Out Option 4-22
Table4-3a Impact to SMECO Operations from a no charge opt-out option with Scenario 5:
Smart Meter: Limited Frequency
Table 4-3b presents the results of SMECOs Operational AMI Business Case analysis, reflecting the
impact of a no charge opt-out option with an Smart Meter: Limited Frequency would have on
SMECOs AMI Business Case. Specifically, the effect to both SMECOs AMI operational benefits and
operational costs.
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Impact to SMECO Business Operations With A No-Charge Opt-Out Option 4-23
Table 4-3b Impact of a no charge opt-out option to SMECOs AMI Business Case with Scenario
5: SMART METER: Limited Frequency to SMECO AMI Business Case
As shown on table 4-3b Scenario 5 does not materially impact SMECOs AMI project value. Even with a
5% opt-out participation level the TRC ratio remains consistent with the original estimated project TRC
in both NPV and nominal terms. This scenario would require minimum adjustments to the proposed
business processes under AMI in the previously filed business case. Moreover, a singular meter reading
system will be maintained under this option.
4.4 IMPACT OF A NO CHARGE OPT-OUT OPTION WITH SCENARIO 6: PROBE ADIGITAL INTERVAL METER
SMECO analyzed the effect a Probe a Digital Interval Meter opt-out option would present to SMECOs
post-AMI business operations if the customer-members choosing to opt-out were not responsible for
their service charges. Table 4-4a depicts the financial impact to SMECOs business processes post-AMI
deployment at the 1%, 2% and 5% opt-out participation levels. If customer-members electing to
choose an opt-out service were not responsible for their service charges (asdepicted in Table 3-4a),
SMECO anticipates a total impact range from an opt-out program in Year 1 to be between roughly$1,700,000 and $7,550,000.
Element
Total AMI Benefits Current
Business Case
1% Opt-Out
Particpation
2% Opt-Out
Particpation
5% Opt-Out
Particpation
Current
Business Case
1% Opt-Out
Particpation
2% Opt-Out
Particpation
5% Opt-Out
Participation
Avoided Capital $1,652.7 $1,652.7 $1,652.7 $1,652.7 $ 3,844.0 $3,844.0 $3,844.0 $3,844.0
Avoided O&M $36,256.3 $36,256.3 $36,256.3 $36,256.3 $73,152.4 $73,152.4 $73,152.4 $73,152.4
Increase Operating
Revenue
$7,392.5 $7,392.5 $7,392.5 $7,392.5 $15,079.6 $15,079.6 $15,079.6 $15,079.6
Avoided Purchase Power
Costs
$1,438.5 $1,438.5 $1,438.5 $1,438.5 $ 2,947.3 $2,947.3 $2,947.3 $2,947.3
Total $46,740.0 $46,740.0 $46,740.0 $46,740.0 $95,023.3 $95,023.3 $95,023.3 $95,023.3
Total AMI Costs Current
Business Case
1% Opt-Out
Particpation
2% Opt-Out
Particpation
5% Opt-Out
Particpation
Current
Business Case
1% Opt-Out
Particpation
2% Opt-Out
Particpation
5% Opt-Out
Participation
Capital $21,607.3 $21,683.0 $21,752.2 $21,959.7 $41,138.2 $41,269.5 $41,392.0 $41,759.5
Amortization of Existing
Meter Assets (net)
$2,199.1 $2,199.1 $2,199.1 $2,199.1 $0.0 $0.0 $0.0 $0.0
O&M $16,489.1 $16,489.1 $16,489.1 $16,489.1 $28,259.8 $28,259.8 $28,259.8 $28,259.8
Total $40,295.5 $40,371.2 $40,440.3 $40,647.9 $69,397.9 $69,529.3 $69,651.8 $70,019.3
Total Resource Cost (TRC)
(Operational) 1.16 1.16 1.16 1.15 1.37 1.37 1.36 1.36
Total Resource Cost (TRC)
with DR1.70 1.69 1.69 1.68 2.07 2.07 2.06 2.05
Net Present Value ($ millions) Total $ (nominal)
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Impact to SMECO Business Operations With A No-Charge Opt-Out Option 4-24
Table 4-4a Impact to SMECO Operations from a no charge opt-out option with Scenario 6:
Probe a Digital Interval Meter
Table 4-4b evaluates the impact that a no charge opt-out option with probing a digital interval meter
would have on its AMI Business Case. Below, SMECO presents the impact of an opt-out program to
both AMI operational benefits and operational costs if customer-members electing to opt-out were
not responsible for their service charges.
