The California Public Utilities Commission (CPUC) should reject Southern California Gas Co.’s (SoCalGas) application to spend $1 billion to upgrade nearly six million meters to advanced devices with two-way communication capabilities, according to the state’s Division of Ratepayer Advocates (DRA), an independent consumer advocacy division of the CPUC.

SoCalGas customers would receive only about 85 cents in benefits for every dollar spent on the project, according to DRA. The cost of the project “far outweighs any potential benefit” to the utility’s customers, said DRA Director Dana Appling.

In a proposed decision released by the CPUC last month, an administrative law judge found that SoCalGas had overestimated the project’s potential benefits by $174 million and said the project would result in costs exceeding benefits by more than $145 million. A second proposed decision, authored by CPUC Commissioner Dian Grueneich, recommended approval of the project with only minor changes.

SoCalGas filed with the CPUC for approval of its smart meter program more than 18 months ago (see Daily GPI, Oct. 2, 2008). SoCalGas said the advanced meters would use existing mechanical dials to measure monthly gas consumption, and the system’s communications module would collect the data more frequently and make it available to customers more quickly. The modules would lead to significant operating efficiencies and provide customers near real-time usage information. As a result, customers would reduce their gas usage by an average 7.5%, SoCalGas said.

DRA did not dispute the possibility that customers would reduce their usage with the help of smart meters, but it found that SoCalGas overestimated the total reduction in usage by nearly 300%. DRA also said that the project’s $1 billion price tag does not include $40 million needed for in-home displays that about 400,000 customers would need to obtain any conservation benefit from the program.

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