A new electricity retailer is harnessing the untapped potential of metering technology to make power pricing a whole lot smarter
News there’s a new electricity retailer in the market may not send frissons of anticipation through your average household consumer.
There are already plenty of me-too offers turning up on the doorstep (or the end of an unwanted phone call) – mostly just when you’ve just got dinner on the table.
The latest one might be different.
Flick Electric Co, which is so far available only in Wellington and Hamilton, is the first power company offering time-of-day pricing based on the electricity spot price – a price based on the actual cost of power,
Sounds boring, but because the spot price is based on the actual cost of power and varies considerably during the day depending on demand and any supply problems in the system, this means small customers can now do what big customers have done for years – adjust their power usage to take advantage of times of the day when electricity is cheap.
Flick CEO Steve O’Connor says smart meters have been around for several years and have given retailers the opportunity to offer time-of-use pricing for a while. But retailers haven’t done taken advantage of the technology. Although over half of all domestic electricity meters are now smart (this is forecast to be 75% by the end of 2015, and up to 95% in 2018), power retailers have largely used smart meters to make it quicker – or unnecessary – for that guy with the fluoro jacket to turn up at your house to read your meter.
Customers are still largely being offered one-size-fits-all, averaged prices – normally around 25 cents per kilowatt hour.
“Retailers smother industry price signals by giving customers a single flat rate,” O’Connor says. “We are unbundling that so customers can see the exact cost of generation, transmission and metering, so they can make decisions.
“New Zealanders have never had any other option but to pay a flat, per kWh rate for their electricity. We think that grossly limits consumer choice, and is indicative of a stale electricity retail market.”
Flick's technology, which has taken a year to develop, bills customers per half-hour segment, according to how much generators and transmission companies are charging at that particular time. Users can log in to see the real-time cost of their power.
“We give customers the online tools to help them understand how they are consuming electricity,” says O’Connor, who previously worked with Meridian Energy’s Arc Innovations smart metering unit, and spent five years as CEO of Wellington’s business incubator, Creative HQ.
He says spot-based pricing gives customers the chance to be cunning with their power. Putting your washing machine on at 11pm (off-peak) instead of 9pm (peak) could mean cutting the cost of that electricity to as little as 6c/kW, he says.
Setting your central heating to warm your house up 5-6.30am, rather than 6.30-8am might do the same.
Power spend before changing behaviour (source: Flick)
Power spend after changing behaviour (source: Flick)
Obviously the same could happen the other way, and customers could end up paying more than 25c/kWh because they unwittingly turned the dishwasher on during a price spike.
But O’Connor says Flick’s 55 trial customers, who have been on the system since January, have cut their power bills by 18%, compared with their previous retailer. The “gamers” – households that use the Flick technology to follow prices in detail – have saved 25%-35%.
Flick bills customers weekly, and lets them know how much they have saved, compared to what they would have been charged by their old supplier.
O’Connor says the development of smart appliances and the so-called “internet of things” will make it easier for consumers to adjust their power consumption.
After feedback from trial customers, the company is working on a product that will alert customers when electricity prices are particularly high, so they can switch appliances off.
O’Connor says from this week Flick is registered with independent electricity price comparison service Powerswitch, and he would like the service to be available nationwide within 12-18 months.
“In Norway, 58% of consumers buy electricity on the spot price. That represents a huge opportunity for us.”