Power pricing about to get smarter

Genesis Energy is on track to introduce variable tariffs by the end of the year that will let customers choose to pay different prices for electricity at periods of high and low demand, instead of a single flat rate.

Spokesman Richard Gordon says it has installed 200,000 smart meters that can measure electricity consumption at half-hourly intervals and a team was working on differentiated tariffs.

"Certainly, it is a high priority. We'd like to be a leader in this space."

Genesis customers will still be able to pay a flat rate for electricity if they choose and variable pricing won't be available to all customers until it swaps out another 300,000 electricity meters.

Contact Energy announced this month that it would roll out smart meters to 150,000 North Island customers, having already installed 60,000 in Christchurch.

Spokesman Jeremy Seed says it is already offering variable pricing to some Christchurch customers but it would be two or three years until it had sufficient smart meters to offer time-of-day tariffs elsewhere.

Variable pricing could have a big spin-off for the environment, reducing the need for new power stations and relieving the strain on the national grid.

Some research suggests time-of-day tariffs could cut 5 per cent off peak demand, while allowing retailers to charge high rates at short notice to counter spikes in demand could slash peak demand by 15 to 20 per cent.

One complication is that some electricity meters are owned by retailers, some by lines companies, others by metering companies and some by customers, and there is no consensus either on who should be in charge of the switch to smart meters or the technology they should be investing in.

Parliament's commerce committee last month rejected a plea first made by Parliamentary Commission for the Environment Jan Wright in 2009 that smart meters should not be installed without a microchip that could be used to turn on and off smart home appliances – though its report was split along party lines.

Retailers argue insisting on even smarter meters would be gambling on uncertain technology, and that the internet means there may be no need for direct communication between smart electricity meters and appliances.

A third of New Zealand's 1.8 million electricity meters have already been upgraded to smart meters, but Wright argues lines companies are the natural custodians, partly because retailers have an incentive to sell people electricity.

"If I was to wipe the slate clean and start again, I think what I would want to see would be the ownership of the meters to be in the hands of the lines companies because they have an in-built incentive to keep peak power down, retailers hardly have it at all. To me, the interests of households, the environment and lines companies are pretty much aligned here."

She says retailers expect to sell metering data to lines companies and if they can't negotiate a price, another risk is lines companies will end up installing secondary meters, just to get the information they need. That is already happening in part of the Waikato, she says. "That can't be economic – to have two meters put in, one owned by retailers and one owned by lines companies."

It's an argument rejected by Genesis. "We are incentivised to provide as many benefits as we can to our customers. It is not about electrons," Gordon says.

He says Genesis is committed to ensuring customers can access data on their half-hourly electricity consumption.

"We are not in favour of allowing monopolies to have control of this."

Wright may have failed to persuade the Government that it needs to intervene in the smart meter market, but she takes heart that a consortium of electricity lines companies have formed a company, SmartCo, that planned to spend about $200 million rolling out up to 750,000 smart meters with appliance-controlling home area network (Han) chips pre-installed. SmartCo's acting chairman Bob Lack has not confirmed those plans, but gives another reason as to why he believes lines companies should be in control of smart metering.

Retailers serve customers that are spread across the country and there is a high rate of "churn" when customers switch electricity provider, he says. That means retailers will constantly be inheriting customers with a different – or no – smart meter.

On the other hand, consumers are likely to remain customers of their local lines company unless they sell up and relocate to another part of the country.

"If retailers are responsible, there is a risk that distributors will see `pepper-potting' of various meters across their systems, with a consequent loss of network benefits," Lack says.

Trustpower spokesman Graeme Purches – a smart meter sceptic – believes retailers are already running into unexpected costs. Some are investing in smart meters mainly to do away with the need for manual meter readings, but in practice it has proved difficult to remotely communicate with smart meters without interruptions, he says.

BusinessDay.co.nz