Technology risks hindered Victoria's smart meter rollout: Auditor-general

The Victorian auditor-general has delivered a follow-up report on the roll out of smart meters, revealing that technology risks had affected the expected consumer benefits of the program.

Despite the fact that Victorians will have spent AU$2.2 billion once the installation of smart meters in all homes and businesses is complete, only 80 percent of the benefits predicted originally are currently being realised, according to a follow-up audit report by the Victorian Auditor-General's Office (VAGO).

In 2006, the Victorian government mandated the roll out of smart electricity meters to all households and small businesses across Victoria under the Advanced Metering Infrastructure (AMI) program. While the program was set to be completed in December 2013, it was only finished in June 2014.

The audit was initiated by Victorian Auditor-General John Doyle to examine whether the issues identified in the 2009 audit have been addressed, and whether the Department of Economic Development, Jobs, Transport, and Resources (DEDJTR) can demonstrate that its AMI program is delivering the expected consumer benefits and is set up to maximise longer-term benefits.

"When the rollout was announced, the benefits were promoted widely. However, when the government reviewed the program in 2011, it was clear there would be no overall benefit to consumers, but instead a likely cost of AU$319 million," Doyle said.

"When the continuation of the rollout was announced at this time, it was said to be the 'better option' for Victoria, but it was not made clear that this was based on excluding the costs that consumers had already incurred."

The Realising the Benefits of Smart Meters audit report [PDF], released on Wednesday, highlighted that the technology risks involved in the roll out of the AMI program are continuing to be addressed.

The audit pointed out that as of January 2015, one distributor had approximately 270,000 meters that could not be remotely read due to technology failures, and as a result had affected the completion of the rollout and the realisation of any benefits.

According to Doyle, the DEDJTR has advised that the issue stemmed from its information management systems failing under the high data load, and that this issue would not have been identified during technical testing of the different available technologies.

The audit report has indicated that the DEDJTR implemented measures to penalise the distributor for its slow rollout progress under the rebate policy, which provides an incentive for the distributor to resolve these issues as quickly and efficiently as possible.

"The relevant departments have been proactive in making submissions to the AER [Australian Energy Regulator] to ensure that the costs associated with the technology problems are not borne by consumers," the report said.

"For example, DEDJTR made a submission to the AER's assessment of the 2015 metering charges, urging the AER to robustly assess the prudence of the distributor's application to adjust their 2015 metering services charges by over 40 percent to recover an additional AU$70.5 million from consumers."

As a result, the audit said that the AER had decided only AU$47.8 million of the AU$70.5 million was "prudent and efficient" expenditure to be passed on to customers. The remaining AU$22.7 million was deemed to be excess expenditure that the distributor incurred due to its continued implementation of its chosen technology and was therefore rejected, the report said.