The Energy Networks Association has released a draft handbook to help develop and implement new electricity prices to benefit customers.
The Energy Networks Association engaged KPMG Australia to assist the production of the Electricity Network Tariff Reform Handbook to guide networks and stakeholders in the process of tariff redesign.
The handbook is now available for consultation.
Energy Networks Association CEO, John Bradley, said Australia’s energy customers are some of the fastest in the world to embrace new energy technologies, but are in danger of being left behind when it comes to fair and efficient pricing.
“About a third of households in the USA now have smart meters, with many US states moving to implement tariffs that reward customers for lowering peak demand – and we have seen similar changes in Italy and Canada,” Mr Bradley said.
Mr Bradley said the draft handbook highlighted insights from the implementation of tariff reform in Europe, Canada and the United States, as well as recent experience in Australian markets.
“Most Australian network service providers are currently implementing new tariff options for customers to choose, which reward reductions in peak demand.”
Mr Bradley said most customers today were charged for how much electricity they used, regardless of when they used it.
“By rewarding customers who reduce peak demand, we can avoid future network investment, encourage the best use of solar panels and battery storage, and reduce cross-subsidies between customers.
“Australian analysis has indicated tariff reform could save consumers $250 per year over the long-term, while the draft Handbook highlights US customer bill savings of 11 to 41 per cent.”
Mr Bradley said the handbook recognised successful reform would require a clear customer focus with better analysis of customer preferences and outcomes, direct assistance for customers to respond and support for vulnerable customers.
“New tariffs have to be simple for customers to understand respond to – and that means collaboration with energy retailers and other new market participants will be vital,” Mr Bradley said.
“Fair and efficient prices are important for enabling choice when investment decisions move from a few large entities to millions of individual customers.
“Some customers will save by simply changing the time when they run appliances, while others can consider take up of rooftop solar PV, household battery storage or smart appliances and thermostats and electric vehicles.”
Mr Bradley said the handbook highlighted well-recognised principles for network tariff design including they be easily comprehended by customers, reflect the efficient cost of providing network services, and minimise unintended subsidisation of some customers by others.
According to the Electricity Network Tariff Reform Handbook, evidence suggests, many vulnerable customers would be better off immediately under a demand-based tariff.
The handbook references dynamic pricing trials in the US that found 80 to 90 per cent of low-income customers would benefit from moving away from flat or inclining block rates to dynamic pricing.
“In the short term, tariff reform will reallocate costs among customers more fairly, while over the longer term, reform will lead to network prices lower than they otherwise would have been,” Mr Bradley said.
The ENA is inviting comment on the handbook until 9 May 2016.
View the draft Electricity Network Tariff Reform Handbook here.