IN A bid to stop overspending on the electricity network, SP AusNet has been blocked by the Australian Energy Regulator from hiking charges to pay for its rollout of smart meters.
The AER, an arm of competition watchdog ACCC, also criticised the company for failing to switch to cheaper technology to avoid a blowout in costs.
The regulator also cut back, from $410.7 million to $304.1 million, SP AusNet's proposed expenditure for the rollout of the meters between 2012 and 2016, triggering a legal challenge by the power distributor.
With the legal challenge failing, consumers will not be charged for cost overruns.
SP AusNet says it has not ruled out challenging the decision, but will "carefully review" it before deciding on a response.
The regulator said "a reasonable business" would have reconsidered what equipment to install after a blow-out in costs.
"The allowance for 2011 that the [regulator] originally approved would have been more than sufficient to cover the costs of switching to the alternative technology," regulator chairman Andrew Reeves said in a statement late on Monday.
If SP AusNet's proposal had been approved, meter prices would have risen by about 16 per cent in both 2014 and 2015 on top of the 7 per cent allowed previously by the government.
No price rise was considered necessary to account for the cost of switching technologies, the AER said, although some provision was agreed to be made for foreign exchange contracts and project management, which will increase SP AusNet's allowance by $17.5 million.
"The effect is that current meter prices will increase by approximately 3 per cent each year in 2014 and 2015 on top of the 7 per cent previously allowed," it said.
For the standard meter, this means prices will increase by $12.93 in 2014 and $14.22 in 2015.
The Victorian government approved a statewide rollout of so-called smart meters in 2006. Since then the cost of the introduction has risen steeply even though the cost of the basic technology has declined, resulting in rising public criticism.
SP AusNet could not be contacted to respond to the government's decision.
Between 2009 and 2015 alone, Victoria's electricity distributors are to spend $2 billion on the meters, recovering the costs through user charges.
SP AusNet services the eastern suburbs of Melbourne and the north-east and east of Victoria.