Experts sound alarm on electricity demand tariffs

Households are being advised to avoid electricity plans with ‘demand pricing’ as it can be complex and is unsuitable for most residential customers.

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Timely advice, noting the tariffs can only be applied to customers with ‘smart meters’. It’s likely too late short of a rethink by Government?

Will there be a fair transition?
Is there a no disadvantage test for customers, given only consumers with Smart Meters will be subject to differentiation on time of usage? The same cannot be applied to the majority of consumers still on the older accumulation metering?

It’s Understood metering and tariff changes are intended to extract a premium from users with greater consumption during the evening peak hours when high cost gas generation is most typical. There is also a social argument against the changes in that they may adversely impact lower income families with both partners working day jobs.

A second point to note is the tariff structures for Cost Reflective Pricing are being applied as agreed to by all the Energy Ministers and the Regulator. It’s not a surprise other than the low key The distributors are now progressively required to introduce billing of the retailers on that basis, where the customers metering provides.

General Comments:
It’s currently up to the retailers to decide whether they use (pass on) the same tariff structure as they are being billed on by the distributor. The retailer may apply a different EG flat tariff when billing those retail customers with smart meters. The AER (Australia Energy Regulator which reports to the ACCC) released this summary in July 2021.

I recently posted this forecast provided to the AER by Energex (SE QLD) which was included in their final approved submission for tariff determinations for 2022-23.

The 2021-22 expected outcome is approaching 400,000 residential customers retailers facing ToU or Demand based tariffs for those premises.

It may be useful, aside from the experts advice to consider how the retailers across all the distributors are responding and their offers to those customers. Many will be on Solar PV plans. Others will be purchasers of new/recently constructed and connected premises.

My personal observations from 12 months prior is that the big retailers were not promoting Demand based plans. This year the offers from Origin and AGL for PV based plans distinguished between, demand based tariffs with moderate offers for feedin, vs flat tariffs with low feedin offers.

P.S.
We’ve one property with PV on a flat tariff and another on a Demand based tariff. The exposure to demand pricing risk is low (accept we are an exception) as our primary peak energy needs are met by NG and solar PV, (no battery). I’d not recommend it for a typical family household that is all electric, especially with an electric oven and induction cooktop, (PV or no PV).

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I suppose it is just another form of gambling. Can you manage your power usage in blocks of 30 minute intervals to beat the bank, in this case the power supplier?
If you can beat the bank, you may save a small amount of money. If you get it wrong, you could loose a lot.
Plenty of businesses recently wish they had never entered into electricity, and probably more damaging gas, demand pricing tariffs.

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The discussion most affects customers with Smart Meters. Although new and existing customers will progressively gain Smart Meters.

A better response might be that some customers will be better off with a Cost Reflective Tariff (demand or ToU) and others will not.

Am I an advocate for Demand tariffs or ToU tariffs.
As a consumer I’m for consumers being better informed and being able to make the best choices. Unfortunately the Industry including all of the regulators and governments involved have agreed to the roll out of CRTs that may benefit some consumers, promoted the tariffs may save those consumers money, and NOT DELIVERED real time metering with the Smart Meters.

I doubt given the technical and financial benefits of levelling grid consumption, the industry nor regulators and governments will walk away from the transition.

I can agree it’s a gamble for >99% of consumers to look at those options, assuming they are given the option of a CRT.

I’d like to drum up more support and consumer discussion towards forcing the Regulator to require distributors to provide fit for purpose and reliable in home (kitchen) real time consumption metering readouts. Preferably as a free offer and as a pre condition of distributors converting any customer connection to CRTs.

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Can electricity demand tariff be managed by a typical consumer ?

It is complicated and difficult to understand, even if you can find anything other than a very general explanation.

As I understand it, in the peak time if your use goes up over some baseline even for a very brief period you get hit with a daily surcharge for a whole month.

Even for someone fairly disciplined in their power use it seems an impossible task to avoid this surcharge.

Seems to me very much like the fines the banks were imposing a while back.

Imposing this fine for a whole month is over the top, or am I misinterpreting the matter ?

Installing solar panels came with a Smart Meter and a new plan with a demand tariff.

Quote here from Energy Matters:

If a household has a peak capacity demand at or above a threshold set by an electricity distributor (let’s say 1.5kW), they are hit with daily electricity demand charges to use that level. Then, for each additional kilowatt of demand, extra charges may apply.

Electricity demand charges apply even though normal usage may be a fraction of the threshold most of the time.

Another unsettling aspect of residential demand tariffs is if the calculation often comes from the maximum half-hourly interval kW demand occurring during the monitoring period over an entire month.

If you happen to be running one or multiple major appliances (e.g. air-conditioner + electric oven) simultaneously for just an hour during the monitoring period on one day during the month, you’ll pay the calculated daily capacity charge for each day of that month!

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Welcome to the community @RobertA101

The topic heading “Experts sound alarm on electricity demand tariffs” emphasises the concerns noted. There are responses in previous posts to some of the questions asked and points made.

