Australia auditor finds smart meters not delivering benefits

Government of Victoria smart meters benefits
The state of Victoria’s assessment of the smart meter rollout finds that the cost-benefit analysis was based on incorrect assumptions, according to auditor general John Doyle

In the Australian state of Victoria, consumers are paying a “substantially increased” net cost for the smart metering programme while most smart meters benefits have yet to be realised, according to a report released this week by the auditor general.

The audit, presented by John Doyle to the Victorian parliament, finds that by the end of 2015, Victoria’s electricity consumers will have paid an estimated AUS790 per household for metering services, including the rollout and connection of smart meters.

Smart meters benefits

The findings, which come as a blow to the state-wide rollout that began in 2009, also assert that “few benefits have accrued to consumers, despite estimates suggesting that approximately 80% of the expected benefits could be achieved”.

One reason why consumers aren’t seeing smart meters benefits is because they rely on their own action to take advantage of these services, said the group of auditors.

The chain of action to realise these benefits also relies on retailers passing on savings to consumers.

The state is unable to monitor these transactions and “as such, the actual transfer of these types of benefits to consumers is unclear as these actions cannot be fully determined in advance”, states the 2015 auditor’s report ‘Realising the Benefits of Smart Meters’.

Consumer engagement to release benefits

In a cost-benefit analysis prepared in 2011, the Department of Economic Development, Jobs, Transport & Resources, which is responsible for the rollout, assumed that consumers would engage with flexible tariffs and demand management programmes.

However, these assumptions are not currently being met. By 2014, the 2011 CBA expected 4% of consumers to have taken up flexible electricity price offers, however, only 0.27 per cent have done so.

Smart meters rollout costs

The enquiry also found there is a risk that the 2011 costs estimate of AUS319 million may increase.

In fact, Mr Doyle said in each analysis since the 2009 audit, the estimated costs have increased and the smart meters benefits have diminished.

The 2011 cost benefit analysis was the fourth assessment of the rollout in ten years.

Doyle said: “This continual change highlights the serious flaws in the programme’s original business case which we identified in our 2009 audit, as well as the unrealistic assumptions around the achievability of the costs and benefits which were beyond the control of the state.”

Risks to smart meter rollout

A move to give consumers choice of which smart meters they buy and have installed from 2017 is another factor that increases the risk of spiralling deployment costs.

National reforms to metering that are expected to be introduced from mid-2017 could mean that smart meters installed under the AMI program may be replaced by other, competitively provided meters, under nationally agreed arrangements.

The Department of Economic Development, Jobs, Transport & Resources has acknowledged that the removal of distributor exclusivity in Victoria is a risk to the realisation of the benefits of the AMI program. It may also expose consumers to increased costs.