As the clock ticks past 3pm and the early onset of a winter chill sets in, Doreen Fawcett faces a choice she’d rather not make.
Her elderly husband is ailing and, in her own words, “I’m not getting any younger, so I hate the cold myself.”
Keeping warm and comfortable is not just a luxury for the retired British civil servant; it’s much closer to an imperative.
“My husband’s not in the best of health,” she says.
“He has a lung condition and a heart condition. So I’ve got to keep him warm.”
But at 3pm every day, Mrs Fawcett’s power costs more than double.
They’ll remain at that ‘peak’ level until 1am and return to it between 6am and 10am the next day.
Every day she must decide whether to keep the heat running while the peak lasts or switch it off to avoid cripplingly high electricity bills.
Relying on the heat to stay trapped inside the living areas is not much of an option – her home is post-war, draughty and “freezing”.
“Out of a 24-hour day, the peak is 14 hours. Lovely,” she says, sardonically.
A world of complexity
Like a growing number of Australians – by some estimates millions – Mrs Fawcett is contending with a world where her power costs are becoming ever more expensive, and complex.
No longer is she being charged a flat rate regardless of when she draws electricity from the grid, as was the convention for decades.
Now, she’s paying much more during peak hours and less at others – overnight and during the middle of the day.
“The cheapest time seems to be between 1am and 6am in the morning,” she says.
“I’m not likely to be using the electricity at that time.”
Mrs Fawcett is on what’s known as a time-of-use tariff.
That she’s on the tariff is due to a new smart meter that was installed at her property in suburban Adelaide a few years ago.
Much like the time-of-use tariff that came with it, she never asked for the smart meter.
Nor was she given a choice – the meter, and all the changes it entailed, simply arrived.
The consequences, though, are hers to live with.
“All the other bills have to be paid, as well – the gas, water, electric, rates,” Mrs Fawcett says.
“And you think, could I cut back on the food bill? And then you think, well, how else am I going to do it?”
The unheralded transition
Mrs Fawcett has been swept up in a transformation of the energy industry as we know it.
It has got little – at least directly – to do with the huge changes taking place in the generation of electricity as coal-fired plants make way for wind farms, solar panels and batteries.
But it has got everything to do with how we use and pay for power.
“It’s the part of the transition that gets less attention, but it’s really critical, particularly the investment that customers are making in solar panels,” says Anna Collyer, the chair of the Australian Energy Market Commission (AEMC).
At the heart of it are the smart meters that have been installed on Mrs Fawcett’s house, like so many others around the country.
The meters not only allow power retailers to see how much electricity a customer is using and when, they also enable far more dynamic and complicated prices to be charged.
While Victoria has long had near-total adoption of smart meters, other states are catching up.
Under a mandate by the AEMC, every home in New South Wales, Queensland, South Australia and the ACT will have one by 2030.
It’s a similar story in Western Australia, Tasmania and the Northern Territory.
Ms Collyer says the meters hold out the promise of major, systemic benefits that could cut the underlying costs of power for everybody.
“It gives, for example, the [poles-and-wires] networks the ability to be much smarter in how they plan their network,” she says.
“At the moment, their tools are limited and the answer to many problems is ‘well, we should build more’.
“And that costs everybody because of the way in which costs of networks are recovered.
“The smarter they can be, the more data they have, then the less that’s required and they can do much more intelligent things about how to improve their network performance.”
Opportunities and risks
Similarly, Ms Collyer says smart meters can also help some households cut their electricity bills by giving them the information they need to reduce their consumption at peak times and increase it during off-peak periods.
This is increasingly during the middle of the day, when the output from millions of rooftop solar panels is washing through the electricity system, causing wholesale prices to crater.
“For the actual customers … they can save money on their own electricity bills, whether that’s by investing in solar, batteries, electric vehicles, or smart home devices, or using their electricity in a different way,” she says.
“It’s very hard to do that if you don’t know what’s going on.”
But Ms Collyer acknowledges there are also risks.
She notes that although some customers “really like to have the information … they like to make their own decisions”, many others do not want the bother.
