FEBRUARY, 2011
U.S. Residential Gas
Meters Market Study for
Gazdevice
Private and Confidential: Prepared For Internal Use of Gazdevice
U.S. Residential Gas Meters Market Study For GAZDEVICE
Feb, 2011
Table of Contents
1.
USA: Gas Meter Market ........................................................................................................................ 4
2.
Gas Meter Standards ............................................................................................................................ 5
2.1. Gas Meter Design and External Features........................................................................................... 6
2.2.
3.
Gas Meter Sample Tests ............................................................................................................... 7
2.2.1.
Accelerated Weather Test .................................................................................................... 7
2.2.2.
Salt Spray Test ....................................................................................................................... 7
2.2.3.
Chemical Resistance Test ...................................................................................................... 7
2.2.4.
Meter Window Impact Test .................................................................................................. 7
2.2.5.
Temperature and Thermal Shock Resistance ....................................................................... 7
Competitors in the US ........................................................................................................................... 7
3.1. Manufacturers and Models Presented in the US Market .................................................................. 8
3.2. Retail Price for Selected Models ....................................................................................................... 8
4.
Import of Gas Meters into the United States ....................................................................................... 9
5.
Challenges of Entering U.S. Market ...................................................................................................... 9
6.
Invitation to Bid, the City of Pensacola ................................................................................................. 9
7.
Suggestions to Gazdevice for Entering US Market ............................................................................. 10
7. 1.
Establish Legal presence of Gazdevice in the United States ....................................................... 10
7.2.
To Obtain Pre-Certification of Gazdevice Products ................................................................... 11
7.3.
To Contact Municipalities and LDCs ........................................................................................... 11
Appendix A: LDCs Investor-Owned
Appendix B: LDCs Municipal-Owned
Appendix C: LDCs Privately-Owned
Appendix D: Price Estimate for ANSI Pre Certification by Measurements Controls, Inc.
Appendix E: Request for Approval of AM 250 Residential Gas Meter by the State of New York
Appendix F: Approval of Metris 250 Residential Gas Meter by the State of California
Appendix G: Request for Proposal to Supply 1,500 Residential Gas Meters to the City of Pensacola,
FL
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Addition 1: Itron Metris 250 Description in the U.S.
Addition 2: Elster AMC Description in the U.S.
Addition 3: Sensus Residential Gas Meters U.S. Brochure
Addition 4: Sensus Cubix 250 Description in the U.S.
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U.S. Residential Gas Meters Market Study For GAZDEVICE
1.
Feb, 2011
USA: Gas Meter Market
The natural gas distribution markets in the United States are regulated at the state level. Although
it is possible to purchase a gas meter individually, then install it and register, the overwhelming
majority of gas meters are purchased by gas utility companies, otherwise known as Local
Distribution Companies (LDCs) or municipalities. Each LDC installs the gas meter necessary for the
regulation and measuring of gas to its customers. The LDCs will continue to own, maintain and
operate the gas meters and are responsible for sample testing and annual maintenance of the gas
meters, as required by the states.
There is almost no open market for gas meters in the United States. The market is divided among
three major manufacturers: American Meter Company (presently Elster), Itron Inc, and Sensus.
Their growth was conducted via acquisitions of local gas manufacturers with existing US-based
manufacturing and distribution channels.
All meters installed in the United States must comply with the applicable provision of American
National Standard ANSI B109 (see Gas Meter Standards). Usually, a manufacturer can self-declare
that its product meets ANSI B109 specifications and negotiate with an LDC that will later sponsor
the gas meter through registration with state authorities.
Utility companies choose the meters they would like to use. Utility companies perform in-house
testing, calibration and maintenance, including testing required by states (often calibration and
maintenance is outsourced to ANSI’s approved companies).
Based on ICP’s research, there are currently over 1,200 LDCs. These LDCs own the gas meters and
the distribution line directly connected to a residential customer. LDCs are categorized as investor
owned, private or other municipally owned. Appendix A, B and C present lists of LDCs based on
their ownership categorization and include the LDC’s geographical area, state and contact
telephone numbers. These LDCs are potential customers for Gazdevice.
Municipally-owned LDCs purchase gas meters via open tenders. For an example of a typical open
tender by a municipally-owned LDC is provided as Appendix G – Request for Proposal to Supply
1,500 Residential Gas Meters to the City of Pensacola, FL.
The certification process is usually driven by utility companies that are licensed to operate in a
state. The flowchart below illustrates a typical certification process for a gas meter if the gas meter
is purchased and installed by a utility company.
