Electricity Competition: Will it benefit only large-scale consumers?

Extract from Hansard

Legislative Council
20 October 1999

Sandra Kanck
Deputy Leader Australian Democrats
Member of the Legislative Council

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The Hon. SANDRA KANCK: I want to address a question to the Treasurer. In Audit Overview, part A4 (page 22), the Auditor-General raises the question of metering. He talks about the use of smart meters in order for bidders to be able to check in on a half hour time period within the national electricity market. However, he notes that smart meters are expensive, and they could exceed $ 600 per year for a customer. He then goes on to suggest that an alternative could be load profiling but then refers to a study undertaken by IPART which suggests that load profiling is not necessarily a low cost option, either.

Interestingly, he makes an observation, one which the Democrats have been stating for the past 18 months, that the benefits from competition are likely to be unevenly shared amongst consumers with lower consumption consumers bearing the costs but gaining little from competition. Can the Treasurer guarantee that all electricity consumers will benefit from the use of smart meters when the NEM becomes fully contestable and, if not, what metering system does the Treasurer believe is appropriate for small electricity consumers?

The Hon. R.I. LUCAS: The comment which relates to the benefits of competition likely to be unevenly shared, on my reading, was a reference to the findings of the study by the New South Wales government's Independent Pricing Regulatory Tribunal (IPART) rather than-

The Hon. R.I. LUCAS: I can certainly clarify that with the Auditor-General. However, the whole section refers to the fact that in December 1998 a study was conducted by the New South Wales government's tribunal. In one paragraph, it is stated:

Further, the study revealed that an initial cost benefit assessment indicated there may be no significant net benefit to the average residential consumer from competition. In addition, the benefits from competition are likely to be unevenly shared. . .

The Hon. R.I. LUCAS: No, that is not the point. I will read the Hansard again, but my understanding of the honourable member's question was that the Auditor-General agreed with the Democrats that the benefits from competition are likely to be unevenly shared. The Auditor-General would be horrified-and I would not want to put words into his mouth-to hear that he was being associated with any party, not necessarily just the Democrats. He would pride himself on his independence. Nevertheless, putting that to the side, on my reading-and I will have this confirmed-he is referring not to his comments at all but to the New South Wales government's tribunal study. I will just highlight that issue rather than attributing views to the Auditor-General at this stage.

In relation to metering, it is a critical issue and it is one of the reasons why the government, as it looked at its competition timetable, decided not to rush into ensuring contestability of households until the start of 2003. New South Wales and Victoria during the next 12 months or so will have to resolve the issue of whether they will provide or require smart meters or low profile (or deem low profile, as the Auditor-General refers to in his report) consumption patterns for small residential customers.

After our initial assessment of this last year we believed that if we followed the timetable that had been recommended to us it would be very problematic, because these issues are so significant in terms of small customers that it was probably advisable- and that is why we took the decision-to have a more transitional move through to contestability, and full contestability for all customers. We are discussing this issue with the ACCC at the moment, in terms of both our vesting contracts and contestability timetable.

We are taking a very strong view that we believe we need time to prepare for this bold new world of the national market. We would like to see what New South Wales and Victoria do so that we can learn from their successes or mistakes (and I say that advisedly). My understanding is that some of these meters could cost not $600 but as much as $1 000. However, one would assume that the cost will come down over time, as occurs with any technology.

We have been looking at the situation throughout the world. We understand that some states in America use from-a- distance metering and, I think, radio technology-something along those lines. So a number of different examples of technology are being attempted throughout the world to try to provide the sort of information that is required for the national electricity market's full contestability for all customers. The simple answer to the honourable member's question is that, at this stage, there is no black and white answer in any of the states of Australia as to how they will tackle this issue. I know in Victoria-

The Hon. R.I. LUCAS: The ACCC I think in New South Wales has expressed a view in relation to this issue. I do not want to place on the record at this stage too much of our discussions with the ACCC until we have concluded those discussions, but it is an issue that we are discussing with the ACCC. It is our very strong view, because there is no simple answer to this, that we should stick to the contestability timetable that we are talking about, to give us at least a couple of years after New South Wales and Victoria have had a go at this to see how they have succeeded or failed and what we can learn from their experiences.

It will not be a situation where residential customers, in my judgment, will be provided by either governments or businesses with $600 to $1 000 smart meters because, if one considers that we have 770 000 retail customers, at a cost of $1 000 a pop that is $770 million. Even if it is half that, you are talking about $380 million worth of up-front costs for smart metering. I can assure members that if the government were to continue in this business we would not be doing it, and therefore I would be very surprised if private sector operators will do it. As they move to contestability, I would be very surprised if the New South Wales or Queensland governments would do it, either.

So, it will either have to be a quantum development in technology-and that is being trialled around the world at the moment-or it will have to be some version of low profiling, or maybe some third solution that no-one has even contemplated yet. We have until the start of 2003 to see whether we can find something that is efficient and effective that we might be able to use here in South Australia.