Review of Smart Metering Policy in Great Britain...Smart Metering Implementation Programme: Prospectus Jul-10 Mar-11 Interim Guidance - Remote Disconnection and Remote Switching to

Review of Smart Metering Policy in Great Britain

Updated February 2013

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Contents

List of Figures ....................................................................................................................... 4

List of Tables ........................................................................................................................ 5

1. Introduction .................................................................................................................... 6

1.1 Smart Metering Implementation Programme (SMIP) ............................................... 8

1.2 Stakeholder Engagement of the SMIP .................................................................... 8

2. Rollout of Smart Metering ............................................................................................ 11

2.1 Delivery Model ...................................................................................................... 11

2.2 Rollout Implementation ......................................................................................... 12

2.2.1 Completion date ............................................................................................. 12

2.2.2 Implementation approach .............................................................................. 13

2.3 Targeting Framework ............................................................................................ 15

2.4 Local Coordination ................................................................................................ 16

2.5 In-Home Displays (IHDs) ...................................................................................... 16

2.6 Responsibilities for In-Premise Communication Equipment .................................. 17

2.7 Non-Domestic Users ............................................................................................. 18

2.8 Monitoring and Evaluation ..................................................................................... 19

3. Consumer Issues ......................................................................................................... 21

3.1 Consumer Protection ............................................................................................ 21

3.1.1 The Installation Code of Practice ................................................................... 21

3.1.2 The Spring Package ...................................................................................... 22

3.2 Consumer Engagement ........................................................................................ 23

4. Data and Communications ........................................................................................... 26

4.1 Data and Communications Company (DCC) ......................................................... 26

4.1.1 Scope and services........................................................................................ 26

4.1.2 Regulatory arrangements .............................................................................. 27

4.1.3 Commercial arrangements ............................................................................. 28

4.1.4 Establishment of DCC services and transitional arrangements ...................... 29

4.2 Smart Energy Code (SEC) .................................................................................... 31

4.3 Data Access and Privacy ...................................................................................... 33

4.3.1 Consumer's Access to Data ........................................................................... 33

4.3.2 Supplier's Access to Data .............................................................................. 33

4.3.3 Network Operator's Access to Data ............................................................... 34

4.3.4 Non-Licensed Third Parties' Access to Data .................................................. 35

4.3.5 Non-Domestic Sector ..................................................................................... 35

4.4 Security Before DCC 'Go-Live' .............................................................................. 36

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5. Interoperability ............................................................................................................. 37

5.1 Smart Metering Equipment Technical Specifications (SMETS) ............................. 37

5.1.1 The First version of SMETS (SMETS 1) ......................................................... 38

5.1.2 The Second version of SMETS (SMETS 2) ................................................... 40

5.2 Commercial Interoperability .................................................................................. 42

References ......................................................................................................................... 45

Glossary.............................................................................................................................. 47

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List of Figures

Figure 1 Timeline of Smart Metering Consultations and Government Documents ................. 7

Figure 2 'Staged Implementation': Key Milestones and Activities ........................................ 13

Figure 3 SMIP Phasing: Foundation Stage and Mass Rollout ............................................. 13

Figure 4 SMIP Summary Plan: Foundation Stage ............................................................... 14

Figure 5 Organization of Intervention Delivery: Key findings from SMIP stakeholder workshops ........................................................................................................................... 25

Figure 6 Processes for Enrolment and Adoption ................................................................. 31

Figure 7 the Framework for Supplier Access to Smart Metering Data ................................. 33

Figure 8 the High Level Functionality of Smart Meters for Electricity and Gas ..................... 38

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List of Tables

Table 1 SMIP Working and Advisory Groups ........................................................................ 9

Table 2 Membership of SMIP Working and Advisory Groups .............................................. 10

Table 3 Delivery Models for Smart Metering Rollout in the Domestic Sector ....................... 12

Table 4 Approaches for Targeting Framework .................................................................... 16

Table 5 Approaches for Local Coordination in the Domestic Sector .................................... 16

Table 6 Objectives in the Installation Code of Practice ........................................................ 22

Table 7 Approaches for Consumer Engagement ................................................................. 23

Table 8 Aims and Objectives for Consumer Engagement Strategy ..................................... 24

Table 9 Potential Timing for Mandating Enrolment .............................................................. 30

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1. Introduction

As the UK transitions towards its low-carbon energy futures, smart metering is believed to be vital in achieving many of the long-term energy objectives in delivering 'an affordable, secure and sustainable energy supply' (DECC, 2011e). For example, by providing energy use-related information to consumers, smart metering enables 'greater visibility and control' of energy use and encourages energy efficiency measures (e.g. through the Green Deal), thus reducing energy consumption, energy bills and carbon emissions (DECC, 2010). It can also facilitate cost savings in industrial processes (e.g. simplified supplier switch, remote meter reading) and perhaps more importantly, the smart grid development, which is able to support the integration of intermittent renewable energy, demand management (e.g. demand-side response) and storage (DECC, 2009a).

The smart metering system for the domestic sector of Great Britain is illustrated in Figure 1 (see further details in the following chapters). The in-premise equipment includes smart meters for electricity and gas, in-home display (IHD), Communications Hub and other devices (e.g. consumer access device). The Communications Hub enables the in-premise communications between meters, IHD and other devices through the Home Area Network (HAN), and allows the information exchange to suppliers, network operators and other authorised parties via the Data and Communications Company (DCC) through the Wide Area Network (WAN). For the non-domestic consumers, similar but different arrangements are designated, especially in areas including IHDs and communication services (e.g. optional use of the DCC service).

Figure 1 Architecture of Smart Metering in Great Britain: For domestic sector

Source: DECC (2012e)

A number of key consultations and Government documents have been published to enable the smart metering policy-making, the timing of which is summarized below (Figure 2). The Energy Review (DTI, 2006) and its associated consultation1 considered the general case of introducing smart meters, especially in small businesses and domestic sector. Following the Energy White Paper (DTI, 2007) where the Government laid out its vision for all gas and

1 Energy Billing and Metering – Changing Customer Behaviour: An Energy Review Consultation,

November 2006, with the Government response published in July 2007

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electricity customers to have smart meters, the Energy White Paper Consultation2 was launched to consider practical issues of smart metering rollout with the Impact Assessment (IA) showing the clear business case only for small businesses. Based on the revised IA indicating positive cases for small businesses and domestic consumers, however, a Consultation on Smart Metering for Electricity and Gas3 evaluated different delivery models and functionality requirements for domestic and small non-domestic sectors (see Section 2). Starting from the Prospectus Consultation4, more detailed smart metering policies are being considered, mostly under the auspices of the central delivery programme, Smart Metering Implementation Programme (SMIP).

Figure 2 Timeline of Smart Metering Consultations and Government Documents

Source: Author

*Commercial Interoperability: Proposals in Respect of Managing Domestic Customer Switching Where Meters with Advanced Functionality are Installed, August 2011; Supporting Effective Switching for Domestic Customers with Smart Meters, December 2011; Supporting Effective Switching for Domestic Customers with Smart Meters: Further Statutory Consultation and Notice, March 2012; Supporting Effective Switching for Domestic Customers with Smart Meters: Additional Statutory Consultation and Notice, June 2012; Supporting Effective Switching for Domestic Customers with Smart Meters: Modification of Supply Licence Standard Conditions, August 2012 **Part 1 Government Response published in January 2013

The main objective of this document is to synthesize the key issues and concerns that are considered by and impact the regulatory framework for smart metering in Great Britain (GB). It reviews the evolution and latest progress of smart metering policies in GB, by focusing on the SMIP and analyzing the consultations and Government documents as disseminated by

2 Energy Billing and Metering – Changing Consumer Behaviour: A Consultation on Policies Presented

in the Energy White Paper, August 2007, with the Government response published in April 2008 3 Energy Metering: A consultation on smart metering for electricity and gas, May 2009, with the

Government response published in December 2009 4 Smart Metering Implementation Programme: Prospectus, July 2010, with the Government response

published in March 2011

From To

Energy Review: A Report Jul-06

Energy Billing and Metering - Changing Customer Behaviour: Energy Review Consultation Nov-06 Jul-07

Meeting the Energy Chanllenge: A White Paper on Energy May-07

Energy Billing and Metering - Changing Consumer Behaviour: Consultation on Policies Presented in the

Energy White Paper Aug-07 Apr-08

Consultation on a Draft Licence Modification for Provision of Advanced Metering for Larger Business

Sites Jul-08 Nov-08

Consultation on Smart and Advanced Metering for Small and Medium Sized Businesses and Sites, and

Other Non-Domestic Customers Jul-08 May-09

A Consultation on Smart Metering for Electricity and Gas May-09 Dec-09

Smart Metering Implementation Programme: Prospectus Jul-10 Mar-11

Interim Guidance - Remote Disconnection and Remote Switching to Prepayment Aug-10

Smart Metering Spring Package - Addressing Consumer Protection Issues Feb-11 Nov-11

Supporting Effective Switching for Domestic Customers with Smart Meters: Consultation Series* Aug-11 Aug-12

Consultation on Draft Licence Conditions and Technical Specifications for the Rollout of Gas and

Electricity Smart Metering Equipment Aug-11 Apr-12

A Call for Evidence on Data Access and Privacy Aug-11 Oct-11

Licence Conditions for a Code of Practice for the Installation of Smart Electricity and Gas Meters:

Consultation Aug-11 Apr-12

Consultation on the Detailed Policy Design of the Regulatory and Commercial Framework for DCC Sep-11 Apr-12

Open Letter - Possible Exemption for Small Suppliers from the Smart Meters Rollout Obligation Dec-11 Apr-12

Open Letter - Possible Exemption for All Suppliers from the Smart Meters Rollout Obligation Jan-12 Apr-12

Consultation on a Draft Statutory Instrument the Electricity and Gas (Prohibition of Communications

Activities) Order 2012 Feb-12 Jul-12

Smart Metering Implementation Programme: Programme Update April 2012 Apr-12

Consultation on the Draft DCC Licence Apr-12 Nov-12

Consultation on the Draft DCC Licence Application Regulations Apr-12 Sep-12

Consumer Engagement Strategy: Consultation Apr-12 Dec-12

Data Access and Privacy: Consultation Apr-12 Dec-12

Smart Energy Code: Consultation Apr-12 Nov-12

Smart Meters Programme Strategy and Consultation on Information Requirements for Monitoring and

Evaluation May-12 Dec-12

Consultation on a Draft Licence Condition Relating to Security Risk Assessments and Audits in the Period

Before the DCC Provides Services to Smart Meters May-12 Dec-12

Consultation on the Second Version of the Smart Metering Equipment Technical Specifications** Aug-12

Stage 1 of the Smart Energy Code - A Government Response and a Consultation on Draft Legal Text Nov-12

Foundation Smart Market: Consultation Nov-12

Implementing the Energy Efficiency Directive Provision for Easy Access to 24 Months of

Daily/Weekly/Monthly/Annual Consumption Data for Consumers with Smart Meters Dec-12

2006 2007 2008 2009 2010 2011 2012

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the Department of Energy and Climate Change (DECC) and the Office of Gas and Electricity Markets (Ofgem). Rather than being comprehensive and providing detailed summarisation, several key aspects of the regulatory arrangements to deliver smart metering in GB are covered, including the rollout strategy (Chapter 2), consumer protection and engagement (Chapter 3), management of smart metering data and communications (Chapter 4), and technical and commercial interoperability (Chapter 5).

1.1 Smart Metering Implementation Programme (SMIP)

The term, Smart Metering Implementation Programme (SMIP), was first used in the Prospectus Consultation to describe the central programme to design, establish and implement the regulatory and commercial frameworks to facilitate the rollout of smart metering in GB. It is now directed by the Strategic Programme Board (SPB) comprised of representatives from DECC, other Government Departments, Ofgem and Ofcom, and reports to the Senior Responsible Owner (SRO) in the DECC, who is then 'accountable to Ministers for its successful delivery' (DECC, 2011d). Before the conclusion of the Prospectus Consultation, however, the regulatory deliberations of smart metering were managed by the Ofgem E-Serve. As the independent regulator of the electricity and gas markets, Ofgem has the role in ensuring consumer protection, establishing and regulating DCC, and enforcing new obligations on suppliers and other parties (DECC, 2011d).

1.2 Stakeholder Engagement of the SMIP

A number of working and advisory groups are also set up in the SMIP to consult industry stakeholders and integrate their inputs to inform the policy-making. Key roles of these stakeholder groups (Table 1) and their membership (Table 2) are summarised below. In analysing how stakeholder engagement facilitates the SMIP, it is worth noting that some structural changes of these working and advisory groups have occurred. For instance, the Data and Communications Company Group (DCCG), which was established to seek stakeholder expertise for the design and delivery of DCC, the procurement of its services and other data and communication matters5, is now superseded by Smart Meter Regulation Groups (SMRG). Smart Metering Design Group (SMDG), whose sub-groups developed detailed specifications for components of the smart metering system with guidance from the Security Technical Experts Group (STEG), is replaced by Overall Design Advisory Group (ODAG).

