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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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Student Signature: MA. JO-ANNE B. LQOUELLANO Date: 6 OCTOBER 2012
https://academichonesty.unimelb.edu.au/https://academichonesty.unimelb.edu.au/https://academichonesty.unimelb.edu.au/7/28/2019 Smart Meters in Victoria
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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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