RE: South Australian Policy for New and Replacement Electricity Meters, Discussion Paper, January 2014

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1 3 April 2014 Department of Manufacturing, Innovation, Trade, Resources and Energy Energy Markets and Programs Division GPO Box 1264 ADELAIDE SA 5001 RE: South Australian Policy for New and Replacement Electricity Meters, Discussion Paper, January 2014 SA Power Networks strongly supports the position proposed by DMITRE to mandate the installation of a smart ready meter whenever a new or replacement meter is installed in South Australia. Such a policy is considered essential to providing early access for South Australian electricity customers to the significant benefits available from smart metering, but will do so in a way that is efficient and thus delivers those benefits at minimum cost. In the absence of a minimum specification, we consider that there is a high risk that there will be continued inefficient investment in dumb meters in the state, precluding SA Power Networks from introducing more cost-reflective tariffs and delaying delivery of broader smart metering benefits. Although we understand that the policy is proposed to be implemented concurrently with the advent of metering contestability, given the current uncertainty as to when contestability may commence, it would seem imprudent to delay until then. Consequently, SA Power Networks will be proposing to the AER in its Regulatory Proposal that it install smart ready meters, on a new and replacement basis, in its next regulatory period. However, for the community to gain the full potential benefits from smart metering, the prescription of a minimum specification meter is by no means sufficient in itself. We consider that the definition of common service standards, access and pricing for basic smart metering services is critical and we are actively contributing to the AEMC s review of these matters. We urge that DMITRE also continue its active engagement in this process, or there is a risk that the South Australian community s investment in smart ready meters could fail to deliver the outcomes that collectively we seek to achieve. Our detailed responses to the questions posed in the Discussion Paper are attached. If you have any questions in relation to our response please contact Mark Vincent, Manager Network Investment Strategy, on (08) Yours sincerely, Sean Kelly General Manager Corporate Strategy

2 Attachment: Responses to specific questions 1. Do stakeholders consider such a new and replacement policy is necessary to reach a sufficient critical mass of advanced meters that will allow customers to have access to associated products and services that will provide benefits to them? Yes Smart meters have the potential to deliver significant benefits to customers and the community however many of these benefits require a critical mass of meters to have been installed before: o o Distributors, retailers and other energy market participants are able to justify expenditure in marketing, systems and processes to offer new demand-side services; and Data available through power quality monitoring and loss of supply alarms can provide sufficient resolution to be effectively utilised by distribution businesses to deliver service benefits to customers. While it is possible that a critical mass of advanced meters could be reached under the proposed arrangements for contestable metering without a new and replacement policy, reliance on market forces alone to deliver this outcome carries significant risk: 1. SA Power Networks considers that a transition to cost-reflective network tariffs should be undertaken urgently to begin to address unsustainable cross-subsidies between various customer classes (particularly those with and without solar PV systems). More cost-reflective network tariffs will also encourage more efficient investment decisions by customers in the purchase of new energy technologies and appliances, thus benefiting the community overall by putting downward pressure on peak demand growth. In the absence of a new and replacement policy, retailers and other metering providers may continue to install least-cost meters that are incapable of supporting such new tariffs, or may target more advanced meters only to specific customer demographics, thus impeding the transition to cost-reflective network tariffs and perpetuating inequitable cross-subsidies. 2. Even if the meters installed did support cost-reflective tariffs, in the absence of a new and replacement policy that sets an appropriate minimum specification, the market may deliver a substantial penetration of meters that do not include functions required to enable all available benefits, in particular those functions that can deliver network efficiencies but do not necessarily add value to retailers, such as power quality monitoring or loss of supply detection. While it may be in a Metering Coordinator s (MC s) interest to offer additional services relating to network functions if there is an opportunity to generate additional revenue, it is not their core business under the currently proposed market arrangements, which is to provide metering services to Financially Responsible Market Participants (FRMPs). In the absence of adequate standards and a minimum service specification, it is likely that MCs will vary in their willingness and ability to offer network related services according to their individual business models, commercial arrangements with their primary customers (FRMPs) and technology choices. In the early stages of market development it is therefore quite possible that no single MC will have the critical mass of meters with the required functionality to deliver network benefits, particularly where there are several MCs operating in a particular jurisdiction.