5 DCCG was comprised of 4 working groups: WG1 DCC Licensing, WG2 Smart Energy Code, WG3

DCC Service Provider Procurement Strategy and WG4 DCC Adoption Criteria and Limits

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Table 1 SMIP Working and Advisory Groups

Stakeholder Groups Areas of Input

Smart Meter Regulation Groups (SMRG)

Detailed design of regulatory and commercial framework for DCC licence, application and procurement and the SEC

Proposal review, analysis and evaluation

Identify security and data privacy issues

Identify risks and mitigation measures for SMIP

WG1: DCC Licensing Policy design of DCC licence conditions

Development DCC Licence application regulation

WG2: Smart Energy Code Development of SEC governance

Design and delivery of SEC

WG3: Non-Domestic Issues Design and delivery of non-domestic regulation

WG4: Consequential Changes Potential consequential changes to other industry codes and

regulatory instruments

Overall Design Advisory Group (ODAG) Cross-cutting issues straddling expert and advisory groups

Overall design of smart metering solution

Smart Metering SMETS Stakeholder Advisory Group (SSAG)

Technical expertise for consultations

Interim and draft final deliverables associated with SMETS

Risk identification for SMIP and mitigation measures

Business Process Design Group (BPDG)

Specification of new processes, activities and information flows and necessary changes to existing retail markets

Smart Meter Foundation Strategy Group (SMFSG)

Requirement and approach to feedback and learning during the Foundation Stage

Foundation Interim Operating Model (FIOM)

Testing strategy and implementation for enduring solution

Trialling activities during the Foundation Stage

Foundation Testing and Trialling Strategy (FTTS)

Testing and trialling strategies for the end-to-end smart metering programme

Implementation Coordination Group (ICG)

Identify delivery risks and potential solutions

Capture deployment experience and assess the SMIP proposals and plans

Consider dependencies between SMIP and individual programmes

Ensure effective operation of and support for expert groups

Consumer Engagement & Rollout Group (CERG)

Review consumer rollout experience and provide advice on rollout strategies

Advice on consumer engagement strategies

Advice on consumer concerns to inform policy

Identify and resolve operational issues at consumer premises

Consumer Advisory Group (CAG)

Review policy and SMIP proposals

Advice on consumer interest protection

Advice on the roles of consumer groups to protect and engage consumers during the rollout

Security Technical Expert Group (STEG)

Risk assessment review and ongoing update

Development of security requirements

Security representation in design groups

Analysis of security design options

Source: Author

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Table 2 Membership of SMIP Working and Advisory Groups

Stakeholder Groups Proposed Participants

Smart Meter Regulation Groups (SMRG) DECC, consumer representatives, suppliers (x8), ICoSS, ENA, iDNOs/iGTs, Intellect, ESTA, AMO, Energy UK, SBGI, Ofgem, Ofcom, Ofwat, GSMA and IUK

WG1: DCC Licensing DECC, consumer representatives, suppliers (x8), ICoSS, Energy UK, AMO, ESTA, ERA, Ofgem, IUK and SBGI

WG2: Smart Energy Code DECC, consumer representatives, suppliers (x8), ICoSS, ENA, AMO, ESTA, Energy UK, Ofgem, Intellect, SBGI and GSMA

WG3: Non-Domestic Issues DECC, ICoSS, Suppliers, ESTA, ENA, AMO, Energy UK, Ofgem, MAPs, MSPs and SBGI

WG4: Consequential Changes DECC, suppliers, ICoSS, ENA, Energy UK, Central Bodies, Ofgem, IGTs/iDNOs, SBGI and AMO

Overall Design Advisory Group (ODAG) DECC, Ofgem, First Utility, ENA, EDF, Elexeon, ERA, British Gas, Scottish Power, E.ON, Npower, Consumer Focus, Gemserve, Utilita and SSE

Smart Metering SMETS Stakeholder Advisory Group (SSAG)

DECC, Energy UK, E.ON, Npower, Scottish Power, Ofgem, SBGI, ESTA, BEAMA, SSE, Energy UK, British Gas, AMO, EDF, Utilita, ENA and CMAP

Business Process Design Group (BPDG)

DECC, British Gas, EDF, E.ON, Npower, Scottish Power, SSE, ICoSS, ENA, ERA, AMO, Electralink, Elexon, Gemserv, Xoserve, Ofgem, ESTA and Haven Power

Smart Meter Foundation Strategy Group (SMFSG)

DECC, AMO, BEAMA, British Gas, Calvin Capital, CMAP, Consumer Focus, EDF, Energy Networks, Engage Consulting, E.ON, Npower, Scottish Power, SSE and UK Power Networks

Foundation Interim Operating Model (FIOM)

DECC, BEAMA, British Gas, Calvin Capital, Centrica, Consumer Focus, EDF, Electralink, Elexon, Engage, E.ON, First Utility, Gemserve, Intellect, Npower, Ofgem, Onstream, Powerdata Associates, SBGI, Scottish Power, SSE, Totalgp, Utilita and Xoserve

Foundation Testing and Trialling Strategy (FTTS)

DECC, AMO, BEAMA, British Gas, CMAP, EDF, Electralink, Elexon, E.ON, ERA, Gemserve, Intellect, Npower, Ofgem, SBGI, Scottish Power, SSE and Xoserve

Implementation Coordination Group (ICG)

DECC, Ofgem, First Utility, ENA, EDF, ERA, British Gas, Scottish Power, E.ON, Npower, Consumer Focus, SSE, Ofcom and ICoSS

Consumer Engagement & Rollout Group (CERG)

DECC, AMO, British Gas, Consumer Focus, EDF, ENA, E.ON, ERA, ESTA, First Utility, Green Alliance, ICoSS, Npower, Ofgem, Scottish Power, SSE, Which?, SBGI, Age UK (formerly Age Concern), EMA, Centrica, National Grid

Consumer Advisory Group (CAG) Consumer Focus, Age UK, the Public Utilities Access Forum, the Fuel Poverty Advisory Group, National Energy Action, Citizens Advice, Ofgem, Groundwork, RNIB and Which?

Security Technical Expert Group (STEG)

Membership by invitation only at the discretion of the group leader; includes suppliers, trade associations, meter manufacturers, system integrators and telecommunication providers, Centre for Protection of National Infrastructure, CESG (National Technical Authority for Information Assurance), technical security specialists and consumer representatives

Source: Author

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2. Rollout of Smart Metering

The Government's aim is to roll out smart metering to the 29 million GB households and businesses, which constitutes a complex industrial undertaking and requires elaborate regulatory arrangements and planning (DECC, 2011f). This chapter covers several key aspects of the rollout framework that reflect the general approach and principles in delivering the SMIP within the UK-specific context, including the delivery body, completion arrangement, local coordination, content of rollout, and monitoring and evaluation.

2.1 Delivery Model

The Consultation on Smart Metering for Electricity and Gas assessed three models 6 for delivering smart metering in the domestic sector: competitive model, central communication model and fully centralized model (Table 3). In the Government response, another three network-based models were also appraised7 in considering the potential roles of network businesses in the rollout (Table 3). The supplier-led Central Communication Model, where a central communication function (i.e. the DCC) would be established and suppliers responsible for smart meter provision and installation, is chosen as the preferred model for rollout that balances multiple objectives including market competitiveness, quick rollout and interoperability.

The competitive market structure is believed to support the innovation and flexibility of suppliers, and incentivizes them to provide high-quality customer services. The network-based models, particularly the Energy Network Coordination Model and the DNO-Deployment Model, and the Fully Centralized Model may reduce the competition in metering, thus undermining the consumer values. It is also noted that the supplier-led rollout in the Central Communications Model has the benefit of retaining the relations with customers and responding to their needs by offering other services.

Compared with the network-based models, the Central Communication Model would maintain the existing competitive market structure, thus avoiding the challenges and risks of re-regulating the metering industry and promoting the early implementation of mass rollout. Similarly, the need for the Fully Centralized model to set up the regulation of monopoly entities (e.g. regional franchise for meter management) in addition to central communication provider is also considered as a drawback as it may lengthen the rollout process.

Although the Competitive Model maintains the competitive market structure, the Government is of the view that the absence of central communication results in greater difficulties in establishing interoperability and common communication than with the Central Communications Model. This increases the cost of smart metering rollout and adds further complexity to industry processes, creating risk to key program objectives including efficient supplier switch. Moreover, the centralized communication solution is also believed to be important for the long-term goal of smart grid development, provided that 'the communication solution and meter specification was appropriately designed' (DECC, 2009b). Regarding the potential roles of network businesses in smart grid development, there is wide agreement that the Central Communication Model can support their contribution by engaging them in 'the process of defining the minimum meter specification and the central communication function' (DECC, 2009b).

6 Based on Smart Meter Roll-out: Market model definition and evaluation project, Baringa Partners,

May 2009 7 Based on Smart Meter Roll-out: Energy network business market model definition & evaluation

project, Baringa Partners, December 2009

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Table 3 Delivery Models for Smart Metering Rollout in the Domestic Sector

Models Descriptions Advantages Disadvantages

Central Communications

Introduce a new central function on national basis to implement and manage communication infrastructure and data

Maintain competition in other metering services

Supplier flexibility

Suppliers retaining customer relationship

Maintain competitive metering market

Standardized communication

Offers opportunity for industry simplification

Challenges and risks in establishing central service provider

Competitive Existing competitive metering market model (i.e. suppliers are responsible for all metering services)


Quick to deployment

Adding complexity to industry processes

Fully Centralized Introduce regional franchises to manage meter asset (e.g. selection, ownership, deployment and maintenance)

Central communication services

Efficient deployment strategy and avoidance of asset and communications duplication

Challenges and risks of tendering

Monopoly regulation

Long setup period

Regulated Asset Ownership

DNOs and GTs provide smart meters for electricity and gas respectively

Suppliers are responsible for installation and deployment

Central communication service

Suppliers retaining customer relationship

Standard regulated metering agreements promote commercial interoperability

Reduces competition in metering

Energy Network Coordination


DNOs and GTs coordinate for deployment and installation

Central communication services

Focused campaign to improve customer awareness


Reduce competition in metering

Reduces supplier flexibility and innovation

DNO-Deployment


DNOs manage the deployment and strategy for both electricity and gas meters

Central communication service

Focused campaign to improve customer awareness


Reduce installation visits and minimize disruption

Reduce competition in metering

Reduces supplier flexibility and innovation

Source: Author

2.2 Rollout Implementation

2.2.1 Completion date

An obligation has been proposed to require suppliers to take all reasonable steps to complete the rollout to their domestic and smaller non-domestic customers by 31 December 2019. The Prospectus Consultation made clear the Government's intention to accelerate the smart meter rollout and complete it before the previous target of 2020 (DECC, 2011d). Even with the wide concern that a completion date in 2019 was challenges and there was likely to be delays in the programme activities (e.g. notification of SMETS to the EU, DCC set-up), the Government considered that such a time framework was still feasible with the proposed

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staged approach, wide industry engagement for SMETS development, and its encouragement for early actions (DECC, 2012f).

2.2.2 Implementation approach

Given its determination to accelerate the rollout, a 'staged approach' towards implementation was initially proposed in the Prospectus Consultation (Ofgem, 2010b). Under this approach (Figure 3), a defined regulatory framework ('Go-Active') would be established in early 2012 to facilitate the smart meter rollout and the setup of DCC. The mandated rollout of smart meter ('Go-Live Rollout') would subsequently commence in summer 2012 before the availability of DCC services ('Go-Live DCC') in autumn 2013.

Figure 3 'Staged Implementation': Key Milestones and Activities

Source: Ofgem (2010b)

There were, however, concerns about mandating the smart meter rollout before 'the end-to-end smart metering system is in place and the DCC begins providing services' (DECC, 2011d). The uncertainty of pre-DCC arrangements was considered to pose risks to suppliers, which might increase the overall cost of rollout and affect the consumer experience. It was also noted that to devise and implement interim solutions would 'distract attention from the development of the enduring solution' (DECC, 2011d). Therefore, the phasing of smart meter rollout (Figure 4) has been accordingly divided into the Foundation Stage (Q2 2011-Q1 2014) and the Mass Rollout (Q2 2014-onwards), instead of adopting the 'staged approach'.

Figure 4 SMIP Phasing: Foundation Stage and Mass Rollout

Source: DECC (2011)

The next Foundation Stage would take steps to promote interoperability, transitional arrangements for the DCC and market readiness. In preparation for the subsequent mass rollout, the Foundation Stage Baseline Plan sets out key deliverables and dates, covering

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consumer protection and engagement, regulation, technical specification, and data and communications (Figure 5).

Figure 5 SMIP Summary Plan: Foundation Stage

Source: DECC (2012j)

The Consultation on Draft Licence Conditions and Technical Specifications for the Roll-Out of Gas and Electricity Smart Metering Equipment8 has concluded on several more detailed issues of the rollout:

New and Replacement Obligation 9 . The Government agrees to develop with the industry certain criteria to determine the appropriate timing for such an obligation to take effect. Following the consultation responses, key milestones in the SMIP, such as the SMETS development and the operation of DCC, will be considered but it is recognised that the 'new and replacement obligation' being introduced around the start of mass rollout is feasible.

Enduring Compliance with SMETS. The smart metering system should comply, on an enduring basis, with the version of SMETS as designated at the time of installation. Recognizing the respondent concern that the smart metering system may need to be modified or replaced due to changes in SMETS, however, the Government makes reservation for a retrospective requirement of such modifications or replacements.