Figure 1: Gas Meter Approval Process
Confirmation the
gas meter
complies with
ANSI B109 with
independent ANSI
accredited Lab
Contact and
preliminary
negotiations
with LDC
Testing
performed by
LDC
Application
filed by LDC
with state
commissions
Approval or
denial of
certification by
state
commissions
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U.S. Residential Gas Meters Market Study For GAZDEVICE
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The recommended first step is to obtain a confirmation from an accredited laboratory in the United
States that Gazdevice meters comply with ANSI B109-1 requirements. We have contacted several
laboratories licensed by ANSI and requested a fee and time estimate. We have received a written
estimate from Measurement Controls, Inc. with a written proposal to conduct testing and
calibration of Gazdevice meters. Please see Appendix D for a copy of the proposal.
After confirmation from an accredited laboratory is received, initial contacts with utility companies
should be made to gather their interest in purchasing gas meters from Gazdevice. We recommend
that Gazdevice establish a legal entity in the United States that would co-ordinate its sales activities
in the US.
Preliminary negotiations should result in a letter of intent or a similar
document/arrangement.
After a letter of intent is obtained, the utility company will submit applications to the state
regulatory commissions for approval to use the gas meters manufactured by Gazdevice in a
particular state. We have contacted several state regulatory commissions and their response was
that they usually don’t review applications unless they come from a utility company. Gazdevice will
have to provide 3-5 meters for each state to conduct testing by state commissions.
Please see Appendix E for a sample request for approval by a utility company. Please see Appendix
F for a letter of approval for a gas meter.
The open market for gas meters is small and driven by retailers that sell to plumbers or to endconsumers for co-metering purposes.
2.
Gas Meter Standards
To provide some common base for rating the capacity of various manufacturers’ gas meters, the
American National Standard Institute (ANSI) in 1980 developed the first set of regulations for gas
meters. These standards were revised in 1987 and the final sets of revisions and confirmations
were made in 1992.
The current set of ANSI B109 regulations consist of the following sub-parts:
ANSI B109 sub-parts
ANSI B109-1
ANSI B109-2
ANSI B109-3
Descriptions
Gas meters with capacity of under 500 ft3
Gas meters with capacity over 500 ft3
For rotary gas displacement meters
For the purposes of this analysis we will concentrate on residential gas meters with capacity under
500ft3/hr (ANIS B109-1). Within ANSI B109-1, meters are divided up into several sub-classes:
Gas Meter Class
50
175
250
400
Capacity (ft3 / hr)
Minimum
50 (1.4m3)
175 (5.0m3)
250 (7.1m3)
400 (11.3m3)
Maximum
174 (4.93m3)
249 (7.05m3)
399 (11.29m3)
499 (14.13m3)
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U.S. Residential Gas Meters Market Study For GAZDEVICE
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In order to comply with ANSI B109-1, a meter shall meet certain physical requirements, have
mandatory external features and be subjected to several tests.
2.1. Gas Meter Design and External Features
Figure 2: External Features Required for ANSI B109-1
"C"
1.3mm
"B"
90' ±2'
"A" Section 2.2.2
"B"
90'
"Plate" Section 2.3.2
Subject "D""
Mark “A” : To and including 6.0” (152.4mm) center to center = ± 1/32” (0.8mm)
Over 6.0” (152.4mm) to and including 12.0” (304.8mm) center to center = ± 1/16” (1.6mm)
Over 12.0” (304.8mm) to and including 18.0” (457.0mm) center to center = ± 3/32” (2.4mm).
Mark “B”: The axis to the threads on the connections shall be perpendicular to the gasket face
within 2 degrees.
Mark “C”: The gasket surface of top-connected meters shall not permit a gap exceeding 0.050 inch
(1.3mm) from a plate formed by a flat resting on both connections.
Mark “D”: The manufacture badge shall contain identification information in a permanent plate.
The following information shall be contained on the badge:
a. Meter Class (see table above);
b. Manufacturer’s name and trademark;
c. Meter serial number;
d. Year of manufacturing;
e. Maximum allowable operating pressure (MAOP) rating;
f. If the gas meter is a temperature compensating model, the badge shall be a durable red
color and shall state that the meter is “temperature compensated”;
g. Meter capacity at a 0.5-inch (125 Pa) water column pressure differential.
Meter serial number shall be at least 0.25inch (6.3mm) high, shall be embossed on the badge and
shall be visible an angle of 45 degree.
In addition, a clear space shall be provided for the purchaser badge. (Please refer to the Appendix G
for an actual sample of external requirements).
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U.S. Residential Gas Meters Market Study For GAZDEVICE
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2.2. Gas Meter Sample Tests
Internal parts and surfaces of the meter should be resistant to corrosion or chemical attack. The
meter case and external components shall be protected by materials resistant to attack by the
atmosphere, weather, sunlight and agents used to clean and repair the meter over the expected
meter life. Meter exteriors shall be capable of meeting the following 2,000 hour test and there
should be no sign of corrosion or electrolytic action, discoloration or deleterious reaction.
