Smart systems plan criticised for lack of focus on consumer protection

Government’s smart systems plan underestimates challenges of citizen engagement and protection, says energy policy expert

The government’s new plan for creating a smart and flexible energy system does not give sufficient space to questions about consumer protection or citizen and community engagement, Joan MacNaughton has warned.

MacNaughton is chair of The Climate Group and served as director general for energy at the former department for trade and industry.

Speaking to Utility Week, MacNaughton said the government’s smart systems plan, produced in collaboration with Ofgem, was “tremendously welcome” and had put forward “by and large, a whole host of sensible recommendations”.

However, she added that it was lacking in two key areas – its commitment to assure community and citizen engagement in the creation of a decentralised and decarbonised energy system, and its attention to questions of consumer protection.

MacNaughton said the report’s reference to community and citizen engagement was “quite general”.

“There is nothing very specific there,” she said. “I think that’s an area where it will be really challenging for government to do enough and the sooner they start the better.”

On the second issue of consumer protection, MacNaughton expressed disappointment at the level of attention government gave to new challenges that energy system transformation will expose.

She said that while the smart systems plan states that existing consumer protection frameworks are “completely adequate” she is unconvinced.

“We have already seen that it is difficult to keep companies behaving well in all aspects of fair operation,” MacNaughton observed. And in a decentralised energy system challenges around regulating and monitoring fair practice on the treatment of consumer data will become more complex.

Another consumer protection challenge will arise around assuring social equity in a decentralised energy system, added MacNaughton.

“We have already seen that action was required because poorer people were paying more on prepayment meters,” she said.

“If we get to a situation where more affluent people are the ones who have the capital to install decentralised generation and energy storage, then we could get to a point where grid charges weigh most on those who are least able to pay”.

In addition to her concerns about the attention government’s smart system plan gave to engagement and protection, MacNaughton added that most of its recommendations assumed that the roles, responsibilities and hierarchy of current system players will remain the same.

She called the plan a “very good deep dive into the impact of smart technology on the system” but its “sensible” recommendations “rather assume the current framework and hierarchy of relationships remains”.

She called for government to be more “proactive” in engaging in questions about the creation of distribution system operators and in changing relationships between transmission, distribution and consumers.

They should be “taking a lead” she said, not just observing industry strategies and reports on this transformation, she said.

MacNaughton made her comments alongside the launch of a new report from Forum for the Future, which explores the impact of energy system transformation on large incumbents.

The report engaged six “wise minds” to commentate on the challenges that decentralisation, decarbonisation and digitisation pose to traditional energy players.

In addition to MacNaughton, these “wise minds” included: Volker Beckers, former chief executive of Npower, Sir Ed Davey, former energy secretary, Charles Hendry, former energy minister, Steve Holliday, former chief executive of National Grid and Ian Marchant, former chief executive of SSE.

Beckers told Utility Week that too many energy system incumbents are underestimating the urgency with which they must transform their business models for a decentralised future.

He added that the hardest part of the challenge for today’s chief executives will be engaging shareholders and investors in a transition plan which moves away from old fashioned revenue streams.