Smart meters and fuel poverty

National Right to Fuel Campaign What Will Smart meterS do to help the fuel poor?

a report by the National Right to Fuel Campaign

December 2011

Smart meterS? Will Smart meterS

help the fuel poor?

National Right to Fuel CampaignWhat Will Smart meterS do to help the fuel poor?

About the National right to Fuel Campaign

The National Right to Fuel Campaign (NRFC) was established in 1975 with the key objective to end fuel poverty by securing a warm, dry, well-lit home for all, regardless of income and location, and has taken a leading role in putting fuel poverty high on the political agenda. The Campaign has a membership comprising voluntary organisations, local authorities, trade unions, individuals, academics and professionals in housing, social welfare and environmental health.

Address PO Box 67187, London SW1P 9SZEmail [email protected] Web www.right2fueluk.com

Chair Hugh GoulbourneSecretary Elliot Ledsam

National right to Fuel Campaign A Not for Profi t Organisation ● Company Limited by Guarantee ● registration No. 2961887

Image on front page courtesy of: http://www.infraredvision.co.uk/pages/content.php?subID=42&catID=2


CoNteNtS

WELCOME

by Charles Hendry MP, Minister of State, DECC

2

FOrEWOrD

by Hugh Goulbourne, Chair of NrFC

3

INTrODUCTION 4

rECOMMENDATIONS 5

1. PUTTING SMArT METErS IN CONTExT 6

2. FUEL POvErTy TODAy 7

3. WHAT WILL SMArT METErS DO? 10

4. PErSPECTIvES 12

4.1. SMArT ENGAGEMENT: How to ensure all consumers benefit from smart meteringby Maxine Frerk, Consumer Engagement, roll Out and Benefits Team, Smart Meter Programme, DECC

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4.2. SMArT TArIFFS:

Will smart meters bring new innovative pricing and savings to the

customer?

by Jenny Saunders, National Energy Action

14

4.3. SMArT CONSUMErS:

Will all customers engage with Smart Meters and reap the

potential benefits or will they feel squeezed?

by Jenny Driscoll, Which?

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4.4. SMArT BUILDErS AND PrOvIDErS:

How will house builders and providers make Smart meters work to

help the fuel poor?

by Paul redmayne, Carillion

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4.5. SMArT rOLLOUT:

What will greater transparency and a Code of Practice really mean

for the consumer and for energy companies?

by Jennifer Boraston, npower

20

4.6. SMArT BENEFITS:

How can we maximise Smart Metering benefits for fuel poor and

vulnerable consumers?

by Zoe McLeod, Consumer Focus

22

4.7. SMArT JOBS:

Will Smart meters mean more skilled jobs and greater job

opportunities?

by Mike Jeram, UNISON

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National Right to Fuel CampaignWhat Will Smart meterS do to help the fuel poor?2

As the Minister responsible for smart metering I very much welcome the publication of this report and the initiative undertaken by the National Right to Fuel Campaign. As a Government we are determined that all consumers benefit from smart meters, particularly the fuel poor.

It is very important that we build an understanding of how to best support the fuel poor during the smart meter roll-out. At a time when we as a Department are developing a strategy on how best to engage all consumers to make sure they realise the benefits of smart meters, this report will provide a timely a contribution to our evidence base.

I hope that anyone interested in the success of the smart meter rollout will find this report useful in presenting innovative suggestions and ideas and that it will contribute to the most successful smart meter strategy possible.

WelCome

CharleS heNdrY mpmiNiSter of StatedepartmeNt of eNergY aNd Climate ChaNge


foreWord

Depleting domestic resources of oil and gas, the transition to a low carbon economy and replacement of our ageing energy infrastructure all mean that the UK’s energy industry will undergo a huge transformation in the coming decade.

As part of this energy revolution, over 50 million smart meters for gas and electricity will be installed into every home and business in the UK. The smart meter rollout means consumers will have access to detailed energy usage and that energy companies will have the opportunity to develop more innovative tariff structures.

In short, our relationship as end users will be dramatically different with the energy grid and with the companies that supply energy to us through this infrastructure. But will smart meters do anything to help reduce the burden of costly energy bills on vulnerable households?

Fuel poverty is increasing across the UK. A recent report commissioned by the Guardian newspaper identified that a quarter of households had fallen into fuel poverty due to increased energy prices and stagnating incomes, whilst John Hills, in his Interim Report, has reiterated the need for fuel poverty to be treated as an issue that is unique and distinct from general poverty in today’s society.

In compiling our report the National Right to Fuel Campaign set out to examine the key questions and concerns around smart meters: consumer engagement; complicated tariffs; the roll out of smart meters; and the possibility for new job creation. Through consultation with a wide stakeholder group we have identified that smart meters will deliver savings across the gas and electricity networks. However, in order to ensure that these savings are maximized far greater thought is needed around the way in which the programme will be rolled out.

Local authorities and housing associations will be needed if we are to achieve the most cost effective delivery of smart meters into households and guarantee “good” new jobs. Greater clarity is necessary if vulnerable consumers are to understand the role of the smart meter in their home and the benefits of the roll out for them.

Tariffs need to be simplified and further work is needed to integrate the roll out of smart meters with other national schemes such as the Green Deal and the Energy Company Obligation. Lastly, the relevance of switching and competition in the new energy market is in urgent need of review.

The smart meter rollout can deliver real and equal benefits to all households if it is done in a way that makes people confident that it is being done for them. £11 billion is a lot of capital in the current economic climate and the vulnerable households who we represent rightly have little tolerance for wasting money.

I commend this timely report and its recommendations for serious consideration by policy makers and the energy industry.

HUGH GOULBOUrNECHAIr NrFC

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iNtroduCtioN

The UK’s energy industry is due to be transformed over the coming decade. The recently announced Electricity Market Reform (EMR), the launch of a Green Investment Bank (GIB), the Green Deal (GD) and rollout of smart meters (SM) are set to lead this transformation. With a raft of other schemes such as feed-in tariffs (FIT) for renewable electricity and renewable heat incentives (RHI), the landscape and economics of energy generation and consumption will change dramatically in the future.

These changes are particularly important to those people in fuel poverty. Recent fuel poverty announcements from DECC1 indicate that the number of people living in fuel poverty in the UK has increased to over 5.5 million in 2011, and is likely to increase further this winter, in part, as a result of recent energy price rises2. Another important recent development is the Hills Review on Fuel Poverty, which is critiquing the definition of fuel poverty. The Interim Report concludes that: • fuel poverty can be defined as separate to general poverty; • it lies between poverty, health, and carbon/energy issues; • and that the government is unlikely to meet its 2016 target for ending fuel poverty.

Over the coming decade, around 54 million smart meters for gas and electricity will be installed into every home and business in Britain (Northern Ireland is administered differently). In doing so, energy companies will have access to more accurate energy usage data, with an end to estimated billing3. It may also lead to the development of more innovative tariff structures that better reflect our diversifying low carbon energy generation mix. But, what impact will this have on the fuel poor?

The National Right to Fuel Campaign (NRFC) is leading the way in independent thinking on fuel poverty by addressing the political and social challenges head on. Our report aims to sum up current thinking on fuel poverty. Specifically, it provides a unique snapshot of the potential issues for the fuel poor that may result from the smart meter rollout.

Ultimately, the rollout of smart meters and delivery of a ‘smart energy world’ will be paid for by all consumers. This inevitably places the most vulnerable at risk of becoming even more affected by energy costs. The real challenge over the coming years will be to deliver ‘smart’ cost savings to consumers, particularly those in fuel poverty.

