Smart meters, but at whose expense?

THE introduction of smart meters in Victoria may have been a costly exercise  for consumers but it has proven an impressive money spinner for a handful of  Australian entrepreneurs.

Cameron O’Reilly, the scion of the Heinz food empire and former chief of  media group APN, along with John B. Fairfax, the Smorgon family and Kerry Stokes  are a few of the high-profile names to have made a killing from the sale of  smart meters. They were major shareholders of Landis + Gyr, the company that  amassed about 56 per cent of the market in deals to supply the electricity  distributors in Victoria.

Their big payday came in 2011 when O’Reilly sold Landis + Gyr to Toshiba for  $US2.3 billion.

An investigation by BusinessDay has found Australians have been paying about  twice the amount for smart meters than consumers in the US and Europe. And there  has been poor transparency even though the metering devices had been mandated by  the government.

  That the costs of the implementation in Victoria have already blown out from  $800 million to $2.3 billion presents a salutary warning to New South Wales,  which is now deliberating on a rollout of its own, albeit optional.

The success of Landis + Gyr has confirmed Cameron O’Reilly as one of the most  savvy businessmen in Australia. The O’Reilly family had controlled regional  media group APN and just as the fortunes of old media were about to take a  battering last decade, O’Reilly was already moving deftly into a new space.

He started with Bayard Capital in 2002, garnering seed money from friends and  business acquaintances. Kerry Stokes and J.B. Fairfax pitched in $20 million  apiece, and the Smorgon family another $5 million. O’Reilly soon sold two-thirds  of his APN shares and chipped in a further $5 million.

He raised $100 million in seed capital, then Bayard went on a $1.5 billion  spending spree, acquiring Swiss metering company and industry leader Landis +  Gyr.  The Toshiba sale for $2.3 billion made Bayard’s seed investors a handsome  multiple of their investment, although it is only possible to piece together  estimates of profits from the public materials.

The Fairfax family would make about $203  million, through Marinya Holdings,  and the Smorgon family’s Escor Investments, $36 million.

John Curtis, the chairman of St George Bank made $24 million and the private  equity group Propel Investments about $405 million.

Propel and Curtis came on board through a series of capital raisings before  the Toshiba sale. Other shareholders in Bayard were Temasek Holdings, the  investment arm of the Singapore government, the former Lion Nathan chairman Doug  Myers and fashion designer Carla Zampatti. Once O’Reilly had acquired Email  Metering, the Enermet Group of Finland, Hunt Technologies and Cellnet  Technologies in the US, and Europe’s Landis + Gyr, Bayard was the No. 1 player  in the world market.

Not only did Landis + Gyr, to which Bayard then changed its name, dominate  Victoria but it also managed to fetch high prices for its devices, perhaps the  highest in the world.  Repeated efforts by BusinessDay to find relevant  information about smart meter prices and contracts have fallen on deaf ears.  ”Commercial in confidence” has been the response. Both government agencies and  distributors refused to provide details, although industry sources said  Australians have been charged twice as much as customers in other developed  markets.

According to eMeter Corporation, a meter data intelligence department of  Siemens, the average cost of smart meters sold to utility companies in the US is  $221, and in Europe $272. A spokesperson for the Australian Energy Regulator  (AER) confirmed the Victorian distribution companies paid an average of $346 to  their suppliers. Powercor paid the highest at $423.

Landis + Gyr meters are widely used across the US and Europe. It is the sole  supplier of the E350 model to SP AusNet and has a contract to supply 80 per cent  of CitiPower and Powercor’s E350 smart meters. A spokesman for CitiPower and  Powercor said that there were at least 32 respondents to the tenders. It was a  ”highly competitive process” with 16 detailed proposals lodged, according to  CitiPower and Powercor. Landis + Gyr’s PR company said the prices negotiated in  Victoria could not be compared with those overseas as specifications changed  from country to country.

”The Landis + Gyr smart meters sold in Victoria are manufactured in  Australia to meet the custom specifications of local utilities,” he said. ”The  model numbers we use, in this case the E350, specify a generic nomenclature  within Landis + Gyr globally, however, between each region, the form factor,  functionality, communications type, network provider and feature set vary  widely, meaning the same model number meters are not the same regional devices  at all.”

Although Landis + Gyr could hardly be expected to divulge commercial  information, the government should disclose. The public is footing the bill,  after all. Yet there was no response from the AER, or the distributors.

The other major supplier of smart meters in Victoria is Secure Meters  previously known as PRI Australasia. Secure Meters supplies the i-Credit 500  model. It is headquartered in India.

The high price of a meter in Victoria and the paucity of proper information  about their cost serves as a warning to consumers in NSW. Last month, the  O’Farrell government announced plans for a market-led rollout of smart meters  for NSW. One distributor, Essential Energy, said it had been reviewing Landis +  Gyr and Secure Meters as potential suppliers.

