Smart time-of-use tariffs move ‘one step closer’

Smart time-of-use electricity tariffs have moved “one step closer” as Ofgem announced plans to reform the electricity settlement process.

The energy regulator has stated it is looking into options to reform arrangements for working out how much electricity households use at different points throughout the day, and how much suppliers pay for that electricity.

This will be based around the availability and usage of half-hourly (HH) data from smart meters which are due to be installed into more than 30 million homes and small businesses by 2020.

There are currently more than 29 million customers who are non-half hourly metered, and these consumers are put into one of eight profiles to estimate their usage, and are provided with estimated bills.

The reforms would allow suppliers to accurately track a customer’s usage and provide price signals for load to be reduced at peak times, or for lower prices to be offered when electricity is cheaper.

Rachel Fletcher, senior partner, market, at Ofgem, said: “To make sure consumers get these benefits, we must reform industry charging arrangements which have been in force since the 1990s.

“This is so that more advanced time-of-use tariffs can be brought in.

“Taking these steps now means that we can make the energy market work even better for consumers, now that our reforms for a simpler, clearer, fairer market are in place.”

Energy secretary Ed Davey added: “Alongside the rollout of smart metering, it will reform back-office electricity market processes that are vital to help deliver a more modern, competitive energy market for consumers.”

It is also hoped that by using HH consumption data, the reforms will “promote competition by reducing risks of entering the market”.

Ofgem stated the reforms to the electricity settlement process will be defined before the start of the national rollout of smart meters in autumn 2015.