Power price structures have radically changed, but nobody thought to tell consumers about it
By Daniel Mercer, ABC Energy Reporter
14th June, 2024
It’s the great untold story of Australia’s energy transition.
For years, acres of newsprint, countless hours and squillions of dollars have been dedicated to fighting about and transforming the way we generate our electricity.
How clean it is, how much it costs to build, how much of it we need and where we plonk it have been the dominant, overwhelming themes of the subject.
But quietly, almost imperceptibly, an equally monumental shift has been happening in the energy landscape of this country, with arguably as much effect.
The way we pay for electricity is being turned on its head.
From a system where we pay the same rate for electricity no matter when we need it from the grid — a system that’s all most of us have ever known — we are moving towards something vastly different.
No-one is quite sure what that something is, but it’ll almost certainly be more complicated.
It will involve paying prices that depend on the time of day you’re using the power, the intensity with which you use it, and your ability to afford the technology that might help offset the costs.
In other words, it will require consumers to take a quantum leap in their understanding of the energy system, and their willingness to fit their behaviour around its whims.
When silence is deafening
And yet.
Despite the fundamental nature of these shifts, there is a deafening silence about the fact the changes are happening at all.
Within the energy industry, the topic of changing the way people pay for power — tariff reform, as it’s known — is widely recognised.
These tariffs, which are collectively called “cost-reflective”, come in different shapes and sizes.
There are time-of-use tariffs, which charge consumers more for the power they buy from the grid at peak times and less at others.
There are so-called demand tariffs, which basically charge someone according to the intensity with which they use electricity in peak hours.
Use power in a particularly intense way over a 30-minute period during the peak, and you’ll pay that rate for an entire month.
No doubt there are other tariffs besides.
What all of these tariffs have in common is complexity — a complexity that’s aimed at getting consumers to use less power when it’s relatively scarce, and more when it’s relatively abundant.
It’s an objective that’s gained ever more impetus as Australia shifts from an electricity system that runs on fossil fuels that can generate on demand around the clock to one where the daily cycles and vagaries of renewable energy are increasingly dominating.
But try finding an energy minister who’s declaring the need for these new tariffs from a public pulpit, or a regulator that’s running loud and unmissable education campaigns about their introduction, or a power company that’s truly trying to help consumers manage the transition hurtling towards them.
You’ll probably be searching a while.
We’re migrating, but to where?
Effectively, there is a huge, forced migration underway among energy consumers who are being shunted from a comfortable world of simplicity to an arcane one — and practically no-one is talking about it.
The numbers don’t lie.
Across the jurisdictions overseen by the Australian Energy Regulator — New South Wales, South Australia, Queensland, Tasmania and the ACT — massive numbers of people are being affected.
In NSW, the number of households on time-of-use or “flexible” tariffs increased from barely 150,000 in the middle of 2019 to almost three quarters of a million by the end of last year.
The increase is even sharper in South Australia, where the number of affected customers has exploded from just 4,134 in mid-2019 to more than 335,000 as of December 31 — a rise of more than 8,000 per cent.
While not quite as pronounced, it’s a similar story in south-east Queensland, where fewer than 2,000 affected households in 2019 had become 220,000 at the end of 2023.
Key to all of this are the smart meters that are being rolled out across the country and enabling the type of complex pricing consumers are now experiencing.
The rollout of smart meters — Victoria excepted — had been a sputtering affair in Australia until the relatively recent past.
But that’s no longer the case.
Rule changes by the bodies that run the electricity system have turbocharged the rollout of the devices, which have now been fitted to about 40 per cent of Australian homes.
By 2030, under another rule change by the Australian Energy Market Commission, every home will have one.
The upshot is that by the end of the decade, every home in Australia could be liable to pay cost-reflective tariffs.
Recent reporting by the ABC shows the public may be slowly waking up to the massive changes to which they are being subjected.