2.2.1. Accelerated Weather Test
Direct Ultraviolet Radiation and Water
• Light only
102min
• Fresh water spray and light 8min
2.2.2. Salt Spray Test
Samples shall be subject to 1,000-hour salt spray test.
2.2.3. Chemical Resistance Test
The meter index window or cover shall demonstrate resistance to chemicals used in cleaning
meters. The test is performed by placing a meter in the cleaning agent for 30min. The sample shall
show no signs of discoloration or harmful effects on the window.
2.2.4. Meter Window Impact Test
The index window shall withstand the impact of a 0.875ich (22mm) solid steel ball dropped from a
height of 15inches (381mm).
2.2.5. Temperature and Thermal Shock Resistance
Meter shall be capable of operating within ambient temperature and following gas temperature of 30F and 120F (-34.4 C and 49 C). The meter case shall not be structurally impaired by an exposure
to 360F (182 C) for a period of one hour.
The assembled meter shall withstand the following thermal shock test. The meter shall be heated
in 140 F (60 C) water for one hour and then plunged into water at a temperature of 40 F (4.4 C).
The assembled meter shall then be cooled to 20 F (-6.7 C) for one hour and then plunged into water
at a temperature of 120 F (49 C).
3.
Competitors in the US
The residential gas meter markets in the United States and Canada are controlled by three major
companies. The industry underwent significant consolidation.
1. Sensus - acquired Carolina Molding Inc and Equimenter Inc.; (www.sensus.com);
2. Elster - via its related companies, American Meter Company and Canadian Meter Co
(www.elster.com) ; and
3. Itron Inc. - acquired Actaris Metering Systems in 2007. (www.itron.com)
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U.S. Residential Gas Meters Market Study For GAZDEVICE
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The fourth manufacturer, Schlumberger is not considered to be a market leader, however
Schlemburger’s products are certified and used by LDCs.
The table below shows major manufacturers that are present in the United States and Canada and
their based models marketed among utility companies as well as distributed directly.
3.1. Manufacturers and Models Presented in the US Market
Manufacturer
Models
Sensus (Carolina Molding Inc., Equimenter, Inc.)
R-175, R-200, R-250, R-275, S-275, R310, R-315, R-415
Itron Inc. (Actaris Metering Systems)
Metris Model 250, Gallus 2000.
Schlumberger Inc/ Spraque
Elster American Meters
American Meter Company)
(Canadian
Meter
175, 240, 250, 400
Co., AC-175, AT-210, AC-250, AM-250, AL425, AL-425, AC-630
Please refer to Additions 1, 2, 3 and 4 for more detailed information about some of these models,
marketing samples used in the US by Sensus, Itron and Elster.
3.2. Retail Price for Selected Models
We have contacted several distribution companies and requested price estimates for individual
residential gas meters, as if a purchaser were a contractor. The table below sums up our findings.
Model
Retail Price
Sensus R-250
$125.00 -137.00
Sensus R-275
Elster AC-250 (with Odometer Reading)
Elster AC-250TC (with Odometer Reading)
Elster AM-250
$130.00 - $145.00
$211.66
$237.55
$214.85
Information about prices charged to utility companies was not available. However, it is safe to
estimate that wholesale discount may be up to 40-60 percent based on volume.
We are not sure what is the cost base for Gazdevice products but the table above could help you
decide if price ranges for the competitors’ products would leave room to compete.
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U.S. Residential Gas Meters Market Study For GAZDEVICE
4.
Feb, 2011
Import of Gas Meters into the United States
Most likely, gas meters manufactured by Gazdevice would be classified under HTS4 Code 9028 Gas, liquid or electricity supply or production meters, including calibrating meters thereof; parts
and accessories (HTS6 9028 10.).
The Russian Federation has Normal Trade Relationships (NTR) status with the United States. The
current rates of import duties for HTS6 9028 10 from NTR country is USD0.16/unit and 2.5% of
declared price. Therefore, the import tariff will be calculated at follows:
((0.16USD)*[NUMBER OF UNITS]+(2.5%*DECLARED CUSTOMS VALUE)) = TOTAL IMPORT DUTY
5.
Challenges of Entering U.S. Market
The system of sales of gas meters in the United States has a “catch-22 problem” related to obtaining
contracts and getting gas meters certified. ICP contacted regulators in several states in order to
conduct mock interviews of the certification process and the response received was that unless gas
utility companies sponsor a gas meter, state commissions will not waste time reviewing the
application and conducting tests. On the other hand, in order to approach LDCs, Gazdevice or its
representative should have ANSI B109-1 or B109-2 certifiable products. This problem can be
solved by getting Gazdevice’s products approved by ANSI certified calibration and testing
companies and then self-declaring by Gazdevice that its products are compliant with B109.1 or
B109.2 requirements.
