Smart way to trim spending

In the second of three monthly articles on the customer experience, Utility Week looks at the need to educate consumers about how smart meters can save them money

Senior officials at the Department of Energy and Climate Change (Decc) are continually frustrated by the emotive term “fuel poverty”. They feel that the definition – a household that spends more than 10 per cent of its income on energy – encourages politicians to attack each other with an arbitrary measure that does not reflect whether or not those people are able to afford their bills.

Nevertheless, annual energy bills are on the rise, now costing £1,353 – up nearly £100 over the past 12 months alone, at a time when inflation has outpaced wages for four years straight. Fuel poverty might not be an accurate term, but it is a real political and social issue, particularly in the midst of a financial crisis that is set to last longer than the Second World War.

Successive governments have pinned their hopes of solving this problem on smart meters, which they also believe will help them meet strict emissions targets by encouraging people to turn off lights and televisions when they’re out of the room.

In 2009, then energy minister Ed Miliband announced that between 2015 and 2020 he wanted to roll out meters that could help households and businesses track and therefore trim their spending on electricity and gas. The coalition later fast-tracked by one year the £11.7 billion programme to install smart meters in 30 million homes, only to return to Miliband’s timetable on 10 May this year.

In a statement, Decc conceded that industry needed more time to “design, build and test phases of their programmes… if the mass rollout was to get off to the best possible start”.

For years, the proposals have been dogged by rows – such as the National Audit Office questioning government claims that the meters would save the average household £23 a year – and even warnings that they could be hacked.

However, the energy industry also spies an opportunity through the delay of such a vast plan: there will be more time to properly educate consumers on how they can use this technology to make those much-trumpeted savings.

“What is important is making sure that the consumer engagement piece is done well,” says Robert ­McNamara, executive director at SmartGrid GB. “Smart meters represent really big changes, so the consumer will need to be up to speed.”

At the moment they are not. A recent YouGov study showed that six out of ten people had no idea what a smart meter was, while three-quarters were not aware of what is arguably one of the government’s flagship energy policies.

The same study suggested that once the concept was explained to consumers, they were overwhelmingly impressed by the benefits of accurate, rather than estimated, billing as a result of the meters sending usage information to the supplier every day; a standard display that shows how much energy is being used; and the potential for additional services such as mobile apps.

Also, if the smart meter helps a bill-payer see that they are paying 25 per cent more than a neighbour who is simply being a little more careful about when they switch on the washing machine, then consumers should realise that there is plenty of cash to be saved through being savvier with their electricity. The key is teaching people how to use the data they gather to their financial advantage, such as how to identify peak usage hours.

Zoe McLeod, head of smart and sustainable energy markets at Consumer Futures, argues: “We urge companies and governments to use the extra time to identify opportunities to better co-ordinate installation activity… to offer better value, service and experience to customers. Community-level consumer engagement and rollout trials must be a priority.”

At present, industry sources are concerned that suppliers will host their own “outreach” programmes to inform consumers about the benefits of smart meters. Instead, they would like to see community trials that would bring together the suppliers to talk to all their customers at once.

So, rather than suppliers talking to residents in, say, Liverpool on a piecemeal basis, they should hold jointly orchestrated events and explain the advantages to the maximum number of people in an area in a single effort. A source argues: “You can’t just whack in a meter – that won’t give you behavioural change.”

The government has gone with a model that uses a central data and communications company (DCC), which is expected to be appointed in July, to manage and collate the information from the meters. Critics believe that the networks should have been tasked with handing out the meters, but the energy suppliers have instead been charged with that role.

The critics argued that networks, given their physical dominance of large geographies, would also have been better suited to acting as the hubs for a region’s data. For example, a high rise block of flats could see residents use all of the big six suppliers between them, meaning half a dozen different visits to bother the landlord and install the meters – a network could have issued them at a single time.

So, some sceptics have seen the delay as a chance to again argue the case for networks to run the programme, though an outspoken critic has been disappointed to find a “lack of will” to rectify the model. This is probably because there is a sense that debating the issue will add another two or three years to the rollout.

As a spokesman for the Energy Networks Association puts it: “Initially, the networks were surprised by the government’s decision for suppliers to roll out smart meters. As programme preparations have moved on considerably, it would not be a good use of customers’ money to reverse this decision.”

Instead, the time is going to be used to iron out some of the technical glitches that have beset the meters so far. Darren Braham, founder and finance director at First Utility, says: “This is a massive programme and it was clear to us that 2014 was a very optimistic start date. Delaying the process for a year has absolutely helped.

“From a technology point of view, you need more of a suite of solutions to meet the requirements of 95 per cent of properties, such as getting the gas meter to talk to the electricity meter. Trials showed that this was at best 70 per cent, which is not acceptable to the ­customer.”

James Harbidge, programme manager at the Intellect technology association, points out that the IT element of smart meters also means that there are complications arising from getting “a whole new range of players” involved in the energy industry. These include the likes of BT, Vodafone and O2, which will inevitably “take time to build relationships with utilities”.

While Harbidge insists that “those who are inclined to use smart meters will use them”, he does admit that there are concerns over those who are less comfortable with modern technology, such as the elderly. This has been a major concern throughout the process and few seem hopeful that an extra year will make it any easier to persuade and train this group to use the technology to its maximum potential.

The delays to the introduction of these meters clearly offer a number of advantages, from properly informing people of this fundamental change to their lives to getting rid of any remaining glitches in the technology. The latest postponement, however, ­certainly doesn’t help suppliers deal with the march of time.

This article first appeared in Utility Week’s print edition of 7th June 2013.

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