1 February 2012 – Smart meters, hailed by government and electricity distributors as the answer to reducing power use, have fallen victim to an inefficient distribution system, regulatory complexity and inflexible pricing. So far Victoria is the only state to mandate smart meter installation and consumers there are paying hundreds of dollars extra in electricity bills, often before they even get a meter.

Craig Memery, smart network specialist with the Alternative Technology Association, told The Fifth Estate this week that Victorian households will pay between $99.31 and $153.95 per meter during 2011, rising to between $127.46 and $219 by 2015. This money goes to distributors.

“Most customers have been paying these charges since 2010 regardless of whether they have had a meter installed. Every energy user had the levy imposed.”

Mr Memery said in NSW, where smart meters are so far voluntary, around 400,000 meters have been installed.

“COAG [the Council of Australian Governments] agreed that all states would put in smart meters but I haven’t seen any energy ministers falling over themselves to announce a mandatory program,” Mr Memery said.

In 2009 COAG committed to roll smart meters out nationally. Victoria was the first to initiate a program, mandating the installation for all residents, along with payment for the rollout by consumers. NSW was expected to follow but has since fallen silent on its intentions. Not surprising, given the Victorian rollout has been beset with cost blowouts and accusations by the current Coalition government that the previous Labor government mishandled the program.

Originally estimated to cost around $800 million the Victorian smart meter program is now expected to cost $2.3 billion.

The rollout was halted last year pending the outcome of a review by the Auditor General, and reinstated in December.

The Auditor-General stated in his report that: “If the project’s emerging risks delay the installation of smart meters it is likely that consumers will face further cost increases and gain fewer benefits”.

When announcing that the program would continue, Victorian Minister for Energy and Resources, Michael O’Brien, said the government would bring in changes, including subsidising the cost of in-house displays so consumers could see how much energy they were using.

“These changes aim to give households and business greater control of their energy consumption and their energy bills by making basic in-home display devices available at low cost to Victorian families and businesses,” Mr O’Brien said.

Smart meters are required for use by large consumers under the National Electricity Rules.

The advantage of smart meters is that they measure the amount of electricity used every 30 minutes and so allow electricity distributors and retailers to charge different rates based on time of use.

The real benefit for consumers is that they can see the true cost of their energy use and alter their consumption patterns so that they use less power at peak times. This also takes pressure off the power grid during peak usage.

The meters also have capacity for remote communication, allowing electricity suppliers to send or collect information directly from the meter and the customer, including for billing or outage notices.
However, incentives for consumers to use power more efficiently have been pushed back in Victoria with the decision by the state government to delay the introduction of flexible pricing until at least 2013. This follows protests by consumer groups that high peak pricing will disadvantage consumers.

Victorian consumers can also choose to remain on flat rates even when flexible pricing is introduced.

Unfair to low income people
A recent report by the University of Melbourne and national charity St Vincent de Paul found that unless suitable protections and policies are put in place to shelter vulnerable and low-income households from the cost impacts of time-of-use pricing and increased fixed charges, the Victorian smart meter rollout would seriously disadvantage groups such as pensioners, people on fixed incomes, and single parents, potentially adding around $300 to their annual electricity costs.

The report said low-income households were particularly disadvantaged because of their inability to take advantage of time-of-use pricing and direct load control technologies to off-set cost increases. Also, because of the low-volume of their consumption, fixed charges account for a much larger proportion of low-income household’s overall costs—so increases in fixed charges cause a more significant increase in their overall electricity costs.

“The effect of the rollout on energy affordability could be even more severe if households are put on TOU [time of use] pricing once smart meters are introduced. Two key time-of-use pricing initiatives here are time-of-use tariffs and Critical Peak Pricing tariffs,” the report said.

“These tariff structures will penalise low-income households, who tend to be peaky households with inelastic electricity use: households that mostly need to use electricity during the day-time because of (for example) disability, unemployment, retirement, or caring for young children or a relative; and which have a limited ability to shift their electricity usage in response to price signals because of their household circumstances, the types of appliances they have, the fact that little of their electricity use is discretionary consumption, or because of disability.”

Damien Moyes, Energy Project and Policy Manager with the Alternative Technology Association, told TFE that until tariffs were introduced that gave consumers an incentive to use energy more efficiently during peak times, smart meters offered few benefits to households.

“Right now any time based tariffs that do exist are cheaper from 11pm to 7am when nobody is really using power but then they rise to very expensive rate at peak times. The benefit right now is to distributors who get information from the meters,” Mr Moyes said.

The real future opportunity for distributors and retailers was in providing customers with access to their data through smart phones and web-based portals.

“It is about exploring those opportunities but until we get a tighter policy framework and more effective, well aligned tariff incentives there won’t be much benefit to consumers,” said Mr Moyes.

…. Or to energy consumption and the environment it seems.