Bill shock: Energy retailers have a nasty surprise with smart meters and time of use tariffs

The energy regulators and ministers tell us there should only be small changes to out electricity bill this year as a result of moderating wholesale market prices, and the growing influence of renewables.

But the good news, or at least the good intentions, could be overwhelmed by the rollout of smart meters and the introduction of time of use pricing. Customers are in for a rude shock, and bills actually could jump by as much as 50 per cent in some cases.

Governments, regulators, and policy makers are aware of the problem, but somehow have been powerless to stop it. Consumer groups fear the situation threatens to undermine the already low trust in energy utilities – just when trust is the very commodity needed because of the key role that households must play in the transition to a green grid.

Take my home as an example. Last October, after the demise of the local community focused retailer Enova, we finally chose a variable go solar contract with Origin Energy, which promised a rate of 37c/kWh, and a feed in tariff of 10c/kWh for solar exports. The company told us in a letter that would be in place for at least 12 months.

But promises and written assurances seem to mean little in the energy world – at least when it comes to the consumer. In May, that contract was torn up, we are now informed in our latest bill – and yes, they are allowed to do so. What’s worse, after a smart meter was installed in early June we were shifted – with no consultation – on to a time of use plan.

And the tariffs are truly shocking.

For the evening peak period, we are now being charged just under 50c a kilowatt hour (kWh). For the shoulder period – which is for most of the day – we are being hit with a tariff of nearly 43c/kWh. The off-peak period, which only applies between 10pm and 7am, when we try to sleep, is still a hefty 29c/kWh.

Hang on? Didn’t the Australian Energy Regulator promise us that the default market offer (DMO) would only rise marginally this year. And this would be the reference for all bills. How is this permissible?

Easily. The DMO does not stipulate a kilowatt hour (kWh) price, it envisages a total annual bill, based around assumed average household use. Like much about the regulations that surround the energy industry, there is enough wriggle room for the big players to do pretty much as they please, as we readily note in the wholesale markets.

This is not just happening to our household. It will be happening to thousands, if not tens of thousands of customers across the country, but particularly in NSW where the roll out of smart meters is being accelerated.

“We’re hearing a lot of stories about this,” says a spokesperson for the Energy Consumers Association. “Our position is that consumers shouldn’t be subject to mandatory assignment onto more complex pricing.

“We think consumers should have a choice of tariffs and be provided with the information they need to be able to choose the plan that works for them, whether that’s a Time of Use or a Flat Rate tariff.” 

Energy ministers are also aware of the situation. Last Friday, they announced in a communique that energy retailers would be prohibited from automatically shifting customers to time of use pricing after the installation of a smart meter.

But that has not yet been introduced, and the market rule maker, the Australian Energy Market Commission, has delayed its decision as it seeks more information. Among the things it is being urged to do is to ensure that flat tariffs are still on offer.

“We have heard the concerns about time-of-use tariffs and delayed the final determination for our rule change into Accelerating smart meter deployment to get the customer safeguards right,” AEMC chair Anna Collyer said in an emailed statement to Renew Economy.

“We are considering an enhanced, robust customer protections package that places further obligations on retailers. These include considering whether retailers should be required to obtain a customer’s explicit informed consent before changing them to a new retail tariff structure. We are also considering requirements for flat tariffs and historical bill comparisons.“

Origin Energy was incredibly apologetic to us when informed of the situation. They admitted they made an error, would fix it, and would ensure that flat tariff options are available next time we check out options for our address on their website. Apparently those options had been “supressed” but no one is too sure why.

The company insists that shifting households with newly installed smart meters to ToU bills was and is not their policy, and that our experience is unique, or at least a rarity. Rotten luck, then, that it should occur to one of the country’s few energy journalists, who could work out what was going on.

“Origin’s approach is to not make any changes to a customer’s retail tariffs after a smart meter has been installed at their property,” said John Briskin, the head of Origin’s retail division, in a statement emailed to Renew Economy.

“We have successfully completed over 35,000 smart meter installations over the last 12 months in NSW where we have made sure customers remained on the same preferred tariff they were on prior to the meter exchange.

“We are sorry and made a mistake in this instance. This should not have happened and we have fixed it and reverted the customer to their preferred tariff.”

But we know – from the regulators, media, and anecdotal reports, that thousands of others find themselves in the same situation, across many energy providers. (The federal government might want to check out what is happening with the retailing arms of its own government owned retailer, Snowy Hydro, for instance).

