Smart metering: But what about businesses?

Smart metering is coming to the UK electricity market, both for domestic and business customers, but big six supplier Npower last month revealed that 81 per cent of UK retailers are unaware of this. And retailers are not alone. Smart Energy GB, in charge of the consumer engagement campaign, say only five per cent of businesses have proactively requested a smart meter so far.

The reasons for why businesses are not more informed range from the technicality of the changes to a lack of a budget for a specific engagement campaign. But there is a strong incentive for Government and energy companies to address this: the switch to smart will burden a high proportion of businesses with increased energy costs, which is already the number one cost concern for 46 per cent of businesses, according to Smart Energy GB. Npower says it is doing enough, but business groups are worried.

Trade association the Federation of Small Business (FSB) says:“The transition to a smart new energy market is a real necessity, but the process is a potential minefield for small businesses. The government must ensure they are offering sufficient support for all eventualities”. That minefield includes both the move to half-hourly charging for higher energy users, and the rollout of smart meters amongst microbusinesses. 

The move to half-hourly charging from November this year for businesses in meter profile classes 5 to 8 will, amongst numerous benefits, likely increase the average energy bill by £230 a year. In addition businesses will be obliged to appoint an accredited meter operator (MOP) and data collection (DC) agent.

Npower’s survey revealed that 67 per cent of retailers questioned did not know that the change could have cost implications for their business. While this is worrying in itself, the FSB has highlighted a further problem, inherent in the market, which will make the transition not only difficult but even more costly for some.

The practise of a new tenant continuing to use a previously installed maximum demand meter despite only being a business with low energy consumption has, up to now, been commonplace. But these businesses with inherited meters will be liable for the increased Distribution Use of System charges and meter operator contracts that come with using a maximum demand meter after the move to half-hourly charging. To escape these increased costs, the FSB says these legacy customers face a “hefty charge” if they want to downgrade their meter.

The FSB says “It is imperative that these businesses are identified and transitioned to the new smart world in a considered way.” But Npower has said it will only be informing customers of the changes four months ahead of the end of the contract, which will not allow much time to adapt.

Npower Business Solutions director of markets & innovation Wayne Mitchell says that if customers are not ready to come to the market “the message gets lost.” This is partly due to the technical nature of the change, which Mitchell says he fears customers will not fully understand. But he also says that if the decision on how a delayed transition to half-hourly charging had been decided quicker, communication could have been started earlier.

Overall he believes suppliers are doing what is “appropriate and proportionate” and that far more communication is going on than would normally be the case for a change in balancing and settlement code such as this.

But the problem does not end with half-hourly charging. The FSB is also concerned at the government’s proposed approach for informing microbusinesses about smart meters. It says the government’s plan to extend the consumer campaign, run by Smart Energy GB, to microbusinesses where appropriate is a “recipe for failure.”

The FSB said this approach would fail due to the “different and diverse nature of small businesses,” which only a specific non-domestic campaign could address. There is also a legacy of mistrust by small businesses of the energy market that will need to be overcome to achieve buy in through the “guarantee” of real benefits. But as Smart Energy GB points out, there is no budget for a specific campaign, so microbusinesses will have to be tagged on the end of the consumer one.

With the number of challenges facing these ‘unaware’ businesses it would be difficult to argue that either the government, or suppliers, are “sufficiently supporting” businesses in the way the FSB says is necessary.

81 per cent of FSB members believe that their energy suppliers do not care about their needs. When businesses are suddenly faced with inappropriate messaging and a steep increase in costs with very little warning, they might well feel that opinion has been proven right.