1 DECC, Annual Report on Fuel Poverty Statistics 20112 Guardian, 14 July 2011, http://www.guardian.co.uk/money/2011/jul/14/households-fuel-poverty-energy-prices3 Energy Retail Association, 2009

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National Right to Fuel Campaign What Will Smart meterS do to help the fuel poor? 5

reCommeNdatioNS

1. SMArT ENGAGEMENTAll consumers - including in particular those in or at risk of fuel poverty - must be made aware of the advantages associated with smart meters so that they can have an equal share in the benefits of the rollout. Consideration must be given to “an extra help” scheme for fuel poor and vulnerable customers and to prioritising the fuel poor in the Smart Meter rollout. This is going to be a very costly programme and the anticipated behaviour change associated with smart meters will, in the medium term, only make a small difference to energy bills. A much bigger difference could be achieved through insulation and other household energy efficiency measures.

2. SMArT TArIFFSSmart tariffs need to be easy to understand. Energy suppliers should be forced to use the smart meter rollout as an opportunity to simplify energy tariffs so that the costs of energy are transparent and all customers can make informed choices.

3. SMArT CONSUMErSIt cannot be assumed that energy use will fall as a result of smart meters. Government and the energy industry must be honest with consumers about the fact that smart meters are not wholly intended to save customers money. One of the key areas for further discussion within the energy sector is whether the rollout of the smart meter will make it more difficult for customers to switch. Government must see smart meters as an opportunity to investigate whether switching is truly the most efficient method of delivering the best cost option to end users – particularly vulnerable consumers.

4. SMArT BUILDErS AND PrOvIDErSOnly when customers trust both the installation company and the technology will smart meter delivery be efficient and at least cost to the end consumer. Contractors will, therefore, require special training so that they are able to deliver different types of advice during the installation to vulnerable consumers. Contractors need to be asked to sign up to a promise of “no selling, just installing”. In this respect, the role of trusted intermediaries - local authorities and housing associations - is urgently in need of review. The Government needs to engage actively with the affordable housing sector if it is to use the £11billion rollout to actively improve the delivery of help and assistance to fuel poor and vulnerable consumers in the UK.

5. SMArT rOLLOUTThe success of smart metering and the realisation of the benefits it will deliver to the UK are contingent on consumer trust. All suppliers must drive standards forward via the Code of Practice and build consumer trust and ultimately empower their customers’ control over their energy use.

6. SMArT BENEFITSFurther work needs to be undertaken to protect low income and vulnerable customers to prevent the misuse of disconnection, switching to pre-payment and load limiting. This process should identify the distributional benefits and costs associated with the smart meter rollout and in particular the effect on the most vulnerable households.

7. SMArT JOBSThe transition to the new low carbon economy is at the heart of the current debate about a future economy, and the question about how we achieve decent companies and decent jobs. There needs to be a shared commitment with energy companies and their workforce to deliver on the basis of quality, not just cost and to use the £11 billion rollout to deliver high quality and sustainable jobs over the next decade.


1. puttiNg Smart meterS iN CoNtext With the eNergY market

Great Britain increasingly competes internationally for primary feedstocks, having moved from being a net gas exporter to a net importer over the last decade. Global demand for energy continues to rise, driven to a large degree by economic growth in BRIC (Brazil, Russia, India and China) countries. At the same time, global supply has become more volatile due to evolving political landscapes in the Middle East. This impacts on our ability to accurately forecast supply and demand and to put in place long-term strategies. For example, the UK government’s oil price forecast from 2001 estimated that oil would cost less than $50 a barrel in 2011, whereas it is in fact over $100.

The UK energy industry is characterised by global ownership with only two of the ‘Big 6’ energy suppliers being UK owned (SSE and British Gas).It is also likely that large scale renewable energy suppliers are more often foreign owned; creating an energy market that is globally influenced.

Within the UK, energy policy is driven by three often competing priorities.

1. Security of supply to ensure energy is delivered to British homes and businesses

2. Decarbonisation of the industry, in line with international targets

3. Affordability of energy for all

These three competing priorities are not necessarily complementary. The development of a low carbon economy requires upfront investment. This is often supported by renewable energy policies but at the same time paid for by consumers, making energy more expensive. The price of energy is likely to continue to rise resulting in less affordable energy, particularly for the most vulnerable. Equally, the need to secure supplies by diversifying energy generation, and to better manage demand, may not necessarily lead to a fully decarbonised energy industry - as there could still be a need for non-renewable, carbon based sources of energy.

Meeting these priorities is becoming increasingly challenging given the wider economic situation. However, the emphasis on achieving a low carbon economy has been prioritised and is reflected in policy developments over the past five years.

Recently, government has taken climate change more seriously. In 2008, the UK Government passed the Climate Change Act, which included carbon reduction targets up to 2050 and which led to the creation of the Committee for Climate Change. The Department for Energy and Climate Change (DECC), also formed in 2008, brought together the climate change division from DEFRA and Energy division from BERR (Department for Business, Enterprise and Regulatory Reform). This provided a significant platform from which to build a low carbon agenda through subsequent Energy Acts, the most recent receiving Royal Asscent in October 2011. A significant and recent low carbon development is the Electricity Market Reform (EMR) proposals, which aim to provide investors with greater certainty from which to make decisions. Similarly, the rollout of smart meters will lead to greatly improved demand management across the energy sector with other policies such as feed-in tariffs (FIT) for renewable electricity and renewable heat incentive (RHI) encouraging the uptake of low carbon energy and microgeneration, whilst the Green Deal (GD) aims to improve housing stock energy efficiency.

Looking forward, there is a pressing need for government and policy makers to understand and manage the way in which the global energy industry, low carbon economy and on-going economic issues impact on those in fuel poverty, particularly the most vulnerable.


2. fuel povertY todaY

There are several different definitions of fuel poverty. The most commonly used government definition defines4 fuel poor households as “those needing to spend more than 10% of their income on fuel to maintain a satisfactory heating regime”5 . These households typically live in energy inefficient homes and have low incomes. The number of people living in fuel poverty has increased every year since 2004 (see figures 1 and 2) and we can anticipate further increases over the coming year, given recent energy price rises.

Figure 1: Total Number of households in Fuel Poverty6

What is unambiguous is that fuel poverty is wide-spread and increasing. In July 2011, DECC published its latest fuel poverty update, the ‘Annual Report on Fuel Poverty Statistics 2011’. It states that a further estimated 1 million households are living in fuel poverty compared to the previous year. This brings the total to around 5.5 million, around 1 in 5 households, although other sources suggest the number could be as high as 6.3 million.7

4 Department for Energy and Climate Change, 20115 Note: the Hills Review is currently reviewing this definition, with a report due in early 2012.6 DECC, Trends in Fuel Poverty England: 2003 – 20097 USwitch, 6 July 2011, http://www.uswitch.com/news/utilities/63-million-households-are-in-fuel-poverty-900000269/

Figure 2: Fuel Poverty and real fuel prices8

On either basis, the number of people living in fuel poverty is wide-spread and increasing. Significantly, the ‘squeezed middle’ or those on average incomes lying just above the fuel poverty line are most at risk of falling into fuel poverty for the first time. This is driven by both wider economic forces such as the recession, as well as increasing energy prices.

There are four variables that influence fuel poverty:

1. Household income: those in fuel poverty are more likely to live on low incomes.

2. Building energy inefficiency: much of the UK’s least efficient housing stock was built post war or during the 1960s, and is costly to upgrade.