Operational Requirement. Following the general concern that SMETS alone would not be able to deliver the full benefits of SMIP, licence obligations will be introduced for the utilization of the smart metering functionality. Further details of such obligations are specified in the Part 1 Government response (DECC, 2013) to the Consultation on the Second Version of the Smart Metering Equipment Technical Specifications10. These

8 Smart Metering Implementation Programme: A Consultation on Draft Licence Conditions and

Technical Specifications for the Roll-Out of Gas and Electricity Smart Metering Equipment, August 2011, with the Government response published in April 2012 9 The 'new and replacement obligation' refers to the licence condition that only SMETS-compliant

smart metering equipment should be installed for new installations and replacements. 10

The Consultation on the Second Version of the Smart Metering Equipment Technical Specifications, August 2012, with the Part 1 Government response published in January 2013

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obligations include 1) availability over HAN of all consumption, export and tariff information stored in the meter11; 2) establishment and maintenance of WAN connection between the meter and the DCC (for enrolled meters) or supplier's own head-end system; and 3) provision of free access to the full range of SMETS IHD functionality12. These licence obligations, which are expected to take effect later in 201313, will be placed on suppliers to take all reasonable steps to ensure domestic consumers and micro-businesses (enrolled with the DCC) have access to the smart meter functionality. Moreover, it is concluded that the DCC licence and the SEC would require key data14 to be made available to SEC parties, which include the requirement of suppliers to configure smart metering systems so that the DCC can offer services (e.g. access to certain information) to SEC parties.

Exemptions for Smart-Type Meters 15 and Small Energy Suppliers. Two open letters16 were issued to seek views on such prospective exemptions from the smart metering rollout obligation. Regardless of their early benefits, an exemption for smart-type meters will not be introduced due to potential risks (e.g. consumer confusion, potential difficulty in switching suppliers, risk for overall rollout efficiency and cost) as identified by the respondents. Moreover, small energy suppliers will not be exempted from the rollout obligation since it is believed that such an exemption would not effectively address their financing challenges but entails great risk and cost.

Exemptions for Current Transformer Meters and Larger Gas Meters17. Given the limitation and difficulty as identified by the respondents in providing smart functionality, exemptions will be introduced to allow these meters to have advanced functionality instead. Such exemptions apply to non-domestic and domestic sectors18.

2.3 Targeting Framework

The Prospectus Consultation considered two approaches for implementing the rollout obligation: target for completion only and interim targets (Table 4). While the majority of respondents (including most consumer groups, telecommunication companies, meter operators, installers and service providers) supported the approach of interim targets, most suppliers opposed it. With such mixed views, the Government has concluded that no interim

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This applies to a compatible CAD and equally to SMETS 1 meters as to others, which include Foundation meters given the various options (e.g. enrolling the meter with the DCC or replacing the equipment) for suppliers to fulfil this requirement and the incentives facilitated by other regulatory provisions (e.g. the 'Effective Switching' licence conditions implemented by Ofgem). 12

This applies only to domestic consumers. 13

Such obligations apply to new smart metering systems after the licence conditions come into force. If consumers change suppliers, the gaining supplier should fulfil the requirement from the earlier of when the meter is enrolled with the DCC or 31 December 2019. For micro-businesses, the requirement takes effect once meters are enrolled with the DCC. 14

Data items include: 1) power quality information and related log; 2) real-time alerts associated with power quality thresholds; 3) real-time outage management information; 4) active 13-month import/3-month export profile data for electricity (kWh) and 13-month gas consumption data (m

3); 5) reactive 3-

month import-export profile data for electricity (kWh); 6) six-minute gas consumption log; and 7) tariff information. 15

Smart-type meters can offer some of the functionality included in SMETS but are not compliant with SMETS, which have been installed by some suppliers before the confirmation of SMETS. 16

Open Letter: Possible Exemption for Small Suppliers from the Smart Meter Roll-Out Obligation, December 2011, DECC; Open Letter: Possible Exemption for All Suppliers from the Smart Meters Roll-Out Obligation, January 2012, DECC 17

Large gas meters are those designed to deal with gas flows of over 11 m3.

18 Although the volume of these meters in the domestic sector is low, the Government has decided to

apply such exemptions to the domestic sector to achieve regulatory consistency.

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targets would be introduced in the Foundation Stage but large suppliers are required to submit rollout plans and to report progress. Small suppliers are exempted from this requirement given its disproportionate burden on them.

Table 4 Approaches for Targeting Framework

Targets for Completion

Only Interim Targets


Alignment between rollout profile and SMIP benefit

Lower risk for investment delay

Certainty for DCC procurement

Source: Author

2.4 Local Coordination

The engagement with local communities and trusted third parties is recognized as desirable to generate 'necessary awareness, enthusiasm and take up for smart meters' (Ofgem, 2010c). In the Prospectus Consultation, the Government assessed three approaches for local coordination under the supplier-led delivery model: market-led, local project-based and area-based (Table 5). It is concluded that, in the early stage of rollout, the market-led approach will be used. This is mainly due to the value of supplier flexibility, especially during the Foundation Stage, to develop their rollout plans, to respond to early requests and to engage with third parties by learning from experience and feedback.

Table 5 Approaches for Local Coordination in the Domestic Sector

Approaches Descriptions

Market-led

Supplier flexibility to define rollout plan

Promote efficiency, supplier innovation and service differentiation

Opportunity to respond to early requests for smart meters

Possibility of un-aligned interests between suppliers and consumers or broader industry

Local Project-Based

Supplier flexibility to define rollout plan

Supplier obligation to support local projects or initiatives

Address the possibility of un-aligned interests

Area-Based

Focused rollout within areas specified by a common plan

Create greater level of community and third party engagement

Address 'hard-to-reach' properties, especially in later stage of rollout

Constrain supplier's ability to respond to consumer demand

Source: Author

2.5 In-Home Displays (IHDs)

IHDs are recognized as one key component in the smart metering rollout to enable consumers to manage their energy use and reduce the energy bill and carbon emissions. After taking into account the analysis 19 showing the effectiveness of IHDs in changing energy use and the need to comply with the EU 'Energy Services Directive'20 by May 2008, a proposal to provide on request displays for electricity21 on the new and replacement basis, free of charge for two years from early 2008, was made in the Energy White Paper Consultation in August 2007. However, such a proposal was abandoned with the concern about its potential impacts on the smart metering rollout being then contemplated.

19

See Annex C of Changing Consumer Behaviour: A Consultation on Policies Presented in the Energy White Paper, August 2007 20

Article 13 of the Energy End-Use Efficiency and Energy Services Directive, December 2005 21

Displays for gas meter were not available at that time.

17

A Consultation on Smart Metering for Electricity and Gas confirmed in December 2009 the Government intention to require the provision of IHDs in the domestic sector. While there were other alternative measures to provide energy consumption feedback, the Government viewed the mandated rollout of IHDs as important for the overall benefits of smart metering rollout. There was generally wide support for this proposal, including energy suppliers and the Energy Retail Association who expressed preference for such an obligation to be flexible and potentially time-limited to enable innovation.

A number of key aspects in the IHD obligations, which should come into effect at the same time with the rollout licence condition in late 2012, are specified after the Prospectus Consultation and the Consultation on Draft Licence Conditions and Technical Specifications for the Roll-Out of Gas and Electricity Smart Metering Equipment:

Supplier Obligation22 . It is concluded that suppliers have responsibility to provide, without one-off or up-front charge, compliant IHDs at the installation of compliant smart meters in the domestic sector. This decision takes into account the feedback from the Energy Demand Research Project (EDRP) showing the need of greater consumer choice, and the ability of energy suppliers to innovate and differentiate their services to meet the consumer needs in the competitive energy supply market. However, in the case where consumers source electricity and gas from different suppliers, this obligation is subject to the exception for the second installing supplier, if the existing IHD can provide the minimum information required for the second fuel.

Obligation under Change of Suppliers (CoS). It is proposed that, if domestic consumers change suppliers, the obligation to provide a compliant IHD (if the consumer declines the offer from the installing supplier) and to repair/replace IHD should fall on the gaining supplier. However, since the first version of SMETS does not specify HAN, there is risk that one supplier's IHD may not be compatible with the metering system installed by another supplier. It is thus concluded that, until further technical specification is developed, following supplier switch, the gaining supplier is not required to supply a compliant IHD (if the consumer declines the offer from the installing supplier), or repair/replace IHD.

Time-Limiting Nature of Obligation. If the consumer declines an IHD at the installation of compliant smart meters, the supplier is required to provide one compliant IHD, without one-off or up-front charge, when the consumer requests one within one year after the installation. Moreover, for the IHD maintenance and replacement, suppliers are also responsible, without one-off or up-front charge, for one year after the installation. As opposed to an enduring obligation, this time-limiting obligation is considered to enable innovation and flexibility for future development in the energy information delivery (DECC, 2012f).

2.6 Responsibilities for In-Premise Communication Equipment

The Prospectus Consultation has concluded on an arrangement where the DCC, through its CSPs, procures and owns the exchangeable WAN modules (i.e. without having to replace the meter; see Section 5.1) while energy suppliers are responsible for their installation and maintenance; for HAN, suppliers should be responsible for the installation and bear the associated cost. If consumers source electricity and gas from different suppliers, the first supplier to install the smart metering equipment should install the WAN module and HAN.

22

For compliant smart metering equipment that is installed without a compliant IHD before the IHD

obligation becomes effective, it is concluded that suppliers are not required to retrospectively provide an IHD.

18

Many respondents and the Data and Communications Group (DCG) held the view that such an arrangement would promote 'more strategic procurement of DCC communication services' (DECC, 2011b), which led the Government to abandon its original proposal where suppliers would be responsible for the provision and maintenance of all smart metering equipment including WAN module and HAN.

In response to the required exchangeability of WAN modules, the Industry Draft Technical Specifications (IDTS) recommended to include the Communications Hub, comprised of a WAN module, a HAN module and processing functions23, in the smart metering system (DECC, 2011a, DECC, 2012b). The Consultation on Draft Licence Conditions and Technical Specifications for the Roll-Out of Gas and Electricity Smart Metering Equipment has concluded that the Communications Hub should be physically separate or detachable from the electricity meter. Since the HAN standard is not specified in the SMETS 1, it is decided that the Communications Hub is included in future iterations of SMETS (e.g. SMETS 2).

As the Prospectus Consultation has subjected the DCC and suppliers to the responsibility of WAN and HAN modules respectively, the Consultation on the Second Version of the Smart Metering Equipment Technical Specifications considers how the Communications Hub that contains WAN and HAN modules should be delivered. It is concluded that a CSP-led model will be used for providing the Communications Hub, in which the DCC (via the CSP contract) would procure communications hubs and energy suppliers are responsible for installation and maintenance. Compared with the alternative supplier-led model, the CSP-led model is believed to deliver many benefits including reduced complexity in the business processes, lower cost of funding, consistency of operation and interoperability, and better consumer experience on Change of Supplier. The principle of 'costs lie where they fall' will be followed under the CSP-led model to avoid the need of establishing complex recharging arrangements. It is further concluded that additional measures (via the commercial terms for CSP and the SEC), such as a certification scheme for communications hub and requirements covering the 'type fault'24 and upgrade/replacement conditions, would be put into place to incentivize CSP to provide fit-for-purpose, in response to the stakeholder concern that the 'costs lie where they lie' may not be adequate in doing so. Moreover, the installation responsibility of suppliers should include a CSP-provided communications hub from an appropriate time25 in the future.

2.7 Non-Domestic Users

For large business users26, new licence conditions have been introduced to require the installation of advanced metering by April 201427. Such an obligation covers the business sites in electricity profile class 5-8 and with annual gas consumption of 732-58,600 MWh.

For small and medium non-domestic users, a consultation28 was initiated to seek views on extending advanced or smart metering to this sector, with the IA published alongside

23

Processing functions include message handling, data storage and processing functions (e.g. gas

meter 'mirror', issuing alerts on detection of power outage and restoration of supply) 24

'Type faults' occur when the equipment provided by CSP is not fit-for-purpose and should therefore be replaced at the expense of CSP. 25

Depending on the equipment availability and with appropriate notice 26

Very large business users (with electricity consumption more than 100kWh for three consecutive months and annual gas use over 58,600 MWh) are not included since they are already subject to half-hourly or daily-read metering for electricity and gas respectively. 27

Energy Metering: A Consultation on a Draft Licence Modification for Provision of Advanced Metering for Larger Business Sites, July 2008, with the Government response published in November 2008

19

showing the general business case for doing so. In the Consultation on Smart Metering for Electricity and Gas, the Government decided to require the installation of smart meters in this sector, on the same timescale with the domestic sector, with limited exceptions for advanced metering29. It was believed that such an approach would balance the need of smart functionality to support the smart grid and the early 'energy benefits' of advanced metering (DECC, 2009b).

The Prospectus Consultation also discussed the potential use of DCC services in small and medium non-domestic sector. Given the active market to provide data and communication services, the Government has concluded on an optional use of DCC by smart meters in this sector. This decision is also made after considering the capacity of DCC to extend services to non-domestic smart meters. However, if the DCC services are provided to the smart meters in this sector, similar terms of use should be offered as in the domestic sector. The terms of use with respect to advanced meters are subject to the cost of service provision (e.g. cost of determining the compatibility with DCC requirement).

As with the domestic sector, there will be no interim targets in the Foundation Stage but large suppliers need to submit rollout plans and report progress. Small suppliers are exempted from this requirement given its disproportionate burden on them. Given the diverse needs of consumers in this sector and lack of general support for mandatory provision, suppliers are not required to offer IHDs30.

2.8 Monitoring and Evaluation

The Prospectus Consultation has decided to monitor and review the progress of rollout to inform the later stage of SMIP. For instance, suppliers are required to report the numbers of customers having smart meters and those still having 'dumb' meters.