What’s more, she says many will not or cannot change their behaviour to capitalise on cheaper prices at off-peak times, while avoiding higher costs at others.
“I don’t think it’s acceptable that customers should receive a tariff unexpectedly that they can’t respond to or don’t have awareness to respond to,” she says.
“[There’s] no one homogenous customer.”
The Australian Energy Council (AEC), which represents electricity retailers, said it broadly supported the rollout of smart meters and tariffs that better reflected the underlying costs of producing power.
But acting chief executive Ben Barnes said the lobby did not support the mandatory application of cost-reflective tariffs – either to consumers or retailers themselves.
Mr Barnes said customers with smart meters should be able to opt into complex tariffs but not be forced onto them.
“We see opportunities to come from having customers accessing more cost-reflective tariffs,” Mr Barnes said.
“But we have concerns about the complexity of tariff reform generally.”
Asked why the AEC’s members were passing on complicated tariffs to consumers if they did not support them, Mr Barnes suggested retailers had little commercial choice.
“Retailers are at the end of the line in this process,” he said.
“We see it’s unrealistic for retailers to bear the entire network cost-risk and pass through flat tariffs to customers.”
Like paying ‘without using’
Among those customers to have felt the effects of an unwanted and unexpected tariff are Anne and Nigel Cooper, retired IT professionals and self-described “numbers” people from Sydney.
They, too, got a smart meter a few years ago.
They also have solar panels, which help keep their electricity bills low.
Nevertheless, they say that as part of the meter upgrade they were hit with a so-called demand tariff, which charges them based on their single biggest half-hour period of demand for power across an entire month.
“It means that if you’re there for one day of the month, or you have a baked dinner for one day in the month, you’re paying for that oven being on, if it’s in the peak period, for every day of the month,” Mrs Cooper says.
Despite their numeracy, the Coopers say understanding the demand tariff took “an unbelievable amount of time” and involved reading the “super-fine” print, because it was so convoluted.
Eventually, they were able to get off it, but not without great difficulty.
“Most people wouldn’t have the time,” Mrs Cooper says.
“We would have sat here for a day, fiddling on the internet, clicking this link, clicking that link, analysing this, working out that. I mean, we’re retired and we’re interested in numbers.
“I think that tariff structure should be outlawed.
“It’s unethical to have something so complex, that you’ve got no idea what caused that bill to be so high.”
On that point, Ms Collyer from the AEMC appeared to offer some sympathy.
“I think it’s a real question as to whether that’s actually an effective way of helping customers understand their electricity usage,” Ms Collyer says.
Better safeguards needed: AEMC
More broadly, Ms Collyer says the commission is taking steps to get the reforms back on track.
It already had three proposals on the table: requiring retailers to provide at least 30 days’ notice of any tariff change, the inclusion of plain explanations of any changes and the provision of a bill comparison between old and new tariffs based on historic usage.
But in the face of pushback from householders on the upheaval and reporting on the issue by the ABC, the commission on Thursday released a number of proposed measures to strengthen consumer protections.
Among them is a requirement for retailers to get “explicit informed consent” from customers before being allowed to change their tariffs – a right that would last three years.
The AEMC is also proposing a mandatory flat rate option that “certain retailers would be required … to make available to all customers”.
In doing so, Ms Collyer indicated she wants to abolish a loophole that allows power retailers to change a customer’s tariff without forewarning them, in the event the network poles-and-wires company changes the tariff it charges the retailer first.
“I think what we’re really keen to do is ensure we can get the smart meters out there, because the data is going to be the key to all of this,” Ms Collyer says.
“[We want] to make sure that in the immediate term, we’ve got the right customer protections in place so that customers don’t get a tariff shock, that they get a choice with the tariff that works for them.”
Smart meters ‘vital’ to energy transition
Federal energy minister Chris Bowen acknowledged the need to “ensure tariffs are applied equitably and fairly”.
Mr Bowen said this extended to “adequate consumer protections to ensure households and businesses have choice and are not paying more than they need to for their energy”.
He also pointed out that energy ministers had recently moved to ban retailers “automatically switching customers onto time-of-use tariffs when a smart meter is installed”.
