According to EnergyAustralia, the new smart meters and time-based pricing system reflect a long-awaited shift in electricity measurement. While the way Australian homes consume electricity has changed dramatically over the years, the way electricity use is measured has stayed the same for more than a century.

Standard electricity meters record the amount of power a household or business uses over a three month period with one reading every period. The consumer is then charged for the amount of electricity used, regardless of the time of day in which that power is used.

Smart meters, however, give approximately 320 readings every three months and the day is divided into three time periods - off peak, shoulder and peak. Customers get charged the highest rate for the electricity they use during the peak period (24.7 cents/kWh), much less during the off-peak period (5.3 cents/kWh) and a bit less for the shoulder period (9 cents/kWh). This compares with traditional rates of between 11.9 and 16.2 cents/kWh.

A common reaction to the scheme has been a concern amongst consumers that electricity bills will increase because they use most of their power during the peak period. However EnergyAustralia says that this is a misconception.

The company has found that an average home uses about 26 per cent of its power in the off peak period, 56 per cent in the shoulder period and 22 per cent in the peak. When Energy Australia looked at the bills of 3,000 of its customers on the old billing system and compared them with their bill under the new scheme, they found that approximately 90 per cent were paying the same or less under the new system.

EnergyAustralia currently has 100,000 customers - 70,000 residential and the rest business - with smart meters and who are also on time-based pricing in Sydney, the NSW central coast and in the Hunter Valley. And company expects about one-third of its customers to have smart meters and be on time-based pricing by about 2009.

EnergyAustralia’s Anthony O’Brien says that smart meters and time-based pricing are a way of evening out electricity use and helping to make the electricity network more efficient.

Smart meters are therefore smart from a network perspective as well as benefiting consumers. Electricity is getting peakier and capital works cost the consumer money. Over the next five years, EnergyAustralia is planning to spend $3.7 billion in capital works, mainly to satisfy peak demand.

What then is to be done?

“Do you keep letting your capital works be driven by peaks? We will always deliver what customers need, but if you can attack it from a demand management point of view, let’s do that. It makes our network more efficient, because it irons out those peaks and it benefits the consumer too,” says Mr O’Brien.

Early indications suggest that customers are conserving about 3 to 5 per cent of their electricity a day. While he admits that this is a small amount, when you multiply it by 100,000 the saving is more significant.

Analysis also suggests that customers trialling the new pricing system with an in-house display are showing even greater results. Early analysis shows a reduction in energy use of between 20 and 25 per cent during dynamic peak events. These customers also appear to be reducing energy consumption at the same time – up to about 8 per cent in daily energy consumption.

A benefit of the scheme, and a good sign for the environment, therefore, says Mr O’Brien, is that it sends a price signal to customers to shift their discretionary electricity use from peak to off-peak.

“At the same time,” he adds, “because it’s more energy efficient, it makes people more aware of electricity use, so they’re not just shifting but conserving energy.”

In terms of tariffs, EnergyAustralia is 12 months into a Strategic Pricing Study which will help the company form its submission for the next regulatory period.

1,300 customers are taking part in the study, which is examining how to use innovative pricing with smart technology – finding out what customers want from their meter technology and electricity pricing.

Customers have been divided into two seasons - summer and winter - and there are three different pricing time bands. The customer has an in-house display in the home which they can look at to discover their energy consumption, greenhouse gas emission and electricity costs.

Twelve times a year EnergyAustralia conducts a ‘dynamic peak pricing event’, which lasts four hours and which the customer is forewarned about, where the price is increased to a peak of $2 per kWh.

“For us it’s about testing the tolerance of customers,” explains Mr O’Brien. “Will they change their behaviour to lower their electricity bill? Is $2 too much? How can we apply the use of smart metering and do people want in-house displays?

“They might just be happy with seeing their prices on the internet, not an in-house display. At the end of the study we will be able to say.”

Mr O’Brien says that customers in this trial are showing energy conservation tendencies, with early analysis showing a reduction of energy use of between 20 and 25 per cent during these dynamic peak events. They also appear to be reducing energy consumption at the same time.

Another group of customers benefiting from the new pricing scheme are those with solar panels. EnergyAustralia has introduced a scheme where households get paid more than double the standard domestic rate for the extra electricity they generate from their solar panels during peak times.

Under the new solar power buy back plan, customers installing PV panels will have smart meters installed, which normally cost up to $300 to purchase and install, for free to help measure when excess electricity is generated and returned to the grid.

EnergyAustralia says that the new meter will allow customers to be paid more than double the standard domestic rate between 2pm and 8pm during the week for their extra solar power. The normal rate is 11.7 cents/kWh – the new peak rate with a smart meter will be 25.1 cents/kWh.

Currently, there are about 75,000 EnergyAustralia homes and businesses using electronic smart meters. The company is rolling out smart meters to its large residential customers with bills greater than $2,000 a year, to business customers as well as to new and upgraded properties.