The voice of the customer: information and education needs of consumers in transition to smart metering and smart grids

Transcription

1 Slide 1 The voice of the customer: information and education needs of consumers in transition to smart metering and smart grids Jo Benvenuti, Executive Officer Tuesday 17 May 2011

2 Slide 2 About CUAC o Established in 2002 to: Represent all Victorian energy and water consumers in policy and regulatory processes Facilitate and undertake research on consumer utilities issues Monitor grassroots consumer utilities issues with particular regard for low-income, disadvantaged and rural consumers About CUAC The Consumer Utilities Advocacy Centre (CUAC) was established in 2002 to provide an independent, proactive, informed advocacy voice for all Victorian energy and water consumers: to effectively represent their interest in regulatory and consultation processes with key stakeholders; to facilitate and undertake preparation and dissemination of independent research on consumer related utility issues and thereby enable consumers to take full advantage of utility markets; and to monitor grassroots consumer utility issues with regard to low income, disadvantaged and rural consumers.

3 Slide 3 Voice of the consumer This presentation will examine: ovictorian smart meter roll out oconsultation with non government agencies info needs of clients & members ooverseas comparisons ofuture risks and opportunities Case Study: Victorian smart meter roll-out In discussing this topic today I would like to draw on consumer experience of the Victorian roll out of smart meters. In 2010 CUAC met with a broad range of non-government organisations including welfare, financial counselling, local government, environment and small business to determine the information and education needs of their clients and members. I will also look at some of the overseas experience of smart grid rollouts and end with an examination of the risks and opportunities ahead.

4 Slide 4 Case study: Victorian smart meter roll-out o Mandatory roll-out began September 2009 o Planned installation of 2.5 million smart meters o Scheduled completion 2013 o More than 500,000 installed to date BUT... o Cost-benefit case not adequately addressed o Policy and regulatory gaps o Poor information provision In Victoria, the rollout of smart meters for all residential and small businesses was mandated by the previous Labour state government and began in September 2009 with a scheduled completion date for the installation of 2.5 million smart meters by To date, over 500,000 smart meters have been installed across Victoria. In the lead up to the roll-out, CUAC argued that the cost benefit case had not been adequately addressed or communicated and that there were gaps in the regulatory protections and policy considerations needed ahead of the rollout. In addition we called for a comprehensive information and education campaign to prepare consumers for the significant changes ahead. As part of this rationale, we submitted that consumers needed to know about the policy objectives and cost benefits of the rollout in order to support the infrastructure investment and positively engage with the process. During 2009, analysis by the St Vincent de Paul Society and a report by the Victorian Auditor-General provided a focus for community concerns. The Auditor-General also criticised the cost benefit analysis that preceded the roll out and questioned whether consumer benefits would be realised. He raised further concerns about the government s community information and education provision. Meanwhile, however, the technical rollout was proceeding and regulated charges for meters were included in the fixed charge component of all consumer bills from 1 January It was largely left to industry to provide information to consumers. Disaggregation of distribution and retail functions in Victoria provided an added complication. The distribution businesses were tasked with providing information to consumers about the meter installation, whereas, the information advice about the retail functions associated with smart meters, including billing and time-of-use pricing was to follow in stages, as communications systems went live.