However, Mr Bowen argued that smart meters would be vital to Australia’s energy transition by allowing the country to make much better and more efficient use of its vast amounts of clean tech.
“With rooftop solar now three times more common than a backyard pool, and expected to quadruple by 2050, we have a huge reform task ahead of us to ensure batteries, EVs, and solar panels are all working together with the electricity grid,” he said.
“This is how we get more cheap, clean, reliable renewable power into households and businesses, and smart meters are an element of it.”
Calls for simplification grow
Ultimately, experts say the electricity industry must find a better way of shielding households from the volatility and price shocks that increasingly blight the consumer experience.
Gavin Dufty, the national director of energy for St Vincent de Paul, says complexity is inherent in most industries and especially in the generation, distribution and selling of electricity.
He says it’s up to retailers to come up with simpler and easier ways of selling power.
“The change to date has been done pretty poorly,” Mr Dufty says.
“Putting new pricing structures down and shoving them out to households and saying ‘suck it up’, it’s not going to work.
“People will get frustrated. People will be caught out and some people will be paying significantly more than they would have been before.”
Mr Dufty says while there’s unlikely to be a single answer, one of the solutions could involve selling electricity as a service rather than a good in much the same way people pay for things such as insurance, phone and internet services.
The goal, he says, should be providing “a simple service for a simple price”.
“The job for the retailer is to sort of package up products like they do with telcos, like they do with your internet services, like they do with insurance products,” he says.
“We just need to move from goods market selling kilowatts to a service market where people are selling energy as a service.”
Ms Collyer says there is merit to the idea and hopes that technology would eventually be able to do much of the heavy lifting for households.
‘You shouldn’t have to worry’
For Adelaide pensioner Doreen Fawcett, an end to the complexity and uncertainty can’t come soon enough.
In the meantime, she fears she’ll need to keep cutting back her use despite the cold.
“If it was one price, at least you know what price you’re paying,” she says.
“Sometimes I worry … ‘God, we’ve had to have the heating on, how big is the bill going to be’?
“And you start to think, ‘Oh my god, am I going to be able to afford it’? And it shouldn’t be like that.”
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Demand charging is criminal. We host a family dinner once during a billing period (a quarter for some people) and the bill is calculated as if that high power use on ONE EVENING is repeated every single evening of the entire period. That fraud, plain and simple. The supplier is charging for something that is NOT SUPPLIED.
The other thing that is criminal is charging 38c per kwh for power and paying 2c per kwh for solar power fed back to the grid. The continual reduction of FIT rates is misleading and deceptive conduct. People installing solar paid thousands, on the promise of reasonable returns. As soon as they outlay, they are screwed over with a massive reduction in the FIT and repeated further reductions. A commercial organization would be charged with misleading and deceptive conduct. But government and government agencies can do as they please, no matter how dishonest and unethical.
Prices are probably never going to go down as now they’re high, that’s where they’ll stay. The ever confusing tariffs that are charged, estimated and read, plus off peak and peak times this is so most consumers have no idea how to work out their usage. Solar has been a major rip off, and to suggest to put solar on – tell me how will pensions afford that? The governments will never do anything as they and their elite public servants live in a different world to the everyday person.
We have been paying dearly for our electricity supply and infrastructure for quite some time, ever since our governments sold our resources to 3rd party retailers. Over the past decade, Australia has had some of the most expensive electrical supply charges in the world. Here in South Australia we have the most expensive electricity in Australia. We are paying for “smart meters” that give retailers lots of information – but no feedback to consumers. Those of us who spent our dwindling life savings on solar systems can now expect to be penalised for contributing energy to the grid during peak solar collection periods. We are supposedly paying extremely high rates so the grid can be upgraded to accommodate the changes, but I think the feed-in tariff penalties (not to mention ever increasing supply and usage charges) are in place to compensate retailers for dwindling demand.
The explanations offered in the article do not ring true. The government should regain control of its utilities and manage them *fairly*. Grid upgrades, meters etc should be funded by the network infrastructure owners – presumably the government. Costs to consumers should be coming down with technology improvements. Why are we paying so much?