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Monday, September 24, 2012

Get Ready for Electricity at 70 cents per kWh

Electric price shock hazard warning
Electric price shock hazard warning

Extract from Ausgrid Network Pricing Proposal For the Financial Year Ending June 2012, 30th April 2011

Ausgrid’s Time of Use (ToU) electricity pricing program

Ausgrid has been at the forefront of Time of Use (ToU) metering and pricing innovation in Australia since 2004 with its ToU program, as summarised below:

  • Disc meters at the majority of medium sized customer premises (in the consumption range of 15- 160 MWh per annum) have been replaced by interval meters. This meter replacement program has reached completion;
  • Most customers with interval meters have been transferred to ToU prices; and
  • All new and upgraded customer connections receive an interval meter. This includes new domestic dwellings as well as businesses.

The Independent Pricing and Regulatory Tribunal (IPART), in its 2004 Determinations, facilitated this ToU program by allowing expenditure for meter replacement and modifying the pricing side constraints to allow ToU prices to be mandated.

Ausgrid has rolled out interval meters to around 300,000 customers. By June 2014, it is anticipated that in the absence of a mandated Advanced Metering Infrastructure role-out, over 500,000 customers will have an interval meter installed in their premise, making it the largest deployment of interval meters in Australia.

Ausgrid’s strategic pricing study

Ausgrid has completed a Strategic Pricing Study (SPS) that was designed to quantify how customers would respond to tariff reform initiatives such as Seasonal ToU and Dynamic Peak Pricing.

A summary of the key results are shown in the following table.

6: Residential Response Levels to Dynamic Tariffs
Tariff Average across all DPP events Extreme Temperatures Assessment
Winter (5 °C) Summer (31 °C)
Information Only 11% 11% 13% Inconsistent, ranges from -1% to 24%
DPP Medium with IHD 25% 30% 36% No difference in response between medium $1/kWh and high $2/kWh
DPP High with IHD 25%
DPP High without IHD 23% IHDs add minimal response

The key learnings from the study are:

  • Domestic customers who sign up to the tariff respond well to dynamic tariffs, and are willing to reduce their air conditioning usage on hot days, despite popular belief to the contrary. The further away from the comfortable 18° to 22° Celsius range, the greater the demand response.
  • Despite the apparent complexity of dynamic tariffs, customers are able to understand the concept.
  • The dynamic price could probably be set at 50-70c/kWh and still achieve comparable reductions. The demand response to prices above $1/kWh appears to be saturated.
  • 0-160MWh p.a. business customers showed no response to dynamic tariffs during the trial. It may be that they would respond to price signals over the longer term.

While these results demonstrate that innovative network tariffs have the potential to play a role in demand management, more work is required to better understand the equity, economic, financial and regulatory implications of these tariffs.

Proposed new tariff trial during 2009-14 Regulatory Period

Ausgrid is planning to build on the results of the Strategic Pricing Study by launching a new tariff trial during the current regulatory period. The trial will examine a KW-based network tariff as a method of achieving demand response.

As with any innovative tariff structure, an important part of this trial will be to better understand the acceptability of KW-based price signals to end-customers (and retailers).

Extract from Power of choice - giving consumers options in the way they use electricity, 6 September 2012

Australian Energy Market Commission
Power of choice - giving consumers options in the way they use electricity
6 September 2012
Submissions due 11 October 2012.
Reference: EPR0022 Draft Report

6 Efficient and flexible pricing options
"...managing consumer impacts and addressing the needs of consumers who could face increased financial difficulties under new pricing structures, and strengthening the arrangements for retailers and distributors to set cost reflective pricing..."

Further reading - AEMC Power of choice review

The AEMC Power of choice review is looking at possible changes to the National Electricity Market to help consumers better manage their energy consumption.

The review is exploring what changes can be made to help families, business and industry make informed choices about the way they use electricity and manage their bills."


Askgerbil said...

"Limited-form dynamic pricing could commence, although crucially, outside the summer period to minimise the incidence of initial bill shock."

(From a report used by AGL's Tim Nelson.)

Read more AGL no Fan of Energy Efficiency