The Victorian Government has today released a report carried out by independent consultancy Oakley Greenwood that said the state's controversial smart meter roll-out is set to create up to $5 billion in savings.
(Credit: Martin LaMonica/CNET)
"The Advanced Metering Infrastructure (AMI) program is cost-effect no matter which mix of costs and benefits is used," the report said. "In the extreme, if the low-case benefits and highest costs are used, for either the AMI roll-out of AMI Program, a clear net benefit results."
The report said that the current total cost of the roll-out, including the meters themselves, communications infrastructure and IT systems and processes, will cost $1.6 billion over 20 years. An extra $200 million could be spent to create a range of services based on the meters set to increase benefits for energy providers and customers.
These costs are to be met by a set metering charge for each electricity customer. This year that charge is, on average, $17 per quarterly bill or $68 per year, according to Victorian Energy Minister Peter Batchelor.
The report said that the providers currently spend a lot of money on metering-related activities, with an estimated business-as-usual cost over the same 20-year period coming to $1.459 billion. Therefore, implementing the smart meter program would mean a slight cost increase on normal costs.
However, the program isn't just about rolling out the meters to save on costs, according to the report, but using them to create efficiencies throughout the network. Taking this into account, the companies could save anywhere between $2.577 billion to $5 billion over the 20 years between 2008 and 2028.
"The report shows that if there is a reasonable uptake of optional activities by customers, the benefits could be as high as $5 billion. Optional activities could include the take up of new pricing offers, customer information tools or appliance control devices," Batchelor said.
Previously, a Victorian auditor-general report had questioned the roll-out, saying that the technology was half baked, the economic benefits are optimistic and that it was likely consumers would be slugged with higher prices.
After the auditor-general's criticism, three reports were commissioned to look at the costs and benefits. Over time, the benefits increased as more were identified. Oakley Greenwood's report was intended to summarise the conclusions of those three reports.
It said that the vast majority of the benefits it had named should flow through to customers. It assumed that these benefits would be seen in lower costs for electricity, as increases were balanced out by better usage practices.
Yet, such benefits were contingent on regulatory price setting, the report said, which would determine how much the distributors can charge for the new services. The report noted that distributors pricing is only reviewed in detail every five years, so that there might be a time lag between when the benefits are felt by the providers and when they deliver them to customers.
Pricing alterations were already set in train, according to Batchelor.
"Recent applications to the Australian Energy Regulator by distributors to change charges will see the cost of connection and special meter reads slashed," he said.
"For example, under these proposed changes, if you live in Mount Waverley and you need to have a special meter read it currently costs $32.90, but once you get a smart meter that will cost no more than $2.
"If you move into a house in Sunbury it currently costs $23 to get the power connected. With a smart meter that cost will fall to around $5, which might be even less by the time the regulator makes its final decision."
Currently, there is a moratorium on providers charging consumers different prices for different times of the day, a key element in using pricing to help balance load and make savings. The government is still considering the issue, according to Batchelor's office.
Batchelor has seized on the report as proof that the government was doing the right thing by the smart meter roll-out.
"This independent report clearly shows smart meters will deliver benefits for Victorian families and our government made the right decision to roll-out smart meters," he said.
Consumers could use the up-to-date metering information to manage their use, he said, and would be able to integrate technology such as solar panels more easily.
"Because smart meters have two-way communication capabilities, Victorians won't have to pay for manual meter readers, we won't always need a truck to visit for disconnections or re-connections and there'll be fewer estimated bills," he said. "In addition, your distribution business will automatically know if your power goes out and in many cases will be able to reconnect you more quickly."
Batchelor drew attention to the report's finding that even if consumers didn't change their behaviour, the lower case benefits would still be achieved.
"This is a result of moving from manual to automated service delivery," he said.
The roll-out of the meters had created 700 jobs, he said. So far, 250,000 have been installed. The government aims to install 680,000 by 2013.