Power of Choice Update

Background

Master Electricians Australia is continuing to work hard to resolve the issue created or exaggerated by the introduction of power of choice in December 2017.

The system was implemented through rule changes created by the Australian Energy Market Commission to free up the metering aspect of the retailer process. The introduction of new entities such as Metering Coordinators and Metering Providers is part of the overall plan to reduce power prices by freeing up competition. This is a major shift from the introduction of the retailers to the old monopoly of our network controlling the whole market. The introduction of the retailers alone has not reduced power prices, as the core fundamentals to get power to the home have not changed, only now there are more fingers in the pie.

Extensive consultation occurred with the retailers and regulators around the financial aspects of introducing the new regime, but little thought was given to the impact on operations and connections. All the key players have some responsibility in the failure of the new system. Networks have struggled with the loss of control of connections to their networks with only NSW and WA having dealt with this issue previously.

Retailers were under prepared to deal with thousands of new connections and Metering Providers struggled to handle the load of connections. State Governments have been hoping the teething issues would settle down after substantial feedback from customers, builders and electricians on the delays of over three months in the early stages.

Master Electricians advocates vigorously

Master Electricians Australia has advocated on behalf of the industry in two key ways:

  1. Firstly, pulling industry together to resolve the operational and backlog issues to find the best solution with the new rules, as they are.
  2. Secondly, to find a solution to the rules going forward, to provide a better outcome for the industry and positively impact on the core cost factors underpinning power prices.

Pulling the Industry Together

For the first part, Master Electricians successfully reduced time frames in QLD, SA and Tas from an average of three months to less than three weeks. This has been achieved by simply getting the key parties to analyse the processes and communicate, with a focus on the customer. Many of the players have substantially increased their workforce to handle the load, which I have no doubt will flow through to our cost of power in the end.

In these states the process has involved the electrical contractor wiring the installation and applying for power to be connected or altered in some way. Then the network is notified by the retailer to program the connection of the service.  Another visit is then made by the metering provider or their subcontractor to install the meters.  And then finally, the original electrical contractor has to revisit the site to perform the final connection. I wonder if the designers of power of choice envisaged four trips to site to connect one new home.

Multiple occupancy sites get more interesting. With multiple retailers involved, they all have their own metering coordinators and metering providers. This can become quite complex when, for example, a major switchboard needs to be upgraded and the different metering providers appointed by the retailers all turn up out of hours to change the meters over.

Logistically the best solution for the customer is one visit by a qualified person who can competently complete all tasks. We are close to this in NSW, where the install contractor can be authorised to install the service and meters, but only if they have a relationship with the particular retailer.

So why don’t we go back to getting the network operators to do everything?

Part of the new rules aimed at freeing up the market are to limit the activity of network operators to operations relating to looking after the network. Specific ring-fencing rules are now in place to stop networks using their market advance, and often Government owned status, to compete with private firms. This is because without it they could throw significant resources to eliminate competition and then control the market price leading to high prices for power.

To circumvent this, many networks have created other organisations they control to compete in the open market and feed work directly to them. We need to ask if this is the best outcome for our community.  Or should networks be limited to running the network as efficiently as possible?

Like Buying a Car

Retailers need to start owning their customers.  If I go to a Mercedes dealer and I want to buy a car, I expect the salesperson to manage everything in the background. We don’t expect to have to organise delivery, registration and the paperwork, we expect them to do it all.  Yet with energy, we are organising all the coordination and delivery ourselves.

It Gets More Complicated

To complicate the issues further we are now seeing a new market being created where customers are trading power between themselves, both with and without the use of a retailer. The is challenging the law makers, with the system we have created struggling to deal with the value of the long-established grid against the cost to transfer power to your next-door neighbour. Solar and storage have enabled some customers to go off grid.  This risk of too many customers doing this will drive up the network charges for the remainder.

Where to Next?

It is certainly unlikely that we will head back to the good old days of one government owned organisation distributing power to everyone and receiving a small quarterly account. So where do we go from here? To move to the next phase of how power should be delivered, we should achieve the following:

  1. Revalue the grid for its new role in the market. This will require both a substantial write down on its value and the Government to reduce its rate of return on investment.
  2. State Government’s need to remove their restrictive state-based rules that conflict with the AEMC rules and allow the market to operate nationally.
  3. Allow for any licensed person to make connections and install meters to the grid. The customer contractor should be responsible for the connection to the grid or metering. The cost of connection should be borne by the customer and paid to the contractor for the work done.
  4. Allow retailers to develop their own tariff and pricing structures. This should see some great new flexible options delivered to the community, which may combine and limit exposure through volume.

The grid needs to be a product for community use and must to be available and reliable in order to underpin our future energy needs.

Malcolm Richards
CEO
Master Electricians