After eight years of wavering, debating and planning, Palo Alto is preparing to begin its switch to "smart meters," a $20 million move that city leaders believe will make local electric, gas and water utilities more efficient and reliable.

The city is set to approve contracts with three companies that the Utilities Department has selected to install what's known as "advanced metering infrastructure," a system in which meters and data management tools allow communication between customers and utilities.

A report from the Utilities Department calls advanced metering infrastructure (AMI) "a foundational technology that is becoming a standard in the utilities industry." The technology, the report notes, helps improve customer experience, strengthens reliability and enables the community to meet its sustainability goals, according to the report. It could, for example, provide customers with real-time data energy use and help them find the optimal time to charge their vehicles or use their appliances. It could also also alert customers about water leaks.

The city's switch to smart meters will cost about $20 million to implement. This includes a payment of about $12.7 million to Sensus, the firm that the city selected through its bidding process to replace all 30,326 existing electric meters with its own "smart" meters. Palo Alto also plans to pay up to $4.7 million to Utilities Partners of America, a Sensus subcontractor, for installation services, and $1.3 million to Smart Works for data management.

It will also require a shake-up in the Utilities Department, where seven meter-reader positions will become obsolete. The report notes that the city will make the "best efforts" to train and reassign seven staff members to new roles once the new technology is adopted. At the same time, the city is preparing to create new positions, including an AMI manager, AMI systems technician and MDMS (meter data management systems) data analyst, to manage the systems associated with the new technology.

While smart meters are hardly new, with about half of all public utilities and more than 80% of investor-owned utilities like PG&E already employing them, the City Council's conversion to the technology is relatively recent. In 2012, the council opted not to make the switch, citing high costs and uncertain benefits. Council members had a change of heart in November 2018, when they unanimously endorsed the technology and approved a road map for implementing it.

A key step in the implementation process occurred on July 7, when the Utilities Advisory Commission voted to approve drawing $18.5 million from the Utilities Department's "electric special projects" reserves to pay for advanced metering infrastructure (the funds will ultimately be replenished by electric, gas and water ratepayers). The council is scheduled to approve the commission's recommendation once it returns from its summer recess.

The commission, which has been discussing the project for years, generally agreed that the switch will benefit both the city and customers. The only dissenter was Commissioner Phil Metz, who suggested that the city should develop a clear plan for "smart grid" programs before proceeding with the investment. Other commissioners, including A.C. Johnston and Greg Scharff, all supported moving ahead without further delay.

"It's really exciting to see this moving forward and getting close to actual implementation," Johnston said during the July 7 discussion.

Johnston and commission Chair Lisa Forssell both said they were concerned about potential cybersecurity threats to the advanced metering system. While they were assured by staff that each of the vendors complies with industry standards when it comes to privacy and security, Forssell urged staff to work with auditors and security firms to perform infiltration tests to ensure the system is safe.

And while commissioners generally agreed that the system would bring tangible benefits to electric and water users, Scharff noted that the benefit for gas customers is less tangible and questioned the need to invest in the gas utility, which may gradually get phased out over the coming years as the city tries to meet its sustainability goals.

Utilities staff noted, however, that keeping existing gas meters in place would require the city to retain meter readers and thereby forgo one of the major economic benefits of switching to the new system.

"Not investing in radios for the gas utility is not economical because we would be sending meter readers just to read the gas meters," said Shiva Swaminathan, senior resource planner at Utilities Department.

The project will unfold in phases, with about 100 meters installed in early 2022 and an additional 3,000 meters in late 2022 and early 2023. Crews would then install the remaining 71,000 meters by the end of 2024. In addition to replacing every electric meter, the project calls for replacing 8,369 water meters that are more than 20 years old. The rest would be retrofitted with "SmartPoints" to enable a connection to advanced metering infrastructure. About 24,000 gas meters would also be retrofitted with "SmartPoints" so that each would contain a radio that would wirelessly transmit gas data.

Utilities staff noted that the system would provide customers with information that would enable them to use gas more efficiently, thus allowing the city to buy less gas and the customer to achieve savings on their bills.

"AMI is very cost effective because you're helping people save simply by providing information. That's where the community sees bill savings — by not having to buy that additional gas because they're using the information from their AMI system to use energy more efficiently," Jonathan Abendschein, assistant director for utilities resource management, said at the meeting.

Metz, meanwhile, noted that the city has yet to fully define the "smart grid" programs that it hopes to implement once the new technology is in place. Utilities officials talk about their desire to implement "time-of-use" rates and "distributed energy" systems that encourage, for instance, electric-vehicle owners to charge their cars during off-peak periods. The city, Metz said, should develop a "concrete plan" for these programs to justify the city's investment in advanced metering infrastructure.

"I sort of feel like 'smart grid' was used as a slogan and not fleshed out. … What will we do about it, to get some value from automated metering?" Metz asked.