The peak body representing energy users has attacked complex power prices that charge consumers more at peak times, saying they do not work and may only hurt average people.
In an damning assessment, Energy Consumers Australia said charging households and small businesses more for power at peak times may do little – or even nothing – to avoid network upgrades and cut costs.
The group said this was because the real problem driving up costs for everybody was demand during extreme heat or cold.
According to ECA, the energy industry should tackle that problem first, rather than punishing householders with higher tariffs during the daily peak.
"Mandatorily rolling out 'cost-reflective' network tariffs appears to be an inefficient and ineffective approach to minimising network costs," ECA wrote in a report.
The report coincides with an acknowledgement by one of Australia's biggest energy retailers that flexible or "dynamic" tariffs are a problem for many customers.
Energy Australia boss Mark Collette, whose company supplies about 1.6 million households across the eastern seaboard, lamented what he said was the over complication of electricity prices amid the rollout of smart meters and the dynamic tariffs they enable.
Complex prices: In whose interest?
As reported by the ABC, hundreds of thousands of households are being – often unwittingly – subjected to cost-reflective prices such as time-of-use or demand charges.
These can cost them significantly more for power at peak times.
"I certainly think there are a number of customers who've had unexpected and unpredictable outcomes," Mr Collette told the ABC.
"And I don't think that's in the customer's interest."
Currently, about one in three homes across the country has a smart meter, though in Victoria the figure is close to 100 per cent.
Under a directive from the Australian Energy Market Commission, every Australian home is set to have a smart meter by 2030.
Regulators and poles-and-wires companies have long supported the rollout of smart meters, saying they will make the electricity system more efficient by sending consumers price "signals" about when they should use power.
However, the rollout of the meters and the spread of the flexible prices they enable has sparked a backlash from consumers and fears that many householders are being unfairly punished.
Mr Collette said dynamic prices could benefit some consumers who were able to cut their consumption at peak times and increase it during off-peak periods, when tariffs were cheaper.
But he conceded that many other households enjoyed no such luxury and, in fact, would be unable to avoid the penalty of higher prices during the morning or evening peaks.
"I think it's fair to say that there have been some mixed experiences for customers," he said.
"On the one extreme, there are some customers who like to be energy traders – they have things like batteries and electric vehicles. And they really like the dynamic nature of the energy market.
'Not everyone is a trader'
"However, most customers in our experience are actually looking for a very simple and predictable energy tariff.
"And I think it's fair to say that there have been quite a few experiences as have been profiled in the media, where customers … have seen a change in their metering, which has triggered a change in their tariff type, which has made energy less predictable for their particular circumstances."
Asked about the retail industry's practice of using a loophole to shift people on to cost-reflective tariffs without warning when an underlying poles-and-wires tariff was changed first, Mr Collette was critical.
He said "certainly it does appear that there are customers who've gone through some pretty unpredictable experiences" but stressed "we don't automatically change the tariff".
The Energy Australia chief said it was imperative the industry figure out a way to simplify power bills to ensure consumers were not hurt by complexity and kept faith in the energy transition.
To that end, he said Energy Australia was part of a group – which included a number of network poles-and-wires companies – looking at fundamental changes to the way electricity is priced.
Among the options is bringing power into line with other services such as phone and insurance, which typically charge customers a flat monthly fee.
Mr Collette said the group was yet to come to any firm conclusions, but the goal of simplicity was paramount.
"Imagine if the retail market was designed so that retailers like ourselves had longer term contracts, which meant that there was more price stability over a longer period of time," he said.
"Once you do that, you can certainly imagine the pricing structures might deliver more price stability over time, which sort of leads back to that question for consumers around is the current structure based on passing annual pricing better than alternatives?
"And that's a live conversation."
Reforms on flawed assumptions?
The interventions from Energy Australia and the peak body representing energy consumers comes at a turning point in the tariff reform process.
Following months of revelations about the secretive and indiscriminate nature of the changes, the Australian Energy Market Commission has proposed a shake-up of the protections given to consumers.
These include a requirement that retailers provide a flat-rate offer.
Retailers would also be required to get "explicit informed consent" from consumers before any tariffs could be changed for the first three years after a smart meter was installed.
In its report, Energy Consumers Australia noted this latter proposed rule would still allow energy firms to transfer a customer on to a cost-reflective tariff after three years had passed.
As such, it said the industry and regulators were still operating on "an underlying assumption … that there is a strong and necessary case for transferring every household and small business to a cost-reflective network tariff".
"We believe this assumption warrants re-evaluation," ECA wrote.
The lobby found – contrary to the arguments for cost-reflective tariffs – slapping householders with punishing tariffs during the daily peak would have little benefit for the network.
ECA said network costs were driven not by the daily cycles in energy consumption but by the extreme heat or cold – events which may happen only once or twice a year.
It argued that tackling the problem of this "true peak" was far more likely to avoid the need for costly upgrades of the network.
Use the carrot, not the stick: ECA
However, the group said making people use less power during those times was also likely to be "ineffective and potentially unwise".
"Price signals may have limited effectiveness in reducing energy consumption during extreme weather," it said.
"In very hot or very cold conditions, households and small businesses are likely to prioritise comfort over cost savings.
"Further, many of our homes were built before building energy standards were introduced and, as a result, are highly inefficient."
[Power fault - Graph]What's more, ECA said peak demand had stabilised in all jurisdictions bar Queensland over the past 12 years thanks to factors including the spread of rooftop solar.
Consequently, it said most poles-and-wires companies were spending far less than a decade ago on network upgrades and had significant amounts of spare capacity.
"Any efforts to lower demand in low-utilisation areas will not reduce network costs," ECA wrote.
To deal with true peak demand, ECA proposed governments and the energy industry look at "non-pricing" measures.
[Endeavour Energy peak rates]Among them were energy efficiency programs, "community batteries" that could act like a bank for excess rooftop solar power in a neighbourhood, and education campaigns.
As well as this, it said customers should be given a carrot – rather than a stick – to cut back on their consumption at peak times.
The AEMC is expected to make a final decision on the new smart meter safeguards by the end of the year.