Read more about consumer bill shock:
- Charged a month for ‘moment’ of demand: Consumers angry at ‘mysterious’ power tariffs
- ‘Loophole’ allows energy providers to change power tariffs without consumer consent
- Why this baker ripped out his electric stove to avoid thousands in power ‘penalties’
- Anger and despair as electricity customers shifted to ‘punishing’ tariffs
Scores of readers have poured their frustrations into emails and sent them in, relaying accounts of rude bill shocks and battles with retailers waged.
A question of accountability
A common thread runs through most of the correspondence.
These readers often had no idea they were being put on to rates that would change according to the time of day, the capacity they required from the grid or simply by dint of getting a smart meter.
And that’s because no-one was really, truly telling them.
How consumers can be basically kept in the dark on a change of such monumental significance is remarkable.
There is another recurring feature in this affair.
Behind the scenes in the energy industry, there is a furious game of blaming and blame-shifting taking place.
Politicians and regulators, on the one hand, allowed these sorts of prices to be charged to users, and the smart meters that would give rise to their introduction.
Distribution companies — the ones that control the poles and wires of the electricity network — were allowed to change the way they charged retailers, and did so with gusto.
Think Energex in south-east Queensland, Ausgrid and Endeavour Energy in NSW, and SA Power Networks in South Australia.
And retailers, thanks to a loophole in Australia’s energy rules, were in turn allowed to pass those network tariffs on to household consumers without even having to tell them beforehand.
Think the big three — Origin, AGL and Energy Australia — as well as many of the second- and third-tier providers nipping at their heels.
Finally, it seems, the regulators at least are springing into action amid concerns about the dangers involved and the real effects being felt by households.
This week, at the electricity industry’s annual jamboree in Melbourne, two of the country’s most powerful and important energy watchdogs raised red flags.
The Australian Energy Market Commission, which sets the rules in a national electricity market servicing about 10 million homes on the eastern seaboard, was first off the mark.
Regulator waves the stick
Chair Anna Collyer suggested a slower rollout of tariff reform might be in order as the commission undertook a review of the rules around electricity pricing and looked to strengthen consumer protections.
“We’ve heard ongoing concerns from customers seeing unexpected changes to their tariffs associated with the installation of a smart meter,” Ms Collyer said.
“It’s critical to the success of the rollout that we work through these concerns raised about how retailers might be applying demand or time-of-use tariffs in unexpected ways.
“And we expect we may need to push back the final determination to do this well.
“This does not mean that we’re stepping away from smart meters or the importance of accelerating the rollout.
“What it does mean is that we’re aware of the fears arising from some customers’ early experiences.
“We don’t want to blindly push ahead without considering what more we can do to address concerns and avoid a potential multiplier effect.”
Echoing many of Ms Collyer’s concerns was Justin Oliver, the deputy chairman of the Australian Energy Regulator.
Like Ms Collyer, Mr Oliver said smart meters would be vital to the energy transition by encouraging the more efficient use of the poles-and-wires network — a network whose cost made up as much as 40 per cent of a typical bill.
Electric vehicles, he noted, would need huge amounts of power to charge, and ensuring that happened at suitable times could avoid the need for massive upgrades to the grid.
Similarly, smart appliances whose demand for power could be remotely reduced during periods of stress on the grid could shave serious costs from the system.
For all the benefits, Mr Oliver acknowledged that too few people seemed to be enjoying them.
Ominously for the industry, he issued a veiled warning about regulating prices in some form unless it could do better.
Complex power prices ‘concerning’: Energy rule maker
“Why do we see so many reports of consumers who feel that smart meters and time-of-use or demand tariffs are only making them worse off” Mr Oliver said.
“The fact is that, today at least, the benefits of the energy transition are not accessible to all.
“If consumers turn their backs on the transition, it’s over.
“It doesn’t matter what we think.”
On the face of it, no-one has done anything wrong in the legal sense of the word throughout this affair.
But millions of people now being caught up in a seemingly botched reform agenda might have a different view about the ethical conduct involved.
With Australia in the teeth of a once-in-a-century overhaul of the electricity system, there may be an important lesson in all of this.
In the case of tariff reform, it seems everyone is responsible, which means no-one is.
That’s cold comfort for consumers.
DeFrock 