Table 4-4b Impact of a no charge opt-out option to SMECOs AMI Business Case with Scenario
6: Probe a Digital Interval Meter to SMECO AMI Business Case
Element
Total AMI Benefits Current
Business Case
1% Opt-Out
Particpatio
2% Opt-Out
Particpation
5% Opt-Out
Particpation
Current
Business Case
1% Opt-Out
Particpation
2% Opt-Out
Particpatio
5% Opt-Out
Participation
Avoided Capital $1,652.7 $1,526.8 $1,474.0 $1,315.7 $3,844.0 $3,573.3 $3,449.4 $ 3,077.9
Avoided O&M $36,256.3 $25,602.3 $15,309.9 ($15,567.2) $73,152.4 $51,565.1 $30,743.7 ($31,720.6)
Increase Operating
Revenue
$7,392.5 $7,345.4 $7,298.3 $7,157.0 $ 15,079.6 $14,980.1 $14,880.5 $14,581.8
Avoided Purchase Power
Costs
$1,438.5 $1,424.9 $1,411.2 $1,370.3 $2,947.3 $2,918.5 $2,889.6 $ 2,803.0
Total $46,740.0 $35,899.4 $25,493.5 ($5,724.1) $95,023.3 $73,036.9 $51,963.2 ($11,258.0)
Total AMI Costs Current
Business Case
1% Opt-Out
Particpatio
2% Opt-Out
Particpation
5% Opt-Out
Particpation
Current
Business Case
1% Opt-Out
Particpation
2% Opt-Out
Particpatio
5% Opt-Out
Participation
Capital $21,607.3 $22,658.7 $22,924.6 $23,722.5 $41,138.2 $43,238.0 $43,722.3 $45,175.3
Amortization of Existing
Meter Assets (net)
$2,199.1 $2,199.1 $2,199.1 $2,199.1 $0.0 $0.0 $0.0 $0.0
O&M $16,489.1 $16,489.1 $16,489.1 $16,489.1 $28,259.8 $28,259.8 $28,259.8 $28,259.8
Total $40,295.5 $41,346.8 $41,612.8 $42,410.7 $69,397.9 $71,497.7 $71,982.1 $71,982.1
Total Resource Cost (TRC)
(Operational) 1.16 0.87 0.61 (0.13) 1.37 1.02 0.72 (0.16)
Total Resource Cost (TRC)
with DR1.70 1.41 1.17 0.47 2.07 1.72 1.44 0.60
Net Present Value ($ millions) Total $ (nominal)
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Impact to SMECO Business Operations With A No-Charge Opt-Out Option 4-25
As shown on table 4-4b the Probe the Digital Interval Meter opt-out option decreases the AMI
programs value, and at a 5% opt-out participation level the TRC ratio falls below 1 in both NPV and
nominal terms. The decrease in the AMI programs value is the result of lower realized operational AMI
efficiencies due to the opt-out program. Specifically, the extensive labor required to probe meters to
enable customer-members with TOU rates will erode most of the operational AMI benefits.
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Conclusion and Recommended Opt-Out Non-Standard Meter Installation 5-26
5.0 Conclusion and Recommended Opt-Out Non-StandardMeter Installation
SMECO agrees with the Commissions perspective that customer-members who are provided with an
additional option to opt-out of the installation of smart meters on their homes, should bear the
appropriate costs. SMECO understands the rationale for investigating an opt-out option for itscustomer-members. SMECO has reviewed the experiences of other utilities18opt-outprograms andhas the expectation that a small number of customer-members will choose to out-out of an AMI meterinstallation. An architected service charge schedule which will ensure the viability of SMECOsAMIproject as well as prevent all customer-members from subsidizing customer-members who are electingan opt-outoption.
SMECO assessed the opt-out impacts to its AMI Business Case19, the impacts to the operational business
processes, as well as the potential opt-out service charges to customer-members electing to opt-out. Asa result, SMECO recommends to offer the most viable option available, Scenario 3, an ERT/AMR meter,which has been in use within the SMECO territory for over 10 years.
SMECO is recommending Scenario 3, an ERT/AMR meter, as it fulfills the Commission srequest toprovide a RF-minimizing option related to the installation of a smart meter. 20This alternative also allowscustomer-members who choose to opt out to retain a legacy meter as defined by the Commission.21
SMECO proposes that a standard meter for its customer-members be the AMI meter, however
customer-members who elect to opt-out will have an ERT/AMR meter installed(Scenario 3).
