smart meters in victoria

7/28/2019 Smart Meters in Victoria

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Assignment Coversheet

COMPUTING AND INFORMATION SYSTEMS

Date: 6 October 2012 Department: Department of Computing and Information Systems Subject: ISYS90032 Title: Emerging Technologies and Issues

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SMART METERSIN VICTORIA

An Individual Case Study

Ma. Jo-Anne Loquellano565767

[email protected] Technologies & Issues


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Table of Contents

Preface.................................................................................................................................................... 2Question 1: Organisational Adoption .................................................................................................. 3

Introduction ..................................................................................................................................... 3AMI Program Benefits .................................................................................................................... 3Advantages for DPI ......................................................................................................................... 3Advantages for Utility Companies .................................................................................................. 4Conclusion ...................................................................................................................................... 5

Question 2: Domestic Adoption ........................................................................................................... 6Introduction ..................................................................................................................................... 6Analysis of Costs and Benefits ....................................................................................................... 6Conclusion ...................................................................................................................................... 8

Question 3: Innovation........................................................................................................................ 10Introduction ................................................................................................................................... 10Conclusion .................................................................................................................................... 12

Question 4: Roll Out ........................................................................................................................... 13Introduction ................................................................................................................................... 13Critical Analysis on DPIs Roll Out ............................................................................................. 13What the DPI Can Change ............................................................................................................ 14Criticisms on Utility Companies Roll Out ................................................................................... 16What the Utility Companies Can Do ............................................................................................ 16Conclusion .................................................................................................................................... 17

Reference List ...................................................................................................................................... 18


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Preface

The succeeding pages contain four separate and self-contained reports pertaining to the AdvancedMetering Infrastructure program. They deal with the following broad issues:

1. Organisational adoption2. Domestic adoption3. Innovation; and4. Roll Out.

A reference list that combines resources used for all of the papers is provided at the end.


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Question 1: Organisational Adoption

Explain the advantages that make the roll out attractive to the Department of Primary Industries (DPI) and utilitycompanies. You must refer to relevant, credible company information to substantiate your answer.

Introduction

With the 2004 Victorian Essential Services Commission (ESC) decision to replace manual with interval

meters, and then in 2006, add two-way communications and more advanced functionality as part of an

upgrade to an Advanced Metering Infrastructure (AMI) program, Victoria achieved the first state-wide

rollout of digital smart meters (Deloitte 2011a). This comes prior to the establishment of the 2008

National Smart Metering Program (Australian Energy Market Operator 2011).

This brief report focuses on advantages that make the AMI rollout attractive to Victorias regulatory and

policy-making body, the Department of Primary Industries (DPI), and Victorian utility companies. The

rationale or project benefits are first established to lay the foundation in examining these advantages. For

the conclusion and summary, I ground my analysis in relevant literature on IT adoption of organisations.

AMI Program Benefits

Global consultancy firm Deloitte, in a report to the Department of Treasury and Finance, identified four

broad benefit categories from the AMI program (2011a):

1. An estimated $802 million representing avoided costs from installing old-technologyaccumulation meters and their manual readings;

2. Increased efficiencies from network operations, which include faster detection of blackouts andquicker reconnections, avoiding errors from time switches, reducing theft, avoiding overloads

and transformer failures, and being able to regulate demand in times of supply shortages;

3. Innovative tariffs and better demand management from Time-of-Use (TOU) pricing; and4. Other smaller benefits from minor efficiencies obtained, particularly for retail operations.

Advantages for DPI

Insights can be drawn from the above rationale and the departments key work areas (DPI 2012e) topinpoint possible advantages for DPI, which may include:

1. Improved ability to create more relevant policies from digitization of consumer metering data;2. Increased acumen for tariff design and regulation resulting from TOU pricing; and3. Enhanced energy management capability.

Firstly, swifter access to more real-time metering data can result into an improved capacity for policy-

making. Granular data obtained from smart meters can feed into administrative policies that better

benefit consumers, particularly disadvantaged groups, providing more solid investment and decision

support (DPI 2012e).


