In an extensive pilot program that began in 2008, smart meters and a new pricing plan proved that customers can reduce peak electricity usage by about a third and enjoy significant savings. BGE is seeking prompt action by the Maryland PSC and federal approval of stimulus dollars to position the utility to move to the next phase of this potential smart grid investment.
This landmark proposal is one of the most ambitious of its kind nationwide, said Kenneth DeFontes, president and CEO of BGE. Our Smart Grid initiative includes a host of transformational programs and energy management tools that have the potential to make a meaningful difference in the lives of our customers and the communities we serve in Maryland. This potential capital investment would improve system reliability and, most importantly, help customers conserve energy and lower their energy bills.
The successful pilot programs weve instituted to date demonstrate that customers can make meaningful changes in how they consume energy in response to appropriate education, price signals, information about usage, and economic incentives, DeFontes said. Following the successful rollout of BGEs PeakRewards and energy efficiency programs, investment in Smart Grid is the next major step in our journey to reducing peak demand and long-term energy costs.
The first phase of BGEs Smart Grid proposal would be the installation of 2 million advanced, or smart, electric and gas meters, operating through a robust utility-to-customer, two-way communications network, which forms the foundation for an automated, digital intelligent grid.
The utility is also planning to roll out a new Smart Energy Pricing (SEP) program as its standard rate schedule, which would pay customers rebates for reducing power consumption during peak periods. In the pilot of advanced metering technology and Smart Energy Pricing, participating residential customers reduced their consumption during peak periods by 26 percent to 37 percent, saved more than $100 on average and gave the program a 93 percent satisfaction rating.
BGEs ability to rapidly and most cost-effectively carry out the Smart Grid initiative depends upon PSC approval and cost recovery in a timeframe that would allow the utility to qualify for a competitive Department of Energy (DOE) grant of up to $200 million to partially fund the initiative. BGE anticipates filing its DOE grant application in early August 2009, and it is anticipated that DOE would begin announcing grant awards in October 2009. The utility estimates initial deployment and operating costs of nearly $500 million over five years, and expects that over the projects lifecycle customer savings will exceed costs by a ratio of more than 3 to 1.
Under the cost recovery mechanism proposed by BGE, the monthly customer surcharge would be 38 cents per month for electric-only customers and 44 cents per month for gas-only customers in the first year of implementation, and the customer cost would increase slightly over time as benefits also ramp up. Over the life of the program, the monthly surcharge would average approximately $1.24 and $1.52, respectively, for residential electric and gas customers, and would be reduced based on the award of a DOE grant. Customer savings from reduced energy and operating costs will be several times greater than the amount of the surcharge.
The program weve developed is essential to addressing the long-term energy and environmental objectives of the EmPOWER Maryland Energy Efficiency and Conservation Act of 2008, which calls for a statewide reduction of 15 percent in per capita electricity usage and peak demand by 2015, said DeFontes. Smart Grid is the foundation from which we can build a more efficient and sustainable energy network in Maryland. It enables large-scale penetration of renewable energy sources and allows us to begin the testing and research necessary to support next-generation transportation innovations, such as plug-in hybrid electric vehicles.
We believe our Smart Grid initiative is tremendously beneficial to our customers and the state of Maryland, and were eager to move to the next phase of this Smart Grid investment proposal with Maryland as our partner, said DeFontes. We will seek an expeditious review and approval by the Maryland PSC so we can begin providing our customers with the savings, reliability, service quality and environmental benefits as soon as possible.