The compulsory roll out of electricity smart meters in Victoria has created a backlash from those who believe the government wants to irradiate us. In Europe, data and privacy issues have been raised. But smart meters appear to be a key element of the Federal Government’s response to concerns about electricity prices. See here and here. To make the roll out work and actually get energy savings, the government needs to do one thing – give the meters to the people.

What do I mean by this? Currently, your electricity meters are owned and maintained by your distribution company. This means that you can move retailers seamlessly but that everyone gets the same plain vanilla meter – or the same plain vanilla smart meter.

What about the retailer owning the meter? The key problem is that if a customer wanted to change retailers to get a better electricity tariff there would be a fixed cost of changing meters. This is like the bad old days when every time you changed mobile carriers you had to get a new phone number. It made it hard to switch, reduced competition and led to higher prices and less innovation.

The mobile phone problem was solved by ‘giving the numbers to the people’. By requiring mobile number portability, the government made sure that consumers can keep their phone number when they switch mobile carriers. How about we do the same for smart meters?

This approach is simple. There is a basic meter that a consumer can have as part of their electricity connection if they want. But there is also a selection of ‘approved’ smart meters from competing suppliers that a consumer can pay to have installed. If you have a smart meter then, depending on its functionality, different retailers can compete for your business through the package of electricity prices that they offer to you.

What are the benefits of this? First, if you don’t want a smart meter (fear of radiation or Martians) then nothing changes. But if you do want to use a smart meter to manage your power consumption then you can choose the one that best suits you. In other words, consumer ownership of meters creates consumer buy-in and control.

Second, it encourages innovation. Pretty quickly consumers will have a range of choices for smart meters. They will range from simple (perhaps a two-tariff meter based on spot electricity prices where your meter ‘tells you’ when you are on a high or a low tariff, but it is up to you to decide what to do with your appliances) to a ‘Rolls Royce’ version (internet/NBN connected appliance control by the retailer or through the meter so your appliances automatically adjust to electricity prices on a real-time basis). So consumers can choose the smart meter that best suits them.

Third, it encourages competition. The consumer can change retailers or upgrade meters as they see fit. If a retailer doesn’t offer the best package then easy – just switch. If a new meter comes on to the market with better functionality, great, you can choose to buy it if you want to. No waiting on a bureaucratic decision by government or the monopoly distributor.

How do we know it will work? Because this is the way competition works successfully for pretty much all other modern electronic devices. And that is all your smart meter is.

What are the negatives? The engineers complain that choice leads to cost. But this is the Soviet style approach. It is ‘cheaper’ and ‘more efficient’ if we all have the same car (say, a Trabant) but it is also a bad outcome. Indeed, I wonder how many of the ‘command and control’ engineers would be happy if they were all required to have the same mobile phone, the same computer, and the same television, all chosen for them by a central agency to ‘reduce cost’.

So will it cost more? No. Because the consumer will choose if the benefit of the meter outweighs the cost and if it does they will be willing to have a smart meter. And if it doesn’t, then there is no cost and they keep their basic meter.

What about data integrity and the integrity of the electricity network? This excuse was used for years to stop consumers having a choice of telephone. It was nonsense. There will be a range of smart meters that can safely be connected to the electricity network. These can be certified by an independent body (not the network owners who have no incentive to have anything but the basic meters).

In brief,  smart meters can work. But only if we avoid making the same mistakes that we made in other network industries, like telecommunications, when technology started to revolutionise customer services. How do we avoid those mistakes? Look at where we have got to in those other industries and realise that consumer choice drives competition and good decision making. Give the smart meters to the people!

9 Responses to To reform electricity – Give the smart meters to the people!

  1. JJ says:

    I didn’t realise they belonged to the power company! After all we are paying for them through increased bills, so what you are saying is just common sense. We’ll see how long it takes ….

  2. Dave Smith says:

    Stephen,

    I couldn’t agree more. I find it shocking that the Productivity Commission is supporting the “Soviet style approach”. It argues that smart meters provide strong positive externalities, but even if this is true, that just suggests that smart meters should be subsidised, not mandated.

  3. Peter says:

    So simple but so effective. Another problem with the current system is that I will have no idea when the meter is actually paid for. I suspect the charge has become a permanent addition to my costs.

    However I have turned the smart meter to my advantage by installing a PV system with sufficient capacity to generate more than I consume. To counter this my retailer transferred me to a time of use tariff but thanks to my distributor I can download my daily consumption and generation profile. With this information I am manipulating my usage practices to minimise my consumption and maximise my generation, for which I receive a generous feed in tariff subsidised by all those poor suckers who can’t do the same thing. Sad, isn’t it!

  4. CraigM says:

    Hallelujah!! Nice post. In addition, this idea could also increase take-up. Thinking about the mobile phones example, we might see competing retailers offer “free” smart meters.

  5. Letta Mego says:

    People need to realize “smart” meters are basically cell phone substations….they act like a cell phone tower to wirelessly control “smart” appliances by the user or the utility company (or a hacker). Smart meters have two antennae…one antennae beams radiation into the home to control “smart” appliances (that we don’t have)…a second antennae beams radiation outward to the neighboring “smart” meters…the “smart meter also contains an operating system (computer) and can tune up or down the radiation. These “smart” meters are hackable…they also will need replacing every 5 years or so. Just so “smart”.

  6. Ben says:

    I think it should have two parts. The basic sensor that does little more than measure and talk to the utility which has a standardized output (say a USB) that allows for the addition of the smart upgradeable stuff, such as wifi house communication of real time price monitoring. Standardize that output, make it so that you don’t have to be an electrician to install it, watch the market make cool stuff.

  7. caf says:

    The reason that they’re being paid for by the distributor is that the distributor is the one that realises most of the up-front cost savings – by not having to pay for physical meter checks anymore. Obviously that saving would be almost entirely eliminated even if there was just one hold-out in each neighbourhood.

    The data integrity issue is also different to the telecommunications example – neither fixed line nor mobile phones are responsible for recording billing information, but that’s the primary function of an electricity meter.

  8. Peter says:

    In Victoria, the only state thus far to mandate introduction of smart meters, the consumer pays for the meter, not the distributor.

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