Meters play brings out Macquarie

29 Nov 2012 | Sydney Morning Herald
IF THERE is money to be made in the field of government-regulated assets such as toll roads, electricity and gas, it does not take long for Macquarie Bank to show its hand. And with the likely introduction of smart meters in NSW, the bank is only too keen to help.

The introduction of these meters is under way in Victoria and this week the NSW government disclosed it has established a working party to study their introduction in NSW.

So-called smart meters can be read remotely and the power supply also controlled remotely. As a result, they promise significant savings for power companies, but their benefit for most households is uncertain.

But the poor experience in Victoria, where the cost of the roll-out has risen to more than $2.3 billion, which is well up from the initial estimate of $800 million, and a lack of household benefit from the move, threatens to derail the proposal in NSW.

Recently, the power industry overseer, the Australian Energy Market Commission, opened the door to the possibility of taking meters out of the hands of the power distributors and putting them into independent management, in a bid to drive change.

Macquarie Bank, for one, reckons electricity retailers are the natural owners of the meters, since they already hold the supply contracts with consumers.

This would involve taking the metering business out of the hands of the distributors, such as Ausgrid or Endeavour Energy in NSW, in favour of having the retailers such as EnergyAustralia, Origin Energy and AGL run it.

In a little noticed submission to the Productivity Commission review of electricity networks, Macquarie argued retailers were better placed to assess and manage the risk of the introduction of meters - and face the loss of customers and market share if they had an uncompetitive product.

For most users, the lack of clear benefits from smart meters means there is natural concern that their introduction will emerge as a new revenue stream for power companies.

Coming as electricity prices are surging to fund an upgrade to electricity networks, without readily identifiable positives, resistance will be acute.

One of the mistakes in Victoria was to mandate the introduction of these meters just before their price per unit collapsed. They now cost significantly less than $100 each, depending on their functionality, but Victorians are paying more than double this.

According to some, the largest single benefit from smart meters would be ending the need for meter readers to visit every property, along with eliminating thefts of electricity.

These benefits would be significantly greater than any savings from reduced power consumption, for example. Supporters of the technology claim it would help cut power bills by eliminating over-investment in poles and wires of the network.

The apparent gains could explain why Macquarie has a big stake in the metering industry in Britain. There it owns more than 500,000 smart meters out of a total of more than 6 million gas and electricity meters, and is looking at opportunities in Australia.

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