Making Smart Sensible Too

Economist looks at the issues surrounding the introduction of smart meters.

Published: 07-Nov-2010

THERE is not much to see in the city of Bakersfield, north of Los Angeles, but recent events have put it on the global electricity-industry map. As in many other Californian communities, Pacific Gas & Electric (PG&E), the local power utility, had installed smart meters in most households. Soon afterwards customers started complaining about rocketing power bills. For some people they almost trebled. Predictably, this caused a political storm. Local politicians and consumer groups jumped on the issue. Enterprising lawyers launched a class-action suit. PG&E admitted that some of its meters had technical problems, but the higher bills were clearly due to a combination of exceptionally hot weather, increased charges and changes in the rate structure.

An independent auditor found nothing wrong with the smart meters, and California’s regulators did not stop PG&E from installing more of them. But utilities and regulators elsewhere, spooked by the incident, have become much more careful before embracing the technology. “Bakersfield is likely to slow down the installation of smart meters—not just in the United States but worldwide,” says Ahmad Faruqui of the Brattle Group, a consultancy. Bakersfield also demonstrates that a smarter world will meet with resistance. The reasons are part technical, part institutional.

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