Ofgem seeks views on half-hourly electricity settlement

Ofgem has issued a call for evidence on its plans to introduce half-hourly electricity settlement for households and small non-domestic customers on the back of the smart meter rollout.

The aim of the consultation is to gain a better understanding of how consumers are likely to be affected by and respond to half-hourly settlement. Of particular interest is the distributional effects on vulnerable customers.

According to the document, half-hourly settlement will expose suppliers to the “true costs” of supplying electricity to their customers. This in turn will create an incentive for suppliers to encourage their customers to shift their consumption to periods when electricity is cheaper to generate or transport through new products and services such as time-of-use tariffs.

Ofgem has asked stakeholders to give their views on the willingness and ability of different groups of customers to adjust their usage in response to price signals – either themselves or through a third party – and adopt new enabling technologies.

Although it expects all consumers to benefit from half-hourly settlement due to lower overall system costs, the regulator highlighted concerns that some vulnerable customers may be unwilling or unable to alter their consumption due to cost barriers or their circumstances.

It said responses to the consultation will help to establish whether any further regulatory interventions are needed to prevent them being burdened with excessively high energy bills.

Ofgem said half-hourly settlement will be necessary to enact a number of related changes it is considering as part of its significant code review looking at forward-looking network charges and grid access arrangements which it commenced in December. These options include more cost-reflective and granular charges that could vary by time of day, throughout the year or by location.

Accordingly, feedback from the consultation will also inform the decisions it makes as part of the review.

The deadline for responses is 29 March. Ofgem intends to make a final decision on the implementation of half-hourly settlement in the second half of 2019.