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Secondly, regulation of energy consumption through more complex rate structures can be derived from

Time-of-Use (TOU) pricing. An important caveat on this is Deloittes acknowledgement that TOU

benefits can be very difficult to estimate because of great variability, being highly dependent on the

publics response to AMI and flexible pricing itself (2011a).To capture this advantage, DPI must astutely

implement Demand Side Management or DSM. This helps encourage consumers to opt-into TOU and

positively change consumer behaviour through decreased energy consumption at peak hours (Breukers,Heiskanen, Brohmann, Mourik, Feenstra 2011). DSM coupled with pricing signals provides the DPI with

a regulatory tool to encourage a shift in energy consumption to less critical times.

This then leads to the third identified advantageenhanced energy managementsuch that policy and

regulation enables the DPI to achieve its charter to build and support the energy industry (DPI 2012a).

Key to realizing this advantage is improving TOU rate designs so that rates are based upon marginal

costs and not at several multiples higher, alongside wholesale consumer adoption of smart meters in

order to have the capacity for flexible pricing in the first place (Friedman 2011, p. 13). International

studies suggest that implementing a basic TOU tariff reduces energy consumption roughly 5%, but this

could already halve the spot price of electricity (Newsham and Bowker 2010; Rosenzweig, Fraser, Falkand Voll 2003 cited in Deloitte 2011a). These can bode well for DPIs energy management and bolster

the Victorian governments efforts towards reducing the countrys carbon footprint.

Advantages for Utility Companies

On the other hand, utility companies seem to benefit the most, if one looks at the absolute number of

benefits ticked for distributors and retailers under DPIs Categorisation of Benefits Table(DPI 2012b). These

can be summarized as increased efficiencies in network and retail operations, which lump together

benefits 2 and 4 of Deloittes benefits categorization in the preceding page. Specifically, these include

(Deloitte 2011a):

Operational advantages for remote connectivity and access to data, validation and monitoring,and energy load balancing and management;

Less reliance on manually-read meters with decreased billing errors; Improved forecasting and scheduling based on past demand and simulations of future use; and Increased ability monitor energy consumption and demand, minimizing outages (distributors)

and enabling flexible tariffs (retailers).

Distributors

Arguably the main advantage for electricity distributors is that smart meters enable them to track almost

in real-time customers electricity consumption and demand, and then respond accordingly. In the short-

term, they can relocate power where demand is high to avoid outages, while in the long-term, they can

project how much extra capacity and infrastructure they might need to meet future demand (Deloitte

2011a).

Retailers

The Energy Retailers Association of Australia or ERAA considers financial gains for an electricity retailer

to depend not so much in terms of the amount of energy it sells, but on how it efficiently trades in the

wholesale market (ERAA 2012). Smart meters allow half-hourly readings, as opposed to once every three

months. This enables retailers an opportunity to design a flexible scheme that is responsive to consumer

demand during peak and off-peak hours, and also, better manage the companys own assets and debts

(ERAA 2012).


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Conclusion

The above report briefly examined the advantages that accrue to DPI and utility companies. Digital smart

meters make energy data more accurate and more readily-available. This information offers tremendous

business value, empowering the DPI and the utility providers to do something that [they] could not do

before (Seddon 2012). If widely adopted by consumers and wisely managed by these organisations,

smart meter technology, and benefits it enables, can become a resource that allows competitive advantage

for the Victorian energy industry. Seen this way, it arguably follows Barneys (1991) Resource-Based View

of the firm and provides insight as to why DPI and the utilities consider AMI advantageous.


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Question 2: Domestic Adoption

Analyse the costs and benefits that accrue to the householder as a result of the roll out. You must make use of relevant and

credible literature.

Introduction

Electricity distributors commenced Advanced Metering Infrastructure (AMI) installation in 2009,

targeting a 2013 completion. As at 1 May 2012, there have been more than half of an estimated 2.6

million replacements, with consumers paying between $160-$270 for AMI meters (Deloitte 2012; Deloitte

2011a). Meanwhile, an extensive State Government review finds that the most responsible option is to

continue the rollout of Smart Meters, because delay in installations mean the customers reap fewer

benefits while facing more [energy] cost increases (VAGO 2009).

This brief report analyses the costs and benefits that accrue to Victorian householders as a result of the

smart meter roll out. The following table summarises the main arguments, with succeeding paragraphs

discussing each point in detail. Finally, a conclusion is derived from the analysis.