The opening post by a choice staffer responds to your opening question.
Can electricity demand tariff be managed by a typical consumer ?
(Please note the removal of the bold emphasis as it’s already captured in the topic heading)

There are reasons why the Energy Ministers of the states and territories served through the NEM and the appointed bodies have all agreed to progressively introducing cost reflective tariffs. It’s a more complex discussion (technical + financial) than trying to explain how a demand tariff works.

Whether Energy Matters comments fully explain how it is with demand tariffs, requires a longer reply. As a resource Energy Matters fail to mention plans with a demand tariff have a lower flat rate for metered consumption, a significant saving and are generally better than a ToU alternative.

As consumers we are free to speak up about how the changes/progress relate, ask important questions, and expectations to be treated equally and fairly. There’s also a significant social question, whether energy supply (electricity) is a community responsibility subject to cross-subsidisation (by Govt or ….), or the user pays?

P.S.

The peak demand charge is supposed to reflect the added cost (notionally capital cost of the extra network, and peak generation) meeting household consumption in the evening, 4-9pm in our area. It’s not perfect, IMO.

Depending on your distributor you may have the option of a ToU tariff. Our retailer is required to put new Solar customers onto the default tariff. We still had an option last time I looked for ToU. It assumes you talk to your retailer when installing solar to agree which plan. If you share which area/distributor others may be able to comment further.

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Thanks for your replies
I guess I will watch my next bill closely and decide then if I need to change anything.

Cost reflective pricing - Demand tariffs and Time of Use tariffs remain a concern.

Are you on a cost reflective tariff for your electricity supply, how did it come about, and do you think you are better or worse off?

What might you change to ensure consumers who use large amounts of electricity during the evening peak period may more for their demand?
Consider how any solution can reduce the higher demand in the evening peak period. Typically the peak demand is met by greater use of expensive gas peaking generation. It is also a factor driving investment in more poles and wires (transmission and distribution) to meet the greater peaks.

No I am not on time of use as I kept a close eye the matter and found my ability to control my time of use was so little it was not worth it.

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but what happens when the time of use cannot be relied on. Ie the meter data is worng ?
(NOTE i have demonstrated to my retailer this is the case)

It would benefit others in the community if you could share some more details of what happened. How did you demonstrate the difference you observed? Knowing which region of Aust, distributor and retailer involved will also better assist others with the same to know what they should be aware of.

Note:
The regulation of tariffs/pricing and hence billing is not uniform nationally. It’s a further difficulty average consumers face in understanding ToU and Demand tariffs, and whether they are better or worse off.
There are differences in how each state/territory has responded to the implementation of cost reflective tariffs. There can also be differences where one is serviced in a rural/regional area. EG most of regional QLD is serviced by the State owned distributor Ergon. Electricity charges for those customers (separate to any determination made by the National Regulator) are subject to State Govt regulation through the QCA - Queensland Competition Authority.

Discalimer:- this is my own experience and whilst others may have similar I am not commenting directly upon that.

My situation was first posted on this board in the thread AGL and Smart meters not working correctly (july 23)
The issue is still unresolved.
The retailer is Origin and I have not had any issues with them. Origin appear to be attempting to resolve the issue. My distributor is Endeavour. (I am not having issues with them). However in between these two is another company who actually does the meter reads. (back in the dark ages I only had to deal with one company, Integral Energy, who had to resolve the issue and couldn’t pass the buck).
Back to the issue, I can demonstrate very clearly that there are errors in the smart metering of my electricity. Thankfully I am not on a Time of Use plan.
In the event I have a power outage, which given I am in Western Sydney, occur moderately often my meter appears to keep registering usage. For example we had 1 power outage of 2 days not so long ago and upon checking the Origin app it clearly stated that I had been using power exactly as normal and producing solar power as well at the same time. I then requested and checked the meter data from my distributor (which is readily available) and found that the origin app and billing matched the meter data. So either my meter is sending non existant data as part of its transmissions (which I think is unlikely) or the software/system that receives the data is refusing to accept a zero value.
This has now been going on for over 18 months and has been the subject of 2 ombudsman complaints, many hours on the phone to Origin (whom I do not think are at fault) and much analysis of my meter data.
I recognise I am being rather pedantic about the data and wonder if others actually check their usage apps or data, BUT, if some of the data can be proven to be wrong (acknowledged by Origin) then how can I trust the rest of the data (we actually have meter data showing our solar is producing power at 3 oclock in the morning as well)
I note that the the metering company does not appear to be answerable to anyone.
The ombudsman has overview of the retailer and it is the retailers responsibility to ensure supply and billing are correct but it appears to be in this case their supplier wil not correct the issue. So where does it go from here?

I cannot belive that this issue is unique but can only suspect that others interacting with the same companies are not checking their metering data correctly.

It could be the case that the meter is faulty. This would require that a second meter is installed to check the results that are being produced by your first meter. I and my mother in years past both experienced faulty meters and had to insist on the check meters being installed. Mine was at my cost initially but refunded on the fault being identified, my mother had the meter installed by the retailer at the retailers cost as the retailer were fairly sure it was a meter issue . So in some cases, the cost of the check meter is billed to you but it is refunded if a fault does exist.