3. Price of energy: energy prices have risen sharply in recent years.

4. Building occupancy: when and for what duration a building is being used.

This year we have seen all of the Big 6 energy companies putting up gas and electricity prices by between 4.5% and 19%. These rises are in addition to those that took place in late 2010 and early 2011. See Figure 39 for details. Fuel poverty is increasing because people have less disposable income, energy prices are rising, a large proportion of houses remain fuel inefficient and we have experienced very cold winters in recent years. It is clear that the inability to pay energy bills forces many people to live in cold homes which can result in ill health and/or death. There are too many winter deaths linked to fuel poverty.

8 DECC, Annual Report on Fuel Poverty Statistics 20119 BBC, EDF Energy to put up Gas prices by 15%, http://www.bbc.co.uk/news/business-14928311

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The fuel poverty challenge is a hard one to meet. Government and other key stakeholders have adopted a number of measures to define and deploy schemes which they hope will address fuel poverty. These include the following:

Direct support payments

Winter fuel payment10: is a tax free, non means tested payment intended to help the elderly keep warm during the winter. For the winter of 2011/12 it is set at up to £200 for those over 60, and up to £300 for those over 80.

Cold weather payment11: is intended to help towards extra heating costs during very cold weather. £25 is paid automatically for each seven day period of very cold weather between 1 November to 31 March to people with income support, employment allowance, job-seekers allowance or pension credits.

Warm homes discount12: came into operation on 1 April 2011 and provides £120 rebate on electricity bills for vulnerable and poor pensioners. The scheme mandates domestic energy suppliers to provide approximately £1.13 billion of direct and indirect support arrangements to fuel poor customers over four years.

Energy efficiency measures

Warm front scheme13: installs insulation and heating measures for people on certain disability or income-related benefits. The Warm Front Scheme is for people who own their own home or rent it from a private landlord. This scheme will be replaced by the Green Deal within the next two years.

10 Direct Gov, http://www.direct.gov.uk/en/moneytaxandbenefits/benefitstaxcreditsandothersupport/inretirement/dg_1001865711 Direct Gov, http://www.direct.gov.uk/en/moneytaxandbenefits/benefitstaxcreditsandothersupport/inretirement/dg_1001866812 DECC, http://www.decc.gov.uk/en/content/cms/funding/whds/whds.aspx13 Direct Gov, http://www.direct.gov.uk/en/Environmentandgreenerliving/Energyandwatersaving/Energygrants/DG_10018661

Figure 3: Energy price rises

Carbon Emissions reduction Target (CErT)14: came into effect in April 2008, obliging electricity and gas suppliers in GB to help reduce carbon emissions from homes by providing energy efficiency measures and increasing the amount of energy generated from renewable technologies.

Community energy saving programme15: requires gas and electricity suppliers and electricity generators to deliver energy saving measures to domestic consumers in specific low income areas of GB. It was introduced in 2009 and runs until 2012.

14 DECC, http://www.decc.gov.uk/en/content/cms/funding/funding_ops/cert/cert.aspx15 Ofgem, http://www.ofgem.gov.uk/Sustainability/Environment/EnergyEff/cesp/Pages/cesp.aspx


Future energy efficiency

Green Deal16: is intended to revolutionise the energy efficiency of British properties. The government is establishing a framework to enable private firms to offer consumers energy efficiency improvements to their homes, community spaces and businesses at no upfront cost, and to recoup payments through a charge in instalments on the energy bill. It is a flagship scheme, however has received some criticism as to its potential impact on the fuel poor.

Energy company obligation17: is aimed at household groups that do not fit the Green Deal’s ‘Golden Rule’ and is intended to benefit lower income households and support the supply potential of the next most cost effective energy efficiency measures.

It remains difficult to accurately define the conditions of a ‘typical household’ in fuel poverty. Energy consumption patterns, different quality of housing and whether they are located on or off-the gas grid means that those living in fuel poverty do so under different conditions. In the Government’s October 2010 spending review, it committed to examine the current definition of fuel poverty and fuel poverty targets. In March 2011, Professor John Hills was commissioned to undertake this review. His independent review is focusing on three aspects of fuel poverty; whether it is a real issue, how it can be best measured, and the implications of its measurement in terms of designing and implementing policy. The first two of these points have been addressed in his Interim Report, which notes:

1. That fuel poverty can be defined as separate to general poverty.

2. It lies between poverty, health, and carbon / energy issues.

3. That the government is unlikely to meet its 2016 target for ending fuel poverty.

16 DECC, http://www.decc.gov.uk/en/content/cms/tackling/green_deal/green_deal.aspx17 DECC, http://www.decc.gov.uk/assets/decc/legislation/energybill/540-energy-security-bill-brief-energy-company.pdf

Hills agrees with the original 2001 definition that those in fuel poverty have low incomes and also live in homes that have poor energy efficiency. Furthermore Hills recognises that there should be a means to measure the relative ‘fuel poverty gap’ or scale at which people are in fuel poverty. By early 2012, the final Hills Review on fuel poverty will be complete and will provide a platform from which to address fuel poverty in the future.

The Hills Review may provide greater detailed and a more accurate understanding of how best to define and measure fuel poverty, thus enabling improved policy design implementation. However, this is not guaranteed. Over the next eight years, smart meters will be rolled out across the UK. Smart meters will transform UK energy networks and the consumer’s relationship with energy. They may also enable improved visibility of fuel poor households. Therefore, smart meters have the potential to transform how we tackle fuel poverty tomorrow.

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3. What Will Smart meterS do?

Smart meters will replace current gas and electricity meters and measure energy use in a building. The smart meter is designed to be interoperable, with information able to be sent both to it and from it. It will transmit a building’s energy use on a frequent and regular basis to transceivers where the information will then be passed through the DataCommsCO18 (a data communication company that will be set up to manage the flow and storage of data) to the consumer’s energy supplier. In future a smart meter might also be able to communicate with appliances within a consumer’s home, e.g. switching on a washing machine when electricity prices are at their lowest. Within each home there is also required to be an ‘in home display19’. This will show accurate real time as well as historical energy use data in an understandable format (e.g. pounds or kilowatts) and be presented visually so as to facilitate consumer understanding.

In outlining how smart meters and their rollout might impact the fuel poor, there are three areas to consider:

1. rationale for smart meters

Much of the existing energy generation capacity in the UK is coming to the end of its natural life20. It will be replaced by low carbon nuclear and renewable energy generating capacity. These energy sources are intermittent (e.g. wind) and/or non-despatchable (e.g. nuclear). Consumers will need to be encouraged to take energy when it is available if the country is to avoid substantial unnecessary investment in energy generating, transmission and distribution capacity. Providing consumers and energy generators with an accurate and regular measure of energy use is a critical part of the solution. Smart meters will enable active supply and demand management and enable the grid to become more efficient, resilient, and economical.

18 DECC, 2011 ‘http://www.decc.gov.uk/en/content/cms/tack-ling/smart_meters/dccg/dccg.aspx’19 DECC, 2011 ‘http://www.decc.gov.uk/assets/decc/consultations/smart-meter-imp-prospectus/233-smart-metering-imp-in-home.pdf ’20 DECC, 2011 ‘http://www.decc.gov.uk/en/content/cms/legislation/white_papers/emr_wp_2011/emr_wp_2011.aspx’

From the consumer perspective, the introduction of smart meters and associated ‘smart technologies’ in coming decades, has the potential to transform our interaction with energy consumption. Smart meters will enable consumers to become more informed in their decision making and may persuade them to change behaviour patterns; for example, taking advantage of cheaper tariffs at certain times of day. However, these types of interactions for the majority of consumers are still many years away.