COSTS BENEFITS

Possible threats to privacy and security with the

collection and tracing of personal information

Consumer empowerment: obtaining real-time

data on energy usage and being able to respond

accordingly

Concerns on health from electromagnetic

exposure

Better customer service through alerts that can

notify electricity distributors of any problems

Economic costs related to smart meter roll out

Table: Costs and Benefits of the Smart Meter Rollout in Victoria

Analysis of Costs and Benefits

Threats to Privacy and Security

Smart Meters are two-way, digital communication systems that record electricity usage every 30

minutes, with such information accessible through web portals or In-Home Displays (IHD) that make

tracking electricity consumption more detailed and immediate (ESC 2012b, p.5).

On a basic level, the technical security standards are compliant with the requirements of the Essential

Services Commission (ESC) and other regulatory agencies, which minimises accidental privacy risks

particularly when IHDs are connected to Home Area Networks (Lockstep 2011).

On a deeper level, the collection of data presents a rich goldmine for more targeted advertising from

electricity distributors, retailers and even third parties. As such, it poses a threat to consumer privacy and

security when used unknowingly and without consent. For example, large retailers already mine various

shopper habits, among them, to determine who are pregnant customers and entice loyalty among them, as

they are seen as lucrative sales targets (Duhigg 2012). The US-based chain Target came under fire fordirectly marketing baby products to an adolescent before she had revealed that she was pregnant to her


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family (Wilson 2012). In the same manner, behavioural patterns obtained from digital meter readings over

time make it possible to trace, and later on, target, customers based on their electricity usage data (ESC

2012b).

Electricity distributors and retailers under the Victorian smart meter program are bound by the Privacy

Act to handle data generated from smart meters with discretion, confidentiality and secrecy. TheAustralian Governments Privacy Act considers as Personal Information (PI) information or

opinionabout an individual whose identity is apparent, or can reasonably be ascertained from the

information or opinion (Office of the Australian Information Commissioner 2012). Therefore, energy

providers can stand in breach if they use information collected for other purposes and without the

consumers consent because the individual retains the right to choose how, or whether, their metering

data can be used for purposes other than monitoring electricity consumption.

This puts the onus on both provider and consumer to reach a respectable middle ground: the former

needs to be prudent in the manner it retains, protects and discloses data, and communicate so clearly,

while the latter bears the cost of trusting the providers, while being circumspect when opting intosecondary use of data. Indeed, this is reflected in a recommendation by Lockstep Consulting, a private

practice specialising in digital identity and privacy based in NSW. In its Privacy Impact Assessment

Report for the ESC, Lockstep determines that metering data belongs to the customer and are bound by

Australias National Privacy Principles (2011).

Concerns on Health

A report from EMC Technologies (2011) states that smart meters radiation levels are within the limits

defined by the Australian Radiation Protection and Nuclear Safety Agency, and are in fact lower than

other household items such as mobile phones and baby monitors.

However, the scientific community is divided on this matter of electromagnetic fields (EMFs) and health

effects. Some research do not find conclusive evidence on adverse health effects (van Rongen, Croft,

Juutilainen, Lagroye, Miyakoshi, Saunders, de Seze, Tenforde, Verschaeve, Veyret, & Xu 2009; Otto and

von Muhlendahl 2007; Valberg 2006). Meanwhile, research quoted by Stop Smart Meters Australia, a

private sector coalition opposing the smart meter program, argues that chronic radiation exposure has

been found to cause adverse health effects, among these, cancer, neurological diseases and impairments

particularly among children, loss of fertility, and insomnia (Fragopoulou et al. 2010 cited in Stop Smart

Meters Australia 2011; Sage & Carpenter 2009). The coalition also cites the World Health Organizations

report that while evidence is still being gathered, radiofrequency EMFs [are classified] as possibly

carcinogenic to humans, a statement echoed by the International Agency for Research on Cancer(cited in Stop Smart Meters Australia 2011; Sage & Carpenter 2009). As such, the health and safety of

households, especially those with children, are cast in doubt.

Economic Costs Related to AMI Roll OutThe question of who pays the real bill in the AMI program is a politically-sensitive issue. Network costs

are essentially passed through to consumers even though it is the electrical distributors who shoulder

upfront costs related to the smart meter installation (Deloitte 2011a). For example, experience in

California, USAs implementation of smart meters shows a short term cost in addition to costs of

installing the smart meters (NERA Economic Consulting cited in McGann and Moss 2010).


