Finance Roll

Last night after work and the gym, I headed home. Pulling into the driveway I noticed something unusual. There was a big white piece of paper taped to my front door. I wondered what it could be.

It's not uncommon to find advertisements at our doorstep. Someone's always trying to sell something. But this wasn't an advertisement.

This was some type of official notice.

I grabbed the paperwork and started reading. It was a notice from APS, the local utility. The electricity to the house would be cut for a short while.

Now, I know it's not uncommon to lose power due to a storm, an equipment failure, or even an accident... but this was different. They were shutting off our power to replace the meter. The house I live in is only 3 years old... the meter couldn't be bad already.

I knew in an instant. APS is installing an AMR system.

Now I know that look on your face. You're wondering, "What's an AMR system?"

An AMR system is simply an "Automated Meter Reading" system. It's an automated way for the utility to collect the meter readings from tens of thousands of houses quickly and efficiently. The next time you get your utility bill, look at it closely. Somewhere on the statement they'll list the date the last meter read took place.

In some areas, the time between actual meter reads can be a few months or a year or more.

Bet you didn't know the utility can "estimate" your energy usage and bill you for it! Now, the cost of doing a meter read is fairly expensive. You have to pay hundreds of people to walk from meter to meter and take a reading. Then you need them to accurately record that data. The utility won't admit it, but they have a huge number of errors every day.

Now, I have an investment idea based on the AMR technology... but before I get to that, let me explain how it works.

First, let me say this. There are a number of technologies out there. All of them are different and the technology can get quite complex... here's the simplified version.

When a utility decides to roll out an AMR system, they typically plan to deploy it to all of their customers. Deployment times can take anywhere from a few months to a few years. The utility has two options. They can install a brand new digital meter with the technology already built in, or add on an AMR unit to the old-fashioned meter. Here in Phoenix, they went the digital route, and that means replacing every meter on the grid.

In the new digital meter is a little radio chip. Every so often the chip wakes-up and sends out a signal identifying itself and announcing the last meter reading. Here's the cool thing... this signal can be adjusted to fit the needs of a customer or utility.

In a residential setting the utility might collect data once a month. In a commercial or industrial setting the utility can collect data every day, every hour, or even every few minutes!

All of this data gets routed through a receiver and sent back to the utility.

The technology is a godsend to the utilities. An AMR system gives them a more accurate picture of consumer demand. It allows them to monitor big users of electricity. It can help with energy conservation. It even eliminates meter reading mistakes.

But the utilities won't publicize the best benefit of all... it saves them millions!

These AMR systems take us one step closer to a truly smart grid. And not just for electricity. These AMR systems are available for gas and water utilities as well.

So, after reading the notice on my door I walked into the house. I noticed all of my digital clocks blinking.

I realized they'd already swapped out my meter. I immediately grabbed a flashlight and went running outside. Yes, my girlfriend thought I was crazy.

I got to the side of the house, found the electrical panel and took a quick look.

Unfortunately, I was very disappointed.

It was an Elster Meter. I know that means nothing to you, so let me explain. When I was an investment banker, I worked on a multi-million dollar financing for an AMR company. That company was Itron (ITRI). Elster is one of Itron's biggest competitors.

Now, I'll admit, I'm biased. If I had a choice, I'd want an Itron meter on my house. When I worked with the company, I got to know the management team very closely. I got an inside look at their plants, facilities, and met many of their employees.

In my opinion, Itron is the best AMR company in the world.

I took a look at the stock recently. I can't believe how low it's trading. This stock was consistently above the $100 a share mark, and today it's trading for more than 60% off. The company has a 1.6 billion market cap, making them one of the largest players in the industry. Last year they did almost $2 billion in sales, and were hugely profitable. That alone makes them a great buy, but there is much more to the company than that.

Itron is a leader in developing the technology for a smarter grid. Every-thing they do is tied to making energy usage more efficient, and that makes the company a true "green enterprise".

In my opinion, they are one of the few ways to play the "Smart Grid" future. I've run out of room today, but at some point in the future I'll talk more about Itron. I encourage you to take a look at the company. Now might be a great time to add some to your portfolio.