While the recent media attention on the Victorian smart meter rollout has been on allegedly dodgy installations, the bigger picture is that customers have no choice but to pay around $100 a year for the technology and are yet to receive any direct benefits.

Back in 2005, Exigency was commissioned to run a series of smart meter business cases based on an annual per customer cost of $50 and benefits of around $100. Since then, the Victorian roll out has blown out to a $1.6 billion program and the resulting $100 a year meter charge now supports a functionally rich system and uses a regulatory model that defers customer benefits for several years.

To be fair to the networks that are responsible for the program’s cost, it is a massive undertaking, with 2.5 million meters to be replaced by 2013, and so it’s little wonder that their focus has been on installing meters instead of enabling functionality.

The last cost-benefit analysis for the program relied on customers being able to respond to meter data and price signals. While regulations are generally supportive of customer access to meter data, the retailers (customers’ representatives in the smart metering program) are currently minded towards providing detailed data annually, on request, without charge and for a fee beyond that. This manual approach to making meter data available makes realising benefits from demand management harder for customers.

Early last year, Victoria's then-Brumby government responded to talk-back radio’s discovery that time-of-use tariffs were effectively a tax on low-income households by putting a moratorium on them. In doing so they removed the benefits available to average and high users of electricity to use smart metering applications that could actually reduce their electricity bills and potentially avoid rolling supply interruptions of 2009.

So the Baillieu government’s review of Victoria’s smart metering program is timely and could deliver real value to customers. After all, it's the customers who are financing the program, so it’s only fair that they should be the focus of any review.

Stopping the program is a theoretical option, however the reality would be contractually complicated and create regulatory difficulties. Above all, such a move would raise “sovereign risk” for corporate investors, who tend to look to the relatively small, but technologically savvy, Australian market as ideal for development.

More practically, the review could usefully focus on how to realise the benefits for customers from the original cost benefit study. While changes to the business model or regulatory arrangements should never be undertaken lightly, much could be done in the area of service levels and data access to accelerate the flow of benefits to customers.

Serious work also needs to be undertaken on peak-pricing. One of the factors that convinced the Council of Australian Governments to push for a national roll out of smart meters was the potential for carbon reduction. Yet the possibility exists, in Victoria at least, for the present peak pricing regime to lead to an increase in carbon emissions.

The Baillieu government’s smart metering review could deliver real benefits to customers but to do that will require a focus on them rather than industry. The backlash over smart meters in the run-up to last November’s election suggests the political stakes are high, but the potential electoral rewards are at least as great.

Bruce Macfarlane is an associate director at specialist energy and carbon market advisory firm Exigency