5 Slide 5 LEADING TO... o misinformation, inaccuracy and growing community fear o moratorium on mandatory re-assignment to time-of-use pricing o smart meters - election issue o further cost-benefit analysis ahead of policy decisions o consultation has resumed with consumer representatives to examine policy issues Given the lack of a clearly articulated information and education campaign accompanying the rollout, debate about its purpose, transparency about charges, and potential tariff changes, public debate took place instead in the media, particularly talkback radio. It was not a surprise therefore that this resulted in misinformation, inaccuracy and growing community fear about the costs and impacts of the meters. Consumers started to blame their smart meters for high bills, associated with other network and consumption costs. Some consumers rejected the meters, saying they didn t want them and couldn t understand why they were paying for the meters if they hadn t received them. In response, the then government announced a moratorium on the mandatory reassignment of time-of-use pricing while policy and regulatory issues and equity impacts were examined. A new governance structure was developed, providing direct access for consumer advocates to identify policy issues with the Minister. A customer impact study was commissioned to examine the impacts of time-of-use prices on different customer profiles. And a review was begun on tariff options, the concessions framework, the customer protection framework and information and education needs. However, while all of these steps were supported by consumer advocates, the information provision from government was still very limited and public debate continued, with smart meters becoming a significant issue in the state election in November The Victorian rollout therefore provides a good example of what not to do in implementing smart technology. The newly elected Coalition government has commissioned a new cost benefit analysis, which is due in September The government has indicated that it will not make further decisions about the rollout until the study is completed. However the rollout continues and

6 the moratorium on mandatory reassignment of time of use pricing is still in place. Joint departmental, industry and consumer meetings have been reintroduced to provide advice on policy and communication.

7 Slide 6 Policy and protection framework o Business case based on benefits for the average consumer, while insufficient attention given to different consumer groups that experience detriment o Assumption that: Consumers can respond to dynamic/ time-of use pricing Consumers have financial resources to purchase technology o Low-income consumers may end up subsidising higher-income consumers o Government must intervene when competitive market does not provide outcomes in the consumer interest o Information and education must be appropriately targeted after the policy and regulatory considerations are in place. The business case put forward for smart grids overseas and in the Victorian rollout of smart meters is largely based on cost/benefit analysis that looks at the benefits for average consumers and does not give sufficient attention to different consumer groups that experience detriment in terms of cost, access and or quality of supply. A number of assumptions are built into the business case for smart grids and smart meters. This includes that for short term cost savings, that consumers are able to respond to dynamic or time of use pricing, that they will have the financial resources to purchase technology options such as the HAN and or energy efficient appliances to enable them to identify use and price and that they will be able to change their consumption pattern and behavior and to thereby reduce their costs. However the equity issue arises that many consumers on low incomes who may not be able to change their behaviours/or actively participate in appliance purchase will, by virtue of costs passed through in their increased network charges be subsidising higher income groups that can benefit from cost reduction. CUAC believes that government must intervene where the competitive market fails to provide outcomes in the consumer s interest. In determining CUAC's policy principles there are three broad considerations that determine our positions. These are: genuine choice; fairness; and equity. Getting the policy and regulatory settings right must precede the information and education campaign, providing certainty for consumers and industry alike.

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9 Slide 7 Information and education o Energy service delivery is poorly understood by the community o Widespread misunderstanding of the purpose, cost, benefits and implications of smart meters There is a need for a comprehensive information and education campaign to raise community awareness about energy, sustainability and energy efficiency whole-of-government approach coordinate existing resources and programs simple messages and building understanding support for low-income and vulnerable consumers to access realtime consumption data CUAC s engagement with community agencies indicates that cultural awareness in the community about the structure of energy service delivery is very low. The functions of generation, transmission, distribution and retailing of energy are not widely understood, even among agency workers assisting, for example, clients with payment difficulties. CUAC believes that there needs to be a comprehensive information and education campaign by government, regulators and industry, to raise community awareness about energy, sustainability and energy efficiency as part of any smart grid/smart meter rollout. This understanding provides the context for the introduction of smart meters and smart grids. Despite the mandatory rollout of smart meters in Victoria, there is still widespread community misunderstanding regarding the purpose, cost benefits, and implications of smart meters and certainly not much is known at all about smart grids. The key principle here is to keep messages simple and build understanding. Feedback from community agencies clearly identifies the biggest benefit of smart meters is their capacity to assist consumers to better understand their electricity consumption and support energy efficiency and cost saving initiatives with the emphasis on costs savings. CUAC believes that consumers need access to innovative hardware and software to facilitate this benefit and that the government should consider support to low-income and vulnerable consumers to ensure they can also access real time consumption information.

