If your meter records what time you use electricity, you could save a bundle.

Dumb meters, dumb tariffs

If you have a very simple tariff where you pay a flat unit rate for electricity and perhaps a daily charge as well, then you likely have a non-Time-Of-Use meter. Your meter records how much electricity you use between monthly meter reads, but not what time of the day – or day of the week – you use it.

We call this a dumb meter. Why? Because dumb meters don’t record whether you’re using most of your power during peak periods when wholesale rates are high, or during off-peak periods when wholesale rates plummet to a tiny fraction of the peak cost. So you can’t take advantage of cheaper power at off-peak times. Dumb, dumb, dumb!

What’s the up-shot of all this? Well, if you tend to use more electricity at lower cost times compared to the average business, you might not be getting rewarded for it.

Smarter meters, smarter tariffs

So dumb meters only record electricity use in monthly increments. But what if you have a meter that records electricity in much smaller increments? Well, if your meter records both the time and day you use electricity, retailers can offer you wholesale Time-Of-Use (TOU) pricing.

This pricing reflects the costs that retailers face when they generate or purchase electricity at the times you actually use it. Straight supply and demand factors come into play here: you pay a premium for energy costs at times of high demand – when retailers have to turn on additional generation to supplement cheap hydro generation – and get discounted rates at times of lower demand – when there’s plenty of cheap hydro power to go around.

Furthermore, Time-Of-Use metering lets retailers pass through the costs that they in turn get charged by lines companies to deliver your electricity, rather than just bundling a rough estimate into your rate.

Put simply, the costs you pay for electricity are much more transparent.

When should I install a Time-Of-Use meter?

Sometimes you are required to install a Time-Of-Use meter. Larger electricity users are legally required by the Electricity Authority to install one over a certain threshold. Typically your site would be drawing the equivalent of around 50 domestic households before you fall into this camp.

Some local lines companies may require you to install a Time-Of-Use meter well below this threshold, so that they can work out how much load you contribute to their network at peak times, and charge you accordingly.

However, you might choose to install a Time-Of-Use meter anyway – even if your annual consumption is well below such thresholds, because –

  • Your retailer can offer you a Time-Of-Use tariff to go with it, that more closely mirrors the underlying fluctuations in the cost of electricity, and so is much closer to wholesale prices
  • Complex network charges are passed through to you transparently, meaning you are incentivised to shift your load away from peak times, and potentially save thousands
  • You can track your energy use in greater detail, allowing you to identify opportunities to manage load in ways that can save you thousands more.

Countering these benefits is the extra cost of installing and hiring a TOU meter. Hirage and data handling charges will generally cost around $1200 per year, and installing a meter usually ranges between $150 – $800 dollars, depending on the complexity of the current metering arrangement and whether any additional cabling is required.

These factors place a lower limit on the size and type of site for which it is economic to change meters. But the bigger your site, the more you generally stand to gain…sometimes thousands of dollars per year.

What does Time-Of-Use pricing look like?

Small to medium sized electricity purchasers who have installed a TOU meter installed typically purchase what is known as a Fixed Price, Variable Volume contract that sets out the prices they will pay for electricity over a set term within set time periods, and allows them to consume any volume of energy at those prices, within acceptable limits. TheseĀ  contracts usually set prices in four-hourly blocks that are further differentiated by business/non business day, month and by year.

These contracts have 144 numbers in them per year that the contract covers: for each month of the year, the rate changes in four hourly blocks depending on whether it is a business day or a weekend. So comparing a 144-step Time-Of-Use tariff across retailers is a lot more challenging than a simple Non-Time-Of-Use rate.

Talk to us now on 0508 332 474 and see if smarter metering will save you money.