As crunch time approaches for weary power consumers in NSW, the state would  do well to deliver a more transparent outcome – and a lower price, seeing it is  the customer who has to pick up the cost while the greater benefits, according  to most independent observers, fall to the distributors rather than the  customers.



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9 Responses to Smart meters, but at whose expense?

  1. Rob Guy says:

    We expect governments to collect public money in a fair and transparent manner and then to spend it wisely. An illustration of the novel and indirect ways in which government collects money to subsidise commercial projects makes good reading but getting value for the money spent remains largely unknown. Consider these two examples;
    Reliability Engineering is a proven method for predicting the onset of the wear-out phase in machinery. Suppliers have withheld details of this analysis and so we can not confirm or otherwise how long these meters will last. On past performance, some suppliers will sell the meter inventory back to the government just before they start to wear out.
    Can we verify that the cost of the meter rollout was managed in a verifiably effective way? Probably not. Although some suppliers claim to operate an internationally recognised management system, almost equivalent to our 4 ticks accreditation system, the Order-in-Council is contractually dominant and so over-rides their claim by requiring only that suppliers use an effective management system. The word “effective” is entirely subjective, and therefore unverifiable.
    Tariff flexibility is good for distribution businesses , but retailers are yet to give advance notice, even by a few minutes, of tariff variations. Advance notice gives canny consumers the opportunity to tailor their usage pattern to minimise costs but even this capability is taken from us.
    It is becoming clear that a parliamentary committee was an inadequate platform from which to launch a major infrastructure program, add that to the Major Projects Department and giving project lead status for a secondary industry to the Department of Primary Industry, words fail me.

  2. Sharron says:

    Another fine example of corporate greed. Well said by all objectors – there’s strength in numbers and eventually we will prevail. Best wishes for the New Year everyone!

  3. Jodie says:

    maybe we should all boycott the products these companies sell

  4. Linda says:

    I was watching ‘Pillars Of The Earth’ yesterday. It struck me then that nothing has really changed. I suppose the ‘common proletariat’ should look on the bright side; we are no longer tortured physically or hung! But history shows that the adroit and powerful exert an absolute control over those who are disempowered. The common man has only three roles; to vote (compulsory, and with no real choice of effecting outcome); to pay taxes; and to serve masters and be disgarded by them at will.
    There IS no other role.

    We are of course so ‘civilised’ today, thus this absolute control is not so obvious, and unlike the past, today we have ‘marketing’ which is the principle of telling one that they are being screwed,-but it is for their own good, and they will feel much the better for it.

    In other words: it comes as no surprise to me to see the very few make a lot of money, to the cost of so very many, over these vile contraptions.

    • Pam says:

      Linda – Agree wholeheartedly with everything you have said. Just makes me sick to the stomach. I STILL WILL NOT HAVE A SMART METER FULL STOP…………….CHEERS PAM 🙂

  5. Freddie says:

    That explains why the letters sent to The Age in the past 8-10 months by myself and countless other Victorians describing heart wrenching situations of disabling illness from wireless smart meters and lives destroyed as a consequence WERE NEVER PUBLISHED! Financial interest is making Fairfax media (and others) complicit in perpetrating this immoral, unethical EXPERIMENT on the entire Victorian population. HOW CAN WE EVER TRUST THEM AGAIN!?

    • Pam says:

      Freddie – No wonder your “Stories” were never published. It is just a bloody joke. Well they are NOT GOING TO EXPERIMENT ON ME. Once Christmas and New Year are over I am going to my Local Paper and let them see that Post and we will see what happens then. This should be taken to ACA or SIXTY MINUTES (they are most likely Fairfax owned anyway). They can all go to hell I WILL NEVER HAVE ONE OF THOSE KILLER SMART METERS INSTALLED IN MY HOME….cheers pam 🙂

  6. Pam says:

    The ‘ALMIGHTY DOLLAR’ . speaks all languages, BUT AT WHOSE EXPENSE – ‘OURS’ the Ordinary People. They can SHOVE THEIR SMART METERS up you know where!!!! Everyone I beg you please LOCK YOUR BOXES DISPLAY YOUR SIGNS and make ‘GETTING RID OF THESE BLOODY THINGS’ once and for all, your NEW YEARS RESOLUTION – THE Billionaires may have the Dollars, but let’s face it us ‘ORDINARY PEOPLE’ THAT HAVE THE NUMBERS and it is ‘US’ who are being affected in all areas – Financially, Safety, Privacy and most importantly our Health and the Health of our Families. How these people sleep at night is beyond me. Thanks SSMA for keeping ‘US’ up-to-date………………………….Cheers Everyone……Pam 🙂

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