2. Completing a successful rollout

The rollout of smart meters will involve the replacement of around 27 million electricity meters and 23 million gas meters at an investment of over £11 billion21. Currently around 10,000 traditional meters are installed every working day, amounting to 2.5 million installations per year. These installations are driven by new builds, electricity and gas meter recertification and replacements, switching between prepayment and credit meters, and replacing faulty meters. The transition from current replacement rates to those required for the smart meter rollout is significant. With mass rollout due to commence in 2014 and be completed by 2019, the rollout challenge is also significant. Government has decided that energy suppliers will be responsible for delivering smart metering to domestic and non-domestic consumers across the country. There are various ways in which smart meters are able to be rolled out but regulatory obligations will ensure suppliers meet the required standard by delivering smart meters in a way that meets the programme’s objectives. Particularly relevant to this, is the smart meter Code of Practice22 which will set the boundaries for the new Smart meter industry. Similarly, with such large investments needed, there is likely to be interest from traditionally non-energy related companies, which will add to the complexity of rollout. Suppliers will need time to prepare their rollout programmes and then ramp up their installations to the required level in order to meet government targets.

21 DECC Smart Meter Implementation Programme ‘http://www.decc.gov.uk/assets/decc/consultations/smart-meter-imp-prospectus/1475-smart-metering-imp-response-overview.pdf’22 DECC Smart Meter Code of Practice ‘http://www.decc.gov.uk/assets/decc/11/consultation/smart-metering-imp-prog/2545-smip-licence-conditions-consultation.pdf’


The volume of data available from smart meters on a daily basis will be around 9000 times greater than it is today. This huge volume of data is to be pooled centrally in the soon to be created DataCommsCo (DCC), from where it will be passed on to energy suppliers to bill their customers appropriately. The setup of the DCC is currently underway and will be completed by the end of 2012. DECC have issued two contract notices for services to the DCC which are ahead of the DCC being appointed. There are two services:

• IT Services: Consulting, software development, internet and support – which is for the procurement of the data and communication services that will be contracted to the DCC in order to manage smart meter information.

• Wide area network: This is for the procurement of communication services to connect smart meters households and businesses across GB. Services will be split into three separate lots based on geographical areas.

The challenge of rolling out smart meters across the UK and creating a DCC that is able to manage their data is sizable. Adjusting to this ‘smart industry’ could be an equally as challenging a task.

3. Living in a smart industry

The first and most immediate challenge for the industry is to successfully install smart meters across the country and educate the consumer on how best to use them. Those that are most vulnerable and living in fuel poverty will require support in this transition. The ability of consumers to choose tariffs that work best for them and only

pay for exactly what they use, will revolutionise how we all interact with energy companies. However, the ability by those in fuel poverty to access information and choose different tariffs may not be as easy as those not living in fuel poverty. Therefore, the fuel poor may still pay a premium for energy.

A crucial aspect of the smart meter rollout and subsequent smart industry is consumer engagement; from initially educating and supporting and then actively interacting with consumers. This is made possible when using accurate energy usage data that is produced by the smart meters. If energy prices continue to rise, it is unlikely that smart meters will lead to greatly reduced tariffs; and the potential for energy companies to pass on operational efficiency savings that result from a ‘smarter business’ may not prove possible. Smart meters are likely to create costs in other areas such as the upfront costs involved in rolling them out over the next eight years.

What is clear is that smart meters will generate vast amounts of accurate energy use data. They provide an opportunity for energy companies to analyse and interpret this data in order to provide potentially insightful information. This might include details of where people are living in fuel poverty and therefore enable more informed decisions on how best to help them. To put this into context, the Hills Review is based upon a sample size of 8000 people; using smart meters it would be possible to use a sample size one hundred times this or more.

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4. perSpeCtiveS

The rollout of smart meters to all homes and small businesses by 2019 will help put consumers in control of their energy use, saving them money and helping reduce carbon emissions. It will also enable suppliers to reduce costs and provide improved customer service as well as facilitating a move to a more sustainable and secure energy supply.

A key concern for DECC in developing the detailed proposals for the rollout, including the proposals for consumer engagement, is how to ensure that all consumers – including in particular those in or at risk of fuel poverty - share in these benefits.

Around 40% of the benefits of the programme are expected to come from consumers changing their behaviour in response to the improved information that smart meters will provide. All consumers will be offered an in home display (IHD) which will show in pounds and pence (as well as in kWh) how much energy they are using in real time as well as providing a comparison over the past week, month etc. Together with advice and guidance provided by suppliers or third parties this will help consumers to work out how to save energy.

But will the fuel poor, who will already typically be pretty frugal in their energy use, really be able to save? The evidence from the trials carried out here and in Ireland is that they do. The recent Energy Demand Research Project gives some information on how consumers at higher risk of fuel poverty are likely to respond to improved feedback and advice around smart metering. In EDRP trials by Eon, consumers from areas of relatively high fuel poverty benefited at least as well as those from other areas, with a generally more positive response to interventions likely to be linked to their greater motivation to save money. In addition, there was some evidence that savings increased over time in fuel poor areas - this may indicate that given that underlying motivation was present, consumers were progressively learning from feedback and advice.

But could there be unintended consequences? Is there a risk that those in fuel poverty will cut back yet further on heating when the true costs become clearer? This is a risk that we are very alive to and we are looking at how to tailor the messages for certain groups to ensure that they are not being urged to turn down the thermostat when this could put their health at risk. And we know that who delivers the message matters. We need credible and trusted intermediaries to carry such messages; particularly to an audience who may be mistrustful of energy suppliers or government.

And what about prepayment customers who do already have a pretty shrewd idea how much different appliances use as they study how to make the last few pounds of credit last as long as possible? Our business case acknowledges that the energy savings for this group might be slightly lower, but they stand to benefit hugely in terms of the whole experience of using prepayment meters. For customers with a bank account, payments will be able to be made without going out of the house – by phone or online. Emergency credit will be available on all meters as will “friendly credit” which prevents supply being cut off overnight or when the shops are shut at weekends. And because the same meters will be used for credit and prepayment the cost differential should disappear and consumers will be more readily able to switch between payment options if their circumstances change.

And what about those who will struggle to understand the information that is provided or are fearful of new technology? While many of the vulnerable and fuel poor will be well able to use the improved information that will become available we know that there are others for whom English is not a first language or who have low levels of literacy and numeracy who may have more difficulty in understanding the data. We have made clear that the IHD must follow principles of ‘inclusivity by

Smart eNgagemeNt: hoW to eNSure all CoNSumerS beNefit from Smart meteriNg

Maxine Frerk, Consumer Engagement, roll Out and Benefits Team, Smart Meter Programme, DECC


design’ and are requiring a non-numeric display (such as traffic lights) to help those who struggle with numbers. Suppliers will be required to provide additional assistance during the installation visit to customers who need it. And we are continuing to look at what further support might be needed and who might be best placed to provide it.

And finally is there an opportunity during the installation visit to ensure vulnerable consumers are getting the wider help to which they are entitled. We recognise that the installation visit is an important opportunity when someone is in the customer’s home to look at what else could be done to improve energy efficiency such as insulation or more efficient heating through the Carbon Emissions Reduction Target CERT / Energy Company Obligation (ECO). However it is also important that the consumer knows what to expect during the visit and does not feel under any pressure to take other services. We are currently consulting on what the rules should be around sales and marketing during the visit and will be thinking in particular as part of that about the positioning of extra help for vulnerable households.

