Canada: New Electricity Technologies and Their Privacy Implications

In California, an exciting program aimed at managing increasing electricity consumption levels is raising serious concerns about privacy. Demand Response, an initiative recently adopted by legislators in the U.S., promises to eliminate the need for new power plants, saving billions of dollars. Yet the cutting-edge technology required to make the program truly effective has caught the attention of legal analysts and privacy advocates.

Although their implementation takes various forms, demand-response programs generally involve consumers shifting their use of electricity to different times of the day, namely to off-peak usage periods. For example, residential users could engage in their energy-consuming morning rituals at 5 a.m., or some time after 9 a.m. Similarly, they could refrain from using their air conditioning units for part of the time between 6 p.m. and 9 p.m.

The advantages of demand response are best understood by adopting a ‘weakest link in the chain’ analogy. In order to be reliable, the electricity infrastructure must be capable of satisfying demand at all times of the day, and in particular, at the times of day during which consumption is highest. In this context, its reliability is only as good as its capacity to meet demand during peak periods, even if that capacity isn’t needed for most of the day. As electricity consumption levels have increased over the years, so has peak-period usage. Eventually, building new power plants would have to be built to satisfy demand.

If enough users shift their consumption to off-peak periods, electricity consumption levels at peak periods might not increase as much as they otherwise would, and might actually remain constant or decrease. As a result, governments and utilities would save money by not having to build new power plants. Most importantly, under a demand-response program, these savings could be realized even if overall consumption remained the same. The Demand Response and Advanced Metering Coalition argues that Americans can save over $10 billion thanks to demand-response programs.

Government-sponsored attempts to persuade people to change their habits have a mixed record, but utilities and legislators have found several creative ways to convince consumers to shift their electricity usage. In California, residential and commercial users can volunteer to participate in various demand-response programs; under one scheme, residential users can have their utility company automatically turn off their thermostats for 15 minutes each hour. In exchange, the users receive rebates on their electricity bills.

The true innovation of Demand Response arises from utilities charging consumers different rates for electricity consumption based on the time of day, with prices rising during peak periods. This creates an incentive for consumers to shift their usage. At its most dynamic, utilities could vary electricity rates on a real-time basis rather than establish rates in advance, much in the same manner that the price of an airline ticket changes throughout the day. The US Congress formally endorsed this approach when it amended the Energy Policy Act in 2005. Section 1252 of the Act requires utilities to offer, upon request, "a time-based rate schedule under which the rate charged by the electric utility varies during different time periods."

For this to happen, however, dramatic technological changes need to take place. Indeed, they are well under way, in the form of advanced metering technology. The vast majority of consumers in both Canada and the U.S. use conventional electricity meters that record usage on a monthly basis and do not allow utilities to adopt more dynamic pricing models. The new generation of meters are capable of recording electricity consumption continually throughout the day, at intervals as small as 15 minutes, transmitting data wirelessly to the utility’s central office. In this way, consumers who use electricity during off-peak periods can record their use and benefit from lower rates.

Legal scholars and privacy advocates in the U.S. are concerned about the implications of this new technology for the right to privacy protected under the Fourth Amendment of the US Constitution and under state constitutions. In a forthcoming article for the Stanford Technology Law Review, Deirdre K. Mulligan and Jack Lerner note that the information transmitted by the new electricity meters is qualitatively very different from the monthly readings taken on the conventional devices. Specifically, if data on electricity consumption were transmitted every hour and subsequently stored for long periods (as many utilities are required to do), considerable information could be gained about the daily habits of consumers. Electricity consumption patterns could be used to determine when consumers were home, their level of activity at various times of day and whether they made use of specialized medical equipment. Activities taking place purely within the privacy of the home and previously inaccessible to the outside world could be exposed to a wider audience.

The Fourth Amendment entrenches "[t]he right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures," and requires government officials to obtain authorization before carrying out a search of the premises. The Fourth Amendment was long understood in the narrow sense of physical entry into the home. From this view, police officers could use a camera to capture a suspect’s movements and not violate the Fourth Amendment if they never actually entered the home.

The US Supreme Court departed from this approach 40 years ago in Katz v. United States. In that case, the FBI placed an electronic listening device on a public telephone booth and recorded a suspect’s conversations, without having obtained a warrant. The suspect was convicted and successfully appealed under the Fourth Amendment. The court noted that "the Fourth Amendment protects people, not places," from unreasonable search and seizure, and the fact that the electronic device did not physically penetrate the telephone booth was irrelevant. The court also dismissed the government’s argument that Katz could not invoke the Fourth Amendment because he used a public telephone, holding that what a person "seeks to preserve as private, even in an area accessible to the public, may be constitutionally protected." In the wake of Katz, the Fourth Amendment guarantee has been interpreted broadly and remained relevant with advances in technology.

Yet, advanced metering technology remains a cause for concern in the U.S., due both to a nuance in the court’s reasoning in Katz and to subsequent decisions. Although it held that information could remain private even if it were in a public area, the court added that "[w]hat a person knowingly exposes to the public, even in his own home or office, is not a subject of Fourth Amendment protection." Accordingly, in Smith v. Maryland, it held that when people voluntarily give information to a third party, they "assume the risk of subsequent disclosure."

This reasoning raises the real possibility that the government could access detailed data on an individual’s activities within the privacy of his or her home that, in the absence of advanced metering technology, would have required a warrant. The consumption habits of electricity users could, following transmittal, become simply part of a utility’s business records.

Demand Response is far from a purely American phenomenon. Ontario has already implemented a demand-response program and will have installed 800,000 ‘smart electricity meters’ by the end of this year, with the objective of having transitioned all consumers by 2010. The smart-meter technology consists of two components: an Advanced Metering Infrastructure (AMI) and a Meter Data Management and Meter Data Repository (MDM/R). The AMI collects hourly electricity consumption data and transmits it to the utility’s central computer. The data are then transferred to the MDM/R, which compiles billing records. Consumers would be able to access their consumption data on an ongoing basis, making it easier for them to adjust their habits.

Ontario’s Ministry of Energy has held consultations on the implementation of the smart-meter technology and acknowledged that privacy is a concern. Canadian tax law requires that data be stored for at least seven years, since they are used for billing purposes. Feedback gathered on this topic during the consultations underscored the need to set out clear guidelines on the information that will be stored and the level of access granted. Yet, privacy concerns do not appear to have become a great concern; a spokesperson for Ontario’s Office of the Information and Privacy Commissioner interviewed for this article said that her office had yet to receive a single complaint about the implications of smart-meter technology.

It is difficult to argue with the underlying principles of demand-response programs; even the most passionate privacy advocates acknowledge the benefits of smart meters. Although the programs seem so far to have raised greater privacy concerns south of the border than in Canada, new technologies are renowned for provoking legal debates unimagined at the time of implementation.

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