The term “smart grid” refers to the use of technologies and tools that help electric utilities better meet consumers’ needs reliably and affordably by more effectively monitoring power usage demand and system conditions on a near real-time basis. The smart grid combines digital devices, software applications and two-way communications that allow utilities to track the flow of electricity with great precision, pinpoint outages, identify voltages out of allowed ranges, and transmit messages to transformers, capacitors, circuit breakers and other distribution equipment to initiate diagnostic or corrective (self-healing) actions. It can also let utilities record consumer electric use in various time intervals and provide consumers with hourly energy usage data. The U.S. Department of Energy lists seven functions of a smart grid: enabling informed participation by consumers; accommodating all generation and energy storage options; creating new products, services and markets; delivering power quality for the range of needs in the 21st century; optimizing asset utilization and operating efficiency; addressing disturbances—automated outage prevention, containment and restoration; and operating resiliently against physical and cyber-attacks and natural disasters. Across the nation, utilities are modernizing electric distribution systems by deploying advanced communications and automation technologies—including smart meters—to improve reliability, increase efficiency and help control electricity costs for consumers.

A smart meter is an advanced digital electric meter that records energy consumption in time intervals. It then uses two-way communications to transmit the information back to a local utility for power-quality monitoring and billing purposes.