Customer trust should be the focus of concern in smart metering

Much has been said about the threat to customer privacy posed by smart meters or, more accurately, by unauthorised access to and inappropriate use of the data collected by the devices. Recently, the European Data Protection Supervisor warned of the dangers posed by mass data collection resulting from the deployment of smart meters without robust safeguards.

Of course, this concern is right. Customers’ interests must be protected, along with their personal data. There is no doubt that the meters and ­surrounding systems need to be both secure and resilient.

But focusing only on data access security and permission misses the central issue. What is more, overreliance on legislation and regulation misses out what may well be the most powerful weapons in our armoury.

The proposed approach to data ownership and access permissions risks further confusing customers with already woefully low levels of understanding about smart meters – only 45 per cent say they are even aware of the UK deployment plans. How will they tease apart the myriad options of defaults, opt-ins and opt-outs across monthly, daily and half-hourly data?

As well as further damaging customer perceptions of utilities, these approaches will impose costs on the industry – and hence consumers – without, crucially, delivering any additional benefits, with the poorest being disproportionately affected.

Smart meters promise a range of benefits – to society and customers and to utilities and their shareholders. However, these benefits largely depend on the use and analysis of the granular data provided by smart meters to: provide personalised and actionable energy efficiency advice; more intelligently plan network investment; mitigate the network reinforcement costs brought about by increased prevalence of electric vehicles, heat pumps and renewable generation; detect energy theft; and settle the markets more fairly.

Far more attention needs to be given to customer permissions based on the use of data and the benefits delivered rather that the granularity of the data: “do you want to receive personalised energy efficiency advice?” and “do you want to receive advice on the best tariff for you?”.

Yes, we need a secure infrastructure and the regulator should make suppliers set up data councils with customer representatives that clearly and accountably manage how and for what the data is used. But without the central ingredient, these don’t enable the benefits and do add to the cost.

Even if they understand the options open to them, customers will simply not give permission to use data if they do not trust the organisation that is asking. And if they don’t understand the usage implications and the benefits promised, their interests cannot be protected.

So, trust and transparency are the central points: trust and how to rebuild it; and transparency as to the data usage and the benefits it will bring to the customer. This means going back to the basics and getting them right, a rebuilding process the financial services industry is currently undergoing and which offers lessons for energy companies.

Unfortunately, many utilities around the world have stumbled as they have deployed smart meters. The consequences have included adverse publicity and mass customer complaints at increased bills. Driven by fears over data privacy and misuse, legislators in some countries have restricted utilities’ usage of smart meter data. The result can be increased costs in the meter deployment, customer dissatisfaction and reduced benefits to the utilities and, ironically, also to their customers.

One common mistake is the introduction of too many changes in tariff structures – especially time-of-use pricing – at the same time as the meters are being deployed rather than waiting until they are established and accepted. This point is particularly critical. It is hardly surprising the customers will blame their new smart meter if their bills soar at the same time, even if this is actually nothing to do with the meters themselves. Time-of-use tariffs will play a vital role in reducing energy consumption and balancing demand to supply at times of peak usage or supply shortages. However, customers must first be helped to understand their consumption patterns and the steps they can take to reduce energy use and bills.

In competitive energy markets such as the UK, suppliers have to get it right. If they do not, smart meters, and new market entrants and service providers that are likely to spawn, could prove a threat to their businesses. Where customers have the opportunity to switch to other suppliers, smart meters may do more than take out layers of cost from the energy business: they may take out a layer of customers, too.

Only when utilities truly are trustworthy can they expect to be trusted. Then they will be able to take meaningful steps to collaborate with customers who are willing to participate in a new energy future. Then we will see a win-win-win for customers, utilities and for our wider society.

Jon Bentley, smarter energy lead,IBM Global Business Services, UK and Ireland

This article first appeared in Utility Week’s print edition of 19th October 2012.

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