Smart grids: Charge more, power less

Laguna Niguel, Calif. (CNNMoney.com) -- The only way utility companies will move toward a "smart grid" model is if they are allowed to charge more money to deliver less power.

That's the argument set forth by Peter Darbee, head of the California utility PG&E Corp., speaking at Fortune's Brainstorm: Green conference in Laguna Niguel.

Creating a smart grid involves digitizing it with an array of electronic sensors on everything from home meters and appliances to utility substations. Think of it like your cell phone bill, but instead of seeing who you called, when you called them and for how long you spoke, you'd see which devices used how much energy at what time of day. The hope is that with more information people will use less power, and lawmakers have set aside billions of dollars in the stimulus package to jump start the technology.

But utilities are reluctant to make smart grid investments unless the old model of charging customers based on energy used is changed, said Darbee, whose company has run pilot programs around smart meters. After all, what business would spend money so consumers can buy less of its product?

"We need to change the money making model for utilities," said Darbee. "We need to decide what are the objectives we want socially, and set policies to encourage that."

In this case, if the objective is to use less power, paying more for less may indeed be a good thing.

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