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by John Bradley, Chief Executive Officer – Energy Networks Association

Australia’s energy sector is frequently described as being in a state of ‘transformation’ – a fact again highlighted by recent Australian Energy Market Operator forecasts that electricity use will decline by 1.1 per cent over the next three years.

Consumption trends and a rooftop solar PV market with an average annual growth rate of 24 per cent have brought significant change with the potential for more change to come – as consumers increase their use of embedded generation technologies and consider new options in battery storage, electric vehicles and demand side participation.

With this transformation in mind, current and future energy consumers have a central interest in a policy debate which will play out during 2014. The Australian Energy Market Commission is now consulting on a rule change proposal to expand competition in metering and related services.  While the development of the electricity metering framework may sound like a dry topic, it could be the difference between ensuring our electricity system evolves, rather than spirals.

Advanced Metering Infrastructure, or Smart Meters, are a gateway to the long-term sustainability of the electricity system. As technology and energy markets develop rapidly, smart meters will benefit individual customers by providing practical information about energy use, permitting more efficient and rewarding tariff structures; and enabling participation in new markets, such as exporting energy to the grid through solar panels.

Importantly however, smart meters also provide a simple way to achieve benefits to all customers when used by network businesses as part of strategies to reduce or defer capital and operating expenditure through improved network planning, control and management.  The whole of system benefits to consumers include improved safety, greater access to power quality and outage information to reduce customer time off-supply, and improved outcomes for reliability performance.

Recent decisions by Energy Ministers to provide consumers with choice about their metering provider are welcome – but it is vital that the new framework also ensures networks can also employ and rollout these devices to provide benefits to all customers through more efficient and effective network operations.

The 2011 study of Victorian Advanced Meter Infrastructure found that the benefits derived from efficiencies in network operations was $733 million, or approximately 29 per cent of the total benefits – the largest category of smart meter benefits after avoided replacement and meter reading costs.

A new report commissioned by the Energy Networks Association on the potential benefits of smart metering infrastructure suggests that there may be a wider range of potential benefits from smart meters being realised since earlier studies were done.

The Energeia study submitted to the AEMC by the ENA highlights a number of previously unidentified additional benefits which may be achieved through advanced metering to the benefit of consumers.

Not all benefits will be achieved in all circumstances and each investment will require its own business case, but the Energeia analysis highlights how network customers will be disadvantaged if the new metering framework stifles network access to smart meter services or does not fix antiquated rules preventing some networks from using smart meters today.

Energeia concludes in its Review of the Potential Network Benefits of Smart Metering that:

• The potential network benefits have been greater than initially anticipated in the original Victorian and national cost-benefit assessments;

• Energeia’s indicative estimate is that the network derived benefits may be up to three times higher per annum than estimated by the most recent Victorian review in 2011;

• Benefits will vary significantly due to circumstances, and so it is critical that the metering framework fosters innovative applications of smart meters and the economic realisation of benefits as they emerge.

Importantly, it finds that as the penetration of smart meters in an area increases, the benefits to consumers also increases.

ENA supports a contestable metering framework which delivers real benefits to consumers, by providing individual customers with choice, but also allowing all customers to benefit from more efficient network management services.

The current policy proposes to create a gatekeeper of metering services, the Metering Coordinator (MC). While a customer would have the choice to appoint its own MC – for most people appointing an MC is something done when planning a 21st birthday party, so they are more likely to accept their retailer’s choice.  The problem for all consumers is that the new MC would be able to charge the network business for smart metering services as an unregulated monopoly. That risks higher costs to all network customers. A policy framework so unbalanced may provide a real barrier to parties reaching agreements which underwrite significant investment in smart meters.

The need for transformation in Australia’s energy sector is urgent – approximately 70 per cent of Australia’s small customers still have their consumption read on accumulation basis and they are stuck with out-dated tariffs that do not reward cost-saving behaviour.

As the winds of change sweep the Australian energy sector, consumers can ill afford a delayed take-up of smart meters because we ‘didn’t get the rules right’.

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