The Consultation on Information Requirements for Monitoring and Evaluation31 has further considered in detail the supplier obligation to provide the rollout-related to DECC and Ofgem:

Information Reported to DECC. Generally, the Secretary of State should have 'the power to issue Information Requests specifying in detail the content, format and timing of the information required' (DECC, 2012i). Larger suppliers32 should submit annual rollout report33 of their plans and progress for delivering smart metering to domestic and smaller non-domestic consumers, and quarterly updates on their progress in key areas such as the number of smart meters and IHDs installed. The information on costs and benefits should also be included in the annual and quarterly reports. Smaller and non-domestic suppliers, in contrast, need to only report their progress annually. Moreover, network

28

Energy Metering: A Consultation on Smart and Advanced Metering for Small and Medium Sized Businesses and Sites, and other non-domestic customers, July 2008, with the Government response published in May 2009 29

Exceptions for smart meter installation in this sector include: 1) advanced meters installed before April 2014 and the customer wishes to retain this meter; 2) advanced meters installed after April 2014 under existing contractual arrangements. 30

See Footnote 1 31

Smart Meters Programme: Strategy and Consultation on Information Requirements for Monitoring and Evaluation, May 2012, with the Government response published in December 2012 32

Larger suppliers are those who have more than 250,000 domestic gas or 250,000 domestic electricity consumers. 33

Annual rollout reports of larger suppliers should include the overall rollout strategy; planned profiles through to 2019 with an assessment of progress to date; supporting evidence on capacity to deliver their plans, including readiness for mass rollout; consumer engagement plans; and information to enable tracking of costs and benefits (the methodology for this will be further developed, although it is suggested that an approach corresponding to the SMIP's Impact Assessment).

20

companies are also required to respond to the Information Requests issued by the Secretary of State, which is intended to facilitate the evaluation of how they are impacted by the SMIP, from the start of mass rollout.

Regarding the geographical granularity of data, the Government is minded to require large suppliers to continue providing their planned rollout profiles by DNO area as they are currently doing and to further analyse how the need of gas distribution networks (GDNs) for rollout profiles by GDN area should be fulfilled. The quarterly reporting from larger suppliers is also required to be at some appropriate level of postcode, which is intended to allow data aggregation on different geographic levels and to support the targeting of consumer engagement activities. Furthermore, to facilitate the evaluation of policy impacts on individual premises, the Government intends to require suppliers to provide key data items (e.g. installation date of smart meters and IHD) at meter-level (MPAN/MPRN) annually, which will be incorporated into the National Energy Efficiency Data framework (NEED). This is expected to occur after the changes to meter registration systems that enable smart meters to be identified are complete.

Information Reported to Ofgem. The licence has been modified34 to allow Ofgem to 'require suppliers to provide plans and information to facilitate its regulation of the rollout of smart meters, and require suppliers' compliance with certain aspects of the plans' (DECC, 2012i). It is envisioned35 that, once 'key enablers' for the rollout are in place, Ofgem will request suppliers to submit their baseline plans to deliver their obligations for smart metering rollout. The baseline plan should contain, along with justifications, annual interim rollout milestones in the form of percentage of their domestic and smaller non-domestic consumers who have smart meters36 by the end of that year. Once submitted, suppliers are required to achieve 95% of that milestone unless a lower figure is directed by Ofgem. Re-submission of their plans to Ofgem is allowed each year until March 2017. It is also suggested that the information the Ofgem asks for is likely to be relevant sections of larger suppliers' annual rollout report submitted to the Government37. As for smaller suppliers, the applicability of similar obligation is left to the discretion of Ofgem.

These obligations in monitoring and evaluation will cease one year after the mass rollout. To minimize the burden on suppliers and promote consistency, the Government and Ofgem are minded to align their Information Requests in timing and content.

The progress of SMIP will be published by DECC through annual reports and quarterly updates to enable stakeholder scrutiny and engagement. In the meantime, Ofgem can ask suppliers to publish some or all of their rollout plans or publish information, if doing so promotes consumer interests.

34

Section 88 of the Energy Act 2008 35

Ofgem intends to consult on more detailed of this obligation framework in early 2013. 36

Exceptions to advanced metering in the non-domestic sector are also incorporated. 37

Excluding the information that is not needed for Ofgem to fulfil its responsibilities, such as the information on the cost and benefits

21

3. Consumer Issues

Consumer protection and engagement are vital to the positive experience of smart metering rollout, which subsequently bears upon the success and benefits of SMIP as well as the efficient and effective programme delivery (DECC, 2011f). This chapter reviews the regulatory measures to safeguard consumer interests and the approaches to promote consumer engagement.

3.1 Consumer Protection

With protecting the consumer interests being one of its main responsibilities, Ofgem has introduced a number of measures to strengthen the existing safeguards for consumers (Ofgem, 2010a). For example, the Energy Supply Probe38 was initiated to address issues in areas covering contract variation, sales and marketing activity and information for domestic customers, and Standards of Conduct was issued as guidance for suppliers to exercise consumer protection. The Energy Retail Association (ERA) also introduced its Code of Practice for Face-to-Face Marketing of Energy Supply. Additional steps have been taken to identify and address issues that are specific to the smart metering rollout, especially for the installation of smart meters and the early-moving adoption.

3.1.1 The Installation Code of Practice

Given the importance of installation visit in the protection and engagement of consumers, the Prospectus Consultation concluded that the Installation Code of Practice, which set out the minimum standards of installation services, would be developed and regulated through licence conditions. A Consultation on Licence Conditions for a Code of Practice for the Installation of Smart Electricity and Gas Meters39 further confirmed that the Code would cover domestic and smaller non-domestic sectors, and should be developed by suppliers and approved by Ofgem against the objectives, which are accompanied by detailed requirements in specific areas, as established in the licence (Table 6). In particular, for domestic consumers, suppliers would be required to offer energy efficiency advice, to satisfy the needs of vulnerable domestic customers, and to seek consent for face-to-face marketing activities40 before the domestic installation visit. Moreover, in the domestic sector, suppliers would not be able to charge upfront cost for standard smart metering equipment nor conclude any sales during the installation visit. It was further required that suppliers and Ofgem would monitor the compliance with the Code, and that suppliers should review the Code regularly and make necessary changes after consulting consumer groups and other stakeholder parties.

38

Energy Supply Probe – Summary of Initial Findings, Ofgem, October 2008 39

Smart Metering Implementation Programme: Licence Conditions for a Code of Practice for the Installation of Smart Electricity and Gas Meters – A Consultation, August 2011, with the Government response published in April 2012 40

A Consultation on Licence Conditions for a Code of Practice for the Installation of Smart Electricity and Gas Meters has defined 'face-to-face marketing' as 'discussion of branded products or services or specific customer propositions'

22

Table 6 Objectives in the Installation Code of Practice

For Domestic Consumers:

Maintain service standards that meet consumers' reasonable expectations

Fair, transparent, appropriate and professional manner in installation activities

Provision of complete and accurate information to consumers regarding smart metering equipment and installation

Not subject to unwelcome marketing in installation visits

For Smaller Non-Domestic (Micro-Business) Consumers:

Maintain service standards that meet consumers' reasonable expectations

Fair, transparent, appropriate and professional manner in installation activities

Provision of complete and accurate information to consumers regarding smart metering equipment and installation

Source: Adapted from DECC (2012a)

3.1.2 The Spring Package

For the 'early moving' installation of smart meters, Ofgem launched the Spring Package Consultation41 in February 2011 to address the consumer protection issues, which are likely to emerge with the smart functionality. Key areas of concern include the remote disconnection and the prepayment switch.

With respect to disconnection and prepayment meter (PPM) installation, the Electricity Act 1989 and the Gas Act 1986 stipulate that 'customer must be given at least 28 days to pay their bill and then at least 7 days' notice before the supplier can install a PPM or disconnect the supply following non-payment of charges' (Ofgem, 2011). The domestic supply licence includes the requirement of offering PPM only where it is 'safe and reasonably practicable'42 and taking 'all reasonable steps'43 to check the status of affected customers and to avoid disconnection of vulnerable groups (e.g. pensionable age, chronically ill or disabled), and the prohibition of disconnection to consumers of pensionable age during winter44.

The Spring Package Consultation has decided to introduce several modifications to licence conditions to strengthen the above safeguards for domestic consumers:

Remote Disconnection. Suppliers are explicitly required to have regard to the guidance on 'all reasonable steps' to identify vulnerability prior to disconnection. The conditions in which the functionality of credit management and load limiting, as enabled by smart metering, constitutes disconnection are also defined.

Remote Prepayment Switch. The Government has concluded to oblige suppliers to have regard to the guidance on 'safe and reasonably practicable' and to make arrangements where the 'safe and reasonably practicable' requirement is no longer satisfied. The requirements of suppliers to provide information about PPM and payment methods, and to offer cash payment for PPM are also included.

41

Smart Metering Spring Package – Addressing Consumer Protection Issues, February 2011, with the Government response published in November 2011 42

Ofgem published the supplementary guidance as to being 'safe and reasonably practicable' in Appendix 10-Supplementary Document for Electricity Supply Licence Standard Conditions, Supply Licence Review-Final Proposals, June 2007 43

Ofgem published guidance for 'all reasonable steps' to identify vulnerability alongside with Proposed Amendments to Gas and Electricity Supply Licence Conditions in Relation to the Disconnection of Vulnerable Customers, March 2010 44

October to March

23

For non-domestic consumers, the Government has proposed to place on suppliers some general 'self-regulatory' requirements45, which include the monitoring of disconnection and PPM, and practices of disconnection that are similar to the requirements for the domestic sector.

3.2 Consumer Engagement

Consumers' understanding of smart meters and their opportunities is essential for their behaviour changes in energy use, which highlights the importance of effective consumer engagement. The Prospectus Consultation considered two general approaches for engaging consumers and promoting their acceptance for smart metering (Table 7). There was strong support from stakeholder responses and workshops in areas including some form of central function for activities and coordination, additional help for vulnerable consumers, engagement of local group and the need of suppliers to differentiate their products and services. The Consultation Response showed the interest of Government in some form of central or coordinated consumer engagement by having recognized its key benefits in facilitating consistency, interactions with local groups and third parties, and national awareness campaign. The Government also stressed the importance of utilizing synergies with other energy policies (e.g. the Green Deal).

Table 7 Approaches for Consumer Engagement

Coordinated Approach

Suppliers establish a Marketing Code of Practice and a 'smart metering brand'

Suppliers comply with the Code through licence obligations

Flexibility and consistent approach

But difficulty in programme-wide coordination with third party campaign

Independent National

Awareness Campaign

An independent national awareness campaign body develops the awareness-building programme

Suppliers operate their own sales and marketing campaigns in parallel

Assist in engaging and leveraging third party activities

Source: Author

The Consultation on Consumer Engagement Strategy46 sets out details of the Government thinking with respect to the aims and objectives (Table 8) and the high-level framework for central consumer engagement:

Understanding the Engagement Needs. Typical energy behaviours and their driving factors (e.g. energy literacy, beliefs about outcomes), which the consumer engagement strategy can influence, are summarised47 in the consultation document. Four levers for changing energy behaviours are identified: direct feedback in near real-time, indirect feedback, advice and guidance, and motivational campaigns. Moreover, the Government is minded to learn from the Foundation Stage evidences and to work with suppliers, NGOs and other relevant parties to understand the consumer engagement needs in parallel with specific research projects (e.g. study on vulnerable and low income consumers' experience of installation by National Energy Action).

Engagement Delivery. It is concluded that suppliers have the primary role in areas including engagement around the time of installation, the provision of IHD and the ongoing provision of direct and indirect feedback. In addition to suppliers' individual

45

Smart Metering Consumer Protections 'Spring Package' – Non-Domestic, November 2011, Ofgem 46

Consumer Engagement Strategy Consultation Document, April 2012, with the Government response published in December 2012 47

This draws upon research work including the review of the Energy Demand Research Project and Empower Demand Report, behavioural models like MINDSPACE and the Consultation's behaviour change framework.

24

engagement activities, there are also some engagement activities (e.g. partnership with third parties) that are best undertaken on a centralized or coordinated basis (Figure 6). An 'integrated supplier-established' model will be used for centralized or coordinated engagement activities to promote smart metering acceptance and energy behavioural change. Under this model, larger suppliers have licence obligations to establish and fund a not-for-profit central delivery body (CDB) to deliver consumer engagement objectives as identified by the Government. The purpose of CDB is to 'deliver consumer engagement activities which contribute to a cost-effective smart metering rollout and the realization of consumer benefits, particularly those related to reducing energy consumption' (DECC, 2012g) and achieve objectives including :

- To build consumer confidence in the installation of smart meters;

- To build consumer awareness and understanding of how to use smart meters and the information obtained from them;

- To increase consumer willingness to use smart meters to change their behaviours so as to enable them to reduce their energy consumption;

- To assist vulnerable, low income and prepayment consumers to realize the benefits of smart metering systems while continuing to maintain an adequate level of warmth and meet their other energy needs.

Table 8 Aims and Objectives for Consumer Engagement Strategy

High-level Aims:

Building consumer support for the rollout by increasing confidence in the benefits of smart meters and by providing reassurance on areas of consumer concern

Facilitate the realization of consumer benefits by building acceptance of the installation of smart meters and by helping consumers to use smart metering to manage their energy consumption

Ensuring that vulnerable, low income and prepayment consumers can benefit from the rollout

Specific Objectives:

To improve understanding of consumer attitudes and the drivers and barriers affecting energy-consuming behaviour relating to smart meters;

To ensure that the identified supplier, centralized, third party and Government consumer engagement delivery mechanisms are put into operation;

To ensure that relevant non-domestic consumers are appropriately and effectively engaged with smart metering;

To explore how consumer engagement can help exploit synergies between smart metering and other energy policies and initiatives;

To monitor and evaluate the implementation of the Consumer Engagement Strategy in order to assess whether the different approaches to engagement are working, or whether they need to be adapted.