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Consumer Empowerment

One highly-touted consumer benefit of smart meters is its enabling use offlexible or time-of-use (TOU)

pricing that can empower consumers to manage and reduce electricity bills (DPI 2012d). However, this

can only materialize if consumers indeed shift their energy consumption to off-peak hours as a result of

pricing signals, and if energy suppliers are able to introduce appropriately-tiered tariffs. One concern isthat retailer adjustments to the tariff structure can directly increase or decrease the benefits obtained by

consumers from these (Deloitte 2011b). Both TOU tariffs and Critical Peak Pricing tariffs are seen as

potentially problematic particularly for vulnerable or inelastic electricity use households who, through

economic or social circumstances, do not have as much leeway to change their energy usage (Deloitte

2011b; McGann and Moss 2010).

Nonetheless, DPIs SwitchOn campaign aims to encourage this shift in consumer behaviour by providing

more information on TOU pricing, the actual cost and breakdown of electric bills, and managing energy

consumption, either by switching retailers or through increased appliance efficiency (DPI SwitchOn

2012a, passim). All of these pertain to increasing consumer knowledge and empowering the consumer to

make informed choices, benefits of which will redound to the customers themselves. Such a process can

be seen to follow Rogers Innovation-Diffusion Decision Process for individuals (1995), wherein

empowered and knowledgeable consumers are hoped to be persuaded to adopt smart meters.

Better Energy Provision for Consumers

There are numerous consumer benefits derived from increased efficiencies in network operations, such as

avoided costs of manual meter readings (Deloitte 2011a). However, perhaps the million-dollar question is

whether smart meters lower electricity prices in the long-term. There is conflicting research on this

depending on the approach. A University of Melbourne paper cites a NERA Economic Consulting report

that reduced consumption during peak demand is not enough to defer future investments in generationinfrastructure (McGann and Moss 2011). Meanwhile, the Brattle Group Consulting posits that a

combination of TOU tariffs with Demand Side Management (DSM) is needed to truly reduce electric bills

(Faruqui 2012; Sergici and Faruqui 2011).

Regardless, the commonality is that smart meters can potentially provide better energy services, primarily

through less blackouts and swifter remote connections and disconnections, by directly affecting the

supply and demand of load. Because smart meters can communicate with other inherently energy-

intensive but smart appliances (such as air-conditioners) through a home area network, consumers who

enable direct load control can reduce overall consumption when usage is cycled on and off during critical

periods (McGann and Moss 2010). Meanwhile, supply-side considerations mean offering sophisticatedfinancial incentives alongside stricter codes and standards for appliances, buildings and machines to

promote energy efficiency (Faruqui 2012).

Conclusion

At first glance there seem to be straightforward costs and benefits to the smart meter program for

households. However, closer inspection reveals that there are attendant issues to be addressed, and a need

to closely manage the program, in order to minimize costs and truly maximize benefits. One example is

that ensuring consumer privacy and security may conflict with gathering and sharing consumer data to

create advantageous tariffs. This puts the pressure on government to regulate electricity providers so that

they not only abide by the law, but also, collect just the right quantity and quality of data in order to


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sufficiently derive value for them (i.e. marketing research) to pass on as value for the consumers (i.e. tiered

pricing). As another example, consumer empowerment through improved choices for wiser decisions can

only materialize if TOU pricing is implemented in a way that benefits the public, without undue

disadvantage to more vulnerable sectors of society. Lastly, better energy provision can be more

meaningful if this is tied to lower electric bills, energy being a staple commodity. This means that short-

term spikes in electricity expenses must be offset with long-term savings.

The cost-benefit analysis emphasizes a need for better project management, greater regulation and

increased transparency, key themes on which the ESCs recommendations build on (ESC 2012b).


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Question 3: Innovation

Develop a proposal that illustrates how smart meter technology should be adapted to ensure that householders are made

conscious of their power consumption, and therefore change their consumption behaviour. In your answer consider technical

feasibility (how this could be implemented, legislated, monitored and administered), likely problems, and additional benefits

to the society.

