Smart meters spark a backlash
Consumers who have the new devices say they’re paying more for electricity and can’t do anything about it.
Tariffs explained
- Flat-rate tariffs, also called single-rate tariffs, apply a flat fee per unit of electricity used during a period of time. They may include a “controlled load” tariff, which is a lower rate for some uses, such as electric hot water.
- “Cost-reflective tariffs” are meant to reflect the cost of providing different amounts of electricity at different times. There are two main types:
Time-of-use tariff: The price per unit of electricity can change throughout the day, week, and year. This often involves some combination of “peak”, “shoulder”, and “off-peak” hours.
Demand tariff: Adds a fee for the demand placed on the network, separate from a charge based on usage. The charge is based on the highest usage across the whole period. This can be based on a single point in time, a window of 15 or 30 minutes, a whole month, or even a season or entire year.
There is more on smart meters and the tariffs here.
Australians are objecting to the mandatory roll out of electricity smart meters.
Those who have had the meters installed, without consultation, say they’ve been hit with higher energy bills and new charges.
It’s a concerning development that could be coming to millions of Australians, as the smart meters are rolled out under the auspices of the national regulator, the Australian Energy Market Commission (AEMC).
Customers in Queensland, New South Wales, the Australian Capital Territory and South Australia will have to get on board. (Western Australia and the Northern Territory have different systems and are not part of the National Energy Market. Victoria and Tasmania are ahead on their rollout of smart meters).
In the face of initial backlash, the AEMC will prohibit electricity providers from applying any new charges without the customer's consent for two years after a smart meter is installed. But there is a catch! There are a number of exclusions from this protection. If you change retailer or move home you will lose this two year protection. Importantly, but confusingly, it will be up to states and territories to implement the rules. So, how it actually works has yet to be seen. Our hope is that state and territory governments go their own way and hold the sector to higher levels of protections.
In the meantime, in places where meters have been or will be installed prior to these protections, consumers may receive significant changes to their energy bills, reflecting the way the meters measure household energy use. After two years, retailers will be free to apply new charges – including controversial “demand” charges – as long as they provide customers with information showing how any new tariffs compare with what they had been paying previously.
In other words, we’re going to get smart-meters and charging changes whether we like it or not. At best, we will have more information about why we’re paying more.
Even the ability to find out how much electricity you are using may be limited. Unlike in Victoria, many of the smart meters being installed are not set up to give near-real-time data to consumers. Instead, consumers get data the next day. This could be particularly impactful for people with demand tariffs, where usage in any 30 minutes can impact bills over a whole month or longer.
The AEMC is consulting on a proposal that would allow electricity companies to charge consumers for 15 years to see their live data, because that is how long the current smart meters are expected to last. A glimmer of good sense is that the new rules require retailers to offer flat tariff options to customers with smart meters, rather than force them onto demand tariffs, which existing users say have led to higher energy bills.
The AEMC says smart meters are “… essential infrastructure for transitioning to a renewable energy system and achieving net zero emissions targets. Smart meters are the digital foundation needed for a modern, connected, and efficient energy system.
“This reform will help households and businesses increasingly interact with the grid and energy markets as we support the cost-effective decarbonisation of the energy system,” it says.
The truth is the electricity sector has been lobbying for more than 10 years for the introduction of demand tariffs. Consumer organisations like National Seniors Australia and others have been pushing back on these tariffs as unfit for purpose.
Consumer advocate, CHOICE, recently shared the following stories of people hit by the new tariffs:
Greg’s story: “I did not ask for this, nor did I want it. They said it was free of charge and would save them time as they can do everything remotely.”
When he then switched to Alinta Energy, he noticed that new charges were appearing on his bill.
“Not only do they have a daily supply charge and a usage charge, they also have a demand charge,” he says.
Demand charges are based on the highest amount of electricity used for one 30-minute block over the monthly billing cycle. This level of usage then determines how much customers pay in the demand period set by the retailer for the entire billing cycle.
CHOICE says that, in effect, they penalise you every day of the month if, on one day, you have the oven on to cook dinner while using the air-conditioner.
Critics say demand charges are an underhanded way for retailers to recoup costs imposed on them by poles and wires companies, whose infrastructure bears the load of peak usage.
Greg switched to Red Energy in December, only to discover that the company also applies a demand charge.
He asked if they offered a plan without one and was told about a “time of use” plan, but he thinks that might cost him even more.
Richard’s story: Richard also had a rude shock after Alinta installed a smart meter at his residence.
“Following this, my tariffs were updated,” Richard says. Both his daily and peak charges were increased, and a new demand charge was added.
According to Richard's calculations, the demand charge was based on the maximum amount of energy used in any 30-minute period between 4pm and 9pm.
The idea that the smart meter would make billing easier and eliminate the need for manual reads sounds good, but it can also be used as a means to increase revenues.
CHOICE asked AEMC if customers who have been or will be affected by new tariffs before the two-year rule comes into effect will be eligible for compensation, but the agency didn’t respond to the question.
Asked about the fairness of demand charges in general, the AEMC said it’s current pricing review “is examining the broader pricing landscape to ensure the tariffs customers see align with their preferences and needs in the longer term. What matters is that customers have real choice and control over their energy decisions, including their retail tariff.”
CHOICE concluded that it seems demand tariffs won’t be going away anytime soon for customers whose meters were or will be installed before AEMC’s two-year rule comes into effect.
Smart meters may be the way of the future, but consumers should never be forced onto the complicated tariffs that come with them, says National Seniors Australia (NSA) CEO Chris Grice.
“They should move to them only if they have the means to manage the complexity they offer,” Mr Grice said.
“The AEMC has failed to adequately explain how a two-year protection safeguards consumers. Households installing a smart meter won’t get any protection after this point.
“The rollout will place increased cost pressures on already struggling and financially stretched households.”
Mr Grice suggests demand tariffs are a cost-recovery tool for retailers and should be banned.
“We are not opposed to smart meters for those who can manage them, we simply want adequate protections for the many who will struggle to understand the complex tariffs they enable,” he said.
NSA believes that if the energy sector was serious about reducing demand in peak times and not solely focused on revenue generation, it would support the implementation of a hybrid/dual tariff at the retail level combining a flat tariff and 'Time-of-Use' tariff. Under this model, consumers would receive a bill that shows the bill outcome for both tariffs but only be billed for the lower of either the flat tariff or the TOU tariff. As part of the bill, information could be provided showing what behavioural changes would be required to obtain a lower bill under the TOU tariff.
This would provide consumers with protection from bill shock, while educating them about potential savings they could achieve from changing their behaviour.
More information about NSA’s position is available here.
