STATE MEMBER FOR MALVERN
Leader of the Liberal Party
Leader of the Opposition

Portfolio Speeches

Electricity: smart meters

Mr O'BRIEN (Malvern) -- I grieve for all Victorian families and small businesses who are suffering now and will suffer for years to come because of the gross incompetence of the Brumby government's oversight of the rollout of smart meters across this state. The smart meter project has gone from shambles to scandal under the incompetence of the Brumby government.

Let us look at what this government has delivered when it comes to smart meters. These are coming out to 2.5 million Victorian households and small businesses. Every single household in Victoria will get one of these smart meters and will be touched by the delays, the poor functionality and the huge cost as a result of this government's incompetence.

As the Leader of the Opposition said in this house yesterday, the smart meter project makes even myki pale into insignificance in terms of the waste and the cost. This government has said that 2.5 million smart meters will be rolled out across Victoria and that this will help consumers to control their electricity use and take advantage of lower prices. We will examine that claim in a second, but first of all let us look at the cost of this project.

I hope we in this Parliament would all agree that when a government spends money it is spending taxpayers money, and when a government is entering into commitments that will be paid for by electricity users it should take care. It should realise that families are under financial pressure and their money should be used very conservatively and not be wasted. It should realise the difficulties that small business owners face in trying to make a living in tough economic conditions, and it should make sure that no more money than absolutely necessary is required from those small businesses.

When the government decided it wanted to roll out these smart meters to every single household and small business in Victoria, it costed the project at $800 million. I have it on the authority of no less than the Auditor-General himself. His November 2009 report entitled Towards a 'Smart Grid' -- The Roll-out of Advanced Metering Infrastructure -- advanced metering infrastructure is otherwise known as smart meters -- was absolutely scathing.

But let us just focus on this $800 million cost of the entire project that the government claimed it would undertake. On page 30 of the report the Auditor-General referred to significantly larger cost estimates, which I will come to in a minute, and said:

This amount is nearly 50 per cent higher than the $1.56 billion estimated in the 2008 national MCE and three times higher than the early cost estimate of $800 million upon which the AMI project was recommended, and which was acknowledged by DPI -- the Department of Primary Industries -- in 2008 to be flawed.

So the government has rolled out this project and entered into these commitments on the basis of an $800 million cost.

How does that stack up with the reality, bearing in mind that that cost is not paid for by the electricity distributors; it is not even paid for by the government?

Every single cent of this money is going to be recovered by Victorian families and small businesses through higher electricity bills. The government said it was going to cost $800 million. What is it going to say now? Again I refer to the Auditor-General's report at page 30, where he said:

Under the AMI –

Again I remind the house that advanced metering infrastructure is the longhand term for smart meters – legislative and policy framework, the Victorian electricity distributors are responsible for the deployment of AMI. Consistent with the framework, and to allow cost recovery for the AMI project, the distributors lodged their AMI project pricing proposals with the ESC --
Essential Services Commission – in December 2007. These proposals showed that the AMI implementation full metering services costs were projected to be $2.25 billion.

The government has implemented this policy based on an $800 million cost. The distributors who are actually rolling it out say, 'Sorry, government, you are wrong. The cost is $2.25 billion'.
To get it wrong by that amount is extraordinary. Does anybody in this state, apart from the Brumby government, enter into contracts on the basis of, 'Yes, we think it is going to cost $800 but in fact it is going to wind up costing $2250'? You might ask, 'What were you thinking of to enter into a costing commitment which is so wrong?'. But this is the government that gave us myki, which was supposed be a modest little ticketing project that has now blown out to $1.35 billion. This is a government that cannot count. This is a government that is incompetent when using taxpayers money. This is a government, like most Labor governments, that cannot manage money properly and particularly cannot manage the money of taxpayers. This mob opposite really has a sense of entitlement. Government members believe it is their money and they can spend it however they want, that they can waste it however they want. If you were getting a house renovation done and you thought it was going to cost you $80 000 but the builders came in after you had signed the contract and said, 'Actually it is going to cost you $225 000', you might say, 'Barley Charlie, hang on, that's not what I signed up for'. But this is a government that is so incompetent, so poor at managing public money, that it has signed the Victorian public up to a process blow-out that has gone from $800 million to $2.25 billion.

What does this mean for individual households? That is a key point. We talk about big numbers in this place all the time, but what is going to be the impact on Victorian families? There are going to be 2.5 million smart meters rolled out across the state, so if you divide that $800 million original cost by 2.5 million you get $320, so the actual cost of the hardware for these smart meters coming to every single household is $320. That was under the government's original estimate upon which it went ahead with the project. Based on the $2.25 billion figure referred to in the Auditor-General's report, that cost is now $900 per household, per small business. The original cost was $320, but because of this government's incompetence every single Victorian household and every single Victorian small business will be paying $900 just for the smart meter hardware. That is essentially a $580 Brumby government incompetence tax that every single Victorian household is going to have to pay because this government cannot get its sums right. It will now cost $900 per household, $900 per small business.

But it gets worse than that because the way the government has arranged this rollout, every Victorian household and small business is paying for smart meters before they even have them. This is a four-year rollout process but people are paying higher bills today, so every single Victorian is paying higher electricity prices because of smart meters they do not even have yet. Not only do we have a huge cost blow-out and Victorians paying for smart meters they do not have, but let us look at what happens when they actually get the smart meters installed.