Source: Adapted from DECC (2012)

25

Figure 6 Organization of Intervention Delivery: Key findings from SMIP stakeholder workshops

Source: DECC (2012)

While large suppliers are required to set up CDB (in the first half of 2013) and ensuring that it meets its objectives, all suppliers have licence obligation to cooperate with CDB. It is further required that the CDB is governed by the Board of Directors comprised of an Independent Chair and other directors representing large suppliers, small domestic suppliers, relevant non-domestic suppliers and consumers' interests (Consumer Focus and others). Large suppliers are required to work with the Government and other stakeholders to develop a means of monitoring and measuring the CDB's performance against its objectives.

The Consultation has also concluded that individual suppliers, the energy service sector, the CDB and Government should all be responsible for consumer engagement in non-domestic sector. As with the domestic sector, suppliers have key roles in engaging non-domestic consumers. While other non-domestic consumers are supported by suppliers and the energy service market, micro-businesses will also be engaged by CDB. This follows the recognition of the similarity between micro-businesses and domestic consumers, and the respondent view that adapting materials from domestic sector can achieve benefit in delivering effective and generic engagement with micro-businesses.

Regarding the synergies between smart metering rollout and other energy policies (e.g. 'demand-side response' and the Green Deal), the Government is minded to initially give the market flexibility to innovate. Since the development of such areas is still in an early stage, the Government will gather more evidence from tests and trials to inform its future considerations to incentivize potential regulatory synergies.

26

4. Data and Communications

The wide deployment of smart metering requires the establishment of secure, cost-effective and coordinated regulatory mechanisms to manage the large volume of data flowing from and to the smart meters. It is concluded that a new licensable Data and Communications Company (DCC) will be set up to manage the smart meter data in the domestic sector and that the Smart Energy Code (SEC) will be designated to govern the conduct of relevant parties in the smart metering. Moreover, measures are also taken to ensure the data privacy and security.

4.1 Data and Communications Company (DCC)

Under the Secretary of State power introduced by the Energy Act 2008, the DCC will be established as a new licensable central communication entity for smart metering. This decision is made after a Consultation on the Detailed Policy Design of the Regulatory and Commercial Framework for DCC48 and a Consultation on a Draft Statutory Instrument the Electricity and Gas (Prohibition of Communications Activities) Order 201249.

4.1.1 Scope and services

The Prospectus Consultation has concluded on a 'phased' approach for the DCC to provide its services. The initial scope of service provision should cover secure communications, access control, translation, scheduled data retrieval and initial smart grid functions. It is also considered that the meter point/supplier registration of all metering points would be transferred to the DCC within 2-3 years after it commences service provisions50. Further analysis is needed before the Government decides whether data processing, aggregation and storage should be also included in the scope of service provision. This 'phased' approach reflects the Government's interest in the early commencement of DCC service provision and the practical complexity in transferring meter registration and other services (e.g. data processing and aggregation) to the DCC. It is also envisaged that the DCC's service scope may extend to non-energy value-added services.

The Consultation on the Draft DCC Licence and Licence Application Regulations51 has decided that DCC should provide core communications services, elective communication services and enabling services under its mandatory business. Core communication services are the minimum services as specified by the SEC for all compliant smart metering systems, whereas elective communication services are bespoke services for individual users. Subject to the Authority approval, DCC may provide value-added services that are not related to energy/supply purposes. The enabling services (e.g. meter enrolment) to support core, elective and value-added services are also provided by DCC under or pursuant to the SEC. Moreover, the Secretary of State is allowed to issue a direction to incorporate meter registration services any time before November 2018.

48

A Consultation on the Detailed Policy Design of the Regulatory and Commercial Framework for DCC, September 2011, with the Government response published in April 2012 49

A Consultation on a Draft Statutory Instrument the Electricity and Gas (Prohibition of Communications Activities) Order 2012, February 2012, with the Government response published in July 2012 50

At that time the DCC should have access granted by the existing registration system operators to the registration systems to verify whether a party is authorized to access a specific meter. 51

Smart Metering Implementation Programme: Consultation on the Draft DCC Licence and Licence Application Regulations, April 2012, with Government response on the Draft DCC Licence published in November 2012 and that on the Licence Application Regulations published in September 2012

27

The Consultation on Smart Energy Code 52 has concluded that DCC will offer three categories of core communication services for suppliers, for networks and for all parties. In the circumstances where changes to the core services are necessary, the SEC modification processes will be followed. Elective services are available upon request through bilateral contracts between the DCC and its users. The SEC should set out the procedures for the provision of terms for elective services.

4.1.2 Regulatory arrangements

The Prospectus Consultation has decided that DCC should be a management entity for procuring and contracting communication services rather than providing such services itself. This model is believed to deliver benefits including flexibility for future evolution in the smart metering market, ability to procure best value services and more efficient risk allocation (e.g. leaving investment risk with service providers). It is further required that a new fix-term licence will be granted to the DCC through competitive application process53, and the DCC should be independent from its communication service providers.

The Consultation on the Draft DCC Licence and Licence Application Regulations, which draws upon the responses to a Consultation on the Detailed Policy Design of the Regulatory and Commercial Framework for DCC54, has further specified the regulatory framework for the operation of DCC. Key developments are summarised:

Time-Limiting Term for the DCC Licence. It is concluded that the DCC licence55 will be awarded for a fixed, non-rolling term of 12 years, with possible extension of up to six years in specified circumstances56 as set out in the licence. While there was support for the perpetual grant of licence (e.g. Ofgem), the fixed term is believed to give performance incentives and certainty for the incumbent DCC. As for the risks associated with handover, measures including proper handover design and licence extension57 can be taken as mitigation strategies. Moreover, the 12-year licence term is also believed to ensure the smooth DCC handover as the outgoing DCC will operate the next set of service contracts for at least 2 years before the handover and the new DCC can develop experience before completing replacement contracts by itself.

Handover Plan. There is requirement of such a plan to 'provide for a legally enforceable arrangement between the incoming and outgoing DCCs such that the former takes on

52

Smart Metering Implementation Programme: Smart Energy Code – Consultation Document, April 2012, with the Government response published in November 2012 53

A separate consultation has been undertaken on the DCC licence application: The Consultation on the Draft DCC Licence Application Regulations, April 2012, with the Government response published in September 2012 54

Smart Metering Implementation Programme: A Consultation on the Detailed Policy Design of the Regulatory and Commercial Framework for DCC, September 2011; Consultation on the Draft DCC Licence, April 2012, with the Government response published in November 2012 55

The DCC licence also includes specific events (e.g. failure to comply with an enforcement notice served by the Information Commissioner) in which the Authority can revoke the licence. Furthermore, the management order condition allows the Authority to intervene in serious financial or operational failings of DCC and the Government is minded that a Special Administration Regime (SAR) takes over the responsibility when it is in place. 56

Reasons for licence extension include: to facilitate an efficient licence competition; to avoid an overlap of the renewal of service provider contracts and a new DCC licence being awarded; to avoid an overlap with any major energy industry activity; and to facilitate the efficient handover of the DCC's business to a new DCC. 57

The risk associated with handover led the Government to include 'to facilitate the efficient handover of the DCC's business to a new DCC' in the list of specified reasons for licence extension. Consultation of the incumbent DCC is also needed before the licence extension.

28

the latter's liabilities' (DECC, 2012h). The handover plan is intended to ensure the SEC parties have a single legal relationship with the active DCC. The outgoing DCC is further required to assist Ofgem, the industry and the incoming DCC in the handover.

External Service Procurement. The DCC is required to externally procure Fundamental Services Capability58 that is limited to the principal data and communication services. For other services, external procurement is also required 'unless it is more economical to self-provide or procure from related undertakings these services, or the resources involved in service provision are insignificant' (DECC, 2012h). To ensure that major energy policy issues are considered in procuring Fundamental Services Capability, the DCC is required to take account of the Public Interest Statement issued by the Secretary of State, which is related to the procurement activities, in addition to other principles that reflect existing statutory requirements for utility service procurement.

Statement of Service Exemptions. This statement exempts the DCC from providing communication services to specific premises with disproportionate cost. Subject to initial approval by the Secretary of State and enduring oversight of Ofgem, the Statement is intended to ensure the balance between service coverage and reasonable overall cost.

4.1.3 Commercial arrangements

The licence of DCC should establish the general principles for its charging methodology, which form the basis for more detailed charging arrangements as designated by the Secretary of State and stipulated in the SEC. The Consultation on Draft DCC Licence and Licence Application Regulations has proposed a uniform charging for the mandatory DCC businesses (except elective communication services) in the domestic sector (i.e. the First Relevant Policy Objective). Since the communication market exists for non-domestic consumers, this uniform charging principle does not apply in the non-domestic sector so as to avoid cross-subsidization59. Furthermore, it is also concluded that the DCC will operate on a cost pass-through basis whereby the majority of its internal and external costs are passed through to its users on the ground of those costs being incurred efficiently and economically.

The Second Relevant Policy Objective lists several specific objectives (e.g. facilitate effective competition in the supply of energy) to guide the charging methodology for the mandatory businesses. A charging statement for the DCC services is required and must be approved by Ofgem 60 . Moreover, a licence condition is introduced to enable the reimbursement of earlier users for particular DCC services (e.g. upfront development) by later users.

The Consultation on Smart Energy Code confirms that the DCC charging regime should recover fixed operating and any variable costs. The fixed costs associated with core communication services are shared by suppliers and networks. Subject to final conclusion, the Government expects to put these following charging arrangements in place to recover the fixed costs:

Before DCC Go-Live – a charge based on market share of the number of domestic premises where a smart meter is required to be installed;

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As defined in Schedule 1of the DCC licence 59

If a uniform charging was applied to non-domestic sector as well, domestic consumers would end up cross-subsidizing those non-domestic consumers who used DCC services because it was cheaper than the price charged in the communication market. 60

The initial approval responsibility rests with the Secretary of State.

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Between DCC Go-Live and Mass Rollout Completion – an additional charge on any smart metering systems at non-domestic premises that are enrolled with DCC;

After Mass Rollout Completion – a charge on every meter enrolled with DCC.

Arrangements for variable charges will be included in the legal drafting for the Stage 2 of SEC. The charging for elective services may differ based on the bilateral contract between the DCC and its user but should be consistent with the Relevant Policy Objectives of the Charging Methodology.

A 'pay now dispute later' approach will be used for the DCC's invoicing. While most industry respondents are concerned that it gives DCC disincentive to resolve payment disputes promptly, the Government is of the view that this approach reduces the financial risk for DCC. Clear and expedient disputes procedures, however, will be introduced to facilitate fast resolution. It is also concluded that bad debt relating to core and elective services should be socialized across all DCC users.

Given its monopoly status in the domestic sector, the DCC should be subject to appropriate incentive regimes to ensure the cost effectiveness and efficiency in procuring services and managing internal costs. For this reason, it is proposed that the DCC licence applicants bid in key performance indicators (KPIs), which cover DCC's procurement, management and internal services, alongside with the revenue at risk. In response to the concern that the incentive regime may change over the term of DCC operation, the Consultation on Draft DCC Licence and Licence Application Regulations has designed a revenue restriction and incentive regime for the early work of DCC61 and a framework to support future review of incentive elements. In particular, since the early work of DCC is focused on the development, test and trial of systems, the Government does not intend to introduce financial incentives relating to reducing internal costs in the initial phase of DCC operation.

4.1.4 Establishment of DCC services and transitional arrangements

A 'parallel approach' in which the procurement of communication services (undertaken by the Government on behalf of the future DCC licensee62) and the DCC licence application occur concurrently will be used to establish the DCC services. As opposed to the originally proposed 'sequential approach' whereby the procurement of communication services would happen after the competitive application of DCC licence, the change in approach reflects the recognition of the great risk of delay in establishing services if the 'sequential approach' would be adopted.

Since compliant smart meters in the domestic sector are required to use the DCC services, transitional arrangements must be established for compliant smart meters that are installed before the DCC services become available. The Prospectus Consultation has concluded that the DCC has a licence obligation to adopt pre-DCC communication contracts for compliant smart meters, if those contracts satisfy pre-defined criteria and their volume is consistent with the limit set by the Government. In the case where the contracts fail to meet pre-defined criteria or exceed the volume limit, suppliers must replace the WAN module if requested by the DCC and bear the associated cost. As for the replacement of adopted contracts, it is also considered that DCC should have the discretion to decide when such a replacement should happen based on the cost benefit analysis.

61

Regarding the incorporation of meter registration service in the future, there is uncertainty as to whether the initial revenue restriction and incentive regime will remain fit-for-purpose and it is thus expected that this change will initiate a review of revenue control and incentive regime. 62

Data and Communications Company Service Provider Procurement Project

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The Consultation on Foundation Smart Market63 is currently consulting on the details of arrangements and criteria for adopting compliant smart meters that are installed in the Foundation Stage. Some key aspects of the Government thinking are summarised here:

Data and Full Enrolment. The enrolment is differentiated. In Data Enrolment, only data services are provided by DCC and communication services are adopted by DCC; in Full Enrolment, both data services and communication services are provided by DCC.

Mandatory Enrolment of Foundation Meters. The case for and against the mandatory enrolment of smart meters installed during the Foundation Stage is considered. While there are benefits in enrolment including the economies of scale in data access and streamlining the industry processes, the costs for either Data Enrolment (e.g. replacement of 'head-ends') or Full Enrolment (e.g. replacement of communication hubs) are still significant. Indeed, the Government is of the view that there is no sufficient evidence to support a mandate for Data Enrolment or Full Enrolment at this time. However, if the potential enrolment mandate is to be introduced, the timing for such a mandate is also considered (Table 9).

