Smart Metering

Smart electricity meters are gradually being rolled out which monitor energy usage remotely at regular intervals (every 30 minutes is typical). This makes it possible for power companies to charge consumers not just on based on the time of the day but based on how much energy is being used compared with how much energy is available.

In many countries, including Australia, electricity pricing is regulated. I believe that pricing models need to be such that consumers, whether households or businesses have the incentive to shift their energy use, where they can, to when electricity is abundant. Obviously, this isn't always practical, but sometimes it is. For example, in Australia, electricity demand is often high in the evening when people come home from work. It might make sense for a lot of people to air condition their house before the evening peak and then turn air conditioning off during the evening peak. Most houses would hold the temperature for a while. People would use more electricity that way but if they use the electricity while it is abundant and cheaper, then it would still make sense. Charging electric cars is another use of electricity which can take place while energy is abundant. This will become more significant when electric cars get more market share.

Here is what I think the electricity pricing model should look like:

• Electricity companies would only be able to charge minimal fees that are not based on usage. Something like $A10 per quarter for bill processing.
• Electricity companies would have to quote consumers an electricity price based on continuous usage. That price would be the same dollar per kilowatt hour figure for all customers, new or existing, big or small. It would apply to rolling one year periods.
• At any time, if it is justified by demand coming up to supply constraints, electricity companies would be able (and required) to charge customers whatever they needed to ensure that demand does not exceed supply. Of course, to make up for it, they would have to charge less at other times. If, because of a demand versus supply imbalance, electricity companies had a need to increase price but could not do so without exceeding the quoted price for rolling one year periods, they would have to give credits or refunds for past usage.
• Electricity companies would also be able to charge more when it can be justified by electricity costing more to produce. That would be when renewable energy needs to be topped up with electricity from fossil fuel because demand is too high to be covered just by renewable energy. Again, electricity would have to be cheaper at other times to keep the average to what was quoted.