3 SA Power Networks considers that a new and replacement policy requiring a minimum specification is a prudent means to manage these risks. By requiring the installation of a smart ready meter whenever a new meter installation or replacement would have occurred in any case, the incremental cost of installing such meters is minimised. Once smart ready meters have been installed, energy market participants will have the ability to add communications modules at low cost for those customers, or in those areas, where customers are willing to pay for the additional functionality and/or a benefits case exists (for network monitoring for example). 2. Do stakeholders have any comments on definition of smart ready meters, including the functions to be available on installation and retrofit? SA Power Networks considers that all new and replacement meters must be capable of supporting a cost-reflective network tariff. This requires either an interval meter or, as a minimum, a type 6 meter that is capable of recording monthly peak demand (timestamped) 1. SA Power Networks also considers that smart ready meters should be capable, with the addition of a communications module, of providing all key functions described in the SCERendorsed SMI Minimum Functionality Specification 2. In addition to those functions mentioned in the Discussion Paper (remote reading, remote connection and disconnection, loss of supply detection and communications and data security) this would include: a. Load management through a controlled load contactor: to ensure ongoing support for the hot water controlled load circuits currently used by more than 300,000 customers in SA, and to enable effective management of future loads such as Electric Vehicle charging stations that could drive significant increases in network costs if operated during peak times; b. Capacity control: providing a means to ration electricity in the event of a shortfall of generation capacity in the market to reduce impact on the community (currently this requires load shedding of large numbers of customers); c. A home area network: enabling in-home displays and direct load control, and a key enabler for an open market for innovative demand-side services; d. Quality of supply monitoring: to identify quality of supply issues within the distribution network, thus enabling more effective (and extensive) integration of renewable generation into the network; e. Remote meter service checking ( ping ): to improve customer service and reduce unnecessary visits to customer premises by enabling a customer s supply to be tested remotely if they report a problem or to confirm supply restoration following repair works; and f. Customer supply safety monitoring: to ensure opportunities for customer safety benefits are realised, eg degraded neutral detection. SA Power Networks notes that the SMI Minimum Functionality Specification as it stands today is incomplete, and some details may change through further review, but at a high level the list of functions included above is reasonable and readily supported by today s smart meters. 1 This function is already available on some meters, and where not, could be made available readily through firmware upgrades. 2 SMI Minimum Functionality Specification v1.3, 30 November 2011,

4 Based on our discussions with meter manufacturers, we understand that once a meter has been designed to support the key capabilities listed in the Discussion Paper (communications, half hourly readings, remote disconnect/reconnect and loss of supply detection) then the incremental cost of making the meter capable of supporting the full specification is very low. We note, as we have previously made reference in responses to the AEMC, that the New Zealand Parliamentary Commissioner for the Environment, in its 2013 report on the outcomes of the unregulated rollout in New Zealand 3, concluded that: Regulatory intervention should not be done lightly and this is an area of rapid technological change. But the opportunity for delivering benefits to the householder and the environment at a small increase in the cost of the meters has been lost; retrofitting additional features is likely to be much more expensive. We note also that the UK Government has taken the decision to mandate a rich functionality in its smart meter rollout after significant public consultation and analysis. 3. Does the proposed new and replacement policy provide sufficient certainty of future residential metering and infrastructure to enable stakeholders to offer innovative products and services at the commencement of the regime? Yes The numbers of new and replacement meters could be predicted with sufficient certainty to justify and determine optimal timing of investments into requisite product development, marketing, system and process development. As discussed in our response to earlier questions, we also consider that a well-defined minimum standard for all new and replacement meters is essential to provide the certainty that network businesses require to invest in the back-office systems that will enable available network related customer benefits as a critical mass of meters builds. 4. Do stakeholders have any comments on the new and replacement policy providing customers with the ability to opt out of having advanced metering installed? We understand there are three primary reasons why customers may desire to opt out of receiving an advanced meter, being: a. Health concerns; and/or b. To avoid additional costs; and/or c. Privacy concerns. With respect to health concerns, we note that smart ready meters do not materially differ from any other electronic meter that is already installed in customers premises today. It is only the installation of a communications module that gives rise to the emission of radio frequency signals and the health concerns that some members of the public attribute to such signals. The Discussion Paper proposes that installation of such modules would be on an opt-in basis. This being the case, we cannot see any reason why customers would seek to opt out from installation of the smart ready meter itself (without a communications module) for health reasons alone. 3 Update Report on Smart Electricity Meters: How households and the environment can benefit, New Zealand Parliamentary Commissioner for the Environment, June This report focused in particular on the lack of home-area-network functions in the meters that had been deployed, but the same considerations apply to other load control and network functions.

