EnergyAustralia to Run Radical Pricing Plan to Reduce Household Bills

In a radical strategy to contain power bills, households would get lower rates in return for enduring short, but sharp, price increases when demand is at its highest. They could also be paid to go without air-conditioning.

EnergyAustralia, which has 2.8 million customers in southeast Australia, is trialing charging households more than 12 times the normal price of power up to 14 times a year in two-hour “dynamic peak events”. In these events, the price of a kilowatt hour (kWh) of power rises to $3.30. By comparison, customers on standard flat-rate tariffs pays less than 27c/kWh. It means the cost of running reverse-cycle air-conditioning during the “peak event” could be as much as $34. Use the dishwasher for an hour and it will be another $5.

Participants are given two days’ warning – and 53 per cent off the peak price they would otherwise pay from 2-8pm on weekdays. Households that have chosen to participate in the trials used a third less power in the “peak events” but more at other times.

“So on the surface those customers in the trial are enjoying a more comfortable lifestyle outside those small number of trial periods,” said EnergyAustralia retail manager Adrian Merrick.

EnergyAustralia is also gauging customer willingness to allow their aircon’s compressor to be switched off during “peak events” in return for up to $44 as many as six times a year. Other energy retailers, such as WA’s Western Power and SA Power Networks, have also run trials in which they’ve turned off volunteer households’ aircon. This helped cut peak energy usage by up to 25 per cent and 35 per cent respectively.

While they are understood to be reluctant to go beyond trials, EnergyAustralia wants to bring its tariff plans to market. However, there is a significant problem. In the real world, “peak events” occur on extremely hot days. Yet in the EnergyAustralia trials no event had been run when the temperature was 37C or above. The safeguard is meant to be that participation would be voluntary. But the Consumer Utilities Advocacy Centre has serious concerns, particular for the unwell and new parents.

“If electricity affordability is a big issue for them they may well opt in without realising the potential welfare impact if they have a health condition or children,” said CUAC executive office Jo Benvenuti.

Rules that permit Critical Peak Pricing (CPP) and Critical Peak Rebates (CPR) have only recently been adopted in NSW, South Australia, Tasmania and the ACT. The rest of the country is expected to follow shortly. A spokesman for the Federal Department of Energy said:

“The Government believes that the introduction of both CPP and CPR contracts may potentially offer significant gains, with minimum risks for consumers, including many low income consumers.

“However … these tariffs may not suit every household, hence the Government’s view that the use of these products should be entirely voluntary and subject to the explicit informed consent of the customer.”