The Illusion of the Power of Choice

The Illusion of the Power of Choice
Last week, a very large Australian Gas and Lighting company (which shan’t be named) posted a billion dollar profit. One. Billion. Dollars. While Australians (and particularly South Australians) are currently experiencing some of the highest electricity prices on the planet, this company has recorded the highest profit returns for a financial year on record. Although there are several reasons for this, of particular interest is the effect the Power of Choice had on the market.

On the 1st of December 2017, the electricity market in Australia changed. It was a change which most consumers wouldn’t have noticed as it largely didn’t affect them, but it was significant enough to create another level of complexity and chaos to the way energy retailers and network distributers operated in Australia. It was called ‘The Power of Choice’, and it was designed to allow consumers – you - more flexibility in who they chose to do business with by allowing them to not only select their retailer, but also their metering provider.

Prior to the 1st of December, all commercial and residential metering was handled and maintained by the network distributers, which in South Australia is SA Power Networks. Any new meters, meter abolishment, meter alterations and meter upgrades were all handled by SA Power Networks – and they were exceptional at it. Reliable, methodical, thorough – and most importantly, punctual. SAPN created and managed a network of meters across South Australia with very few hiccups or issues, and what issues they did have were generally handled promptly and efficiently. In fact, the metering system itself ran almost faultlessly, and regardless of your personal feelings on how much they charge for the service, that service was one of the best in the country.

Now, thanks to the Power of Choice, that’s all changed.

With the Power of Choice came the introduction of several other regulations which were developed in an effort to stimulate competition within the market, one such regulation being the introduction of the ‘ring-fencing’ guidelines. Under the new rules, it was no longer allowed for a distribution network operator to also provide metering solutions, meaning the businesses tasked with maintaining the physical meters and associated data had to be someone other than SAPN, where SAPN would usually perform the whole scope of works in one go, this now needed to be organised by the retailer who was financially responsible for the site, and in most cases, the retailers were not equipped to handle this new role.

Interestingly, at almost the same time SAPN lost the ability to install and maintain meters, a new company arose by the name of Enerven (with a surprisingly similar postal address to that of SAPN – and by similar, I mean exactly the same). This new company was - you guessed it - a metering data provider, and could provide this service with the same level of quality that SAPN did, presumably because it was the same people, probably. This practice – financially splitting a company’s assets into another, separate entity, is known as ‘ring-fencing’, and prior to December 1, the Australian Energy Regulator released guidelines to promote DNSP’s to do just that.

Before this change took place, any metering requirements were simply completed through Service Orders raised through the Market Settlement and Transfer Solution (MSATS) platform; this software - designed by the Australian Energy Market Operator - functions as a business-to-business platform where market participants and network distributors are able to parse job requirements in relation to the Australian Energy Network, without having to directly contact each relevant party individually.

With the introduction of the Power of Choice, the procedure altered so drastically that few businesses had a chance to develop internal processes to accommodate it. Whereas a single Service Order would previously have been sufficient to get a meter installed and connected to the grid, the process now requires the raising of a Service Order to get the grid connected to a meter isolator, then contacting the retailer who will then contract a meter data provider to facilitate installing the actual meter while getting a third party electrician to connect the meter to the meter isolator (*breathe).
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I know right?

With this new, streamlined (cough) process, a job which might have previously taken only a few short days to complete can now result in weeks or months of waiting for works to be completed. Another great side-effect of the Power of Choice is the complete lack of transparency; there was a time where, when asked, we would confidently be able to tell our clients and customers how much a meter would cost to install on a property, or, at least a ballpark figure. Now, we have no idea. We don’t know how much it will cost, and we don’t know who to ask to find out. In our experience, the costs vary so wildly it’s not even possible to provide any semblance of a quote, and even when you do, there’s no guarantee it will be done any time soon.

We have experienced this within our own business. In some cases we have had clients with new solar installations waiting up to 5 months for a meter to be installed which is able to register energy being put back into the grid, and while the existing meter on site is great at registering what they’re consuming, any energy returned to the grid by their solar installation goes completely unaccounted for. It just returns to the grid and is essentially assimilated into the market.

This is where it gets interesting…

I know what you’re thinking; the revenue generated from that installation must go somewhere? It must be accounted for and someone must get paid for it? Well, you’re right, that energy gets on-sold to other consumers, so even though the customer with the solar energy system on their roof is not getting paid for energy they produce, the retailer who is on-selling that generation most definitely is. And who is that retailer? Well, it’s what they call the ‘default’ retailer. The default retailer acts as the Retailer of Last Resort (RoLR) in a given area, and these roles were established when the market was first set up in 1999.

So, thanks to the Power of Choice, we now have a bunch of generating sites across our nation - in the form of average households with solar installations - who are providing energy to the National Electricity Market for free, as they don’t have the appropriate meters installed to correctly register the amount of generation which they are exporting back into the grid, generation which is being on-sold by the very retailers who are paying nothing for it, and are responsible for taking the appropriate action to get the correct meters installed - meters that, when installed, would result in that retailer having to actually pay their customer for their generation.

So as you can imagine, these retailers have very little incentive to complete these works, in fact, they have more incentive not to.

But, they care about their customers, and wouldn’t do something that could possibly jeopardise those relationships, would they? They only ever operate their business with the best interests of their customers at the forefront of their minds.

Well, while you tell yourself that, just don’t forget that – as I mentioned at the start of this article, they made a billion dollar profit this financial year. And as for you dear energy consumer, what do you have? Why, you have the Power of Choice.

Be careful what you wish for.
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About the Author

Patrick is the Marketing and Communications Manager at Yates Electrical Services. When he's not designing stuff and writing stories, he performs as an acoustic soloist and spends time with his beautiful little family.

Patrick also likes long walks on the beach, sewing, and photoshopping himself to look like an Avenger. He really wishes he was an Avenger.