Networks not interested in saving energy

A few years ago government regulatory authorities realised that electricity network businesses had little incentive to research and prove-up innovative ways in which they could save consumers money through demand management. Because network businesses operate as monopolies there is no pressure from competitors to search out innovative and lower cost alternatives to building more poles and wires.

Even if they did find ways to reduce costs through demand management, the regulator would then simply reduce their expenditure allowances to reflect their new and lower costs. Consequently they’d get little benefit from their research and development.

To go some way to addressing this problem, a fund was established (the Demand Management Incentive Scheme) that network businesses could use to fund research and development into demand management. 

Unfortunately, even after making R&D into demand management essentially a no cost activity for the networks, it seems they’re not all that interested. 

The table below, published by the AER, is a little confusing but the key thing to focus on is the last column showing the proportion of the network businesses' demand management R&D allowance that they’ve spent. Except for Essential Energy, all have spent less than a fifth of their allowance.

Yet ActewAGL, Ausgrid and Endeavour have only about a year left to spend an allowance that was allocated over five years. SA Power Networks, Energex and Ergon have another year up their sleeve, but SA Power Networks has spent none of its allowance and Energex just 1 per cent.

Non-Victorian Distribution Network expenditures claimed, approved and remaining.

Source: Australian Energy Regulator (2013)

When will government authorities realise that you should be offering incentives for demand management to firms whose core business is saving energy, instead of firms who build poles and wires?