We are in the privileged position of being well-established journalists writing about energy, with good contacts. So we were able to get answers and explanations from our retailer, the regulator and the market rule maker.

As a mere customer, that was difficult, if not impossible. On the retailer help line, we waited 20 minutes (after being advised repeatedly of a one minute wait) before getting through. We were then told on that call that the switch to ToU tariffs was automatic. When we questioned the fairness and the legality of that, the line went dead.

We rang up the Energy Ombudsman, but after being put on hold for 30 minutes that line went dead too. We hopped onto the web chat with the retailer, but were told that there were no “billing experts” available on that platform – which made us wonder what it was for. We suspect that this situation is not unique to our provider.

But what about the scale of the ToU tariffs? How are these justified? Aren’t we supposed to be encouraging consumers to use electricity during the middle of the day, and other times when wholesale prices are usually low and often negative?

Big batteries are getting paid millions of dollars to soak up rooftop solar in the middle of the day, so why aren’t households encouraged to create their own load?

Our household has the luxury of having rooftop solar, but the majority of people do not. Origin’s explanation is that they are still working on those tariffs. They should have already put them in place before this, and before the smart meters are rolling out. All the retailers should.

We are moving house soon so are we are not going to worry too much about the situation here. In the next house, we have decided that we are going to install the biggest battery we can afford. We’re lucky because we can, but the people who can afford to do this are still in the minority.

There are multiple problems with this situation, of course. The first is the impact on consumers. We live comfortably but this was still a shock, and our bill is being revised. Such changes will be devastating for households less well off and struggling with the day to cost of living.

Time of use pricing is considered a good idea, because it may encourage rooftop solar, battery storage, and the smarter use of energy. But it needs to be fair and reasonable. Deployed like a bludgeon, in the dead of night, with few other options, it is massively counter productive.

It’s bad for the green energy transition, much of which depends on what happens in the home and behind the meter. We hear so much talk about the importance of marshalling and “orchestrating” consumer energy resources, which means rooftop PV, batteries, EVs, heat pumps, controlled loads, and smart appliances.

For this to happen, there has to be a strong element of trust between the consumer and the energy utility. They want to gather people up in “virtual power plants” and use that to focus on “demand side options” rather than just supply.

This is smart. For the last half a century all we have ever talked about is building new, expensive peaking plants. The demand side equation has always been forgotten.

But unless people believe they are being fairly treated, they will not buy in to such changes and will be prone to scare campaigns, and there are plenty of those in the energy industry and the politics that surround it.

And, for all the hundreds of millions of dollars being spent on their consumer management systems, it seems the big utilities still don’t know how to knock politely on the door.

It appears to be a pattern of behaviour. Australia’s economy is full of duopolies and oligopolies – in banking, general retail and energy – and these businesses have been able to profit handsomely in the face of weak regulation, or indeed regulatory capture.

But in energy, the stakes are too high. The transition to green energy won’t happen without the buy in from consumers. The big utilities are mouthing the right words, but there is not much evidence they understand what these words mean, or that they can suppress what they see as their fiduciary duties to shareholders to maximise profits.

But why do the energy utilities need the government to tell them, and the regulator to enforce a rule, to stop them making such changes? Isn’t it in their long term interests to carefully explain to their customers what smart meters are for, and why they are a good idea, why they should adopt carefully considered ToU tariffs, and why they should stay with them?

But that’s the way of the energy world, it seems.

We now find ourselves in the situation where the regulator tut tuts about bidding patterns in the wholesale markets – where prices are bid so high for so long that the market has to be suspended – but has little or no ability to do anything much about it.

It’s where generators announce or threaten early closure of their coal generators and then do little or nothing to build new capacity before hand, and then hold out their hands for hundreds of millions in payments to keep them open for longer.

It’s where small players – like Enova – try to do something different, and not just think about short term profits, but find themselves chased out of the market by the dominant companies that control all the market levers.

What’s the answer to this? I’m not too sure. I’m not too sure anyone knows. Government ownership does start to sound appealing – but for most of the industry that cart has long gone. For the moment though, consumers should question their bills, demand a better deal, shop around for an improved price. Let the ombudsman know. Get a case number.

But it won’t be simple. Even the Energy Made Easy website set up by the government, regulators and consumer groups is complicated. And guess what, if you have had a smart meter installed, they say they no longer have your historic data. Seriously? You have to do it all by hand.

We really have to do better than this.