Data collection by an Illinois municipal utility's smart meters is a constitutionally allowed search of consumers' homes, according to a federal court ruling in a case that applies most directly to government-owned utilities but also offers lessons for electric co-ops.

The Aug. 16 decision by the U.S. Court of Appeals for the 7th Circuit centered on whether Fourth Amendment protection from unreasonable searches and seizures by the government was violated by smart meters that gather consumers' energy data every 15 minutes and share that information with the municipal utility.

The court found that the municipality's data collection "constitutes a search. But because of the significant government interests in the program, and the diminished privacy interests at stake, the search is reasonable."

The court also ruled that that smart meters "allow utilities to reduce costs, provide cheaper power to consumers, encourage energy efficiency, and increase grid stability."

NRECA joined with the American Public Power Association and the Edison Electric Institute in filing a friend-of-the-court brief in the litigation that involved the City of Naperville, Illinois, an APPA member. Although the Fourth Amendment does not directly apply to non-government bodies, the case also involved questions of law enforcement access to utility data and broader issues of consumer privacy.

"NRECA is pleased that the court of appeals affirmed the dismissal of this case and acknowledged the multiple public benefits provided by smart meters. Electric cooperatives have appreciated these benefits, and they lead the industry in deploying smart meters," said Randolph Elliott, NRECA senior director, regulatory counsel.

About 60 percent of America's electric co-ops have installed advanced metering infrastructure or smart meters capable of two-way communication between the co-ops and member-consumers.

"This case is a reminder to all utilities to understand and listen to the concerns of consumer-members when rolling out beneficial new technologies like smart meters and to have clear policies on law enforcement access to consumer data," said Elliott.

With $11 million in federal funds to update the electric grid, Naperville in 2009 installed a smart meter for every resident and did not allow residents to opt out. The municipality stores the data collected by the meters for three years. A group of consumers sued in 2011, citing privacy violations. A federal judge granted Naperville's motion to dismiss the lawsuit.

The court concluded that data collection can provide specific details, such as what appliances—be it a television, respirator, or indoor grow light—are in a home and when they are used. A smart meter can also indicate when HVAC systems or water heaters are operating or whether a home charges electric vehicles.

"Residents certainly have a privacy interest in their energy-consumption data. But its collection—even if routine and frequent—is far less invasive than the prototypical Fourth Amendment search of a home," the court said. The data in this case was collected by the public utility without physical entry and was not provided to law enforcement.

"We caution, however, that our holding depends on the particular circumstances of this case," the court said. "Were a city to collect the data at shorter intervals, our conclusion could change. Likewise, our conclusion might change if the data was more easily accessible to law enforcement or other city officials outside the utility."

Moreover, the court noted that allowing residents to opt out might prove helpful.

"Naperville could have avoided this controversy—and may still avoid future uncertainty—by giving its residents a genuine opportunity to consent to the installation of smart meters, as many other utilities have," the court said.