5 However, we appreciate and agree that some customers will want the ability to opt out of an advanced meter if they face an increase in their metering cost and they do not perceive any direct benefit. In light of this, we consider that customers should be given the option to opt out and retain a type 6 metering service at a regulated price. This approach acknowledges that the manual reading of interval data, and subsequent processing and storage, adds material additional cost and would not appear warranted unless the customer wishes to accept a tariff or demand-side service that requires interval data. It would also provide a protection to customers in remote or rural areas that may not otherwise be offered a contestable metering service at a reasonable price. This option would also address the needs of customers with privacy concerns as such meters would not be configured to provide interval data to the market. However, for those customers that opt out, we consider that a smart ready meter should still be installed as a minimum requirement, and that the meter should retain the capability to measure monthly peak demand. This would still enable the transition to a cost-reflective network tariff, noting that in the absence of such an approach, customers could otherwise exclude themselves from new network tariffs by opting to retain a dumb meter. Should the customer that has chosen to opt out, or a new customer moving in to the premises, wish to take up a tariff or service offering from a retailer or other party requiring interval data at a later date, the meter could then be enabled for interval data and the customer could transition to an interval metering service at market rates. This transfer could be undertaken efficiently, as a smart ready meter would already have been installed at their premises. 5. Do stakeholders consider the disallowing of meter reversions sufficient to provide certainty that there will be no significant reduction in the installed base of smart ready meters, once the policy has commenced? We agree that the policy should not enable reversions to more basic meters. This is particularly important in an ad-hoc (market led) roll-out as significant reversions could place at risk some aspects of the benefits case and undermine investments that have been made. For example, insufficient loss of supply alarms might be available to assist in supply restoration activities, or reversion of controlled load to uncontrolled could undo previous peak demand reduction efforts. To avoid this loss of benefits, it is not sufficient simply to disallow the replacement of a smart-ready meter with a simple accumulation meter. Reversion should not be allowed for any standard service that has been enabled at the metering installation, that is, any of the services set out in the SMI Minimum Functionality Specification as summarised in our response to question 2 above. We note that the principle of non-reversion is also consistent with the current NER which generally forbids reversion of interval metering to non-interval metering Do stakeholders have views on how the Government s policy for new and replacement electricity meters would be best communicated to customers? No, however we consider it important that the Government consider the successes and failures of the communication undertaken during other smart meter roll-out programs, including Victoria, to ensure that we learn from those experiences. 4 NER7.2.5(d)(7)

6 It is likely to require coordinated communications, in line with an agreed communications plan, across all key stakeholders and market participants including the Government, Retailers, Distributors and customer representatives. 7. Are there certain categories of small customers that should be the focus of the communications strategy? Are there particular communications mediums that are best suited for these customer groups? Disadvantaged customers are likely to require particular attention. Organisations representing their interests would be best placed to provide advice in this area. 8. What information should be provided to customers regarding their new meter prior to it being installed? Where SA Power Networks has installed smart meters on a trial basis, we have provided an information kit to customers that has been well received. We would be happy to provide this kit to the Department for consideration. It will be critical that customers understand their options, obligations, and the implications of their selection of a particular option particularly with respect to the potential costs and benefits of opting in or out of obtaining an advanced meter.