What’s Missing from our Smart Meter Policies?

Initial findings from the Australian Electricity Market Commission (AEMC)’s review of its three-year-old smart metering program has deemed it a failure. Roll-out targets have been missed. And pricing programs don’t actually benefit consumers as much as planned.

The research finds our electricity smart meter installations patchy. Just 17 percent of Aussie households and businesses outside Victoria currently has a smart meter. Of those customers with an advanced meter, less than 20 percent has adopted a flexible, time-based peak/off peak service package.

But policy issues aren’t isolated to the electricity sector. Similar to examples abroad, Australia’s adoption of digital meters remains horrifically low across all utilities.

A Rough Start

Perhaps our poor track record is because we’re haunted by Victoria’s electricity Smart Meters Project in 2006. This remains a shining example of ‘what not to do’ when developing Advanced Metering Infrastructure (AMI) regulation.

A post-mortem of the project finds the AMI cost Victorian residents more than $1.6 billion with little-to-no benefit. Consumers funded the mandatory switch to electricity smart meters before providers could deliver flexible demand and distributed energy. Consequently, power companies reaped all the rewards and cost savings.

The failure to form regulation that is adequately balanced to work for the supply as well as the demand side has continued to negatively affect the perception of value, consumer adoption, and the success of AMI programs.

Policies Remain Too Favourable for Providers

The electricity smart meters program is designed to address systemic customer services issues like inaccurate meter reading and billing practices. It was anticipated that stimulating competition and greater visibility into pricing would see services improve and prices drop.

But smart meters can’t do this alone. Until there’s more effort put into consumer services, smart meter initiatives will continue to fail.

Moving forward, the AEMC promises to investigate what’s required to drive retail innovation so smart meters can propel the future energy market towards one that is two-sided; one where all types of energy users actively buy and sell electricity or their demand for electricity.

How Policies Can be Improved

In the UK, electricity retailers are responsible for the roll out of digital meters. At the point of installation, they’re also required to provide consumers with a free real-time display along with the installation of their smart meter. The installer has to train the household or business owner how to use it so they can understand and manage their consumption.

If consumers have access to their usage via a web portal or in home display, the business case for a smart meter program will certainly start to improve for the demand side of the equation.

Indeed, a recent study found that when consumers are provided a monthly snapshot of their energy consumption and comparison with peers, there’s an average drop in consumption of four percent.

Again, taking lessons from overseas, a model where consumers have a smart meter for some time before being offered a time-of-use tariff would allow them to understand their load or consumption profile. Then they can make an informed decision whether a time-of-use tariff would be the right choice for them.

Developing A Customer-Centric Design

Effective service design is all about taking a service and making it meet the user’s and customer’s needs for that service

1. Do your Research

To develop customer-centric design, an understanding of your customer is critical. Start with the customer and work backwards. This will help to ensure services are designed based on customer need, rather than the internal needs of the business.

Customer-centric services are also designed to deliver a unified and efficient system, rather than process-by-process, or department-by-department services, which contribute to poor overall service performance and user experience.

To assess your existing current design, map the entire customer journey to understand how messaging or processes don’t synchronise adequately, irrelevant products, and other opportunities for improvement.

You also could also perform consumer studies to understand how to prioritise UX efforts. McKinsey’s annual North American customer-experience survey for utilities identified four core hot buttons that influence customer satisfaction. They are:

  1. The billing-and-payments experience
  2. Managing energy usage
  3. Reporting outages
  4. Resolving billing and payment issues.

2. Look at the Case Studies

Effective smart or advanced metering hardware, complete with an online customer interface to services can address all of these levers all relatively fast. Prior projects demonstrate that a digital meter, in combination with an online platform or app interface to services for customers reap rewards for the utility and the consumer alike.

In one real-world example, a European multi-channel customer portal that allowed consumers to monitor their usage and access self-managed services simultaneously:

  1. Improved billing accuracy
  2. Reduced costs for the customer and meanwhile,
  3. Achieved operational efficiencies and customer satisfaction for the utility.

Further, the digitisation of services allowed for the capture of analytics. This was applied to identify significant opportunities for new products that represented cross and upselling opportunities.

A few years ago, McKinsey & Company measured EBIT data to find digital processes improve almost every aspect of a utility’s operations to represent a financial performance improvement of 23.2 percent. The largest savings are made on retail services, at 8.5 percent – and this doesn’t even factor in other less quantifiable business benefits, like customer loyalty and goodwill.

Conclusion

As the market moves forward and regulators tighten the screws on smart meter policies, Australian utilities and policy makers have a choice. They can either ignore the opportunity for improvement to customer services with digitised meters. Or they can leverage the untapped potential in this tech to help them to improve operational efficiencies and customer satisfaction with customer-centric design.

After-all, it is the customer who will pay the costs of the smart meter roll out. Consumers, therefore, should see some more benefits – or they’ll talk with their feet.

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