Table 9 Potential Timing for Mandating Enrolment

Proposals for Timing

Advantages Disadvantage

Enrolment as the first stage of DCC

Go Live

Simplify Data Enrolment process

Maximize DCC efficiency

Ensure 'Smart CoS' for consumers receiving smart meters in the Foundation Stage

Diversion from core objective in establishing stable processes and systems for SMETS 2 meters

Disincentive for investment in required systems and communication services

Enrolment 18-24 months after DCC

Go Live

Establish stable systems and processes for SMETS 2 meters before Data Enrolment

Maximize DCC efficiency

Risk for 'Smart CoS' for consumers receiving smart meters during the Foundation Stage up to 2 years after DCC Go Live

Enrolment by end of 2019

Achieve an overall stable and consistent market and consumer experience

Late realization of enrolment benefits

Risk for 'Smart CoS' for consumers receiving smart meters during the Foundation Stage

Source: Author

63

Foundation Smart Market: Consultation document, November 2012

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Criteria for Enrolment and Adoption. For enrolment, there are three broad categories of criteria including: 1) the compliance of smart metering system with SMETS 64 ; 2) security certification65; and 3) the ability to interact with DCC66. For adoption of the communication contract, four broad categories of criteria are identified: 1) the contract must support key services for smart metering system; 2) the contract should have a reasonable price; 3) the contract 'has terms and conditions that are fair and reasonable and will enable DCC to manage the contract in the best interest of consumers and the overall market'; and 4) the contract should support additional sundry requirements such as provision for change of control67. On the premise that the enrolment is not mandated, the processes for enrolment and adoption are proposed (Figure 7).

Figure 7 Processes for Enrolment and Adoption

For SMETS 2 Meters without DCC Compliant Communications Hub (Data Enrolment):

For SMETS 2 Meters without DCC Compliant Communications Hub (Full Enrolment):

For SMETS 1 Meters:

Source: Author

Cost Allocation. For Data Enrolment, the suppliers bear a pro rata charge for the sites where they are the installing suppliers while the costs of other sites are socialized via the DCC charging. Exception to small suppliers is also proposed whereby some or all costs for them are socialized. The ongoing costs of Data Enrolment68 are socialized as well. For Full Enrolment, the current supplier should bear the installation cost of communication hubs, while the capital cost of communication hubs is provided and recovered by the DCC through normal charges. There are no ongoing costs associated with the Full Enrolment.

4.2 Smart Energy Code (SEC)

As is concluded in the Prospectus Consultation, the SEC will be introduced to provide 'detailed regulatory, commercial and technical arrangements to govern the smart metering system of electricity and gas in the rollout and on an enduring basis' (DECC, 2011e), including the regulatory framework for the interactions between the DCC and its service users. Licence obligation should be placed on the DCC and its service users to comply with

64

For SMETS 1 meters, the compliance with protocol certification is also necessary. 65

For SMETS 1 meters, if they fail the security certification, the assessment of any shortfall and mitigation measures is also needed. 66

Communication contracts must meet the Adoption Criteria. The smart metering system should either be compliance with the GB Companion Specification at the time of enrolment or use ZigBee and DLMS for electricity and ZigBee for gas and IHD over 2.4 GHz. 67

Refer to the Annex of the Foundation Smart Market Consultation for more detailed criteria. 68

The ongoing costs of Data Enrolment include monitoring of bespoke 'head-ends', Data Service Provider (DSP) performance and service levels, higher costs than the standard Communication Service Provider contracts of DCC, and managing the novated contracts.

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the provisions of the SEC. The SEC Panel comprised of signatories to the Code and other key stakeholders (e.g. consumer representatives) should independently procure a secretariat to support its function, the cost of which is covered through DCC's service charges.

Key decisions regarding the SEC from the Consultation on Draft DCC Licence and Licence Application Regulations include:

While the DCC was originally proposed to become a complying party to a number of electricity and gas industry codes as well the SEC, it has been decided that parties to those industry codes should instead become parties to the SEC69. The benefit of this revised approach is that the DCC is consulted before any code modification that may affect the smart metering framework.

A new General SEC Objective relating to the provision of information to facilitate energy consumers' management of their use of energy has been added, which strengthens the justification of consumer-related modifications.

The DCC is required to 'maintain and have in force' the SEC to ensure its continuity and development.

The Consultation on Smart Energy Code focuses on the Stage 1 of SEC, which contains key provisions required for the commencement of DCC operation with additional provisions to be added in the subsequent stages. Some key issues are summarized here:

Parties to the SEC. The complying parties to the SEC include gas suppliers, electricity suppliers, gas network operators, electricity network operators, the DCC and other users of DCC services. While meter operators are not the SEC parties, they are allowed to access certain meter data via DCC as the nominated agents of suppliers, subject to their contracts with suppliers. It is further required that DCC users should satisfy a set of entry process requirements (e.g. security, credit cover) before being able to use DCC services.

Obligation and Right in Enrolling Smart Metering. There is wide support for the proposal that suppliers should grant the DCC the right to access their smart metering systems. Moreover, the Government is also minded that once a smart meter is enrolled, the DCC will notify all SEC parties of the meter point reference number. While a majority of respondents are concerned about the risk of unwanted marketing, the risk is considered to be less the potential benefit in facilitating the information access of energy service providers and the competition in that market.

SEC Governance Structure. The SEC Panel, led by an independent chair whose nomination is subject to the approval of Ofgem, oversees the SEC. SECCo, a special purpose company, will be set up to contract for governance services for the SEC Panel, as it is believed this arrangement will best ensure the alignment with SEC requirements. In respect of modifications to the SEC, the SEC Panel retains the responsibility for the operation of modification process, initiated by any of the three modification paths70. The final recommendation for modification is delegated to a Change Board (a sub-committee of SEC Panel) rather than the SEC Panel itself.

69

See Footnote 51 70

Path 1 modification initiated by Ofgem following a Significant Code Review or to implement EU requirement; Path 2 modification raised by SEC parties and subject to the approval of Ofgem; and Path 3 modification that is judged not to be material and thus managed through industry self-governance.

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4.3 Data Access and Privacy

Key principles for data access and privacy in the smart metering system have been set out in the Prospectus Consultation:

A 'privacy by design' approach will be used whereby privacy issues are embedded into the overall system design from the start.

Except for regulatory purposes, consumers should have a choice about how their smart metering data is used and by whom, which includes sharing their data with third parties.

A number of subsequent consultations set out more details with respect to the rights and obligations of various parties in data access.

4.3.1 Consumer's Access to Data

The Data Access and Privacy Consultation71 has confirmed the expectation of Government that IHDs will be the key means for consumers to retrieve smart metering data. It is also proposed in the Consultation on the Second Version of the Smart Metering Equipment Technical Specifications that consumers should also be able to access, free of charge, all consumption, export and tariff data stored in the smart meters by connecting a consumer access device (CAD) to the HAN. Furthermore, there are developments in related areas to strengthen consumers' right to access their energy data, including the Government's midata initiative and the EU Energy Efficiency Directive72 alongside the existing Data Protection Act 1998.

4.3.2 Supplier's Access to Data

As for the supplier access to smart metering data, it is concluded that the 'basic framework' (Figure 8), which is believed to achieve the balance between protecting consumers and facilitating competition in energy service market, should be implemented.

Figure 8 the Framework for Supplier Access to Smart Metering Data

Source: DECC (2012c)

71

Smart Metering Implementation Programme: Data Access and Privacy, April 2012, with the Government response published in December 2012 72

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2012:315:0001:0056:EN:PDF

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With the anticipation of market arrangement changes (e.g. settlement), the Government intends to review this framework, no more than three years after it first takes effect (DECC, 2012d). Regarding the arrangement for daily data specifically, since there is concern about the impact of the default access to daily data on market competition or consumer rights, the way suppliers access the daily data will be explicitly considered in the review procedures. If consumers wish to exercise different controls for the use of their daily data (e.g. for energy efficiency advice provision but not for wholesale hedging), suppliers are encouraged to make such flexibility available (DECC, 2012d). A seven-day advance notice is also required if suppliers decide to access daily data on the opt-out basis.

It is further required of suppliers to explain clearly to consumers what energy consumption data will be accessed, for which purposes, and the choices for consumers, following the minimum requirements as set out in the licence. These requirements include the initial information provision around the installation73 , and reminders about data collection and consumers' choice at appropriate, regular intervals.

Moreover, suppliers should need opt-in consent from consumers before using their energy consumption data for marketing purposes. Informed by the consultation responses and a consumer research 74 , the Government defined marketing narrowly so that it includes 'information about goods or services, regardless of whether or not those goods or services are free of charge or paid for' (DECC, 2012d). This definition is different from the one used for the Installation Code of Practice as the ongoing nature of marketing based on energy consumption data can cause greater consumer concerns. Finally, if consumers switch suppliers, the new supplier will be prevented from accessing the data of the period prior to its service with this consumer, unless with explicit consumer consent.

These obligations will be set out in the supplier licence. While the alternative of placing these requirements in the SEC was proposed, it is believed that the supplier licence is more appropriate means, recognizing the difference in requirements for suppliers and for third parties. Nonetheless, there will be a basic requirement in the SEC that DCC users, including suppliers, should have 'obtained the appropriate permission before requesting data via the DCC', which is subject to the independent auditing initiated by the SEC Panel.

Expected to become effective at the end of June 2013, such licence obligations cover all SMETS-compliant smart meters regardless of when they are installed. As for non-SMETS-compliant meters (e.g. smart-type meters), since some suppliers and consumer groups support the application of the supplier access regime to these meters, the Government intends to see whether a clear voluntary commitment will be adequate.

4.3.3 Network Operator's Access to Data

The Data Access and Privacy Consultation has concluded that network operators can access the half-hourly electricity data and six-minute gas data for 'regulated purposes without consent if they have had plans approved to address potential privacy concerns' through measures like aggregation (DECC, 2012d). Before December 31, 2014, DECC will be responsible for approving such plans and Ofgem will take over the power afterwards. Such plans are expected to detail what energy consumption data will be accessed, to identify and quantify the benefits in doing so for different groups, and to demonstrate specific aggregation measures. Similarly with suppliers, this condition of the network operator's data access will be established in the licence.

73

Either up to 14 days prior to installation, or as soon as reasonably practicable thereafter 74

Smart Metering Data Access and Privacy: Public Attitudes Research, December 2012, Navigator

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As for the potential needs of network operators to access energy consumption data from individual premises, the Government is minded that it is still premature to allow network operators to access such data. This issue is expected to be considered as part of the review of data privacy and access framework, as further evidence is developed. However, network operators are able to access more detailed data from individual consumers (e.g. consumers with EVs), if the consumer has given their explicit consent to this. Moreover, the same framework for suppliers will apply to network operators in accessing monthly data for regulated purposes without consent. Before the DCC service is available, network operators are expected to access the data required via suppliers, in a way consistent with the licence conditions and the agreement between suppliers and consumers.

For National Grid and other transmission companies, the Government expects them to work with distribution network operators to understand how their data needs should be met, and does not intend to extend the framework for network operator access to National Grid and other transmission companies. This is mainly because their need for data may be only of high-level and aggregated nature, and they are not currently designated as SEC parties.

4.3.4 Non-Licensed Third Parties' Access to Data

Non-licensed third parties like energy service companies and switching sites may also need to access energy consumption data. Consumers can provide the data they derive from HAN by linking CAD to third parties or third parties themselves can access data from the DCC.

Consumers Passing Data to Third Parties. Although not introducing new measures in this area, the Government has proposed that linking CAD should be secure and consumer-friendly in the Consultation on the Second Version of the Smart Metering Equipment Technical Specifications.

Third Parties Accessing Data from the DCC. In this area three requirements will on placed on third parties:

- To verify that the service request comes from individuals living in the premises75;

- To confirm that consent for accessing data has been obtained from consumers;

- To provide reminders about the data being accessed and the choices at appropriate, regular intervals, as required for suppliers.

Those requirements for third parties will be established in the SEC and third parties need to keep record to demonstrate their compliance. It is also proposed that the SEC Panel can arrange for independent auditing to check the compliance.

4.3.5 Non-Domestic Sector

In the non-domestic sector, factors including the existence of advanced meters and the elective use of the DCC services add to the complexity of data access arrangement. The existing licence condition has already obliged advanced meters to 'provide measured consumption data for at least half-hourly time periods (electricity) or hourly time periods (gas), and that customers (or their nominated agents) should, on request, have timely access to that data' (DECC, 2012d). For smart meters opted into the DCC services, consumers and third parties are able to access the data via HAN via the DCC respectively; for smart meters opted out of the DCC services, while consumers are also able to access

75

The Customer Identification Number is proposed as one potential solution. The Government will continue considering other solutions in this area in Stage 2 of the Smart Energy Code.

36

data via HAN, it is expected that arrangement will be made between consumers and service provider as to the data access, thus lessening the need for any additional intervention.

Third parties are expected to comply with general requirements in the SEC if accessing the data via the DCC but it is noted that the specific requirements for non-domestic sector may be different from those for domestic consumers, which will be further considered by the Government.

Moreover, given the similarities between domestic users and micro-businesses, suppliers will be able to access the data of micro-businesses at a level more granular than monthly, only after the supplier has given the consumer advanced notice and the consumer has not objected. This decision is intended to protect the privacy of micro-businesses and avoid the inhibition of competition by allowing unlimited data access for suppliers.