If required by the Commission to offer a TOU rate for opt-outcustomer-members, the customer-
member will have an RF-free, interval data meter installed (Scenario 6). The interval data will be
obtained by physically visiting the meter on a monthly basis, manually connecting a read device to the
meter, and performing a download of the interval data to the back office systems.
18Refer to Appendix 1-1: Review of U.S. Opt-Out Programs.
19AMI Business Case was submitted in June 2012
20PSC Order 85371
21PSC Order Granting Request for Clarification 85371
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Appendix 1-1: Review of U.S. Opt-Out Programs 5-27
Appendix 1-1: Review of U.S. Opt-OutProgramsAs SMECO investigates implementing an Advanced Metering Infrastructure (AMI) program, one
important consideration is the potential impact of an opt-out option. SMECO must anticipate
concerns raised by opponents of the AMI technology. As smart meter deployments have reached an
estimated one in three households in the United States, utilities have faced increasing opposition during
the past two years from those who believe the meters present a danger to health, safety, privacy, the
economy or national security.22 A recent study conducted by Chartwell indicated that within the last
few years the number of active smart meter [AMI] opt-out programs offered by utilities in the U.S. and
Canada has grown from zero to more than a dozen.23 The table below lists the limited number of states
which have addressed the question of an opt-out option:
SUMMARY ANALYSIS OF AMI OPT-OUT PROGRAMS BY STATE
Number of states where a docket or Bill has been
opened to discuss an AMI opt-out alternative
14 States24
and District of
Columbia
States where utilities were ordered to provide an
AMI opt-out program by a regulatory commission
or state legislature
California, D.C., Georgia, Maine,
Maryland, Michigan, Nevada,
Oregon, Pennsylvania and
Vermont
States where an opt-out program is being
considered by their regulatory commissionArizona and Texas
States where utilities have offered an opt-out
program prior to a request by a regulatory
commission (not included in 14 states mentioned
above)
Colorado and Illinois
States where opt-outconcerns were dismissed Idaho, New Hampshire, and
Wisconsin
DESPITE MEDIA ATTENTION OF OPT-OUTPROGRAMS, PARTICIPATION RATES REMAIN LOW
Efforts to oppose advanced metering programs have garnered significant publicity in the media, though
it appears that these claims represent the opinion of a vocal minority as opposed to a concept
22Smart Meter Opt-Out Programs 2013, Russ Henderson
23Smart Meter Opt-Out Programs 2013, Russ Henderson24
14 states - Arizona, California, Colorado, D.C., Georgia, Idaho, Illinois, Maine, Maryland, Michigan, Nevada, New Hampshire,
Oregon, Pennsylvania, Texas, Vermont, Wisconsin
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Appendix 1-1: Review of U.S. Opt-Out Programs 5-28
advocated by the mainstream public. The figures in the chart below imply that the opt -out option is
not as prevalent as the magnified media coverage would lead the public to believe.25
CURRENT EXAMPLES OF OPT-OUT PARTICIPATION LEVELS
UTILITY OPT-OUT
PARTICIPATION
UPFRONT FEE MONTHLY FEE
Central Maine Power (ME) 1.40% $40 $12
Green Mountain Power (VT) 2.03% None None
Portland General (OR) .0004% $254 $51
Pacific Gas & Electric (CA) .55% $75 $10
San Diego Gas & Electric (CA) .08% $75 $10
The basic premise of an opt-out option is to accommodate individuals who refuse an upgraded AMI
meter. In instances where customers do not want an AMI meter in their homes, the opt-out option
relies primarily on maintaining a legacy electromechanical meter. Research indicates that when utilities
offer opt-out customers the choice between the legacy electromechanical meter and the smart meter
with its communications module switched off, the legacy meter is the more popular option.
CUSTOMER RATIONALE FOR OPTING-OUT
Resistance to AMI has the attention of utilities and regulators. Some utilities have initiated their own
smart-meter opt-outprograms, while other utilities have been ordered to do so by regulators. The
proportion of utility customers opting out has remained relatively low. This vocal minority has espoused
a strong apprehension regarding the new advanced meter and its implications for personal privacy or
public health which are summarized below.