We certainly don’t have all the answers yet but we are working hard to develop a clear consumer engagement strategy ahead of the start of mass rollout in 2014. In the intervening years there is the potential for a lot of learning as suppliers start their early rollouts. Fuel poverty groups have made clear that they don’t expect the fuel poor to be in the vanguard of this rollout – it’s important that any early problems are ironed out first. But we don’t expect them to be left until last either and we are committed to ensuring they get at least their fair share of the benefits. As we start to monitor suppliers’ early rollouts this will be a critical area for evaluation.

Image courtesy of: http://www.infraredvision.co.uk/pages/content.php?subID=42&catID=2


Smart tariffS:Will Smart meterS briNg NeW iNNovative priCiNg aNd SaviNgS to the CuStomer?

Jenny Saunders, National Energy Action

According to the Government’s most recent impact assessment, the cost of installing 50 million smart meters in 30 million homes and businesses will reach almost £12 billion over the 20 year implementation period. The introduction of smart meters may contribute to a transformation of the tariff market with significant implications for domestic consumers. It is envisaged that the primary role of new ‘smart tariffs’ would be to manage peak demand through such mechanisms as time-of-use (ToU) tariffs, critical peak pricing (CPP) , load control, maximum demand and real-time pricing to encourage load shifting. It is also envisaged that overall energy demand could be reduced through innovations including rising block tariffs and overall load reduction incentives and rewards.1

Since new tariff structures should be of particular benefit to the networks and supply-side in helping to manage loads there is potential for significant cost reductions across different segments of the market. But it remains unclear exactly who the beneficiaries will actually be: who will win and who will lose and, most importantly, how new tariff structures will impact on low-income and vulnerable consumers.

Whilst international experience can supply examples of outcomes where there are commonalities in the markets, it is important that any differences are also properly considered when assessing the impact on low-income and vulnerable consumers. For example, the DECC impact assessment quotes analysis carried out by the Brattle Group in the US indicating that low-income customers tend to benefit more than average from time-of-use tariffs. However, we should be cautious in allowing comparisons with international examples that are based on different climatic conditions and fuel requirements.

1 Sustainability First usefully discuss some of the possible implications of the different tariffs in their report ‘Smart Tariffs and household demand response for GB’, Gill Owen and Judith Ward, April 2010.

Anecdotal evidence from UK suppliers has suggested that low-income customers tend, on average, to have flatter consumption profiles and could benefit from adopting time-of-use tariffs resulting in lower bills without changing their consumption patterns. But this needs further investigation and is refuted by the experience in Australia for example, where a moratorium was called on time-of use tariffs as they came to be seen as a tax on the poor.

Much more detailed analysis needs to be undertaken by the Government to explore the potential consequences of the various tariffs on different household types. Nor will it suffice to generalise and adopt a one-size-fits-all approach in the case of low-income and vulnerable households. This group is far from homogeneous and further segmentation will be needed to analyse the effect on different income levels; dwelling types and energy efficiency levels; vulnerability in terms of age, illness and disability; and other areas of disadvantage such as language and learning difficulties. Ensuring that these groups are able to access the most appropriate and beneficial arrangements is key to achieving the most equitable outcome from the technology. Equity in outcomes is all the more important given that the costs of the scheme will be recovered regressively through energy bills and, consequently, the impact of price increases will be felt disproportionately by low-income households.

It is argued that smart metering technology will facilitate greater levels of switching between suppliers as though this in itself was vindication of the programme. However, since OFGEM’s 2008 Supply Market Probe found that nearly half of switching customers moved to a worse deal, and when consumer confidence is at an all time low, facilitation of switching is not a compelling justification. Clearly, switching will remain


an important incentive in keeping suppliers competitive; however, NEA would not necessarily see promotion of switching as a principle policy in helping help consumers save money on their bills. In reality, high levels of market churn benefit neither the supplier nor the customer, and many low-income and vulnerable households simply lack the capacity, in terms of knowledge, confidence or motivation to switch.

The existing market is swamped by a multiplicity of tariffs to the confusion and alienation of consumers. Smart metering and additional smart tariffs may simply add a new layer of complexity, meaning that more households become even less engaged and more suspicious of energy companies. It is therefore essential that, as a minimum requirement, smart tariffs are properly overseen and sufficiently transparent to ensure that all customers can make a meaningful and informed choice in seeking the best energy deal for their lifestyle. However, this measure alone will not be sufficient to protect more vulnerable households far less enable them to optimise the potential benefits. The most vulnerable households will need additional support to ensure that they fully understand and trust the options that are on offer to them. This approach would require a dedicated extra help scheme for vulnerable consumers supplemented by an obligation on the companies to automatically switch them over to the most beneficial tariff. This would help build trust and encourage consumer engagement. In fact, a supportive consumer response post-installation is essential to full acceptance of the technology. Otherwise we may see a hostile backlash as customers find themselves on the wrong tariffs, unable to respond to price signals or shift their energy consumption and in receipt of unexpected and unaffordable energy bills.

Finally, it is not assumed that smart meters can deliver demand reduction or cost savings to consumers in isolation. The roll-out will require additional in-depth analysis to ensure that the appropriate education, advice and support services are available for all customers and enhanced provision and support will be required by many vulnerable households. Otherwise, the technology risks becoming a highly sophisticated communications technology serving only to provide information about consumption levels to the supplier and of limited value to the householder.

Householders will be able to respond better to smart meter information and tariff incentives if their properties are already energy efficient. NEA has long advocated the installation of energy efficiency measures as the most rational and sustainable solution to tackling demand reduction and fuel poverty. Once measures are installed they continue to deliver for the householder without requiring any input, specialist knowledge or understanding of the product. In that sense, energy efficiency is the optimal solution and should be fully implemented in conjunction with the smart meter roll-out. However, when we compare the level of funding for energy efficiency2 in comparison with the cost of the smart meter project we do wonder if Government and the energy industry have got the priorities right.

2 DECC’s consultation on the Green Deal and Energy Company Obligation suggests that annual funding for the latter programme will be in the region of £1.3 billion with 25% of the total expenditure devoted to fuel poverty programmes.


Smart CoNSumerS:Will all CuStomerS eNgage With Smart meterS aNd reap the poteNtial beNefitS or Will theY feel Squeezed?

Jenny Driscoll, Which?

When it comes to the energy market we are constantly being told that people are not ‘engaged’ with the market. No wonder, as gas and electricity bills are probably the most complicated products around! But now there is something else on the horizon for us to be engaged with– the smart meter.

Which? sees the benefit of smart meters. They should mean an end to estimated bills, a big headache for many people. However, the UK’s plans to install 50 million smart meters in our homes - potentially, the world’s biggest rollout - is under enormous pressure to get it right, first time! In the current climate people just will not tolerate any suspicion of wasting money and that is why the plans for the £11 billion rollout must leave people confident that it’s being done in the most cost-effective way with one clear aim - consumers must be at the heart of the smart meter rollout.

With this in mind there are two priorities for smart meters. Real benefits for consumers and, ideally, no downsides!

So what are the benefits? The ambitious plans for the rollout are putting a lot of pressure on the poor old smart meter. The hope is that the new box tucked away under the stairs of millions of homes will, according to some, deliver amazing benefits. If you check out the Government’s plans, they are expecting seven billion pounds worth of benefits! The smart meter is under pressure to cut our energy use, help the country meet climate change targets, bring down our bills, improve switching, modernise the network, and open the gateway for ‘smart’ homes. Now that’s a long list!

While smart meters may well deliver, the real difference a smart meter will make to most people’s homes, particularly in the early stages, is likely to a more conservative affair.