10 Slide 8 Retail market choice o Competitive market, but... complex and difficult to make informed choices time-of-use pricing to add another layer of complexity o Need for specific education approaches from government and regulators Retail market choice The Victorian energy retail market is one of the most competitive in the world; however, consumers find it complex and difficult to make informed choices in their interest. There is a significant body of evidence that consumers can make poor choices when overwhelmed by choice and information. Without significant information and education, adding time-of-use pricing will increase that complexity even further. Many non-government agencies we have spoken to, including financial counselling and other support services, admit that they too find the market daunting. Consumers want government and regulators to develop specific education approaches, such as those that have recently been adopted by OFGEM, and Consumer Focus in the United Kingdom and a variety of state based regulators in the United States.

11 Slide 9 Small business consumers o Many small businesses will be unable to significantly shift peak load o Will also require information, education and pricing offers that meet their needs Small business consumers Small business agencies have also raised with CUAC, that like residential consumers, many of them will also not be able to significantly shift load where their core functions require electricity at peak periods. They have indicated that they will want to have access to information and education and pricing offers that meet their needs.

12 Slide 10 Smart grid trials and consumer engagement Realisation of benefits depends on positive consumer engagement... o Learn from overseas development of concurrent consumer engagement strategies o Consider maturity of technology and the products needed for consumer take-up o Australian Smart Grid Trial an important learning opportunity, including: consumer and stakeholder engagement regulatory and standards working groups to examine consumer benefit involvement of consumer advocates and welfare agencies Trials and other evidence In overseas markets, industry participants in the US, UK, Scandinavia and Europe are developing consumer engagement strategies as they proceed with the implementation of smart grids. Examination of their programs will provide lessons for Australian risk mitigation strategies. It is important, however, to consider the maturity of the technology itself and the products that are necessary to ensure that consumers are able to take up the technology and use it effectively and thereby benefit from it. The US initiatives have acknowledged that there are real risks in creating consumer expectations ahead of delivery capability. This leads consumers to reject the technology outright as unusable, unreliable and information as propaganda. Such a rejection of a technology whose benefits depend on positive consumer engagement would expose any misguided implementation to a high risk of failure. Australian Smart Grid Trial Another learning opportunity will result from the Australian Smart Grid Trial. In 2009, the Australian Federal Government committed $100m to the Smart Grids, Smart Cities Project resulting in the successful EnergyAustralia Consortium bid. Consumers such as CUAC advocated for and were pleased to see that the criteria for the bid included: The engagement of consumers and collection of information on households, businesses and communities and the establishment of a stakeholder engagement group, and regulatory and standards working groups to examine consumer benefit issues. The EnergyAustralia Smart grids trial will provide an important test against which we can further examine benefits and risks to consumers in a trial of commercial scale in Australian conditions. CUAC welcomes the involvement of consumer advocates and welfare agencies in the trial and we hope that the learning from the trial will help to identify the policy issues, which need to be addressed.

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14 Slide 11 Conclusion o Requirements for a successful implementation: robust cost benefit research technical readiness learning from other jurisdictions positive collaboration proactive consumer engagement policy and regulatory responses that protect disadvantaged consumers innovation that encompasses low cost and efficient tools to assist consumer engagement with the technology information and education which addresses specific needs of consumers It is important for industry players to be aware of the enormous risks of introducing technology ahead of the other important policy and regulatory issues that need to be addressed. A successful implementation of smart meters and smart grids in order to benefit consumers and not industry requires: robust cost/benefit research ahead of policy decisions learning from other jurisdictions positive collaboration between government, industry, regulators and consumers proactive engagement with consumers policy and regulatory responses that protect disadvantaged consumers innovation that encompasses low cost and efficient tools to assist consumer engagement with the technology information and education which meets specific needs of consumers