Personal PrivacyThe issue of privacy involves the collection and use of energy consumption
information with enough granularity to determine activities going on within the premise. This general
issue of privacy surrounds what information is collected about a person that is not in the public domain,
who is privy to that information, and what is done with the information after it is collected. However,
SMECO wishes to reaffirm to its customer-members that the cooperative is committed to keeping its
customer-member data private. Customer-members can be assured that the cooperative will use
customer-member usage data only for legitimate utility-related business activity. The cooperative takes
very seriously its privacy policy and safeguards the confidentiality of its customer-members that it is
entrusted with. SMECO possesses a comprehensive data privacy protection policy that covers the
energy use and operational data collected by AMI meters as well as other metering devices. SMECOs
25Smart Meter Opt-Out Programs 2013, Russ Henderson
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Appendix 1-1: Review of U.S. Opt-Out Programs 5-29
AMI program will make significant investments in encryption technology and security practices. Usage
data coming over the network will be encrypted using the latest technology and has no customer-
member identifiable information associated with it. All data being sent to and from the meter will be
encrypted to ensure security and accuracy.
Public HealthThe potential health effects of advanced meters is one of the most difficult issues to
address as it is quite difficult to persuade concerned parties categorically that smart meters have no
health impacts. Opponents take issue with the notion that advanced meters are safe because they
operate within the RF radiation requirements of the Federal Communications Commission (FCC) which
regulates wireless devices. Critics argue that the duty cycle assumptions underlying the standards are
different than the actual operational characteristics of advanced meters and that the FCC regulations
are designed for intermittent exposure not long-term exposure. However, SMECO has not discovered
any credible reports which affirm these claims.
SMECOs AMI meters will use very low power radio-frequency (RF) signals to communicate energy use
information back to the cooperative. The respective RF exposure from an AMI meter is minimal
compared to other household products. Additionally, AMI RF signals are of much shorter duration,
typically less than 1 second for every emission. Further, SMECO reviewed the extensive research that
has been provided during AMI opt-out debates across the U.S. and concluded that several studies
demonstrate that consumers will experience no increased health risk with an AMI meter. In 2010, the
California Council of Science and Technology (CCST) evaluated over 100 publications and postings about
smart meters and other devices in the same range of RF signals and consulted with over two dozen
experts in the field. The CCST released its findings in 2011. The CCST found that RF fields from smart
meters are much lower than the RF exposure limits established by the FCC and that scientific research
has not confirmed any adverse effects caused by RF fields below those exposure standards.26The CCSTs
2011 results concluded that, when properly installed and maintained, wireless AMI meters result in less
RF exposure than other household appliances.
The Edison Electric Institute, Association of Edison Illuminating Companies, and the Utilities Telecom
Council published a white paper, which complements the findings of the CCST in concluding that the RF
exposure effects of AMI meter are very small compared to exposure from other sources in the home
and that AMI meters operate significantly below FCC exposure limits. 27The Electric Power Research
Institute (EPRI), after analyzing AMI meter RFs, affirmed that the RF field levels from the AMI meters are
26California Council on Science and Technology, "Health Impacts of Radio Frequency from Smart Meters available athttp://www.ccst.us/publications/2011/2011 smartA.pdf ("CCST Report").27A Discussion of Smart Meters and RF Exposure Issues, an EEI-AEIC-UTC White Paper, March 2011.
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Appendix 1-1: Review of U.S. Opt-Out Programs 5-30
below the exposure limits stipulated by the FCC.28As a result of this thorough review, SMECO does not
believe that AMI RF exposure poses a threat to the health of its customer-members.
Becoming familiar with the respective arguments in each of these areas is important because SMECO
may face questions on these topics and should be prepared to appropriately respond and educate its
customer-members, as necessary. In many cases resistance stems from a customers perspective that
the advanced meter and advanced metering program are typically compulsory for them without their
direct acceptance. Without a basis to personalize the potential benefits, coupled with the natural
perception that this technology will cost the consumer money, customers have a tendency to revert to
objecting to the advanced metering program. However, studies conclude that relatively low
participation in opt-out options indicates that, if educated and engaged; customers recognize and
value the benefits that AMI can enable. SMECO would seek to elucidate the numerous benefits that AMI
provides to its customer-members.
OPT-OUTPROGRAM COST RECOVERY
Despite the nuances of these programs, both regulators and utilities have made an effort to maintain
the economic viability of pursuing an advanced metering program. Regulators and utilities in other
states have had to consider opt-out programs and recognize that an opt-out option may erode the
viability of an advanced metering program as it is difficult to justify the large scale investment without
knowing the number of customers choosing advanced meters. In the few locations where there is an
opt-out option, customers who do not want an upgraded AMI meter are required to cover at least a
portion of the additional on-going operational costs incurred by the utility as a result of the opt-out
option. These additional costs may initially be borne by the utility but they will ultimately become the
burden of the other ratepayers who will be subsidizing the limited number of opt-outcustomers.