It’s still too early to really tell what the smart meter will deliver, but we have asked some of the Which? members who have one, about how it’s made a difference to their lives. Most of them were positive about having a smart meter, particularly as it means they can have accurate bills and have more idea about what they are paying for. But most of the members we spoke to have not cut back on gas and electricity as a result. Also when Which? asked people about smart meters, only ten per cent of them spontaneously mentioned smart meters as something that could help them save money.

And what about the potential ‘downfalls’ for consumers? The big issue for many people is going to be the cost of the rollout. In the current climate while many are struggling on less money and energy is their number one financial concern, spending billions of pounds on replacing meters, seems a bitter pill to swallow. One person contacted the Which? Website to sum up what others are feeling: “Like many others I see no real harm in the concept of a smart meter, it’s this use for that £11 billion I’m not keen on, especially as times are currently tough. It would buy an awful lot of insulation?”

With this in mind it is absolutely critical for the Government to make sure that they have a tight rein over the costs of the smart meter rollout, which is likely to be taken from consumers’ bills.

As well as cost, Government will also be under pressure to make sure that people do not lose out as a result of having a smart meter. There are a lot of areas which need to have consumer protection at the forefront. Protecting people’s data, agreeing the smart meter’s technology and setting standards to guarantee hassle-free installations are just some of the areas which need addressing now. Future ‘time of use’ tariffs (a more sophisticated Economy Seven version) must benefit everyone and smart meters cannot create a divide where people on low incomes will lose out. Finally it will be unforgivable if smart meters ever hindered switching.


Which? is playing it’s part when it comes to smart meters to help consumers. We have published advice and information for people at www.which.co.uk/smart and we have also worked with industry to make sure that the rollout gets off to the best start. Our research tells us that half of the public feel that they are constantly being hassled by energy companies to switch tariff or provider. Our advice to suppliers has been that the best installation is fitting the meter and in-home display monitor safely and hassle-free with no hard sell. That is why we have launched the ‘No selling, just installing’ smart meter challenge and seven companies, including npower, have signed up to this. We are talking to others about joining.

So will consumers reap the benefits from having a smart meter? For many the end of the shock estimated bill will be welcome. But will they be the answer to the question on most people’s minds - ‘Will I pay less money for my energy?’ The Government say that they could reduce our bill by £23 a year by 2020.

There must not be assumptions that having a smart meter one day will result in the consumer making a dramatic cut in their energy use the next. After all, we still have to put the washing machine on! Government must make sure that there is real honesty about what benefits the smart meter will deliver for most people and when. Smart meters can help reduce our energy, but they are just one part of the solution. After all, even the smartest meter can’t make our homes have better insulation.

Image courtesy of: www.consumerfocus.org.uk


Smart builderS aNd providerS: hoW Will houSe builderS aNd providerS make Smart meterS Work to help the fuel poor?

Paul redmayne, Carillion

There are potential problems caused by the Government’s failure to grant trusted community actors – property developers, Local Authorities, social housing associations etc – a clear role in managing the smart meter rollout. And it is vitally important that all government departments, not just DECC, must fully engage in the programme for it to prove a success.

Smart Meters: working in partnership

While Smart Metering has the potential to deliver significant benefits to customers, the rollout may also present major issues which are important to address in order to ensure the continued safeguarding of customers’ interests – particularly those in and vulnerable to fuel poverty.

The latest DECC figures for England show that there are some 430,000 (24%) local authority households in fuel poverty and 332,000 (17%) of RSA tenants. Of the remaining fuel poor, it is a reasonable assumption that a significant proportion of the 2.51m (17%) owner occupiers and 693,000 (21%) privately rented households will have some level of engagement with their local authority, be this through use of child services, adult services or leisure services.

There is a risk of assuming that all households who are in fuel poverty are vulnerable. DECC’s latest figures show that nearly 20% of fuel poor households don’t fall into this category. If one considers those households close to, but not in fuel poverty then this figure could markedly increase. Ofgem currently classify ‘vulnerable’ to include those who are disabled or chronically sick, of pensionable age, with low incomes, or residing in rural areas. Carillion Energy Services (CES) would, however, question this categorisation of vulnerable, and also question whether this categorisation is particularly useful in helping with the rollout of Smart Meters. Instead, we would pose the question of: ‘vulnerable to what?’ We believe in the first instance there are three areas in the Smart Meter rollout where some customers are particularly vulnerable:

Engagement – some customers are traditionally hard to reach and difficult to engage with. For example, customers with certain disabilities, mental health issues or groups where English is not the first language or with low literacy skills. For these customers, standard mass marketing communications are generally unsuccessful leading to little or low take up / response rates. We must explore different ways of communicating what can often be quite complex or indeed “dry” messages especially when you want to encourage a behavioural change.

Installation – the installation of a Smart Meter will require customers to let installers into their homes, potentially to provide a service they do not necessarily want, or understand. For some customers there are cultural issues to consider, and many elderly customers have serious and well founded fears related to bogus callers.

For example, an elderly widower is unlikely to want a smart meter if he has no comprehension of what it will do, which makes it a missed opportunity. Unless the benefits can be clearly articulated and explained by a trusted body, such as a local authority or housing association then his view is likely to be that “a gas meter is a gas meter” and he will not engage with the installation.

Consideration must be given to ensuring obligations are met, especially The Disability Discrimination Act, and the need to avoid any pressurisation and / or inappropriate selling activity during installation visits which could result in significant fines from the regulator.

Functionality and operability – Smart Meters offer a revolutionary way in which customers interact with their energy meters, bills and suppliers. However, for this to be successful many customers will require lengthy and in-depth information and practical assistance both to use their Smart Meter


and realise the benefits of the device. For example, one of the new simple functions for many is the requirement to reset supply following an outage, which has not been necessary to date. A reasonable comparison can be drawn with the digital roll-out whereby many elderly people are not familiar with set top boxes etc.

It is our opinion, based on our experience delivering major national programmes such as the Warm Front scheme and Digital Switchover Help Scheme, that these issues around customer vulnerability, if not addressed sufficiently, have significant consequences. These could potentially include increased installation costs, lower levels of installations completed at ‘first visit’, higher volumes of (potentially avoidable) customer enquiries, reduced levels of customer satisfaction leading to negative publicity.

A successful rollout of smart metering should see local authorities and housing associations playing a key role by providing local leadership, offering support to vulnerable householders or those being supported by council services, and partnering with energy companies or delivery agencies to develop a local plan for deployment.

Local authorities and housing associations are uniquely placed to offer support to enable the efficient installation of meters to a diverse range of property types and households. Some will be engaged with the delivery of smart meters as part of a wider engagement with their customer base, others will seeking to minimise complaints from their residents, but the efficiencies that can be gained by partnerships between local bodies providing knowledge and expertise and the delivery agencies will more that repay the costs to the delivery agencies of establishing these partnerships.

We believe that the adequate provision of suitably protective and supportive services to vulnerable groups will be one of the areas in which Energy Suppliers are subjected to the greatest levels of scrutiny, both from a regulatory view and by consumer groups.

Smart metering is intended to deliver significant benefits to customers. The in-home display will provide real-time information about energy consumption which, together with accurate bills, has the potential to help customers to manage their energy usage and expenditure and reduce their carbon emissions. This however, is contingent on two factors. Firstly, customers are engaged, understand, and can identify the benefits of smart meters as driver to reduce energy consumption / bills. Secondly, customers believe savings can be made, and can identify, understand and access the measures they can take / install to actually reduce energy consumption / bills. Without this level of understanding, Smart Meters are no more effective or useful to customers than existing ‘dumb’ meters.

