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Maine Supreme Court Affirms Validity of Smart Meter Opt-Out Program

Posted in Smart Grid

Maine has been one of the most aggressive states to pursue widespread implementation of smart utility meters for customers throughout the state, but not all utility customers have embraced smart meters. One of the state’s utilities – Central Maine Power (“CMP”) – has also become one of the first utilities in the U.S. to face multiple legal challenges to the implementation of the program, including the utility’s right to install the meters and the implementation of the customers’ right to choose not to have a smart meter at their premises (i.e., to “opt out” from the program).

Early in 2011, customers challenged the state’s smart meter program before the Maine Public Utilities Commission (“PUC”). The customers alleged that, among other things, CMP had no right to install the meters on privacy property without owners’ permission. The customers claimed that the installation violated their basic property ownership rights. The PUC denied the property ownership-based claims because it found that the CMP terms and conditions of service clearly indicated that CMP could access customers’ property to install smart meters. Specifically, reading directly from CMP’s Terms and Conditions, the PUC found that “CMP has the right to access a customer’s property and premises for ‘the purpose of reading meters, or inspection and repair of equipment used in connection with its energy, or removing its property, or for any other purpose.’” In the PUC’s view, the “other purposes” included the installation of smart meters.

However, in a nod to the perceived lack of choice offered to consumers with respect to the installation of smart meters, the PUC required that CMP eventually provide an opt-out choice for customers who do not want to have smart meters on their premises. In a win for CMP, however, the PUC allowed the utility to charge customers a fee for opting out of the smart meter program. The PUC held that CMP adequately claimed that a customer’s failure to allow a smart meter on their property would economically harm CMP through increased costs in two ways: 1) longer repair times for power restoration after storms; and 2) continued inefficient energy allocation to those customers using analog meters.

Having lost the argument that the installation of smart meters violated their property ownership rights, customers brought a claim before the PUC alleging that the opt-out fee violated the customers’ rights under the Fourth and Fifth Amendments of the U.S. Constitution. The PUC ruled that it had no jurisdiction to consider the constitutional claims. Soon after the PUC issued its order, CMP implemented a tiered opt-out fee for customers who refuse to allow CMP to place a smart meter at their premises.

Using the only available avenue of recourse remaining, customers appealed the PUC’s decision to the Maine Supreme Court. In a decision issued on July 12, 2012, The Court refused to consider the constitutional challenges, and otherwise affirmed the PUC’s ruling, finding that the PUC’s requirement that utilities allow customer to opt out from having smart meters installed at their premises renders the customers’ privacy claims mute. The Court was highly deferential to the PUC, noting, in dicta, that “CMP’s implementation of the Opt-Out Orders [which required CMP to implement an opt-out program] … removed the cause of [the privacy aspects] of the complaint.” The Court further stipulated that the Commission was well within its rights to allow CMP to place smart meters on customers’ properties, and affirmed the PUC’s power to implement the opt-out fees.

CMP’s opt-out program is being replicated by utilities throughout the country. With at least partial affirmation of the the opt-out program’s legality by the Maine Supreme Court, utilities may view the decision as showing that courts do not have a significant appetite to entertain objections to the smart metering technology. Because the utility market is regulated by state agencies and each state’s regulations are unique, however, the details of smart meter implementation programs will in large part vary among the markets. The timing of the decision coincides with increasing interest by state regulators in the data privacy and security issues associated with smart meter technology. A number of states, including California and Colorado, have issued regulations that govern smart meter programs. The Maine PUC opt-out program and the Court’s opinion appear to offer a sensible approach to smart meter implementation, while at the same time rejecting some of the fringe arguments that have been raised against this new technology.