It could be software, it could be that you are being billed for another premises use. NMI being incorrectly identified has occurred for others and this can be difficult to get resolved. Wiring in your board could be done incorrectly for bi-directional use and solar power being generated could be being identified as power being used from the grid rather than supplying the grid in certain circumstances. Getting your power board and the wiring and the meter checked are important steps I would take if I had your experience. I would also ask the retailer to ensure that your NMI is the correct one and is being correctly identified in their system.

While not Australian, this page might offer some idea about what I mean about wrongly wired and the results that can occur from that:

NMI incorrectly identified can be an issue

and from some Energy retailers are these statements that show NMI can be incorrectly transferred or there can be a fault with the meter,

“MSATS transfer process
In EWON’s experience, complaints about the timeliness and accuracy of transfers can be
triggered when:
 the winning retailer has delayed in entering a change request on MSATS
 the transfer of the site to the winning retailer fails
 technical or administrative errors are involved in the transfer process, such as
incorrect addresses or NMIs being transferred or retailers entering incorrect
information into MSATS.”

and

"Different problems can happen with meters, for example:

When you change from one energy retailer to another, the wrong meter may be transferred accidentally.
You may experience a customer service issue during the meter installation process.
Your meter may be recording your usage incorrectly.
Your bill might be based on an estimate."

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How is it even legal to offer residential plans of this nature? much less to move a customer onto such a plan without informed consent?

I don’t think this is in practice relevant - because eventually every household will have a “smart” meter.

Why would it not be legal?
The necessary tariff reforms have been agreed with the support of the responsible state and territory ministers. Although there are differences in how and progress towards implementation within each state/territory and distribution networks.

Is it that customers are not informed in advance of the details of the changed tariff structure or plan? Or is it that how the tariff is structured and use (consumption) affects the final bill is not understood?

To suggest for some it is the second:

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In no way does the question “how is it even legal?” suggest that it is not legal. In fact the question implies the opposite i.e. that it is legal but shouldn’t be.

If your question were “Why should it not be legal?” then …

Because of the asymmetry of the situation - information asymmetry and power asymmetry.

(power in the previous sentence used in the sense of strength and influence in the negotiation rather than in the contextually ambiguous sense of electrical power i.e. Watts)

The subtext of the question is … have the governments forgotten that they represent us?

The news media discussion itself makes the observation that a plan of this nature is more commonly offered to industrial users that are large consumers of power and more specifically where their peak power consumption is high (and that is where such a plan makes sense).

Governments have the legislative power to step in and limit the scope of abusive power plan offerings i.e. to rule out certain types of plan for residential customers.

What isn’t mentioned in the ABC article is whether Ms Hyde can revert to a fixed-rate plan. It’s pretty clear that she should at least have been notified about the change and given options, if there are any, before the change happened. Is the fixed rate still available to her?

I understand the rationale behind time-of-use tariffs, but this is like beatings continuing until morale improves.

Like syncretic, many people can’t change their time of use of electricity. So ToU tariffs on their own cannot achieve what they’re supposed to be aiming for, which is spreading the demand more evenly across the day. All they do is make electricity more expensive.

Surely a better approach is to aim to make Virtual Power Plants available to everyone? Not just for those who already have or are intending to install solar and batteries.

This current situation with VPPs doesn’t help people like Ms Hyde for whom solar panels and batteries are not an option:

This might be the future:

Outcome

The project will achieve the following outcomes:

  1. increase the value delivered by renewable energy through delivery of a platform that is agnostic to device manufacturer, retailer and aggregator, enables the enrolment of multiple devices by multiple market participants, and development of a cost efficient and scalable pathway to device orchestration for both system security and customer benefits;
  2. improved commercial readiness by unlocking the financial opportunity for device owners and market participants to benefit from the orchestration of these resources by accessing wholesale market and network services revenue; and
  3. removal of barriers to renewable energy uptake through supporting DNSPs to deliver non-network services, delay augmentation and reduce customer costs, and supporting energy retailers to develop new customer offerings that together incentivise the uptake of controllable devices.
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To be more complete … at least some consumers can change their time of use, so ToU tariffs can partly achieve the objective of spreading demand more evenly - and what they do is make electricity more expensive for both those who can’t be bothered (not price sensitive) and (perhaps unfairly) those who can’t.

The challenge here is that the electricity retailer does pay ToU, no ifs no buts, and so a flat rate throughout the day to the customer is inherently difficult.

The good news is that at the low end of “hard luck story”, the consumer is better able to control ToU. (That second news article, “Ms Hyde”, doesn’t make clear what her personal situation is.)

True. I suspect that the ones who can change their time of use are in the minority, so their impact on balancing the grid would be pretty small, though.

I agree. Finn Peacock from Solar quotes provides numerous informative articles in the solar scene. In this article on virtual power plants, the pros don’t seem to significantly outweigh the cons in regard to the financial situation.

However, I presume/hope that in regard to benefits to climate change that the pros outweigh the cons by a sizeable margin. If that is the case, it would probably entice many people, including myself, to go ahead with a battery and a virtual power plant.

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