Therefore, the issue for the utility to address with its regulator is how to balance individual rights with
the overall economic and societal benefits offered by the advanced metering program. Though there is
not a defined allocation, customers who opt-out of an AMI meter are required to pay an initial upfront
fee and cover at least a portion of the additional on-going operational costs incurred by the utility. The
fees are not an attempt to punish customers who seek to avoid the AMI meter, but are recognition by
regulators and utilities of the impending operational changes. The fees represent a means to alleviate
some of the financial burden imposed on the utility in having to perform distinct dual processes to
accommodate a small minority in the utilitys service territory.
Specifically, an opt-outoption for an advanced metering program has the following results:
28Electric Power Research Institute (EPRI). 2011. Characterization of radiofrequency emissions
from two models of wireless smart meters.
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Appendix 1-1: Review of U.S. Opt-Out Programs 5-31
1) Additional capital costs incurred to enable alternate technologies required and additional
Operation and Maintenance costs to maintain that alternate technology, and
2) Additional Operating and Maintenance costs to support the unique, small scale meter reading
costs associated with the opt-outcustomers.
Below are examples of existing AMI opt-out programs across the U.S.: 29
CURRENT EXAMPLES OF OPT-OUT PROGRAMS
STATE UTILITY PROGRAM
California Pacific Gas & Electric
San Diego Gas & Electric
1. PG&E and SDG&E Customers who want to opt out of advanced
meters will be required to pay a one-time $75 fee and a monthly
charge of $10. Low income customers will pay an initial fee of $10 and
a monthly charge of $5.
Illinois City of Naperville 1. One-time installation fee of $68.35 to install the alternative meters,
and an additional monthly charge of $24.75 to have them read.
Maine Central Maine Power 1. CMP installs an AMI meter with full capabilities, including interval
data, etc.
2. CMP installs an AMI meter with radio turned off
a. Initial charge $20
b. Monthly charge $10.50
3. CMP does not install an AMI meter; leaves legacy meter in place
a. Initial charge $40
b. Monthly charge $12
Michigan Consumers Energy
Detroit Edison
1. CE customers electing to opt out would be subject to initial charge
of $69.39 and monthly $11.12 fee
2. CE customers who elect to have an installed smart meter removed
must pay upfront fee of $123.91 plus monthly $11.12 fee
3. DE customers electing to opt out would be subject to initial charge
of $87 for costs of special infrastructure and metering changes and
monthly $15 fee to cover incremental costs of manual meter reading
infrastructure and other services
Oregon Portland General Electric 1. PGE customers incur one-time installation charge of $254 for the
installation of a non-network meter, labor and vehicle expenses in
addition to a monthly meter reading charge of $51 per month based
upon labor, mileage and vehicle expenses
29This summary is based on an Edison Electric Institute Summary of State Regulatory Actions on Smart Meter Opt-out and
preliminary research of AMI opt-out programs .
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Southern Maryland Electric Cooperative | OPT-OUT ALTERNATIVE COSTS & PROPOSAL
BLACK & VEATCH |Appendix 1-1: Review of U.S. Opt-Out Programs 5-32
CONCLUSION
An assessment of SMECOs service base will enable the cooperative to provide appropriate messaging
regarding its advance metering program which will aid in assuaging concerns. SMECOs research of the
opt-outdebate across the U.S. enables the cooperative to conclude that there is not any reliable
scientific basis to conclude that there are health risks related to RF exposures at the levels emitted bythe cooperatives AMI meters. In addition, the cooperative values its customers privacy and an AMI
meter will not undermine the security of its customer-members privacy. Moreover, the Maryland
Public Service Commission PSC staff indicated last April that based on several studies; most of these
concerns are unfounded. As a result, SMECO believes that an AMI meter will provide benefits for all of
its customer members in terms of managing their bills and usage. However given the nature of concerns
raised by those opposed to AMI, SMECO understands the rationale for an investigation of an opt-out
option for its customer base. For the small base of consumers still wishing to choose a non-AMI meter
solution, SMECO has reviewed the experiences of current utilities and architected an opt-out fee
schedule which will ensure the viability of its AMI project as well as preventing customer-members
choosing AMI from subsidizing customer-members who do not seek an AMI meter.
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