Finally, network operators must comply with the requirements of the SEC in accessing data of opted-in smart meters via the DCC, although they are only expected to explore the potential for data aggregation rather than required with formal obligation. The data access of network operators to opted-out smart meters is considered to be best arranged for using the agreement between network operators and suppliers or energy service providers. It is noted, however, there may be requirement to ensure that data of appropriate granularity be transmitted to network operators as smart grid develops in the future.

4.4 Security Before DCC 'Go-Live'

Prior to the operation of DCC, energy suppliers are responsible for the end-to-end smart metering system. To ensure the security in smart meters and associated communications, a licence obligation on suppliers to assess security risks and implement mitigation measures has been consulted upon76.

It is concluded that suppliers should take reasonable steps to ensure the security of the end-to-end smart metering system that is compliant with SMETS to an 'Appropriate Standard' related to the energy sector in GB. Suppliers are required to undertake ongoing, comprehensive risk assessments and implement mitigation strategies in alignment with ISO 27001, although formal certification is not necessary. The demonstration of compliance with ISO 27001 occurs 18 months after the licence condition comes into effect (expected to be the end of 2012).

Suppliers' security plan is also subject to the independent audit undertaken by the Component Independent Organization (CIO), with the first audit happening within 6 months of the licence condition coming into force and subsequent audits being carried out at least once every 12 months. The Government has confirmed that this obligation will cease at the direction of the Secretary of State when the DCC starts providing services to SMETS-compliant smart meters.

76

A Consultation on a Licence Condition for Security Risk Assessments and Audits in the Period Before the DCC Provides Services to Smart Meters, April 2012, with the Government response published in December 2012

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5. Interoperability

Interoperability refers to the technical and/or commercial ease of one party to make use of the smart metering equipment that is installed by another. Technical and commercial interoperability is essential in achieving the positive consumer experience with the smart metering rollout (e.g. ease of supplier switch) and the effective functioning of competitive energy retail market (DECC, 2011e). However, there is balance between mandating specific features to achieve interoperability and enabling the market to innovate. This chapter explores the policy developments in delivering technical and commercial interoperability for the smart metering deployment.

5.1 Smart Metering Equipment Technical Specifications (SMETS)

Based on the previous work of the Consultation on Smart Metering for Electricity and Gas, the Prospectus Consultation confirmed the high-level functional requirements for smart metering (Figure 9). Additional requirements include:

13-month half-hourly consumption data should be stored locally at the smart metering equipment so as to strengthen consumers' ability to compare and manage their energy use and to facilitate competition in the energy service market.

The power outage management is included as a functionality requirement. The remote disablement and enablement will also be included for domestic gas smart meters but not for non-domestic gas smart meters, which decision has been informed by a special analysis77.

WAN and HAN interfaces should be based on open and non-proprietary standards, while also supporting the security and privacy requirements. HAN should be 'backwards compatible' and should not 'interfere with existing prevalent premises networks'.

The number of meter interface languages will be restricted to promote interoperability and reduce the cost in supporting multiple solutions.

The WAN module is required to be exchangeable so as to enable gas-first installation and to allow flexibility for future smart grid development (e.g. replace or upgrade the WAN module without having to replace the meter). However, following the SMDG assessment indicating the high cost and complexity and the risk of security compromise, similar requirement will not be placed on HAN.

The ambient feedback on the IHDs showing the level of consumption will be required. While the IHD update frequency for electricity and gas is expected to be every 5 seconds and 15 minutes respectively, some practical issues have led the Government to adjust the required update frequency of electricity to less than 10 seconds (e.g. limitation of HAN technology) and that of gas to less than 30 minutes (e.g. battery life of gas meters).

To translate these functional requirements into technical specifications (SMETS), working groups of industry experts are tasked to address specific technical issues and report to the Smart Metering Design Group. For instance, the SMETS Stakeholder Advisory Group (SSAG) is formed under the Overall Design Advisory Group (ODAG) to offer guidance and advice as SMETS is being developed. The IDTS, which further develops the functional requirements, has also been considered.

77

Disablement/Enablement Functionality for Smart Gas Meters, Gemserv, 2010

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As for the enduring governance of SMETS, it is suggested that the SEC should establish the governance arrangements, especially after noting these following advantages in doing so:

More formalized and explicit governance structure involving stakeholders;

Opportunity for the SMETS provisions to be contractually enforceable;

Enabling the introduction of wider certification, assurance and enforcement framework.

Expertise from the Security Technical Expert Group (STEG) is represented in the working group structure to ensure the 'security by design' principle. The full risk assessment drives the security governance, which then informs the designation of technical security requirements. Suppliers are responsible for the security of smart metering system before the DCC is established; after the DCC is introduced, security requirements are expected to form part of the SEC.

Figure 9 the High Level Functionality of Smart Meters for Electricity and Gas

Source: DECC (2011c)

5.1.1 The First version of SMETS (SMETS 1)

The Consultation on Draft Licence Conditions and Technical Specifications for the Rollout of Gas and Electricity Smart Metering Equipment has concluded that an evolutionary approach is to be taken for the development of SMETS whereby the first iteration (SMETS 1) achieves functional interoperability78 to enable the installation and operation of smart meters in the Foundation Stage. This follows the respondent concern that the uncertainty of communication standards for HAN and WAN makes it difficult to define the level of ultimate interoperability desired. As for any future specification of HAN standards that is informed by

78

Functional interoperability delivers consistent, defined understanding of the processing the equipment will undertake and the outputs for suppliers and consumers.

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HAN trials and the Foundation Stage feedback, only internationally recognised standards and protocols will be considered; as for WAN standards, the selection forms part of the competitive procurement of communication services for the DCC.

Key developments of the SMETS 1 are summarised here:

Power Outage Management. The SMETS 1 does not include this functionality since the smart metering equipment supporting this is not available and the outage detection is possible even without this additional functionality in smart metering system79. However, further work needs to be undertaken to identify the most cost-effective solution for outage management in future iteration of SMETS, which may include adding extra functionality in the smart metering system.

Network Layer Addressing. The Network Layer Addressing scheme is needed to ensure the accuracy of individual messaging between smart metering systems and the DCC. In the SMETS 1, a single Network Layer Addressing standard is not mandated so as to give flexibility for CSPs to achieve efficiency in utilizing specific communication technologies. In response to the support for a single standard, the Government has stressed that this decision does not 'preclude the eventual selection of IPv4 or IPv6 as a common specification after evaluation of all available proposals from potential CSPs' (DECC, 2012f). Moreover, while the minimum requirement of one single Network Layer address for one WAN interface is retained, the Government intends to undertake further work to investigate practical issues regarding Network Layer Addressing (e.g. multi-occupancy buildings sharing WAN interface, household appliances connected to HAN).

DNO Operation. Although not included in the SMETS 1, the functionalities that may facilitate the DNO operation, especially in the smart grid context, will be further considered in later versions of SMETS as sufficient evidence becomes available. For instance, the reporting of maximum and minimum energy demand at individual metering points is discussed. Regardless of its benefit for smart grid, it is noted that this function can alternatively be performed through half-hourly reading and the existing supervisory control and data acquisition systems are low-voltage substations, and that smart metering equipment with such functionality is not available. Similarly, while it has merit in supporting varying Distribution Use of System (DUoS) charges and TOU tariff, the network registers within the end-to-end smart metering system is not mandated at this stage. This is largely due to the insufficient evidence showing the benefit in doing so, the existence of alternative ways to achieve similar objective, and the potential confusion with existing settlement systems. Other issues that have been considered include 'dual-porting' option (i.e. smart metering equipment communicating with local DNO as well as the DCC) and the Floating Neutrals (i.e. break in the neutral connection resulting in poor or no connection to earth within consumer's premises).

Wireless CAD. The capacity to support the wireless CAD, by which consumers can retrieve data locally, is included in the SMETS 1. This achieves cost efficiency compared with other solutions including the addition of physical port to the smart metering system and that of a second transmission system.

IHDs. There is a minimum requirement for the ambient feedback to be based on energy usage rather than energy cost. Suppliers, however, are able to provide ambient feedback in monetary terms with information accessible via HAN should they decide to do so. Moreover, while suppliers have no obligation to implement it, the functionality of displaying account balance for credit consumers is included in the SMETS 1. To enable

79

Based on dialogue with Communication Service Providers

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this functionality, the display of meter balance 80 and the capability of suppliers to remotely adjust meter balance are included in the SMETS 1. Finally, the capacity to display real-time gas demand, consumption and cost in latest bill period and 'next-tariff' rate is not included.

Prepayment Interface. The SMETS 1 includes an overarching requirement that a prepayment interface should be provided to allow customers to top up or enable supply without having to access the meter. Since the HAN standard is not specified in the SMETS 1, the requirements for such interface are not specified in the SMETS 1 and will be further assessed in future development of SMETS.

As for the assurance of smart metering equipment, suppliers are responsible for equipment that complies with the SMETS 1. This approach is driven by the observations that 'the existing standards have already governed the core elements of smart metering equipment', and that 'suppliers and manufacturers have commercial incentives to demonstrate the integrity of smart metering equipment installed' (DECC, 2012f). The enduring assurance and accreditation framework for future iterations of SMETS is also being considered.

Regarding the security requirements identified by the STEG, it is concluded that cryptographic functionality is needed to protect smart metering system from unauthorized modification and disclosure of sensitive data and critical commands. The Government confirms that a Cryptographic Key management solution is necessary and, for the enduring stage, the Cryptographic Key management should be centralized through the DCC.

5.1.2 The Second version of SMETS (SMETS 2)

The Consultation on the Second Version of the Smart Metering Equipment Technical Specifications is launched to further consider the development of SMETS 2. In January 2013 the DECC has published the Part 1 of its Government Response, which addresses a number of issues regarding SMETS 2 and operational licence conditions. The remaining issues as contained in the original consultation document will be addressed in the Part 2 of Government Response, which is expected to become available in spring 2013. Key conclusions of the Part 1 Government Response are summarized here:

HAN Application Layer. ZigBee SEP v1 will be used for gas and IHD, and in-premise data communications 'between the meter and the IHD, CAD, and/or PPMID'; DLMS (for electricity, 'tunneled' over ZigBee SEP81), will be required for all communications with the DCC. This decision follows a number of key considerations including specific GB requirements, the SMIP timescale, battery life of gas meters, and the availability of equipment. Moreover, suppliers should demonstrate compliance against SMETS and a GB Companion Specification82, which applies only to SMETS 2-compliant equipment.

HAN Physical Layer. While there are various radio frequencies that can support the wireless HAN standards, limiting the option has many practical benefits such as interconnectability and the simplification of specification, procurement and logistics of the supply chain. It is concluded that a phased approach will be used by which solutions based on 2.4GHz will initially be mandated in SMETS 2 and future versions of SMETS will include 868MHz-based solutions. This decision is intended to achieve the balance between the availability of 2.4GHz-based solutions and the greater coverage of 868HMz-

80

Meter balance is different from account balance in that it does not necessarily include balance adjustments (e.g. direct debit payments, discounts) 81

This refers to the model in which DLMS commands are sent in an SEP 'envelope'. 82

GB Companion Specification (expected to be notified in autumn 2013) will be introduced under SMETS to 'define how each of the standards would be used'.

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based solutions. Furthermore, it is noted in the consultation document that trial will be undertaken for wired HAN, which may be needed for premises where wireless solutions are not satisfactory.

SMETS Additional Capabilities. Decisions on several proposals for additional technical capabilities are also made. Firstly, maximum demand registers (two registers recording the maximum import demand and a third register recording the maximum export) will be included in SMETS 2 to facilitate distribution network planning and operation in the face of increasing renewable generation, microgeneration, electric vehicles and heating. Secondly, the capability to set configurable voltage alert counter thresholds will not be included in SMETS 2, with respondents citing a number of drawbacks such as significant 'additional development costs, complexity and potential delay'. Thirdly, requirements pertaining to 'variant' meters83 are included in SMETS 2 to ensure that 'any supplier could operate any 'variant' meter'. Fourthly, the capabilities for randomization offset84 will also be included in SMETS 2 to spread the load switching over a defined period, which reduces the system stress when many loads are switched on/off at the same time.

The Part 2 of Government Response will address the remaining questions/issues as identified in the consultation document. Several key proposals are summarized here:

Communications Hub. The Communication Hub should contain, alongside WAN module and HAN module, processing functions including gas meter 'mirror' (allowing gas meter and communication hub to be synchronized at 30-minute intervals), power outage management, data storage, message handing and firmware upgrade support. The Communication Hub Technical Specifications (CHTS) is proposed to contain detailed requirements for HAN module and processing functions of the communication hub, while detailed specifications for WAN module would be addressed by CSPs. For non-domestic consumers, suppliers are not required to install a CHTS-compliant communication hub for opted-out customers. At opt in and opt out, a new communication hub may be required and if so the registered supplier should bear the cost of installing a new communication hub.

Governance and Assurance of Security and Interoperability. Firstly, maintenance of smart metering security requirement should be achieved through a technical sub-committee to the SEC Panel, which draws upon the inputs from SEC members (including the risk assessments). Secondly, DCC and DCC users' systems should be subject to independent assurance against the security requirements. Thirdly, independent certification scheme should be established to validate the compliance of smart metering equipment with the security requirements, which is mandatory for SMETS 2-compliant equipment and CSP-provided communication hub, and may also be required for SMETS 1-compliant equipment as part of the process determining eligibility for enrolment in DCC. Fourthly, suppliers operating SMETS-compliant meters without DCC services should ensure a secure end-to-end system by conforming with industry good practice principles for identifying and managing risks to the security of their systems. Fifthly, the governance of SMETS assurance should be set up in the SEC and two certificates are required to show compliance with SMETS/CHTS (a security certificate and a GB Companion Specification certificate).