Introduction

Program mismanagement seems to be rife with the Advanced Metering Infrastructure (AMI) roll out

schedule delayed by a year (VAGO 2009), overblown costs by half a billion Australian dollars (ABC News

2010), and mounting opposition from consumers on installing digital meters in their homes due toprivacy, security and health concerns (Stop Smart Meters Australia 2011).

This brief report outlines a proposal justified by theory, expert advice and practice. I draw from key AMI

roll out recommendations from the Victorian Auditor-Generals Office (VAGO), Deloittes Cost-Benefit

Analysis and the Brattle Group to form a three-pronged proposal that focuses on changing consumer

energy consumption behaviour. Ultimately, the aim is decreased energy consumption and increased

energy efficiency (VAGO 2009). I endeavour to ground this proposal on IT adoption theory. The

conclusion examines the proposals merits and shortcomings.

The table on the next page offers the proposal approach, people responsible, and actions needed, withfurther detail in the succeeding paragraphs.


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PROPOSAL ASPECT STAKEHOLDER RESPONSIBLE ACTION/S NEEDED

1. Demand SideManagement (DSM)

1.1 Government regulatory agencies,particularly the Australian Energy

Regulator (AER) and the Essential

Services Commission (ESC)

1.2 Victorian utilities (electrical distributorsand retailers)

1.3 Victorian consumers

1.1.1 Create a focused and realistic DSM program learning from the implementationexperience of others (Gehring 2002)

1.1.2 Consider a transdisciplinary context (particularly drawing from economics,psychology and sociology di sciplines) for DSM program design (Breukers,

Heiskanen, Brohmann, Mourik, Feenstra 2011)

1.3.1 Communicate and engage with consumers to enable understanding, transparencyand sustainability (Gehring 2002)

1.3.2 Partner with interested third parties to improve participation, reduce cost andemphasize the message of energy conservation (Gehring 2002)

1.3.1 Become aware that a rationale of AMI is energy efficiency and affordability,because in the past twenty years, electricity prices have risen 82% compared to

consumer goods 37%. This rationale is related to sustaining Australias competitive

advantage as a resource-rich country with a sustainable and environmentally-

conscious energy sector (Barney 1991)

1.3.2 Proactively obtain more knowledge on DSM and smart meters from a wide rangeof reputable sources, and perhaps, even consider testing touted benefits of the

meters and TOU pricing, to help make an informed decision on adoption

2. Project Managementand Implementation

2.1 Department of Primary Industries (DPI) 2.1.1 Ensure DPI has the organizational structure to properly manage AMI andattendant risks (VAGO 2009), alongside DSM implementation

2.1.2 Continue efforts on consumer engagement to work through issues, particularly onsafety & health, energy efficiency, innovative tariffs (Deloitte 2011b;VAGO 2009)

2.1.3 Proactively manage technology risks involved, such as delivery of the smart meterequipments expected functionality, alongside promoting related projects to reap

expected benefits, such as usage of In-Home Display units (Deloitte 2011b)

3. Governance andControl

3.1 Relevant government agencies: AER,ESC, DPI

3.1.1 Closely monitor the AMI programs costs and benefits following Deloittes analysis3.1.2 Keep abreast of AMIs economic viability by reflecting the effects of risks and

changes in scope and assumptions (Deloitte 2011b)

3.1.3 Design a regulatory framework to reasonably incentivize the energy industry inmaximizing benefits from AMI (VAGO 2009)

3.1.4 Coordinate with relevant national government and industry bodiesTable: Changing Consumer Behavior: An AMI Proposal in Brief


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The table in the previous page summarizes a three-pronged approach to change consumer behaviour,

based on an understanding that individual IT adoption is a complex decision process, influenced by prior

conditions (Rogers 1995).

At one level, we first need to change cultural perceptions that were reinforced by previous practice. DSMas a portfolio of measures to improve the energy system at the side of consumption helps package

smart meters attractively (Palensky and Dietrich 2011, p. 381). Key to deriving the benefits of AMI is if

consumers opt into Time-of-Use (TOU) pricing and, through either IHDs or web portals tracking

consumption, monitor and conserve their households energy (McGann and Moss 2010). Behavioural

changes are thus seen as complementary to achieving more efficient energy usage (Palensky and Dietrich

2011). Deloittes recommendation of web portals, and its subsequent take-up by energy distributors, is a

step in the right direction.

