How smart is the Centre’s smart meter plan and why Kerala’s move to opt out underscores some of the scheme’s inadequacies

As a result, multiple distribution utilities across states have called tenders for the installation of smart meters and it is estimated that well over 50 million meters are at different stages of procurement across states. While the promise of technology infusion does make theoretical sense, analysts have been pointing to problems with the basic assumption behind the scheme. This was even before Kerala’s decision to break away, which was triggered primarily by the opposition to the scheme from trade unions on the grounds that it would lead to private control of the state’s power sector.

The functional effectiveness of smart metering depends on several assumptions: one, that the smart meter’s telemetry is always synchronised to the grid and it reliably delivers information round-the-clock; two, the smart meter is not tampered with or even bypassed at the consumer level; three, even if the data is acquired and processed to make available actionable decision support, the discoms (power distribution companies) have the capabilities to undertake rigorous energy audits and monitor and enforce them; and most importantly, that the utilities are able to disconnect errant connections. In India, there may not be clear answers to these, especially on the last point, which have been the reason for failure of multiple interventions launched earlier.

The intention

Globally, wherever smart meters have been installed by power distribution utilities, the aim has been to improve the effectiveness of the Time of Day (ToD) pricing of electricity, for which smart meters are essential. ToD pricing essentially refers to differential electricity pricing at the consumer end across peak and non-peak hours. In contrast, in India, smart metering is being driven primarily by the desire to lower distribution losses and accordingly the smart meters incorporate remote disconnection features. But there are question marks over the willingness or ability of most state-owned discoms to disconnect errant connections.

The second issue is the recovery of the costs. The meters, according to a person directly involved in the implementation of the scheme at the state level, have three cost components – the fixed cost comprising the cost of the meter, installations, including the meter reading software, and the recurring billing cost. The meters are to be procured by the discoms on a hybrid totex model, where a part of the fixed cost is paid upfront and the rest is paid out along with the monthly billing. It is unclear how viable the cost recovery of these new meters would happen given the precarious financial position of most public monopoly distribution companies. Analysts say given the challenges, a more appropriate strategy would have been to limit smart metering to higher-value consumers, which would make cost recovery amortisation more feasible.

The Union Ministry of Power is learnt to have “reviewed” Kerala’s proposal for an alternate model of implementation of smart meters seeking financial aid and the state has been asked to submit a “detailed proposal” and “the implementation and roll out plan” for further examination.

The Centre’s scheme is being pushed on a Design-Build-Finance-Own-Operate-Transfer (DBFOOT) model by private operators across states through totex (capex plus opex) contracts, which offer a part of the meter cost in the form of upfront payment while the rest is to be amortised in the monthly bills. Energy Efficiency Services Ltd (EESL) has been designated the nodal bulk procurement agency for smart meters and the programme is being funded as part of the Centre’s Revamped Distribution Sector Scheme (RDSS), with an incentive grant of Rs 900-1350 per meter.

Before the Centre’s nationwide metering push, the Central Electricity Authority — the central planning body in the power sector — had amended its metering regulations to define an electricity consumer meter itself as a “smart meter with prepayment mode” instead of the generic “meter used for accounting and billing of electricity supplied to the consumer”. The electricity meter thereby becomes a bi-directional smart meter that both relays consumption data and allows for disconnection of service.

The players

The discoms in Maharashtra are reported to have awarded tenders for the installation of 17 million smart meters, in addition to an earlier tender awarded by BEST for Mumbai consumers. This is part of the state government’s plan to install 23.6 million smart meters in the first phase. These meters are to be installed over a period of 30 months and maintained over the following 90 months.

Adani Transmission is estimated to have won a third of all smart meter tenders finalised nationwide to date, led by Maharashtra. France’s EDF is another player deploying smart meters. In 2018, the company won a tender to install 50 lakh smart meters. Last year, Reliance Industries (RIL) arm Jio Platforms announced that it was partnering EDF in deploying 10 lakh smart meters in Bihar. Jaipur-based Genus Power Infrastructures has also won several contracts for smart meters through its wholly-owned subsidiary. Its most recent smart meter award win—an order of over Rs 1,000 crore for around 10 lakh maters—was announced in December. Incidentally, Genus Power bought electoral bonds worth Rs 38.50 crore, of which, bonds worth Rs 25.50 crore were redeemed by the Bharatiya Janata Party (BJP), and Rs 13 crore worth by the Congress, as per data made public recently by the Election Commission of India.

Recovering project costs

With regard to the cost aspect, in Europe for instance, the smart meter cost is amortised over a long period and added to the monthly consumer bills and the meters are owned by metering companies, who lease out the meter operation and maintenance to distribution supply companies. The metering contracts are backed by a regulatory mandate that requires the meter cost to be billed and paid to the metering company by the consumer’s supply company.

In India, given the absence of private distribution utilities across most states, the bulk of the cost of the meters has to be borne by the public monopoly distribution companies. The discoms, through the totex DBFOOT model, have sought to off-load maintenance to private companies. “Given the complex political economy of India’s electricity sector and the poor state of discom finances, these companies may be assuming insurmountable risks through such contracts…The biggest problem with amortisation of the meter cost into consumer bills is the maths behind the meter cost and monthly electricity bills. In the UK, for example, with an average monthly electricity bill of 250 British Pounds per household, the fixed cost of less than 1500 Pounds is recovered in affordable instalments. But in India, where over 80 per cent of consumers pay less than Rs 500 as the monthly bill, and fixed cost is over Rs 12,000, affordable and acceptable amortisation becomes difficult,” a person involved in the scheme at the state level said.

Neither the discoms nor the state governments are in any position to bear the cost as a subsidy for what is an already stressed sector. Analysts say given the challenges, a more appropriate strategy would be to confine smart metering to higher-value consumers, perhaps those using more than 500 units per month or those with a monthly bill of more than Rs 2000. This would make cost recovery amortisation realistic. Besides, these higher-value consumers can be offered useful value-added services that utilise the smart meter’s features. This would help enhance the effectiveness of grid management. It can also help address the regulator’s concerns about amortisation of meter costs in monthly billing.

A more nuanced strategy for the phased installation of smart meters would be to target metering of all 11 kV feeders on priority and to monitor feeder-wise supply on a real-time and uninterrupted basis, with an aim to use this information as a decision support to both improve quality of supply and undertake energy audits to detect losses.

This, according to an expert, is important since in practice, the intermittent telemetry synchronisation troubles ensure a large portion of feeder data is unavailable at any time, thereby making effective monitoring impractical. The poor quality of telecommunications connectivity means that smart meters with their need for always-on synchronisation will struggle to operate with any degree of efficacy.

The next step could be to focus on smart metering of high-value consumers, who are fewer in numbers and are also more likely to be typically residing in areas with better telecommunications coverage quality. This could be supplemented with smart metering of distribution transformers that do not have consumer-level smart meters. If these two are wrapped up, it could be possible to create a platform for progressive reduction in losses and improvements in the quality of supply. The third step could be to harness the generated data for more effective nuanced implementation of interventions across other consumer groups, rather than a sledgehammer approach being attempted in the form of the large-scale replacement of meters across all households in the country.