83

Requirements include auxiliary load control switches, boost buttons, multiple measuring element meters and polyphase supplies. 84

Capabilities include: 1) randomisation of on/off switching of auxiliary load control switches; 2) randomisation of switching between registers (for price changes); and 3) ability to align the switching of auxiliary loads with the switching between registers.

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In the meantime, another consultation 85 explores the necessary changes in the smart metering policies, especially the SMETS, to comply with the new EU Energy Efficiency Directive. Replacing the Energy Services Directive, the Energy Efficiency Directive will come into force before the end of 2012 with the implementation deadline of 5 June, 2014. DECC has identified that it needs changes to the regulatory framework of smart metering rollout to deliver the Energy Efficiency Directive provision to 'provide consumers with easy access to 24 months of daily/weekly/monthly/annual consumption data'. For this reason, the Consultation has proposed four options to deliver compliance:

1) Do nothing;

2) Specifications in SMETS 2 (for electricity) and CHTS (for gas) to store 24 months of daily consumption data;

3) Option 2 plus a general requirement on supplier to meet the Directive requirement;

4) Option 2 plus a requirement on suppliers to provide access to data via the Internet at the consumer's request.

The Government preferred Option 4 since it makes it easier for consumers to understand how to access their data and ensures a consistent approach in changing suppliers. Given the fact that suppliers are already developing the Internet-based data through midata, the additional cost on suppliers is believed to be insignificant. Although the DCC's core services may need to include the provision of daily consumption data, the impact on the DCC is also small. Subject to the consultation outcome, this obligation is proposed to apply to smart meters compliant with SMETS 1 and SMETS 2, although specific arrangements may be different.

5.2 Commercial Interoperability

Commercial interoperability refers to the arrangement to facilitate the formation of mutually acceptable commercial terms between meter asset owner and incoming supplier when consumers switch suppliers. In the Prospectus Consultation, respondents identified several aspects of commercial interoperability including standardized charging mechanism for asset capital and installation costs, common or consistent contract terms, support for novation on the same terms, and transferable warranties. It was also noted that a level of technical interoperability was necessary for commercial interoperability.

The Ofgem 'Spring Package' Consultation, building on the work in the Review of Metering Arrangements (ROMA), has considered the commercial interoperability in the context of consumer protection, especially during the Foundation Stage. Key barriers identified by suppliers in achieving commercial interoperability include differences in charging mechanism by meter operators, the mix of communication services requiring 'head-ends'86, difficulty in accessing metering services by small suppliers and issues with prepayment. Having recognized these barriers, Ofgem proposed measures in several areas to promote the commercial interoperability:

85

Implementing the Energy efficiency Directive Provision for Easy Access to 24 Months of Daily/Weekly/Monthly/Annual Consumption Data for Consumers with Smart Meters: Consultation Document, December 2012 86

'Head-ends' translate the message sent by the meter if different meter 'languages' are used. Difference in the communication service procured may result in the incoming supplier having to access the outgoing supplier's 'head-on' for translation or suppliers developing multiple 'head-ends'.

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Meter Use. A new licence obligation should be introduced on suppliers installing smart meters to offer, or arrange for their agent to offer, reasonable and non-discriminatory terms of use of the meter on change of suppliers. This decision was largely driven by the evidence in ROMA showing that commercial incentives may not necessarily give adequate facilitation of commercial interoperability, and the fact that metering agents are not licensed. The initial view of Ofgem was that outgoing suppliers or their agents who installed smart meters 'should not expect to recover more than the costs for a dumb meter'. While being concerned about the unintended risks of prescribing a particular charging mechanism, the Ofgem expected the industry to enhance the information sharing regarding contractual arrangements, and to require the charges offered by the installing supplier or its meter agent to be transparent and clear on chargers, associated liabilities or warranties for a particular meter.

Communication and Associated Services. Suppliers or their agents should have obligation to offer reasonable and non-discriminatory terms of use for communication and associated services if required. The charging of these communication services is expected to be cost reflective.

Prepayment Mode. Suppliers installing smart meter for use in prepayment mode should have arrangements to enable the incoming supplier to use the meter in prepayment mode. The installing supplier should also ensure that those arrangements can enable the incoming supplier to comply with the 'safe and reasonably practicable' requirement as set out for prepayment meters.

The letter Commercial Interoperability: Proposals in Respect of Managing Domestic Customer Switching Where Meters with Advanced Functionality Are Installed87, however, noted the difficulty as identified by respondents in achieving standardized terms of use given the lack of smart meter standards at that time. Therefore, the proposals for domestic consumers as raised above were revised accordingly:

With Consumers. To help consumers make informed decision as to supplier switch, the potential incoming supplier should explain any loss of metering functionality if the switch occurs. The incoming supplier is also prohibited from charging consumers for the new meter, if the supplier switch necessitates the replacement of installed meter with smart functionality to continue prepayment service.

With Suppliers. A licence obligation is placed on outgoing supplier to provide information to enable the incoming supplier in determining the functionality of installed meter with smart functionality and maintaining the services to support the smart functionality of the installed meter. Such information may include arrangements offered by the outgoing supplier or its agent for the incoming supplier to use the meter and/or communication infrastructure, and identification of service providers to offer services that can maintain smart functionality. Moreover, if the incoming supplier requests, large outgoing supplier88 who has installed more than 25,000 meters with smart functionality or more than 5,000 such meters in prepayment mode should make available services that the incoming supplier reasonably requests to maintain some or all of the services relating to smart functionality (or 'service obligation'). This service obligation is fuel specific89.

87

Published on 18 August, 2011 by Ofgem 88

This obligation does not apply to smaller supplier with the number of customers under 250,000. 89

If the outgoing supplier has 30,000 electricity meters with smart functionality and 20,000 gas meters with smart functionality, the obligation only applies to electricity meters.

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For these proposals, the Ofgem conducted the first statutory consultation Supporting Effective Switching for Domestic Customers with Smart Meters90 and introduced changes regarding the implementation date for the service obligation (to take effect on 1 January 2013 rather than at least 56 days after the notification of modifications) and licence condition text for clearer clarification in the second statutory consultation 91 . In the third statutory consultation Supporting Effective Switching for Domestic Customers with Smart Meters: Additional Statutory Consultation and Notice92, the requirement of outgoing supplier to keep historic consumption data in the smart metering system was removed, on the ground of data privacy issue associated with the tenancy change. The Ofgem has notified its decision to adopt the proposals in the August 2011 Consultation with changes introduced by the following three statutory consultations in the document Supporting Effective Switching for Domestic Customers with Smart Meters: Modification of Supply Licence Standard Conditions93. The service obligation will take effect on 1 January 2013, while the effective date for other obligations is 1 November, 2012.

The Foundation Smart Market Consultation94 further considers whether additional measures are necessary to provide greater certainty for suppliers and meter asset providers (MAPs) when consumers with SMETS-compliant smart meters change suppliers, especially during the Foundation Stage. It asks for views as to whether the existing market incentives including SMETS, the rollout licence obligation, the expected 'new and replacement' obligation and the 'Effective Switching' licence conditions introduced by Ofgem will achieve the objective of 'Smart Change of Supplier (Smart CoS)'95 . To ensure the Smart CoS objective, the 'MAP (meter asset provider) identity provision' and 'agree or return' licence conditions are proposed:

MAP Identify Provision. The installing and/or current supplier should providing the incoming supplier with details of the MAP currently responsible for the SMETS-compliant smart meters to facilitate the commercial arrangement for the transfer of the meter.

Agree or Return. The incoming suppliers should either agree terms with the responsible MAP within a prescribed period or return the meter to MAP. This arrangement is believed to improve the confidence in funding and installing SMETS-compliant smart meters.

90

Published on 19 December, 2011 by Ofgem 91

Supporting Effective Switching for Domestic Customers with Smart Meters: further Statutory Consultation and Notice, 29 March 2012, Ofgem 92

Published on 19 June, 2012 by Ofgem 93

Published on 8 August, 2012 by Ofgem 94

Published in November 2012 95

Consumers who have begun to benefit from smart metering should generally be able to continue to do so, if they wish, even if they choose to change suppliers.

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References

DECC 2009a. Smart Grids: The Opportunity. London: DECC.

DECC 2009b. Towards a Smarter Future: Government Response to the Consultation on Electricity and Gas Smart Metering. London: DECC.

DECC 2010. Smart Metering Implementation Programme: Prospectus. London: DECC.

DECC 2011a. Smart Metering Implementation Programme: A Consultation on Draft Licence Conditions and Technical Specifications for the Roll-out of Gas and Electricity Smart Metering Equipment. London: DECC.

DECC 2011b. Smart Metering Implementation Programme: Response to Prospectus Consultation - Central communications and Data Management. London: DECC.

DECC 2011c. Smart Metering Implementation Programme: Response to Prospectus Consultation - Design Requirements. London: DECC.

DECC 2011d. Smart Metering Implementation Programme: Response to Prospectus Consultation - Implementation Strategy. London: DECC.

DECC 2011e. Smart Metering Implementation Programme: Response to Prospectus Consultation - Overview Document. London: DECC.

DECC 2011f. Smart Metering Implementation Programme: Response to Prospectus Consultation - Rollout Strategy. London: DECC.

DECC 2012a. Licence Conditions for a Code of Practice for the Installation of Smart Electricity and Gas Meters: Government Response to Consultation. London: DECC.

DECC 2012b. Smart Metering Implementation Programme: Consultation on the Second Version of the Smart Metering Equipment Technical Specifications. London: DECC.

DECC 2012c. Smart Metering Implementation Programme: Data Access and Privacy - Consultation Document. London: DECC.

DECC 2012d. Smart Metering Implementation Programme: Data Access and Privacy - Government Response to Consultation. London: DECC.

DECC 2012e. Smart Metering Implementation Programme: First Annual Progress Report on the Rollout of Smart Meters. London: DECC.

DECC 2012f. Smart Metering Implementation Programme: Government Response to the Consultation on Draft Licence Conditions and Technical Specifications fo the Roll-Out of Gas and Electricity Smart Metering Equipment. London: DECC.

DECC 2012g. Smart Metering Implementation Programme: Government Response to the Consultation on the Consumer Engagement Strategy. London: DECC.

DECC 2012h. Smart Metering Implementation Programme: Government Response to the Consultation on the Draft DCC Licence. London: DECC.

DECC 2012i. Smart Meters Programme: Government Response to Consultation on Information Requirements for Monitoring and Evaluation. London: DECC.

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DECC 2012j. Smart Meters Programme: Smart Meters Programme Plan. London: DECC.

DECC 2013. Smart Metering Implementation Programme: Government Response to the Consultation on the Second Version of the Smart Metering Equipment Technical Specifications Part 1. London: DECC.

DTI 2006. The Energy Challenge: Energy Review Report 2006. London: Department of Trade and Industry.

DTI 2007. Meeting the Energy Challenge: A White Paper on Energy. London: Department of Trade and Industry.

OFGEM 2010a. Smart Metering Implementation Programme: Consumer Protection. London: Ofgem.

OFGEM 2010b. Smart Metering Implementation Programme: Implementation Strategy. London: Ofgem.

OFGEM 2010c. Smart Metering Implementation Programme: Rollout Strategy. London: Ofgem.

OFGEM 2011. Smart Metering Spring Package - Addressing Consumer Protection Issues. London: Ofgem.

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Glossary

AMO Association of Meter Operators

BEAMA British Electrotechnical and Allied Manufacturers Association

BPDG Business Process Design Group

CAD Consumer Access Device

CAG Consumer Advisory Group

CDB Central Delivery Body

CERG Consumer Engagement & Rollout Group

CESG National Technical Authority for Information Assurance

CHTS Communication Hub Technical Specifications

CIO Component Independent Organization

CMAP Community of Meter Asset Providers

CSP Communication Service Provider

DCC Data and Communications Company

DCCG Data and Communications Company Group

DCG Data and Communications Group

DLMS Device Language Message Specification

DNO Distribution Network Operator

DUoS Distribution Use of System

EMA Energy Market Assessment

ENA Energy Network Association

ERA Energy Retail Association

ESTA Energy Services and Technology Association

FIOM Foundation Interim Operating Model

FTTS Foundation Testing and Trialling Strategy

GDN Gas Distribution Network

GT Gas Transporter

HAN Home-Area Network

ICG Implementation Coordination Group

ICoSS Industrial and Commercial Shippers and Suppliers

IDTS Industry Draft Technical Specifications

IHD In-Home Display

IUK Interconnector (UK) Limited

KPI Key Performance Indicators

MAP Meter Asset Provider

MSP Meter Service Provider

NEED National Energy Efficiency Data framework

ODAG Overall Design Advisory Group

Ofcom Office of Communications

Ofgem Office of Gas and Electricity Markets

Ofwat Water Services Regulation Authority

PPM Prepayment Meter

RNIB Royal National Institute of Blind People

ROMA Review of Metering Agreements

SAR Special Administration Regime

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SBGI Society of the British Gas Industries

SEC Smart Energy Code

SECCo Smart Energy Code Company

SMDG Smart Metering Design Group

SMETS Smart Metering Equipment Technical Specifications

SMFSG Smart Meter Foundation Strategy Group

SMIP Smart Metering Implementation Programme

SMRG Smart Meter Regulation Groups

SPB Strategic Programme Board

SRO Senior Responsible Owner

SSAG Smart Metering SMETS Stakeholder Advisory Group

STEG Security Technical Experts Group

TOU Time-of-Use

WAN Wide-Area Network