On a macroeconomic level, consumer behaviour needs to be reinforced with the right messages from the

environment. Because government is such a big and powerful entity, it arguably can influence norms ofsocial systems through policy and regulation, albeit not immediately. Over time, however, effective

project management and implementation alongside tight program governance and control on AMI, and

the smart grid network of Australia as a whole, can help change entrenched consumer consumption

behaviour.

The Brattle Group, a practice specializing in encouraging smarter methods for the electricity industry,

makes the case for dynamic pricing, which is simply time-based pricing that is maximized through DSM

and smart meters (Faruqui 2012; Sergici and Faruqui 2011).

ConclusionThe experience of other countries, particularly recent years that has seen a renewed interest in DSM, is

generally positive, if designed and implemented properly. For example, energy efficiency financing

programs that are made possible with DSM is estimated to have saved 4,500 MW on average over three

decades (Faruqui 2012). More vulnerable sectors of society need not be disadvantaged, as low-income

consumers in California, who are able to shift energy consumption by at least 22% relative to average

consumers, prove (Sergici and Faruqui 2011). While the benefit of a DSM-based proposal is that it

administers a portfolio of measures to encourage energy efficiency (Palensky and Dietrich 2011), its

limitation is that it needs a well-constructed package of policy, program administration and regulation in

order to succeed. DSM has been around since the 1980s and can be considered on its third generation

(Gehring 2002; Faruqui 2012). The experience of energy efficiency and DSM programs in Canada,Germany and the Netherlands, to name a few, is closely tied to giving due regard to contextual factors

apart from careful program management and governance (Breukers et al 2011). Because DSM targets

those who need and demand energythe consumersit is particularly important that there be real social

and behavioural changes among them for a successful implementation.


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Question 4: Roll Out

What should the DPI and utility companies change about how they are approaching the smart meter roll out? What can be

improved, and how?

Introduction

Consulting firm reports and consumer advocacy websites paint a roll out of the Advanced Metering

Infrastructure (AMI) program that is fraught with opposition and lack of clear understanding on its

objectives and benefits (Deloitte 2011a; Stop Smart Meters Australia 2011).

This brief report has two main sections, one on areas of improvement for the Department of Primary

Industries (DPI), and second, for utility companies. First, we delve a bit deeper into the origins of AMI in

order to provide a historical context. We next summarise main criticisms of the roll out based on reviewsfrom private sector (Deloitte) and government (Victorian Auditor Generals Office or VAGO) to form

the basis of our recommendations for DPI. We draw from literature on individuals adoption of

technology to provide context on our suggestions for improvement. For a conclusion, these changes are

synthesized together with the approach used.

The AMI Origin: A Lack of Clear Communication from the Start

The AMI program leapfrogged the replacement of old accumulation to interval meters, which was the

2004 Essential Services Commission (ESC) ruling, and instead mandated digital smart meters in early

2006. This followed a 2005 cost-benefit study on the societal benefits of advanced functionality (VAGO

website 2011). The study proposed that the interval meter upgrades could be enhanced because there was

a positive cost-benefit to having remote meter reading, and remote connect and disconnect capabilities

(CRA International 2005).

Late in 2004, the year of the ESC ruling, a pilot project on smart meters had been launched by an

electricity distributor to understand customers propensity to change their electricity consumption

patterns if provided with more information about their consumption and its relative cost at different

times of the day and year (Bayard 2004).

Critical Analysis on DPIs Roll Out

Arguably, understanding and responding to the cultural and behavioural changes that smart metersrequire is central to improving the AMI program roll out and avoiding its risks. Judging from the brief

history sketched above and the gap of consumer-targeted information until the first VAGO report came

out in 2009, it seems that the DPI underestimated the effort in convincing consumers of the benefits of

smart meters. Deloitte alludes to this need of a mindset change, stating, AMI creates a platform for

changing the way electricity is delivered to customers (2011a).

Therefore, the main criticisms of the roll out are (VAGO 2009; Deloitte 2011a):

1. Lack of consultation and a progressive engagement with stakeholders, particularly the biggestend-user group, the consumers;

2.

Lack of project governance and control to minimize and manage implementation and technologyrisks; and


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3. Inadequate cost-benefit analysis to create a comprehensive economic justification, and then toengage with groups who stand to become better or worse off.

