September/October 2018 Issue

Also in this issue: Wisconsin Supreme Court Affirms There is No Compensable Property Right to Visibility in Billboard Case     |     Public Service Commission Approves First Financial Assistance Program for Private Lead Service Line Replacements

Court of Appeals Upholds Constitutionality of Municipal Smart Meter Program

Richard Heinemann | 09.27.18

The City of Naperville (Naperville) can constitutionally spy on its municipal utility customers — at least in a limited sense. Such is the inference to be reached from the holding by the United States Court of Appeals for the Seventh Circuit in Naperville Smart Meter Awareness v. City of Naperville (Case No. 16 – 3766, August 16, 2018). 

The case was prompted by a local citizens’ group challenge to a mandatory smart meter initiative implemented by the city’s municipal utility. Using American Recovery and Reinvestment Act grant money to fund an $11 million grid upgrade program, the city’s electric utility installed digital 

“smart meters” throughout its system. The meters allow the utility to collect residential electric consumption data at 15 minute intervals, yielding far more robust profiles of residential ​“load signatures” than the traditional analogue meters they replaced. A citizens group sued on the grounds that collection of the data constituted an unreasonable search and seizure, in violation of the Fourth Amendment and the equivalent provisions of the Illinois Constitution. A federal district court rejected the complaint and the Court of Appeals upheld. 

Citing 2001 Supreme Court precedent involving the government’s use of thermal imaging, the Court of Appeals held first that Naperville’s collection of customer use data at 15 minute intervals constitutes a ​“search” under the Fourth Amendment. The court reasoned that the data yielded by such meters reveals details about activity within the home — such as sleep, eating and appliance use patterns — that would be unavailable to the government without a physical search. 

Next, the Court examined whether Naperville’s search was reasonable and concluded that it is. Although a warrantless search is presumptively unreasonable, the Court found that, in this case, the privacy interest is diminished because the city does not collect the data with prosecutorial intent and does not provide it to third parties, such as law enforcement, without a warrant and a court order. At the same time, the Court found that the government’s interest in the data is considerable because the data it collects reduces cost, enhances grid resiliency, and encourages energy efficiency. Hence, the Court held that Naperville’s smart meter program passes constitutional muster as currently constituted. Under different circumstances, however, such as collection of data at more frequent intervals, the Court cautioned that it could reach a different result. 

The case underscores the fact that rapidly-evolving energy technology carries considerable privacy implications. Municipal utilities implementing smart meter programs should therefore consider allowing some degree of customer choice — the ability to opt out, for example — in order to minimize legal exposure to privacy-related law suits. Such programs should also contain procedural safeguards to ensure that collected data is not readily available to third parties. 

— Richard A. Heinemann