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Smart rollout: What Will greater traNSpareNCY aNd a Code of praCtiCe reallY meaN for the CoNSumer aNd for eNergY CompaNieS?

Jennifer Boraston, npower

Smart metering is a major national programme that will deliver the replacement of 53 million gas and electricity meters in every home and many small businesses in Great Britain. The new smart meters will provide customers with near real-time consumption information through an In Home Display device, as well as historical data for analysis. The smart solution will provide all customers with clarity over how much they use and what it costs them, helping customers to make informed choices over their energy consumption and spend.

Smart metering will play a key role in achieving a low-carbon economy in Great Britain, transforming how energy is supplied and used. Accuracy of bills and the development of new products and services are at its core. Longer term, it is an important step towards Smart Grids, where energy networks are run more efficiently and responsively.

The development of smart is against a backdrop of consumer distrust in the energy industry, something we are already working hard to improve. Installing new metering systems in every home fundamentally requires the confidence and trust of the consumers to achieve success in deployment. Clarity and transparency is a key part of building this.

One of the key risks to deployment is the effect that any negative perceptions of smart meters could have, particularly if these were echoed in the media. This risk has already had severe consequences for similar programmes in the Netherlands and California. The GB Programme is ambitious: Great Britain is the first nation to deploy both gas and electricity meters at the same time, in short timescales, and in a fully competitive market. Smart meters will be supported by a national communications network and a whole new licensed entity will be created to manage this. It is reasonable to expect that the early stages of deployment will give rise to operational learning for all participants. Providing a balanced view of activities and giving consistent messages to the public about smart needs to be the collective responsibility of all parties involved in the delivery of smart metering.

As part of the centrally-led Programme, a Code of Practice for the installation of smart meters has been developed. This will ensure consistency of approach and define the minimum standards by which suppliers will have to comply. This in turn will provide consumers with certainty and comfort over what they can expect from their energy suppliers at the installation visit. The challenges for suppliers during the installation visits are numerous and significant.

Currently, meter installers have 30-45 minutes on average to fit a single traditional meter. At a smart meter installation, fitters could have 90 minutes to install two meters safely, install communications equipment, commission the system, install the customer’s In Home Display device and, importantly, train the customer on how to use it. In explaining to the customer how to understand and use the In Home Display, installers will encounter issues such as language barriers and differences in the levels of comfort with technology. The approach to installation therefore needs to be flexible. Suppliers risk disengaging technology-savvy customers if training is perceived as patronising, but customers less familiar with the technology may require more time to become comfortable with the device and its purpose.

In some homes and businesses, technical issues may also be encountered. Installers must temporarily cut off electricity and / or gas supplies to be able to change the meter safely. In the case of gas meters, the installer must check the boiler within the property to ensure that it is safe to cut the supply and re-instate it once the meter has been changed. If the boiler or any other appliance is unsafe, by law it must be condemned on safety grounds. This could easily give rise to negative media coverage and fuel speculation that such actions are carried out by suppliers deliberately to sell goods and services. The industry and the central Government Programme must consider whether independent contact points could be provided to mitigate this risk to consumer engagement.


The issue of sales and marketing activities at the installation visit is still subject to debate.

Smart meters will provide improved information on energy consumption, but there will be a range of additional products and services available from suppliers to help customers make the most of this new opportunity to manage their energy. We believe it is appropriate to provide consumers with materials to help them make informed decisions about which products and services they might like to have. The case has also been made that this visit will provide the ideal opportunity to cross-sell products and services; however, given the challenges discussed in this article, we do not share this view.

Some articles in the media have already accused energy suppliers of using smart meters as a mechanism to squeeze additional revenues from consumers to boost profits. Allowing sales and marketing activities at the installation visit could fuel this belief and undermine trust in the national Programme. We believe a breakdown in consumer trust due to the activities of any one supplier will pose a risk to the success for subsequent installations by all suppliers and belief in the Government’s benefit case.

Suppliers still need to be held accountable for their actions. However, many consumers currently have a general distrust of energy suppliers and may continue to do so even if guidelines are strictly adhered to. Issues that affect the smart programme but are not in the control of Suppliers, such as health concerns, need a co-ordinated industry approach led by Government.

The success of the smart programme, and the realisation of the benefits it will deliver to customers and to the country, are contingent on consumer trust. We understand that building trust is a long process, where progress can be slow and setbacks are possible. Suppliers must be transparent in our plans and objectives, understanding and managing legitimate concerns, partnering with Consumer

Groups and dispelling myths where they occur. We must also be able to rely on the technology, which must be carefully designed, planned and fully integrated from the outset.

The Smart Metering Installation Code of Practice demonstrates a commitment to our customers from the six largest Suppliers. This will drive consistent standards, a common approach and a positive experience of the smart roll-out programme. Furthermore, our public commitment not to use the home installation visit to get customers to sign up to products and services is one way in which RWE npower is leading the debate amongst our peers. Government, Regulator and Consumer Representatives should be passionate advocates of Smart Metering too. The Programme must not be undermined by media speculation around Suppliers’ motives for discharging their statutory obligations.

Of course, a successful installation is just the start of a new relationship and dialogue with our customers. Our future propositions will be founded on giving our customers insight into and control over their energy use. Only when consumers trust both us and the technology can we deliver the benefits that they rightly expect.

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Smart beNefitS:hoW CaN We maximiSe Smart meteriNg beNefitS for fuel poor aNd vulNerable CoNSumerS?

Zoe McLeod, Consumer Focus

In the changing rooms of a London community college the Olympics poster on the wall reads ‘if you aim for the sky you’ll reach the ceiling, if you reach for the ceiling your feet won’t leave the floor’. Decision makers on the smart metering programme would do well to remember this, especially when it comes to the fuel poor.

The rollout of smart metering is a major undertaking which will touch almost every home in Great Britain. Between now and 2019, more than 49 million gas and electricity meters will be installed, with at least 40 million appointments made to visit people in their homes. Of these more than six million households will be struggling to afford to pay their fuel bills when the installer comes to their door.

The potential to deliver benefits to customers and Britain PLC is unquestionable. But the potential to get it wrong or to simply miss opportunities is equally clear.

Smart metering is expected to end estimated and inaccurate bills, a major source of consumer complaints. However this will only happen if the communication systems selected are reliable and suppliers update their back office systems in a timely and effective way. In a smart world, we believe, consumers should have the right to an accurate bill and back-billing that can push customers into debt should finally end.

Work is being carried out on protecting low income and vulnerable consumers. In particular new protections came into force this October (2011) to prevent the misuse of remote disconnection, switching to prepayment, and load limiting. These are very welcome and a product of two years collaboration.

The draft Smart Metering Installation Code of Practice (SMICoP), which will govern what energy suppliers must do, pre, during and post installation, also contains some provisions to ensure that vulnerable customers are appropriately supported and do not fall victim to bogus callers. Detailed work on this Code is ongoing, but still more needs to be done around developing a tailored approach to meet the needs of different consumers.

Much less focus has been put on how we ensure that fuel poor and vulnerable householders actually benefit from this £11 billion programme they are paying for – an issue that was put under a stark spotlight at the recent Public Accounts Committee hearing (31/10/2011).

The truth is that low income customers may not see the same benefits from smart metering, despite footing the bill. For example, those who are already energy efficient due to budgetary constraints may not be able to reduce their usage further without under-heating their homes. Prepayment meter customers are likely to see lower savings as their energy use is already very visible to them – a fact recognised by Government. Vulnerable consumers, in particular, could also find it harder to engage with new technologies that could help them make savings.

