IPL’s plan to stave off power plant upgrades would cost at least $31M

In a move to delay construction of expensive new generating capacity, Indianapolis Power & Light wants to roll out "smart"
electric meters to help customers conserve electricity.

The meters would allow for time-of-use electricity pricing that rewards customers with lower rates when they use appliances
during off-peak periods.

IPL’s so-called demand-side management plan pending before state regulators also would provide cash incentives to customers
who install renewable-energy-generating devices such as wind turbines or solar cells.

Those are the most radical elements of IPL’s proposed new DSM program, which would replace an existing one that expires June
30.

The new plan would continue existing energy-efficiency measures, such as a program pushing compact fluorescent light bulbs
and load management devices that allow the utility to shut off the air-conditioning of participating customers during periods
of peak energy use — typically during the day when no one is home.

IPL estimates the proposed plan could reduce demand by 50 megawatts over three years. That would reduce the amount of new
generating capacity needed in the future, which the utility two years ago estimated would be an additional 160 megawatts by
2012.

Rising material and labor costs, along with tougher environmental restrictions on carbon dioxide that the federal government
is likely to adopt, make adding new generating capacity even more unpalatable.

But the expanded energy-efficiency program proposed by IPL comes with a cost of its own: at least $31 million, according to
filings with the Indiana Utility Regulatory Commission.

For the average residential customer using 1,000 kilowatt hours a month, it amounts to an additional cost of $13.08 in the
first year, rising to $26.52 in the third year, according to IPL projections.

IPL is already testing, and hopes to complete in April, the operation of a limited number of smart meters, in what would become
the first of an advanced metering infrastructure that could eventually serve all 465,000 customers in Marion County.

The meters have additional data storage capacity and are capable of two-way communication between the customer and IPL. Currently,
most of IPL’s meters can only "call home" to IPL to report customer power usage, via a network of receiving antennas
placed
on utility poles.

Pending a successful test, IPL would this year begin installing smart meters for 6,400 commercial and industrial customers.
The utility said the meters would allow those customers to have more timely data via an Internet portal to tailor their equipment
operations and startup schedules to reduce or eliminate consumption during costly peak demand times.

Then, in another phase, IPL proposes installing smart meters for 22,000 residential and small commercial/industrial customers.
Customers could see in "near real time" how much energy they were using at a given time via in-home energy displays
and Internet
portals.

"Customers would be able to take action with some of these options. They would then better manage their energy usage
and conserve
when possible," said IPL spokeswoman Crystal Livers-Powers.

The meters would allow for "time of use" rates, which IPL said is key to its advanced metering concept. "Smart
meters are
useless if you still have dumb rates," said Ken Flora, IPL’s director of regulatory affairs, in a recent commission filing.

For example, customers of Tucson Electric Power have meters that can track the number of kilowatt hours of electricity they
use at different times of the day. The time of the day they use the electricity determines the rates paid. Customers have
an incentive to do the laundry or use other energy-hungry appliances during off-peak hours, when power is cheaper.

The metering technology IPL is evaluating has potential for sophisticated conservation applications. It would use the ZigBee
radio communications standard that can allow the meter to talk with thermostats and certain appliances that are likewise enabled.
Certain appliances could then be instructed to operate only during low-cost energy periods.

IPL said other future automation applications could include "smart charging" of plug-in hybrid electric cars, in
other words
charging them during off-peak hours.

Time-of-use pricing alone has been demonstrated to result in 5-percent to 10-percent reductions in peak load, IPL said. Time-of-use
pricing "combined with enabling technology such as programmable thermostats and access to near real time usage information
has been shown to increase peak reductions 20 percent to 30 percent," Flora told the commission.

IPL already has installed control devices for the 25,200 customers participating in its CoolCents program, which shuts off
air-conditioners during peak demand days. That alone saves the equivalent of 25 megawatts of summer peak reduction capability,
says the utility. The same commands could be given through the smart meters.

"The technology is continuing to evolve," Livers-Powers said.

IPL also wants to jump-start customer deployment of renewable energy generation. It proposes to offer to both residential
and commercial/industrial customers an incentive of $2 per watt — up to $4,000 per site — for "small scale"
renewable
energy systems.

IPL said there has been "very limited adoption of renewable generation projects" by its customers, as evidenced
by the number
participating in a "net metering" program, in which customers generating their own power sell their excess power
back to the
utility’s grid.

"Although IPL’s net metered program has been available to our customers for about 10 years, only five customers are currently
enrolled as participants," IPL said in a recent commission filing.

Indianapolis-based Citizens Action Coalition, a customer advocacy group, has argued in favor of saturating the grid with more
renewable power from sources such as sun and wind. Two bills pending in the Indiana General Assembly would increase the amount
of power customers could sell back to utilities, with House Bill 1347 calling for up to 5 megawatts from the current limit
of 10 kilowatts, CAC said.

Ultimately, energy efficiency should be the core focus of utility efforts, said Grant Smith, executive director of CAC. He
wonders how much of IPL’s smart meter concept is about load control during peak times versus end-use energy efficiency.

"Our first priority should be energy efficiency and to drive costs down as much as possible for ratepayers," Smith
added.

Duke Energy, the Charlotte, N.C.-based utility serving 69 counties in Indiana, last May announced it planned to install 800,000
new smart meters over five years. Duke said the meters also allow utilities to better gauge the location of power outages.