CLIMATE SPECTATOR: Pensioner plan for a smarter grid

Climate Spectator

"You want pensioners dying in their homes from switching off the air-conditioner during a 40 degree day?”

This was the response of a state government energy minister to a proposal to introduce smart meters in combination with an electricity pricing strategy that would see significantly higher prices during peak demand periods.

I consider this the best explanation for why 88 per cent of Australian homes still don't have meters installed that know the time of day, 10 years after a mandatory rollout was recommended by the COAG Parer Review. It also happens to be quite a good insight into why state governments still feel the need to impose price controls over electricity, when these have been abandoned in just about every other product market that doesn't involve a monopoly provider.

Since 2002 we have had several cost benefit analyses undertaken that indicate the benefits flowing from the mandatory rollout of smart meters would outweigh their costs. There is also now a reasonable body of field research on time of use pricing that suggests consumers will curtail demand in response to higher peak prices (although we can do a better job if consumers are given proactive help rather than left to their own devices).

Yet other than in Victoria, the rollout of smart meters to support time of use pricing has been insipid. This is not because these other state governments are stupid, very far from it. Underneath it all there is a legitimate fear for its impact on the least fortunate and vulnerable members of society. Electricity is most definitely an essential service – our comfort and wellbeing fundamentally relies on it.

Pensioners stand-out as the predominant concern. No one counts their pennies better than a pensioner. (I've received handwritten letters from pensioners taking me to task on grocery prices because they don't match the shopping dockets they've been tracking in a handbook for the last 15 years!) They watch their money closely because there's no other way to survive on the pension if you don't.

So it would seem that pensioners are likely to be the first people to respond to peak pricing, which will almost always be on an extremely hot or cold day.

At the same time because many pensioners tend to be old and frail, their health can be dependent on maintaining comfortable temperatures in their homes. If it gets too hot or too cold they are likely to suffer health problems that could land them in hospital or even quite possibly dead.

Yet while the case of the pensioner dying is a legitimate concern it is a rare exception driving the rule for the entire residential electricity market. Surely we could take care of such vulnerable electricity consumers without distorting the entire electricity market.

In the end a failure to address peak demand (as well as lax regulations governing networks) is increasing costs of electricity across the board and this is definitely hurting the poor. Pensioners and other poor households may well have air conditioners but they won't be trying to cool a McMansion with a huge central air conditioner, meanwhile running a massive plasma screen television and a swimming pool pump as well.

Vulnerable members of the community must be protected from possible adverse effects from electricity market reform, but it is counter-productive to manipulate the entire electricity market as a tool of social justice.