Energy companies under fire over move to 'punishing' time-of-use tariffs

Angela Hyde’s power bills doubled after her retailer changed the way it charged her. (ABC News: Tony Hill)

Angela Hyde lives a modest life near Berri, about two and a half hours east of Adelaide on the Murray River.

Money is tight in Ms Hyde’s home, where she lives with her ex-partner and three adult children.

It was a bitter blow, therefore, when she recently received a quarterly power bill for $2,000 – more than double the previous invoice and unlike anything she’d had before.

“That’s a lot of money for me,” she said.

“I was horrified when I saw the amount. And I thought, ‘How am I going to pay this?’

“So I’ll be entering into payment plans. But you never really catch up when you’re on a payment plan.”

Ms Hyde said the shocking bill came after changes were made to the way her property was charged for electricity.

Economic theory, messy reality

Instead of paying a flat rate throughout the day, her property has been moved on to a so-called time-of-use, or cost-reflective, tariff.

Under the tariff, charges are significantly higher between 6am and 10am and 3pm and 1am – a total of 14 hours every day.

But she said she knew nothing about the change until after she received the bill from her retailer – French-owned firm Simply Energy – and sought help from a financial counsellor.

“I hadn’t done anything differently,” she explained.

“I hadn’t bought any new appliances or anything that would change it except for the … new times-of-use tariff.”

To the anger of charities and consumer groups, Ms Hyde’s story is an increasingly common one.

Across Australia, but particularly in South Australia, consumers are being shifted on to time-of-use tariffs in big numbers.

[Graph – Time-of-use consumers increase]

Enabling the change are smart meters that supposedly allow householders to see how much power they are using in “real time” while giving retailers and regulators better oversight and control of customers’ usage.

The industry says time-of-use tariffs will make the electricity system more efficient by sending consumers price signals about the underlying costs of their power.

Thanks to the rise of solar power in Australia, wholesale electricity prices are typically far cheaper in the middle of the day.

However, they often soar in the afternoon and evening when solar output falls away and back-up generators such as gas plants have to fill the breach.

Tariffs ‘essential’ for efficient grid

The Australian Energy Regulator (AER) says time-of-use tariffs encourage more of the solar power to be used.

“Tariff reform can encourage more efficient use of networks, delay the need for network augmentation and investment, and spread network costs more equitably,” the regulator wrote in its latest State of the Energy Market report.

According to the AER, smart meters “are essential” for cost-reflective tariffs to be applied.

It noted that as of June 30, 2022, about 57 per cent of households in the national electricity market (NEM) had metering “capable of supporting” such tariffs, though a smaller percentage had been assigned to them.

But the regulator also noted that the Australian Energy Market Commission (AEMC), which sets the rules in the NEM, had “reached the view that the rollout of smart meters had progressed too slowly”.

As a result, the AEMC last August called for a mandatory rollout of smart meters to ensure every household had one by the end of the decade.

Simply Energy declined to be interviewed about Ms Hyde’s case or the broader effects of time-of-use tariffs.

Instead, the company provided a statement in which it appeared to put the onus on the poles-and-wires company – SA Power Networks – that services Ms Hyde’s property.

A spokeswoman for Simply Energy said it was the poles-and-wires company that installed the smart meter and updated the tariff “to the default, which is currently the time of use tariff”.

“We can confirm that the customer is on a time of use tariff,” the spokeswoman said.

“Although the tariff changed, we did not change the customer billing and therefore, we are not required to notify the customer.”

Others take a dim view of the position put forward by regulators and the industry.

Changes fuel inequality worries

Ross Womersley from the South Australian Council of Social Services said the case for time-of-use tariffs might make some intuitive sense.

But he argued the implementation of the tariffs had been poorly handled by regulators and the industry.

At the heart of it, he said, had been a failure to properly notify and inform consumers about the changes and the effects that would be felt.

He labelled as “extraordinary” the 14-hour-a-day application of peak rates in South Australia, saying it was excessive.

And he said there must be an end to the mandatory assignment of cost-reflective prices, arguing consumers should be given a choice.

“We think there’s a major failing here, both on the part of the regulator and on the part of the retailers who are not informing their customers that this is going on,” Mr Womersley said.

“As a result, they can’t even start to make decisions about whether there’s any way that they could move their demand for electricity use through the day.

“And there are genuine and good reasons for people to be concerned.”

Much worse, he said, the tariffs were entrenching inequality and badly hurting many of the people who could least afford it.

He said if regulators and the industry genuinely wanted to improve the system, they should implement changes providing fairer access to surplus renewable energy.

“The opportunities to really maximise any of the advantages from time-of-use come with having the flexibility on the one hand to move your usage pattern or the mechanisms to control for your demand,” he said.

“And clearly things like battery storage and electric cars are one of those mechanisms for being able to do that.

“However, what we also know is that those things are costly.

“And the only people who are likely to have the capacity to implement measures that really protect them will be those households that probably have the most capacity to continue to pay for their energy use into the future.

“But if you haven’t got that capacity, then you’re going to actually be punished.”

No real choice

Ms Hyde, for one, feels as though she is being punished.

She works full time at a local charity and cannot easily change when and how she uses electricity to reduce her exposure to peak prices.

“Well, that (changing her usage) is fine if you are at home during the day to do things,” Ms Hyde said.

“I don’t have that option because I work all day.

“And on weekends when I could do it I’ve got other commitments … like taking people to sport and … socialising and stuff.

“I don’t want to spending all my weekend daytime hours doing washing and catching up on the week’s worth of dishes and things like that.”

Her inability to shift when she uses power means Ms Hyde is dreading her next bill and worrying about how she will afford to live.

“If I’d known previously, I could have put more money aside to cover the extra or try and cover at least some of the extra [cost],” she said.

“Because I’ve always put money aside for the power bill, knowing that it’s a large bill.

“And I’ve always had enough in the bank to pay it. And this time, I haven’t.”