The critical failure of the DPI is to communicate, particularly with consumers who stand to be most

affected with the changes. When the decision was made to adopt smart meters instead of proceeding with

less-intrusive interval meters, this should have signalled a need to begin engaging end-users in a dialogue,particularly if the technology is foreseen to impinge on consumer privacy. This did not happen, nor did

any awareness campaign occur to encourage outspoken respondents from the pilot run to influence their

social networks. Rogers (1995) theorizes early adopters as more inclined to adopt technology and

characterize them as more risk-tolerant, have higher socioeconomic status, and highly-interconnected

with peers. The DPI could have engaged with pinpointed early adopters from the pilot study (those

generally favourable and supportive of smart meter roll out) to leverage on their communication and

social networks. Inferring from the role that early adopters play in speeding up adoption of innovations

(Tushman cited in Seddon 2012), this could have helped catalyse the informal acceptance of smart meters

among the broader majority.

What the DPI Can Change

The improvements suggested on the following table draws from the critique above and on the Unified

Theory of Acceptance and Use of Technology or UTAUT, a synthesis of eight models on IT acceptance

(Venkatesh, Morris, Davis and Davis, 2003). The UTAUT helps understand what drives acceptance of IT

innovations as a means to create interventions that facilitate adoption (Venkatesh et al 2003). Recognizing

that the AMI program is already mid-implementation, we further segment the first set of

recommendations based on Rogers Innovation-Diffusion process (1995), to target consumers who are

still deciding whether or not to adopt smart meters, those who decided favourably, and those who

rejected.


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CRITICISMS OPPORTUNITIES FOR IMPROVEMENT OF THE DPI

1. Lack of consultationand a progressive

engagement in

engaging with

consumers mid-

implementation

AT DECISION STAGE(Convince to Adopt)

FAVOURABLE DECISION(Support Decision)

UNFAVOURABLE DECISION(Persuade Otherwise)

1.1 Have consumer focus groups tofind out current expectancies onperformance and effort, andstructure awareness campaignsaccordingly

Publicise the SwitchOn campaignonline and through traditional

media to introduce the concept offlexible pricing, and encourageconsumers to opt-in and becomemindful of reducing energyconsumption

Reach out to different consumergroups that have price sensitivity,drawing from Deloittesvulnerable and non-vulnerableclassifications through social media

1.2 Reinforce facilitating conditions(Venkatesh et al 2003) thatencourage the consistency of smartmeter adoption with values, needsand experiences.

Provide information on theSwitchOn website for different

needs:- those who have already installedsmart meters and are consideringswitching to TOU pricing- those who have switched to TOUpricing and need guidance inadjusting

highlight success stories of reducedelectricity costs and benefits to thehousehold from smart meters

1.3 Establish regular dialogue with groupsopposing the roll out, such as StopSmart Meters, beginning with people

who are perceived as opinion-leaders,to use social influence in persuadingthe public of the merits of AMI

Acknowledge that simplistic factsheets online will not deteropposition.

Address the fundamental concerns ofconsumers on privacy and healththrough more detailed websitesand/or dialogue with respectedspokespersons (researchers orpractitioners who have experience inimplementing AMI).

2. Lack of projectgovernance andcontrol to minimizeand manageimplementation andtechnology risks

2.1 Understand that adoption of smart meters and Time-of-Use pricing (TOU) requires a fundamental mindset change, but isessential for the program to be successful

2.2Acknowledge inadequacy of program management staff (possibly in both numbers and in skillset) handling the AMI programand take steps to create more efficient team

2.3 Develop a risk management plan immediately, starting with the risks that have already materialized

3. Inadequate cost-benefit analysis tocreate acomprehensiveeconomic justification

3.1 Learn from published papers and international research on states that have adopted digital metering technology, combinedwith AMI lessons learned to date (Houseman 2010)

3.2Adopt a whole-of-project view to complement incremental analysis of benefits and risks

Table: Opportunities for Improvement for the DPI
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Criticisms on Utility Companies Roll Out

Five Victorian electricity distributorsCitiPower, Powercor, Jemena, United Energy and SP AusNet

businesses that own and maintain the electrical equipment such as poles and wires (ESC 2012a), are

responsible for the installation of digital smart meters across the state (DPI 2012c).

