What Constitutes a Reasonable Search? Smart Meter Implementation in Naperville

Energy Law Journal, July 1, 2019 | Go to article overview

What Constitutes a Reasonable Search? Smart Meter Implementation in Naperville


I. INTRODUCTION

Smart meters and related data-use initiatives have exploded in popularity within the U.S. utility sector, attracting a throng of legal challenges.1 A recent decision by the United States Court of Appeals for the Seventh Circuit addresses one set of those challenges-issues arising under the Fourth Amendment of the U.S. Constitution-and defines new boundaries for entities instituting smart meter programs in the context of traditional search and seizure jurisprudence.

In the August 2018 decision of Naperville Smart Meter Awareness v. City of Naperville (Naperville),2 the Seventh Circuit upheld a lower court decision dismissing an amended complaint by Naperville Smart Meter Awareness (NSMA), a group of customers opposed to smart meter installation.3 The Seventh Circuit determined that under the facts pleaded,4 the City of Naperville, Illinois' collection of municipal electric customers' smart meter data at 15-minute intervals was a reasonable, acceptable search, and thus, could not infringe on the organization's rights under the Fourth Amendment of the U.S. Constitution.5 The court also emphasized that if the City of Naperville had provided a "genuine" opt-out alternative to smart meters then "Naperville could have avoided this controversy."6

The ruling in Naperville further develops the view of what is a reasonable search in the context of the Fourth Amendment as technology such as smart meters becomes more sophisticated and pervasive in the utility industry and beyond.7

This case note will first discuss relevant background describing smart meters and policy forces aiding their expansion, as well as provide brief context to concerns presented by utility consumers with respect to smart meters. Additionally, as background, this note will provide a brief discussion of relevant Fourth Amendment cases. Next, this note discusses the factual and procedural background of the Naperville case, presents the court's reasoning, and also discusses potential implications the ruling might have within, and outside of, the utility industry.

II. Background

A. Development of Smart Meter Programs and Rising Public Concerns

At the center of the Naperville decision is the smart meter, which has been a relatively new source of investment and a technological breakthrough for both utilities and consumers.8 However, smart meters have also raised concerns with energy consumers.9

The smart meter is one component of capital investment under the broader category of what is known as Advanced Metering Infrastructure (AMI).10 AMI is "a system of smart meters, two-way communications networks, and data management systems."11 These are technologies that together facilitate metering and other informational interactions between utilities and their consumers.12 Additionally, "[t]his two-way information exchange enables a range of new customer service applications, such as time-based rate programs, demand response programs, and web portals with near-real-time customer energy usage information."13 Due to the increased information accessible to customers through so-called "green button" and other similar initiatives, AMI allows consumers to change their use patterns, which ultimately impacts their electricity bills.14

Beyond the benefits to rate base of new capital investment, utilities have sought to add smart meters to their systems for a variety of additional benefits including operational and reliability improvements, reduced labor costs, load smoothing, and energy efficiency initiatives to name only a few.15 Third-party energy providers also have been able to develop new offerings through the use of smart meter data.16

From the utility perspective, AMI resolves some key long-standing hurdles in terms of customer pricing.17 Since the late 1800s, there has been debate over how to properly charge customers for electricity consumption.18 Although timebased pricing schemes had theoretical bases early on (it was evident even in the 19th century that electricity usage fluctuated regularly over the course of the day), cost-effective technology was not yet in existence to allow for detailed electricity consumption. …

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