The Victorian rollout of smart meters has been described as a textbook case of bad public policy and the south-east Australian state is now looking to government to help them get the most of what they were forced to pay for.
Business case for smart meters questionable
The controversial smart meter rollout kicked off in 2009 when Victorians were told that they had no choice but to pay for their smart meters. They were also not given a choice as to the meter model. When it came to the rollout costs, it became clear that the Department of Economic Development, Jobs, Transport and Resources failed to track the costs of the programme, leaving consumers with a hefty bill.
Added to this, was the fact that consumers had not been properly informed of the meter benefits. According to a report released last September by the Victorian Auditor-General's Office (VAGO), despite improvements to consumer education since an earlier 2009 audit, market research conducted in early 2014 found that 66% of Victorians do not fully understand smart meter benefits. The report found that many consumers were also unaware of the ability for smart meters to help reduce energy bills. It stated that customers appeared not to realise that changes in consumption behaviour would help reduce bills their bills directly. The auditor general found just 0.27% of consumers had subscribed to flexible pricing offers associated with smart meters, well below the target of 4% by 2014 and 15% by 2017.
Residents of Victoria have paid in excess of AU$2 billion (US$1.53 billion) for the rollout of smart meters and according to the auditor-general's report, the biggest benefit so far is that consumers are avoiding the installation and manual reading of older meters. It is clear that the full potential of these smart meters have yet to be realised.
In 2009, there were already signs that the business case for smart meters was questionable. The 2009 VAGO report into the rollout programme was highly critical of the original business case for smart meters, making recommendations to improve the governance and stakeholder engagement, reassess the economic viability of the smart meter programme and to assess the impact of changes to scope and underlying assumptions.
VAGO’s new report indicates that while efforts have been made to address the recommendations, changes have not been sufficient to overcome the "manifest problems with the estimation and control of cost benefits".
Controversial smart meters can still deliver benefits
With the rollout now completed, Victoria is left with infrastructure which has the potential to lead future innovation and consumer benefits.
Energy Minister Lily D'Ambrosio said the government had made significant progress in improving the smart meter system and most of the auditor-general’s report's recommendations were in the process of being implemented or already had been.
"We're very keen to make the most of the smart meter technology that is already available to all Victorians, and there are some fantastic benefits that are already being reaped," she said.
At the time of publication, we had yet to hear back from the government with regards to what VAGO recommendations had been followed and what exactly these benefits are as per the Energy Minister.
Customer engagement and rollout go hand in hand
Smart electricity meters are a great idea. They offer opportunities for consumers and electricity retailers to develop innovative programs to save both power and money. Tied into smart appliances and the internet, smart meters are the way of the future.
But, when customers are not properly engaged from the outset, rollouts can fall flat and benefits won’t be realised. We wrote recently about the importance of unlocking real smart meter value for consumers in our article, Utilities-Don’t leave your customers behind. Customers must be engaged from the beginning-not only to understand and accept the investment being made but also to participate in the new services that become available such as time-of-use tariffs, demand response programmes and smart home technology.
“With energy companies undertaking massive smart meter deployments expected to reach 1.1 billion installed meters by 2022, to date the investment planning has primarily been focused on operational benefits, such as using smart meter data to facilitate remote connections, improve meter-to-bill processing, improve outage detection and reduce technical losses,” comments Jon So, Senior Manager of Product Marketing, International at Opower. “The customer benefits of smart meter deployments have been largely absent in these planning conversations. Or if they were, they were never realized.”
Smart meters represent an opportunity for utilities to upgrade their customer experience by investing in personalized engagement platforms that allow them to deliver the right message to the right customer, through the right channel at the right time.
As Matthew Warren, chief executive of the Australian Energy Council, which represents retailers, points out: "Smart metering is not a bad thing, it's a great thing, which will enable households to become more efficient. He added: “….the lessons from Victoria are there's nothing wrong with the technology, the problem was with the way it was rolled out there….”