New electricity meters can add up to $800 to power bill

Smart meters being rapidly rolled out in the push to slash carbon emissions could be “enabling a rip-off”. See what this means for you.

Exclusive: New electricity meters being rapidly rolled out in the push to slash carbon emissions are “enabling a rip-off”, according to an economics professor that federal Labor appointed to the Climate Change Authority.

University of Queensland’s John Quiggin told this masthead many households with smart meters had been moved to demand tariff power plans that were “just crazy.”

NSW’s Independent Pricing and Regulatory Tribunal (IPART) has found demand tariffs can add up to $800 a year to annual bills if consumers have high use during the late afternoon or early evening.

Demand tariffs carry an extra charge typically calculated on the heaviest half-hour of consumption between 2 and 8pm or 3 and 9pm on a single day, multiplied by the days in the month or even longer.

University of Queenland’s Professor John Quiggin.

They were devised in response to reforms that required distribution networks to set charges to reflect the impact of customer usage on power infrastructure.

Households are hit hard if, for example, they simultaneously use multiple electronic devices such as air-conditioners, pool pumps and kitchen or laundry appliances.

“I object to demand-based tariffs,” said Prof Quiggin, who was on the Climate Change Authority board for five years from the time it was established by the Gillard government in 2012.

The Australian Energy Market Commission announced the decision to accelerate the rollout of smart meters in November. All households and businesses will have one by 2030.

The AEMC said it “expects the accelerated deployment of smart meters will support emissions reduction in the electricity sector.

“Smart meters support the integration of zero or low emissions technologies … (and) increased reliance on consumer energy resources such as solar PV, battery energy storage systems and electric vehicles.”

As part of the accelerated rollout, the AEMC is introducing “consumer safeguards” meant to shield against higher bills from demand tariffs.

These measures include forcing retailers to obtain explicit consent before a shift from a flat-rate plan.

However, serious concerns have now emerged about why this protection isn’t being applied to households and businesses that already have a smart meter.

More than 40 per cent of homes and enterprises across NSW and Queensland have a smart meter now, up from 25 per cent in 2021.

A sharply rising share of these customers have already been moved to demand tariffs, sometimes without their knowledge.

In some areas of NSW and Queensland, demand tariffs became the default plan after the installation of a smart meter.

Around 430,000 or 13 per cent of NSW households are now on demand tariffs, up from 190,000 two years ago.

In southeast Queensland, it is 16 per cent.

There are low numbers of demand tariff customers in South Australia and Victoria, according to the ACCC and state authorities.

Recently, some retailers such as AGL have stopped assigning customers to demand tariffs, arguing that they are unfair and too complex.

In December, an IPART report put the potential financial impact from demand tariffs at up to $800 a year for customers with heavier use during the afternoon or evening.

IPART told this masthead it was concerned the AEMC’s explicit consent requirement wouldn’t apply where a customer already has a smart meter, or has a smart meter installed before December 1 this year.

The AEMC is also heralding a new provision allowing states and territories to require that flat tariff standing offers be available to customers with smart meters.

Independent Pricing and Regulatory Tribunal has found demand tariffs can add up to $800 a year to annual bills if consumers have high use during the late afternoon or early evening. Picture: iStock

But IPART argues that this will still leave many consumers paying more than necessary because there will be no requirement to make flat tariff market offers available to customers with smart meters. Market offers are as much as $350 a year cheaper than standing offers.

Commenting on IPART’s concerns, AEMC chair Anna Collyer told this masthead: “Rather than alter these newly determined safeguards before they begin, we believe the focus should be on successful implementation while monitoring their effectiveness.”

Ms Collyer said that “for customers who already have smart meters or will receive them before the accelerated rollout starts, important existing protections remain in place.”

For example, retailers “must give customers advance notice of tariff changes and provide clear information about any variations,” she said.

But that hasn’t always happened, according to consumer advocates.

IPART’s report revealed the federal government price comparison website, Energy Made Easy, cannot calculate the demand charge component of bills. So it is difficult to shop around for a better deal.

The only site that can do a comparison is privately operated Bill Hero.

“I didn’t quite believe it when I first discovered there was nowhere to go” to compare demand tariffs, said Bill Hero CEO Richard Foxworthy.

That switching of households to demand tariffs without their knowledge was a “very unfortunate set of circumstances,” Mr Foxworthy said.

Peter Nink says the demand tariff is costing him $125 a year because he and his wife can't shift the time they use power for cooking. Picture: Liam Kidston

Peter Nink of Redcliffe in Queensland turned to Bill Hero after being moved to a demand tariff.

Mr Nink said his retailer made out that receiving a smart meter would be to his financial advantage.

“It wasn’t,” he said. “It was to their benefit because they could charge a demand tariff.”

He now runs the pool pump in the off-peak period and uses fans instead of the airconditioner.

But there’s little he and his wife can do to avoid a penalty for making dinner using the oven or cooktop.

“That’s where the demand tariff gets you,” Mr Nink said.

The extra charge on his bill is $125 a year.

Bill Hero had found him a rate that means his overall costs are still lower than what he was paying before the smart meter was rolled out.

Some consumers are much better off on demand tariffs. These households are likely to have a lot of solar panels on their roof and a battery for storing excess energy from the sun.

While demand tariffs can be costly, these complex electricity rates are a winner for those with lots of solar, a battery – and the flexibility to go somewhere cooler on the odd day that it’s really hot.

Jonathan Prendergast and his family tick all those boxes.

It helps that Mr Prendergast, of Como in southern Sydney, is an expert on solar and energy efficiency.

Jonathan Prendergast displaying his battery that is used to power his home in Como during peak times. Picture: Ted Lamb

The demand tariff he has chosen has an extra fee based on the highest consumption during the peak demand period, which covers the latter half of the afternoon and early evening.

But the Prendergasts largely avoid that fee, by using power at other times.

Their retailer provides very cheap rates when demand is moderate and wholesale electricity prices are low – typically because of high generation from the sun and wind.

The Prendergasts use their solar panels to charge their battery, which gives them stored power to get through that peak period.

Jonathan Prendergast with his daughter Olivia, charging his electric car. Picture: Ted Lamb

Of course, the sun doesn’t always shine during the day to charge their battery.

And that’s when the Prendergasts have to consider altering their behaviour.

“We try to moderate our consumption if the clouds stick around,” Mr Prendergast said.

And there’s always the option of jumping in their electric vehicle and going somewhere for a swim to get out of the heat at home.

Incentivised by the prospect of the demand tariff penalty, they do this about three times each summer.

Mr Prendergast said there were some credible criticisms of demand tariffs, including how they’ve been introduced, but “there are some nice advantages too.

“If you are on a demand tariff and willing to make a few changes and adjust things, you’ll get rewarded” with significant savings, he said.

He was critical of authorities for not doing any upfront education about the potential benefits.

“I haven’t seen a single video, photo or even text post on Facebook,” Mr Prendergast said.

Originally published as New electricity meters can add up to $800 to power bill