Smart metering will also facilitate the introduction of a range of new tariffs which while offering greater choice risks adding further complexity. This could include: multiple rate time of use tariffs, automation (where suppliers have direct control of appliances in the home), off-peak rebates, and deals that combine energy supply with other products and services. Historically vulnerable consumers face the most barriers to engaging in the energy market and accessing the best deals. The Retail Market Review does not adequately address the challenges of new smart deals.

‘Easy wins’ are also in danger of being missed. At present, for example, the proposed basic energy display will not show how much customers owe their supplier (an account balance) despite overwhelming public interest in this information and its potential as a valuable budgeting tool.

Following lobbying from Consumer Focus, DECC has committed to carry out an assessment of the distributional impact of smart metering in the spring. This should look at how different groups of customers will be affected. This is essential – if we understand which groups will be the winners and losers from this Programme we can take steps to safeguard their interests and ensure they can access the benefits.


But further work is needed. Government needs to be more proactive about how it can use this rare opportunity to actively improve the delivery of help and assistance to fuel poor and vulnerable consumers in Great Britain.

Going door to door also offers a unique opportunity to access vulnerable customers that have been historically hard to reach. Consumer Focus urges that consideration be given to developing an extra help scheme for fuel poor and vulnerable customers that could include a package of measures that delivers suppliers existing social and environmental obligations much more cost effectively. The timescales for rollout and the Energy Company Obligation for example could allow for some synergies. Southern Water is reportedly trialling this kind of approach as part of its Green Doctor scheme, alongside water meter installation.

The rollout of effectively a new national communications infrastructure which is needed for smart metering could also facilitate digital inclusion, and help to promote tele-healthcare services that could enable elderly or the long-term sick to live independently in their homes for longer. But this will only happen if the right technologies and standards are selected. All of this requires a joined-up approach not just within DECC but across Government. So far, no one Minister has yet taken the baton.

2012 is without a doubt a big year for British sport, but it is also a key year for decisions on smart metering. Rollout has the potential to radically change the energy retail market and customer’s role within it. There is much talk about the Olympics’ legacy given its billion pound price tag. We need to ensure that the smart meter rollout at a cost in excess of £11bn also delivers enduring benefits, especially for those most in need in our society.


Mike Jeram, UNISON

There can be little doubt that we need jobs in the UK. Unemployment already stands at 2.62 million, the highest level for nearly 20 years. Over 850,000 people have been out of work for more than a year and there are one million young people out of work. What’s more, things aren’t set to get better anytime soon. To a large extent this is a consequence of the government’s austerity measures. Public sector job losses have now totalled around 290,000 since December 2009. According to the government’s Office for Budget Responsibility, these job losses are to be mopped up by an expanding private sector. However, between March and June this year public sector job losses have started to outweigh private sector job gains for the first time, just at the moment that the main phase of the spending cuts is about to hit.

So we need jobs, and we need them fast. But that’s only half of the story. The UK’s economic recovery, if it is to be sustainable, has to be based on decent jobs. By that we mean jobs with decent wages that enable people to meet their living and housing costs and have a decent quality of life. Jobs provided by employers that are committed to providing healthy and safe working practices, equal opportunities and staff development. If you want to look at the roots of the current economic crisis an important start point is the dwindling number of decent jobs and decent employers, the deregulation of the labour market and the growing wage inequalities that pushed many into debt, forced to supplement their increasingly meagre wages with credit. In the mid 1970s the share of national output accruing to wage earners was nearly 65 per cent. That has now shrunk to as little as 53 per cent.

This trend has been exacerbated, and the economy further unbalanced, by the way in which the declining share of income going to wages is shared out.

Over a generation the wages of the bottom half of the working population have shrunk to 10 per cent of GDP, whist the top 1 per cent have seen a 50 per cent increase in their share.

Smart JobS: Will Smart meterS meaN more Skilled JobS aNd greater Job opportuNitieS?

And whilst whilst GDP increased by 108 per cent between 1978 and 2008, the wages of middle income Britain grew by an average of just 56 per cent. There are many reasons for this, including globalisation, de-industrialisation, technological change alongside flexible labour markets. The main point is that if our economy and our workforce are to prosper and we are to avoid repeating the instability of the past, we need a new approach with decent jobs and decent employment as the policy priority.

What’s this got to do with smart meters?

Many agree that smart meters can, if combined with energy market reform and effective domestic energy efficiency measures, help to reduce fuel bills and carbon emissions. Can they also be part of the solution to the economic crisis, and the need for more decent jobs?

The short answer is that yes they can. This can be an important element of the green new deal in practice – addressing the interlinked problems of economic crisis, energy security and climate change. Hundreds of jobs, including fitters working in the field, support jobs and managerial positions have already been created in smart meter pilots. This will rise massively as meters are installed in 30 million households and businesses across the UK from 2014. But to ensure that these jobs are decent jobs will require a strong commitment from employers to a business model based on high quality work and a committed, well rewarded workforce. Competition amongst the different providers must be on the basis of quality and not simply cost. In short, decent companies, customer satisfaction and decent jobs. One of the early tests will be the way in which employers deal with their existing metering workforce. We support the idea of a just transition for the workforce with retraining and redeployment, rather than firing older workers and hiring new workers on worse terms.


As a trade union representing members in this sector we are only too well aware that this could become a problem

UNISON has already won an employment tribunal against a company whose business model was to sack transferred staff and offer them a franchise contract where they would become self-employed meter readers.

What are the barriers?

Clearly there are huge logistical and infrastructure challenges. Effective operational systems will be required to manage an incredibly complicated supply, fit and maintenance process. One industry insider has recently suggested that there are as many as 20,000 potential problems that supply companies, installers and network staff could encounter.

Ensuring the skills are in place to deliver this operation will be key. This is one area where the government urgently needs to give a firmer steer. The coalition government’s approach to low carbon skills as part of its ‘Green Economy Roadmap’ has been disappointing. Along with the TUC UNISON believes that government needs to display commitment across all departments, ministerial leadership, comprehensive planning and structure, urgency, resources and a willingness to intervene where there is market failure. There are particular concerns regarding the loss of the Regional Development Agencies, the destabilised funding of Sector Skills Councils and the reduced role of the UK Commission for Employment and Skills.

Above all we need a shared commitment from the companies involved and their workforce to deliver on the basis of quality, not just cost. The barriers to achieving this have economic, political and cultural components. This is at the heart of the current debate about a future economy, and the question about how we achieve decent companies and decent jobs. We remain determined to play our part in overcoming these barriers, and hope employers and government are too.

Image courtesy of www.detectenergy.com


This report was commissioned to the NRFC by UNISON and coordinated by Connect Communications. Orion Innovations provided low carbon and energy sector knoweldge, insight and support in its delivery. Focus groups and stakeholder events were held throughout summer 2011, with thought-piece contributions submitted during autumn 2011.

Thanks must go to: DECC, NEA, Which?, Carillion, npower, Consumer Focus and UNISON for their support and valued contributions.

UNISON

UNISON is Britain and Europe's biggest public sector union with more than 1.3 million members. Our members are people working in the public services, for private contractors providing public services and in the essential utilities.

www.unison.org.uk

Orion Innovations LLP

Orion Innovations’ analyst George Phillips coordinated the provision of research and insight for this paper. Orion Innovations is a specialist business consultancy that works with businesses and public sector organisations to realise commercial value from Smart Clean innovation in a resource constrained world.

www.orioninnovations.co.uk

Documents

Smart meters and fuel poverty