Tens of thousands of customers risk being charged up to $150 more a year - on top of smartmeter fees - as an alternative to disconnection.
Energy Minister Nicholas Kotsiras said: "Distributors still have the right to cut people off if they repeatedly refuse but I believe this is a more humane way to go."
Many objectors, who claim the digital meter rollout is unjust or a health hazard, are believed to be pensioners who would face bill increases.
The controversial $2.3 billion project won't be completed by this year's December 31 target, despite years of warnings that installations are mandatory.
More than 2.5 million homes and small businesses already have smartmeters but about 150,000 were not converted as of late last month.
About half of the unfitted properties were "refusals" and the rest delays, Mr Kotsiras said.
Planned new regulations will force companies to compensate consumers if they have never attempted a meter installation by June 30 next year.
Extra costs could be separately clawed back from customers refusing to replace manually-read meters from March 1, 2015.
"We need to make sure the costs of running two systems are not spread on to all consumers. It is preferable to getting police involved, or disconnecting," Mr Kotsiras said.
"Distribution companies wishing to recover the costs will apply to the Australian Energy Regulator to approve a charge."
An industry source believed that would be about $120-$150 a year.
Mr Kotsiras was confident most people would embrace smartmeters once the benefits were understood.
The rollout has been riddled with cost blowouts, mismanagement claims and health and privacy concerns.
The Coalition pressed on with the former Labor government initiative in late 2011 after a review concluded too much money had already been spent to turn back.
Smartmeters, which record electricity use every 30 minutes, give detailed power use information and flexible "time-of-use" tariff options.
"Smartmeters also mean faster and cheaper reconnections, an end to estimated bills and better reliability as electricity companies can pinpoint faults and act more quickly to fix them," Mr Kotsiras said.
heraldsun.com.au 17 Nov 2013