I am the customer:

“To dismiss the proposal is potentially costly to us all”

‘Disappointing’ – is one word to describe DECC’s response this week to the Energy and Climate Change Committee’s report on smart meter roll-out. “Expensive” could be another.
Smart metering is estimated to cost more than £12 billion – a price tag that has risen over the years, with ultimately customers footing the bill. There are significant potential consumer benefits from roll-out but while Government continues to say that customers are at the heart of the Programme, in practice there are still no guarantees that we will get even the most basic of benefits, not even accurate billing and an end to shock bills.
In its smart meter report, the Committee says it’s “not convinced by the argument that competition in the market will ensure that costs are kept down and benefits are passed on to consumers” and proposes that suppliers work together to achieve efficiency savings. But Government has rejected the Committee’s recommendation to draw up a co-operation protocol and require suppliers to sign up to it.  DECC believes that because “they are in competition with each other, suppliers are motivated to deliver the roll-out in the most efficient way.” While this might be the case in some circumstances, the delivery of this major infrastructure project isn’t one of them.
Greater coordination could deliver multi-million if not billion pound savings to customers. Savings from reduced travel costs, the development of common technological solutions and fewer aborted installation visits. Well targeted communications and outreach activity could facilitate greater customer engagement, and improve the overall consumer experience, helping people to access the benefits of smart more easily.
Let’s take three examples. Rollout involves at least one visit to every home, but thanks to a supplier-led approach most of the third of customers who don’t have dual fuel will now have at least two visits. Even at the most conservative of estimates, an extra £10 per visit, that’s many millions extra not to mention the inconvenience to the customer and the cost to the economy of taking two, not just one half day off of work.  On top of that, in a single street you could have more than 10 different suppliers installing smart meters in a given week all incurring the cost of travelling there. How can that be cost efficient?  
Around 1 in 5 households live in dwellings of multiple occupation, defined as high rise and low rise flats and converted buildings. Many of these buildings will need additional technology for smart to work. Under the current approach suppliers will select and install their own communications equipment and meters at different times, dependent on their roll-out schedules. This is likely to increase costs from parallel and duplicate equipment being installed by different companies; result in greater inconvenience to customers and landlords from multiple visits; restrict the ability to properly test the system; make it harder to identify who is responsible and what the problem is when things go wrong; and increase the chance of interference with customers appliances and equipment – in short a really bad idea.
DECC is rightly quick to highlight the importance of consumer engagement to the smart metering programme and third parties role in this. But pity the community group who despite the creation of the Central Delivery Body (CDB) could still be expected to liaise with more than 10 separate suppliers, over a period of seven years on limited resources and with limited time. Not to mention the additional costs and potential for customer confusion from suppliers all doing their own thing alongside CDB activities.
Government believes it is up to energy companies to coordinate where they want to. But this is not straight forward given the complexities of competition law, historic accusations of supplier collusion and low levels of consumer trust.  The experience of the Low Carbon Network Fund pilots and Warm Zones reminds us that suppliers don’t naturally work together even when there are benefits and cost savings that could be delivered to consumers and tax payers. Energy UK’s predecessor the Energy Retail Association is on record as saying ‘It is difficult to envisage how suppliers alone could lead any form of co-ordination under what is fundamentally a competitive meter installation approach.’ It’s also fair to say the interests of smart early movers may not be so well aligned with those who have approached roll-out and risk more tentatively.
The truth is, we have yet to see DECC’s evidence that competitive roll-out equals cost effective roll-out, let alone the most positive customer experience.
Consumer Futures believes that Government should properly consider the Committee’s proposal for a co-operation protocol and mandate community based trials involving at least the big six suppliers which assess the cost effectiveness of greater coordination. To just dismiss the proposal as seems to have been done, without due consideration and appropriate evidence, is not only irresponsible but potentially costly to us all.

Zoe McLeod, head of smart and sustainable energy markets, Consumer Futures