In order to sell gas meters to LDCs and municipalities, it is critical to have legal presence in the
United States. In addition to legal presence, municipalities may list other requirements in their
invitations to bids. Please refer to Appendix G as an example of an invitation to bid. This is an
actual invitation that we were able to obtain based on the representation agreement signed
between ICP and Gazdevice.
6.
Invitation to Bid, the City of Pensacola
Appendix G presents an actual bid request that was received by ICP as a representative of
Gazdevice. It demonstrates that it is possible for Gazdevice to enter the market with persistent
approach. The City of Pensacola was interested in purchasing up to 1,500 gas meters over a 3 year
time period (the first shipment of 500 meters) with minimum capacity of 250SCFH. Suppliers had
to meet the following requirements and fulfill the following steps:
1. Post a bond of $1,000 by the certified check (this amount is returned after the bid);
2. The Offeror should be a U.S. company or would have legal presence in the United States.
Offerors should have all required licenses and permits to operate in the United States and
the State of Florida. It means that an Offeror should be registered in the U.S. and have a
license permit to operate from the States of Florida. In addition, the Supplier should have
the following insurance coverage:
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U.S. Residential Gas Meters Market Study For GAZDEVICE
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a. Workers Liability Coverage of at least $500,000 (per person – accident, -disease);
b. Commercial General, Automotive and Umbrella Coverage of $1,000,000.
The insurance requirement is common for US companies and can be easily purchased by a US Legal
Entity.
3. Bid could be proposed by an authorized representative.
marketing materials should be available in English;
All technical literature and
4. Offeror within a three-year period was not in default by any Federal or State agency and
should not use sub-contractors that were in default;
5. Offeror should be able to supply an emergency shipment of 50 meters within two days;
6. Provide manufacturing warranty for 15 years;
7. Within 365 days from the effective day of the contact, develop and implement a program
that certifies the quality and accuracy of future meter shipments;
8. Provide proof sheets of tests of all Meters;
9. Install or have installed the appropriate Sensus AMI/AMR transmitter unit.
Appendix G Section B lists technical requirements for the Meters in more details. The Section C
requires that the Meters would be compliant with ANSI standards.
7.
Suggestions to Gazdevice for Entering US Market
After carefully examining the U.S. market we suggest the following steps for Gazdevice to pitch into
the US market.
7. 1. Establish Legal presence of Gazdevice in the United States
We suggest Gazdevice to establish a limited liability company (LLC) in the United States, wholly
owned by Gazdevice. Doing so will allow Gazdevice to manage negotiations with LDCs, as well as
build a network of distributors among ANSI-licensed firms that service LDCs.
We suggest creating a LLC or a Corporation wholly owned by Gazdevice in a state that has low state
tax rate (for example Delaware, Washington or Oregon). The costs of that is under $1,000. After an
LLC is created and a tax ID can be obtained from the Internal Revenue Services (IRS) and a bank
account can be opened.
After a legal entity is registered, operating licenses can be purchased from other states. The
process is very simple and takes about $10 - $50 per state to obtain an annual license to operate in
that state.
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U.S. Residential Gas Meters Market Study For GAZDEVICE
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Gazdevice US would be an exclusive representative of Gazdevice RU registered in the United States
to perform the following functions:
1. To establish a network of local distributors that have working relationships with LDCs and
municipalities;
2. To participate in tenders organized by LDCs and municipalities either directly or assisting
its distributors;
3. To provide US point or reference for legal and commercial information that may be
requested by LDCs, municipalities or distributors.
7.2.
To Obtain Pre-Certification of Gazdevice Products
Gazdevice US will coordinate pre-certification of gas meters manufactured by Gazdevice with an
ANSI-certified calibration company to check compliance of the gas meters with the requirements of
ANSI B109-1 or B109-2. After confirmation that Gazdevice’s products would meet the
requirements of B109-1 or B109-2, Gazdevice US would be able to start offering Gazdevice products
to LDCs, participate in tenders (contingent to meeting other requirements established by local
municipalities) and build a network of distributors among calibration and gas meter servicing
companies certified by ANSI.
In proposing products to LDCs we suggest to start with LDCs owned by municipalities, since they
should have a more transparent procurement practice.
7.3.
To Contact Municipalities and LDCs
The biggest current market opportunity is conversion of old-type gas meters to “smart-meters”.
This process requires retrofitting the existing hardware and could provide an opportunity to enter
the market. As is evident from the actual request for bid by the City of Pensacola, FL, that market
opportunity is real and timing is right to enter the market.
After Gazdevice products are pre-certified, Gazdevice US would have to develop marketing
materials similar to those developed by competitors and will contact LDCs and municipalities to
gather interests from the products.
As interest is generated, each contact will have to be
negotiated separately.
In addition to contacting LDCs, Gazdevice US should participating in organized bid requests for the
supply of gas meters.
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