Smart Meters

Note – Moratorium on time-of-use pricing:

Effective since 22 Mar 2010, the Victorian Government has issued a moratorium on the introduction of time-of-use pricing by electricity utilities until further research and analysis has been conducted to ensure the use of the meters can be regulated in a way that prevents perverse outcomes and protects people vulnerable to changes in energy pricing. read more

What are Smart Meters?

Traditional electricity meters are mechanical ‘spinning disk’ type devices that only measure total energy consumption by comparing the current reading with a previous reading to calculate how much energy you have used since the last reading.

Smart Meter example Although the cost of supplying energy to a home varies throughout the day, mechanical meters can’t tell you what time the energy is being used, which is why energy retailers charge the same price per kilowatt-hour (kWh) for all the energy you use. Where there is an off-peak tariff available, there are simply two meters and a switch with a timer.

Smart meters are electronic meters that record your energy usage every half-hour and store the data within the meter, with capacity to communicate this data remotely for billing purposes. The new smart meters being rolled out in Victoria will securely report energy usage back to the electricity distributor each day, who will then provide the information to your retailer – the company that sends you an electricity bill.

The Victorian Government is working with electricity distribution companies to install smart meters in all residential homes and small businesses across Victoria starting in 2009 and ending in 2013. Other states are set to follow.

Why are they being installed?

The smart meter has potential to enable electricity consumers to have a detailed look at their usage and better monitor and reduce electricity usage.
The detailed usage information will give your electricity retailer the opportunity to offer innovative time-of-use pricing that would encourage energy efficiency and discourage energy use during peak periods, thus lowering the risk of blackouts and the need for expensive upgrades to the supply system.
The communication between meter and utility company would remove the necessity of having meters manually read.
Utilities will be able to more accurately spot a fault in the supply or outage and respond faster.
Also, when you move house, the chance of someone else using the power and you footing the bill will be reduced.
The new smart meters may be capable of controlling home appliances, so they can automatically switch off during peak times to save power and money. For this to work, home owners will need to buy appliances or adaptors that can be controlled using a wireless protocol called ZigBee.

How will I be affected?

The cost of the roll-out has been passed on to consumers in the form of an increased service charge, even if you have not received your meter installation yet.

You’ll be given at least 10 days’ written notice before your new smart meter is installed by your electricity distributor.

Smart meters that track our consumption through the day will allow electricity retailers to offer “time-of-use” pricing packages aligned with our actual usage. The price will also be aligned with the wholesale price retailers pay for electricity. With a smart meter, it’s possible a retailer could charge less than 15 cents during off-peak times but a peak rate that’s higher than 23 cents.

Why would they do that? Well, it means the price paid for electricity more closely reflects the real cost of producing electricity – something current tariffs and home meters haven’t allowed – and give consumers an incentive for choosing energy efficient appliances and homes.

For example, in previous years all energy consumers who don’t use air conditioners or heaters on high demand days have been subsidizing those who do, by paying for the supply network upgrades that allow higher demand to be satisfied. The new time-of-use tariffs may be an effective way for those who are able to avoid using large amounts of energy during temperature extremes to reduce their bills.

This would be great for households who can save money by shifting some of their energy usage (e.g. pool pump, washing) from daytime to night, and for working households where nobody is home during weekdays. On the other hand, people who are at home during the day, such as stay-at-home parents, retirees, and whose energy use is not so flexible, may find their bills increasing if they are charged for time of use. For this reason, the Victorian Government has issued a moratorium on the introduction of time-of-use tariffs until further analysis – see page top.

How can I take advantage of Smart Meters?

With smart meters currently being rolled out to homes in Victoria and energy retailers already offering time-of-use pricing, choosing the right energy retail product and understanding how you use energy will be key to taking advantage of smart metering. Through our experience in dealing with electricity retailers, we can help you find the best package for your home – to find out more, feel free to contact us.

The people most susceptible to electricity price hikes from the smart meters are those that consume large amounts during peak times. Generally these are people who use an air conditioner during the day or evening in summer due to hot air inside the house. If you use an air conditioner, we can help you reduce your bills by improving the energy performance of your home. Our Energy Makeovers Roadmap will comprehensively assess your energy usage and recommend the most cost-effective projects to your home to improve your comfort while saving on bills.

Further Information

The typical electricity bill has two types of charges: “energy use” and “services” such as infrastructure supply and maintenance. Retailers charge domestic customers for energy use based on fixed tariffs but the wholesale price retailers pay for electricity varies throughout the day. The wholesale price retailers pay is generally at its lowest overnight. As factories and businesses start operating, electricity demand rises, with the wholesale price following. As the day progresses, peak demand pushes up the wholesale price further. As the day winds down, so does energy demand and the wholesale price.

On really hot days the wholesale price of electricity rises even further as demand soars due to air conditioners. At periods of very high demand, extra power generators are brought into play that cost more to operate. As a result, the cost of generation skyrockets. With time-of-use tariffs, consumers will be charged a price that more closely reflects this cost of generation in order to encourage saving energy and lowering demand in peak times.

For example, if you know running a pool pump during the middle of the day is more expensive than earlier in the morning, you can change your usage pattern to reduce your bill. It also means we can reduce the peak demand on electricity generation, resulting in more efficient energy production.

The smart meters that will be installed in Victoria maybe able to support in-home displays, giving you an immediate view of your energy use and what it’s costing. It may even form part of a home automation system that lets you more tightly manage the use of energy-hungry appliances during peak pricing periods.

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Source: “New energy into meters”, Adam Turner, The Age 10 Dec 2009; “Plug pulled on smart meter plan”, Paul Austin, The Age 23 Mar 2010; “Smart meters – a rough guide”, Craig Memery, ReNew magazine (ATA) Issue 111 April-June 2010; Origin Energy website; PowerCor Australia website.