Two expert evaluations of the latest case NB Power is making to install smart meters around New Brunswick raise questions about whether the project will ultimately pay for itself — a critical issue in whether the utility can get the plan approved by the Energy and Utilities Board.

Daymark Energy Advisors of Worcester, Mass., hired by New Brunswick public intervener Heather Black, and Synapse Energy Economics Inc. of Cambridge Massachusetts, hired by the EUB, submitted reports last week.

Both companies suggest the meters are unlikely to produce the 28 per cent return on investment over 15 years that NB Power has been projecting.

NB Power has a hearing in January in front of the EUB, where it is hoping to win approval for its $92-million plan to equip its distribution network with what is known as advanced metering infrastructure, or AMI.

NB Power's first application to acquire smart meters in 2017 was rejected in 2018 when the EUB found the costs of the plan were greater than its benefits. (Robert Jones/CBC NEWS)

Daymark concluded some of the benefits that NB Power claims will flow from the project are likely exaggerated, and a zero per cent return on the investment is possible.

"It is evident that a combination of variations in costs, benefits or selected discount rate could result in the benefit-cost ratio approaching break even," wrote Daymark consultants Kathleen Kelly and Philip DiDomenico in their evaluation of NB Power's plan.

The four consultants who contributed to the Synapse report echoed that analysis and suggested that under "plausible conditions" the project as described could lose money.

"We conclude that the business case is not well documented or justified," said the Synapse report.

"There are plausible future scenarios where the AMI investment might provide net benefits to customers, but there are plausible conditions where it might not."

That is potential trouble for NB Power, which must convince the EUB it's smart meter plan will be cost-effective.

Wants 360,000 smart meters

The utility has already spent or allotted $8 million to the metering project but needs the EUB's permission to allocate the remaining $84 million, which includes the acquisition of 360,000 smart meters for installation with NB Power's entire residential and commercial customer base.

NB Power has been submitting written evidence in support of the application since August, and it is that material consultants were asked to evaluate.

A similar application in 2017 was eventually rejected by the EUB because NB Power failed to convince the board the investment would generate a net financial benefit for the utility — a key issue again this time.

"The demonstrated benefits to ratepayers must outweigh the expected costs that ratepayers will bear," the EUB ruled in rejecting NB Power's first application

Wireless meter readers

AMI is a collection of physical and digital upgrades to the electrical grid, including the installation of smart meters that will allow NB Power to collect individual consumption data electronically in real time from customers instead of once a month by a meter reader.

The utility has said this will allow for all sorts of pricing and service innovations that the current electrical grid cannot deliver, such as offering different electricity prices at different times of the day to match periods of low and high demand.

It will also allow for instant identification and location of outages and let customers track their own daily electrical consumption so they can make changes to head off large monthly bills if they choose.

In its first application to adopt the technology NB Power's own numbers showed costs of the plan outweighed its benefits, but the utility has reworked the numbers and now claims there will be a significant net benefit.

The current application claims that the "net present value" of project costs will amount to $109.6 million over a 15-year period, including interest costs against benefits of $140.7 million — a net gain for the utility of $31.1 million, or 28.4 per cent.

Public intervener Heather Black hired Daymark Energy Advisors to evaluate NB Power's $92-million plan to deploy smart meter technology. The consultants found projected benefits of the plan to be exaggerated. (Robert Jones/CBC)

A number of benefits are not in dispute — these include savings NB Power will generate by eliminating manual meter reading costs — but both Daymark and Synapse question whether other benefits being claimed for the project are reliable.

Each questioned whether NB Power's estimate that it would gain $11.5 million in benefits from smart meters being more accurate than older analog meters is reasonable. Older meters are suspected of undercounting customer consumption amounts as they age.

Synapse noted the $11.5-million benefit was twice as large as claimed in the first application, and Daymark pointed out that accuracy benefits are not unique to smart meters and should not be counted as though they are.

"This benefit can also be achieved through a non-AMI option by installing digital meters to replace analog meters," said the Daymark report.

"So a better savings estimation methodology would calculate the difference in benefits arising from improved meter accuracy with respect to AMI as compared to the adoption of digital meters."

Skeptical about new savings

Similarly, the two consultants each raised doubts about a new $15.4 million saving NB Power did not have in its original application but now says will flow from being able to warn customers of excessive wintertime-power use with a "high bill alert service."

It costs NB Power more to supply electricity from its least efficient generating stations on high-demand winter days than it charges for the power. An alert system able to show customers during a cold snap how their consumption is piling up could help cut demand and save both consumers and NB Power money.

But Daymark argued NB Power's estimate of $15.4 million in savings from alerts assumes extreme levels of public participation in the program and is likely 40 percent too high.

Synapse separately concluded true savings from alerts may halve what NB Power estimates.

"The High Bill Alert program has not been designed, and estimates of savings for this program are poorly supported and may be overstated," said the Synapse report.

Electricity from NB Power's generating station at Coleson Cove in Saint John costs twice as much to generate as it sells for. The utility believes smart meters will help it get consumers to cut down on their peak winter power use and help it save millions. (Matthew Bingley/CBC)

Both consultants agreed the adoption of smart meter technology could benefit both NB Power and its customers but each recommended the EUB proceed cautiously.

"Given that the Company's business case is not entirely clear on the net benefits of the proposed AMI, we recommend that the Board conditionally approve the AMI [but] the Board should require the Company submit a revised application," concluded the Synapse report.

Daymark suggested that if the project is approved, the EUB should monitor it closely and require quarterly reporting.

NB Power is entitled to question the authors of each report in writing and to receive answers by Dec. 23. The utility is also entitled to submit rebuttal evidence if its chooses.

The EUB hearing is scheduled for eight days beginning on Jan. 13.