One of Australia’s most powerful energy watchdogs has flagged a shake-up of electricity pricing rules amid concerns about the spread of complex and often punishing tariffs affecting unwitting consumers.

Anna Collyer, who is the chair of the Australian Energy Market Commission (AEMC), will on Wednesday morning put power companies on notice over the way they are up-ending electricity prices for huge numbers of customers across the country.

The AEMC is responsible for making the rules that govern retailers in the national electricity market, which covers much of the eastern seaboard and services about 10 million customers.

Ms Collyer is due to present the keynote speech at the Australian Energy Week conference in Melbourne, where she will acknowledge worries about the pace and nature of electricity tariff reforms.

At the conference, she will also announce a new pricing review to examine whether power charges were appropriate.

“We have heard ongoing concerns around the way customers are experiencing unexpected changes to their tariffs when smart meters are installed now,” Ms Collyer will say.

“We think it is critical to the success of the rollout to work through concerns raised about how retailers may be applying demand and time-of-use tariffs in unexpected ways.”

A groundswell of concern

In recent weeks, the ABC has highlighted a groundswell of concern about the implementation of radical changes to electricity charges that are hitting hundreds of thousands of households.

From a system where consumers predominantly paid a flat rate, which cost them the same amount for a unit of electricity no matter when they bought it from the grid, users were being shifted on to far more complicated charges.

Among them were time-of-use tariffs, which charge consumers more during peak hours and less in off-peak times, as well as so-called demand rates, which slug households based on the intensity of their demand during busy periods.

The changes are being enabled by smart electricity meters, which the AEMC wants installed on every Australian home by the end of the decade.

Currently, about one in three Australian households has a smart meter.

According to Ms Collyer, smart meters were an essential tool for consumers and providers as the country transitioned away from fossil fuels and towards green sources of power.

This was because renewable energy – particularly solar power – was abundant at some times and scarce at others, increasing the need to take advantage of production when it was available.

She said smart meters allowed rooftop solar systems to “talk” to the grid, noting that one in every two Australian homes was soon expected to have panels.

Moreover, she said meters gave consumers the ability to save money by giving households much better visibility of when and how they were using power.

“Once you can see how your home actually uses electricity, it’s easier to apply energy-saving tips like programming different run times for your pool pump or getting a plug-in timer for your washing machine,” she will say.

Despite her strong support for smart meters, Ms Collyer said not everyone could – or wanted to – radically change the way they use electricity.

From obsessed to uninterested

Among electricity consumers, she said, “we have those who are obsessed, those in a mess, and those who, completely understandably, just couldn’t care less”.

She said changes to electricity pricing needed to account for all types of consumers rather than just those who would benefit from more complexity.

To that end, Ms Collyer said the commission was proposing new rules that would help protect households affected by tariff reform.

Following revelations that many retailers are using a loophole to avoid warning energy users about changes to their tariffs, these new rules would include greater notification requirements.

They would also require retailers to provide more information to consumers about the effects of any changes and prevent up-front installation costs.

“We will be extremely mindful of how any changes we make in the context of the smart meter rule change will need to transition to a future world we are still considering,” Ms Collyer will say.

“The traditional thinking around tariff reform is sound.

“We want to reduce the peak demand because we have to build our infrastructure to the peak. So if we can reduce the peak, we can have less infrastructure and lower costs for all.

“One way to do that is that is if people can change how much energy they use during the peak, and one way to prompt customers to do that is to make their energy more expensive then, and less expensive at other times.

“But is that traditional thinking working now?

“Are the signals actually getting through that tariff maze all the way to customers?

“What’s the role of retailers in all of this?

“And will it work at all once we have half the customers with solar panels and batteries, and half without?

“And – importantly – what is it that the customer really wants?”

Retailers, are you Apple or Kodak?

Ms Collyer said it was also incumbent on power companies to make tariff reform worthwhile for their customers.

She said the coming wave of smart technology from electric vehicles and internet-enabled white goods presented a golden opportunity for utilities to lift their game and “innovate”.

A growing number of products, such as EVs, would not only be smart but also have “flexible” demand, meaning they could adjust the power they sucked from the grid according to underlying prices at any one time.

In a coded message to existing retailers, Ms Collyer asked whether they would be “the Uber, not the taxi; Apple, not Kodak” – a reference to large incumbent providers that are undercut or even destroyed by innovative rivals.

“If your thinking or your company’s strategy is still about modifying what you’ve always done rather than creating a better way, you need to catch up,” she said.