Smart Talk: “Most Likely Savings Scenario”

MLGW wants customers to save money on their utilities so that they can have discretionary income to purchase other necessities of life such as food, medicine and housing.  MLGW’s customers already enjoy some of the lowest utility costs in the nation and MLGW wants to keep rates low by investing in projects that have good returns for our ratepayers.  Investing in the deployment of smart meters will help MLGW keep rates low for our customers. 

Under a full-deployment scenario MLGW will reduce annual operational expenses such as, labor and labor related benefits ($14 million), utility theft ($3 million), system losses ($2 million) and net write-offs ($2 million).  These savings will accrue to ratepayers over time by allowing MLGW to maintain the lowest possible rates.  The estimated smart meter full deployment cost is $215 million.  However, MLGW was projected to already spend $70 million over the next 7 years in meter replacements anyway so the incremental cost of just replacing meters with a smart meter is $145 million.  Based on the incremental cost of adding smart meters the internal payback is approximately 7 years, not to mention the huge increase in levels of service in several areas.  The overall benefit to the community is magnified when customer energy efficiency savings are also considered. 

Upon full deployment of smart meters, customer energy efficiency and demand response savings are projected to total $20 million annually.  Furthermore, if customers achieve energy savings similar to the results realized by our time of use rate customers in the pilot study, these projected energy efficiency savings could more than double.  If we include the $20 million savings in the annual reduction of TVA power cost due to energy efficiency and demand response, as demonstrated by our 1,000 customers in our pilot project, the total payback would be about 3.5 years.  MLGW wants to provide customers these opportunities to save and to deliver the lowest possible rates for our customers.

The following table illustrates the savings categories and some of the assumptions related to the savings.

Most Likely Savings Scenario Details
	Savings (in Millions of Dollars)	Notes/Assumptions
MLGW Operational Savings
Labor and Labor Related Benefits	$14	175 positions eliminated through attrition
Utility Theft	$3	11,000 known cases per year, actual theft is probably double the known cases
System Losses	$2	MLGW can reduce overall E,G,W system losses by 0.2%
Net write-offs	$2	MLGW can reduce net-write-offs by 18%
Total MLGW Operational Savings	$21
Customer Response Savings
Energy efficiency	$16	Using pilot project results customers can reduce consumption by 2%
Demand Response	$4	Customers can shift consumption and reduce demand charges by 1.7%
Total Customer Response Savings	$20
Total Savings	$41	Savings for both MLGW actions and customer response activities