A national cost-benefit analysis on the national smart meter program decided on a distributor-led roll out,

however, this was only expected to be beneficial in Victoria if the cost of the roll out fell in the lower

bound of estimates and if benefits of the business efficiencies achieved were in the upper bound

(McGann and Moss 2010). As such, Victorian electricity distributors are arguably even more pressured

towards recouping investments and maximizing revenues. This possibly helps explain why the Australian

Energy Regulator finds an estimated AUD$500 million cost blowout over the three-year roll out, which

may eventually be passed on to consumers (ABC News 2010; Edwards 2011).

What the Utility Companies Can Do

The current situation of Victorian distributors, coupled with conflicting information on digital meters

safety and privacy ramifications, makes them easily susceptible to mistrust by the Australian public (Stop

Smart Meters Australia 2011, passim). It is therefore imperative that there is heightened communication

and transparency, alongside learning from other countries experience, for distributors to allay the publics

anxieties and assist government in a smooth transition. These include:

Establishing smart meter compatible web portals. Currently, only Origin Energy and Jemenahave portals that enable consumers without In-Home Displays to access and track energy

consumption in almost real-time, with United Energy in a trial phase (DPI SwitchOn 2012b).These portals should be mandatory, to enable transparency and sustained engagement with

consumers, a key recommendation of private consultancy firm Deloitte (2011b).

Working with the Australian Energy Regulation to create tariffs addressing bothvulnerable and non-vulnerable households. Deloitte (2011a) distinguishes these

consumer segments and recommends carefully structuring energy tariff levels. Although a

Melbourne University study shows households unable to shift consumption because of specific

circumstances (i.e. disabled, unemployed, retired, single-income, etc.) are made worse-off with

Time-Of-Use (TOU) pricing (McGann and Moss 2010), Deloittes Customer Impacts Study

reveals tariff structures are key to avoid this (2012aa). Regardless, the capability of digital

metering enables a more granular approach towards pricing that should be maximized.

Having the distributor organisations ready for change, particularly in preparing billingchanges. Considering that reduced electricity bills is arguably significantly related to customer

satisfaction, distributors must have processes, systems and resources in place to deliver this

benefit soonest. This ensures consumers performance expectancy of lowered utilities is

addressed (Venkatesh et al 2003).

This particular benefit is just one among many lessons captured in an Electric Power Research

Institute report, which itself would be recommended reading for the companies (Houseman

2010).


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In fairness to the distributors, response papers they submitted to the Department of Treasury and

Finance (DTF) seem to convey an open attitude towards discussion on controversial issues. They address

a number of issues on privacy and security, health, and billing (DTF website 2012) (DTF 2012). In light

of these being main consumer concerns, these specific suggestions are further recommended to spur the

rate of smart meter adoption, such as:

Publishing the privacy plans of distributors in general terms. Apart from simply-wordedprivacy statements to safeguard consumers, plans of distributors as encapsulated in their

responses to DTF can be synthesised and/or publicised in general terms, to enable transparency

and consumer engagement.

Responding tactfully but directly to perceived health concerns. Energy providers seem tohave left this up to the government and not engaged on this issue, although they refer to these in

their communications (response papers). Apart from coordinating for an intra-industry panel

with independent speakers for clarity, they can also be pro-active and engage one-on-one where

feasible. Examples are providing certified personnel for installation, and thoughtful placement of

smart meters away from bedrooms or water sources.

Conclusion

The recurring theme in identifying opportunities for improvement is recognizing the complexity and

multi-layered issues involved in AMI. Consumer issues of privacy, security, health and safety are closely-

related to their sense of well-being and therefore warrant continuous dialogue and engagement in a

sincere and transparent manner. Theories concerning an individuals decision to adopt an IT innovation

and the rate of his/her adoption are useful contexts in making recommendations. Drawing from the

research of Rogers (1991), one should first target increased consumer knowledge, while recognizingsocioeconomic and personality characteristics and prior conditions such as social norms and current

needs in persuading the consumer to make a decision to adopt. Meanwhile, the collaboration of

government and the energy industry in terms of ensuring that consumers performance and effort

expectancies are fulfilled, are useful insights in hastening the adoption process (Venkatesh et al 2003).

Together, these theories lay the foundation for the manner and context of the opportunities presented.


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