Smart Metering or Advanced Metering Infrastructure

Smart Metering or Advanced Metering Infrastructure

Advanced utility metering systems are being rolled out worldwide, with penetration anticipated to rise from 6 percent in Europe and North America in 2007 to 41 percent in Europe and 89 percent in North America by 2012, according to Datamonitor. The Hunton & Williams LLP Global Technology and Energy practices are helping utilities to execute the complex procurements, systems integrations and long-term service agreements that make up these transactions.

In the US, the Energy Policy Act of 2005 (the "EPAct"), which amended Section 111(d) of the Public Utility Regulatory Policies Act of 1978 ("PURPA"), requires state regulatory commissions and unregulated utilities to consider whether it is appropriate to implement a new PURPA standard related to "Time-Based Metering and Communications." The EPAct further requires states to consider the adoption of Smart Metering, which is also commonly referred to as Advanced Metering Infrastructure (AMI).1 In Europe, the European Commission's Smartgrids Energy Technology Platform initiative encourages the development of Smart Metering infrastructure.

At the same time, many AMI systems have become more "intelligent." For example, many vendors are now offering AMI systems that provide advanced features, such as full two-way communications, remote disconnect, load management, outage management integration, and in-home displays where customers can monitor their energy use. These advancements are not only providing customers with the ability to manage their usage through price signals and detailed usage data, but they are also providing utilities with the capability to manage their distribution systems and operations more efficiently and reliably. Accordingly, many utilities are taking a hard look at the procurement of AMI systems both as a direct result of the EPAct and as a means for improving operations and providing better customer service. 

Although utilities procure sophisticated systems with some frequency, the procurement of AMI systems deserves heightened attention in comparison to other procurements for a number of reasons. First, AMI systems are generally procured less then once a decade.  AMI systems are expected to operate for 12 to 20 years before being replaced, therefore, there is generally little "corporate memory" or prior experience from which a utility can draw. Second, AMI systems are generally installed over a period of years, not days or weeks, thereby presenting challenging logistical issues. Third, AMI systems often rely on outside infrastructure, spectrum licenses, communications backhaul and pole attachment, over which the AMI vendor generally has little control. Fourth, AMI systems typically collect information about users which, in terms of the Data Protection laws which operate in Europe, would constitute "personal data". In Europe, the collection and processing of personal data is subject to specific restrictions. These restrictions extend to whether personal data can be exported to the US (or elsewhere) from Europe. And, finally, AMI systems serve as the pathway for all revenue for a utility. AMI systems can significantly improve this pathway or severely disrupt it. 

Without the proper legal counsel, this lack of experience in specifying and purchasing AMI systems, together with the complex and challenging logistics of the deployment, can easily result in disastrously one-sided contracts that ignore common and critical issues. Further, if the AMI system processes the personal data of users based in Europe or results in European personal data being exported to the US or elsewhere, specialist advice must be sought as to how the processing and export may legally be undertaken. Failure to do so may result in the export of data being blocked.

The Global Technology, Outsourcing and Privacy Group at Hunton & Williams has vast experience in the energy industry and has advised clients in the procurement of AMI systems and related technologies built around customer premises equipment (e.g., "smart" thermostats, etc.). Recently, our attorneys advised and assisted in the procurement of a large-scale AMI system reaching over 3 million endpoints for a leading U.S. utility company, with a total deal value well in excess of $300 million. Our attorneys work closely with clients on every phase of these transactions, including the initial structuring of the transaction, documenting the business deal, negotiating the contracts, advising on the collection, processing and international transfer of personal data, assisting in the development of ongoing governance strategies, advising with respect to ongoing management issues, resolution of disputes and contract renegotiations and renewals.

1 "Smart Metering" or "AMI" consists of two separate and distinct elements: (1) the meters that use technology to capture the energy use information of a utility’s customer, and (2) the communication systems that capture and transmit such information in real-time.