The government was boasting about this back in October 2009. A press release of the Minister for Energy and Resources of 16 October 2009 states:
Mr Batchelor said implementing the benefits of smart meters, such as time-of-use pricing, would be a key issue ...

The government says one of the key reasons we want smart meters in every single home and small business in Victoria is so we can introduce time-of-use pricing, which essentially gives the electricity companies, the retailers and distributors the ability to charge different prices for electricity at different times of day. That is a very basic concept, or so you would think. The government has said it believes this is a fantastic consumer benefit and that is why it is rolling out the smart meters, but what did the government say this week in another press release from the Minister for Energy and Resources? The same minister who issued a press release on 16 October 2009 talking about the benefits of smart meters such as time-of-use pricing also issued a press release dated 22 March 2010, with the headline, 'Moratorium to ensure smooth smart meter rollout'. The Minister for Energy and Resources has announced that there will be a moratorium on time-of-use pricing. The government has now said that it will not be implementing the very benefit that is supposed to exist in relation to smart meters -- time-of-use pricing.

You have to wonder about this: you have got people who are paying through the nose because of the cost blow-out and paying for smart meters they do not have, but now when these smart meters are being installed they are not going to have what the government says is one of the key consumer benefits. What planet is the government on?

It gets worse than that. Not only are people paying for smart meters they do not have, a cost blow-out and features that will not be operating, but smart meters are going to lead to much higher power bills in other ways. At the moment Victorian households are paying between $70 and $152 per year because of smart meters; that is just for the hardware. When time-of-use pricing is introduced those consumers will pay a lot more for their peak electricity use. The retailers will get their share as well. The retailers will have costs as part of providing smart meters and those costs will be recovered from electricity consumers.

The Auditor-General's report headed Towards a 'Smart Grid' -- The Roll-out of Advanced Metering Infrastructure states at page ix of the audit summary:

Retailers could also pass their costs on to consumers, with one retailer recently indicating in a public statement that consumers may have to pay an extra $100-150 each year.

In addition to the hardware charges and time-of-use pricing when it comes in, there will be retailer charges. In addition to that of course we are in an environment where the government has allowed severe underinvestment in network infrastructure and has been holding prices back for political reasons over a number of years. We have recently seen the Independent Pricing and Regulatory Tribunal in New South Wales allow massive price rises, and something of that scale could well be on the cards for Victoria as the government's political manipulation of the system comes home to roost. Victorian energy users are going to be paying through the nose for this government's incompetence.

There is one other cost which has not been factored in yet and that is the cost of this government's spin. The aforementioned press release dated 22 March 2010 from the Minister for Energy and Resources states:

Mr Batchelor said the moratorium would enable a joint assessment between government, industry and consumer groups to -- and the fifth dot points states –

Investigate the need for an extensive consumer education campaign to provide clear information about smart meters, the new tariffs and what this means Victorians.

Presumably there is supposed to be a 'for' in there somewhere.

In addition to all the other costs that are going to be lumped onto the poor old electricity users will be the cost of this government's spin campaign that will attempt to explain to Victorians why smart meters, which have been so badly handled, are actually good for Victoria.

Whether it is transport disasters, lack of safety on the streets, an inability to manage water infrastructure, which is killing gardens and sportsgrounds across the state, this government thinks the answer to everything is more advertisements. Forget the reality: 'Look at what is on your television set. We are telling you it is okay, so please believe us'.

The government knows it is under the pump with smart meters, and it knows about the consumer backlash. I hear it in my electorate office. All members of this house are getting phone calls, emails and letters from their constituents saying they are unhappy about the smart meters and they do not see why they should have to pay for something they do not have. They do not see why they should have to pay through the nose for this government's incompetence. The government's answer is going to be an attempt to solve the problem through spin.

There are also a lot of functionality issues with these smart meters.

I have already discussed the moratorium on time-of-use pricing, which presumably will only be until after the election and then the government will implement it straightaway.

Solar energy compatibility is a real issue. The government's smart meter program has been designed without bearing in mind those who are making a personal effort towards energy efficiency and conservation by installing solar panels. In many cases the smart meters are not compatible with solar panels that are feeding back into the grid. This is a government that talks a lot about its concern about climate change and trying to encourage renewable energy. When it comes to rolling out the smart meter hardware, it says bad luck to all the people who have got solar panels.

There is also a lot of dishonesty about this. The government has been dishonest with Victorians about this project and its incompetent management of it.

One example of the lack of transparency of this government is the outrageous attack by the Minister for Energy and Resources on a retailer which dared disclose the smart meter charge on its electricity bill to its customers. In this house on 2 February of this year the Minister for Energy and Resources said:

Certain customers ... will notice a new item listed on their electricity bills because some electricity retailers, like Origin Energy, for example, are listing the smart meter charge separately to the service-to-property charge ...
Electricity retailers like Origin do not want consumers to have the technology to reduce or control their electricity use ...

What an outrageous attack on a company that was being up-front and transparent with its customers about the cost of smart meters. If this government was not embarrassed about its own incompetence, presumably it would welcome customers knowing exactly what components of their electricity bill relate to what. This government is so desperate to try to hide its own incompetence and hide the fact it has blown out this cost from $800 million to $2.25 billion, to hide the fact that the burden is going to fall on the most vulnerable, that it will attack anyone and anything to try to mask its own incompetence.

This truly is the myki of metering, except it has cost far more and the impact will be far more widespread.

Contact Michael
Michael O'Brien MP

313 Waverley Road
MALVERN EAST VIC 3145

Phone: (03) 9576 1850
Fax: (03) 9576 1849


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