Trials carried out on the technology for Victoria's massive smart meter roll-out failed to provide "reasonable assurance" on its viability, according to the Victorian Auditor-General in a report slamming the project.
planned to have meters rolled out to 680,000 customers by 2013, with the major electricity players already announcing
UXC, Accenture, GE, Motorola, Unwired and Logica. Costs for
the roll-out would be recovered via increased prices for
Yet the Auditor-General Des Pearson wasn't convinced that the
technologies the industry is preparing to roll out was
going to work in practice, after trials which he believed were
"For six of the 11 technology candidates that actually
completed the trials process, all technologies were assessed as
requiring further technical development," his report said. "The
generally poor showing of [technologies] under trial raises issues
about an unexplained anomaly, namely why the commitment to the
[roll-out] continued to be recommended, or at least why the
technical vulnerabilities were not explained in any great detail in
The auditor-general believed that some of the technologies were
so immature as to not have warranted extensive testing. According to the state's
Department of Primary Industries, which has oversight of the
project, the testing cost the Victorian Government $6 million.
In addition, the trials weren't carried out properly, according
to the report. "The [trials working group] had difficulty
developing criteria for the department-sponsored trial to the
extent that it agreed that '...success criteria should only be
identified and described in broad terms until further results of
trials/testing are known'. In fact, the trials' success criteria
were not agreed until four months after the trials started," the
The test procedures couldn't show if the technology met
the requirements, the auditor-general continued, with assessment
approaches not representing mature practice. Also, an
inadequate number of staff had been allocated to the project, the
auditor said, leading to a distinct lack of documentation.
The auditor-general admitted that there had been additional
trials carried out in 2008 and 2009, but said there was no
documentation for those trials. The report recommended that the department obtain assurances "without delay" from the electricity retailers that the technology is capable of delivering functionality.
The Department of Primary Industries wasn't happy. "We find the
report disappointing and of more limited value to the [project]
than we had hoped," the response ran. It said that the industry
had incentives to make sure its technology worked and the government becoming involved
would only expose it to risk. The response also pointed out that
one technology had performed in trials.
The auditor-general refuted that the department shouldn't become involved
because it might gather risk to itself, saying that the department
should be more than an observer in the project. "It is a truism in
the public sector that while responsibility can be delegated, full
accountability for achieving intended outcomes cannot be," he said.
Technology wasn't the only problem the auditor-general found
with the program. "The [project] has not used the checks and
balances that would ordinarily apply to a major investment directly
funded by the state," the report said. "There have been significant
inadequacies in the advice and recommendations provided to
government on the roll-out."
It pulled apart the economic cost-benefit analysis, saying
assumptions were false and that benefits might not be as high as
believed. The auditor-general also believed that consumers would have to pay more
than the department's estimate of $40 to $50 a year in metering
costs. According to the report, one retailer recently said the
costs could be as high as $100 to $150 per year.
"In order for consumers to benefit from the cost savings
[incurred by the distributors], the distributors will
need to pass on the savings through to retailers who will need to
pass on the savings subsequently to consumers. If this doesn't
happen, then the benefits may not accrue to consumers who then
ultimately fund the implementation costs," the report said.
The department countered that competition and regulation could
keep cost rises in check and argued that the report did not
consider that the benefits to consumers would not only come from
cost reductions but also from service improvements. It warned the
auditors of taking studies carried out by stakeholders at face
The report recommended that the department carry out a new cost-benefit analysis, that it commission a review by the Department of
Treasury and Finance on the project, that it use risk management
guidelines, talk more with stakeholders and engage the regulator.
The department agreed in principle with the recommendations, but
not for the reasons the auditor gave.