Supplementary memorandum submitted by
Centrica (EEFP 21c)
I wanted to follow up on the debate on smart
meters and, in particular, why British Gas believes a supplier-led
roll out rather than a regional monopoly model is the only sensible
way forward.
We welcome the recent Government announcement
to mandate smart meters. Already, we are investing in systems
and customer trials to begin a large scale roll out in the next
two years. British Gas has extensive experience in smart metering,
having installed the most smart meters in the UK. However, choosing
the correct industry model will be critical in ensuring the success
of this important initiative in the UK.
Currently there are two models being considered,
the supplier-led "Central Communications" model, and
the regional monopoly model. Under the "Central Communications"
model, the supplier would be responsible for installing and maintaining
the meters but a single telecommunications "clearing house"
would be created to manage the data interfaces to smart meters
and so permit ease of switching. Under the regional franchise
monopoly model all metering activity would be centralised via
a Government mandate.
One of the key differences between the two models
is the timescale for delivery. The central communications model,
which builds on the existing market structure, can deliver smart
meter roll out four years earlier than the regional franchise
model. This means that if Government were to decide on the supplier-led
model by March 2009 then roll-out could be largely completed by
2015, in time to also deliver Government plans around feed-in
tariffs for microgeneration and heat. This contrasts with the
regional monopoly approach whereby roll-out will not even begin
until 2014.
It should be noted that a key reason for the
delay in starting mass deployment under the regional monopoly
model is due to the huge size and complexity of the IT and procurement
undertakings. By contrast, the supplier-led Central Communications
model can be delivered by a substantively smaller IT programme,
since it does not seek to centralise the entire metering activity
chain—and so is also an inherently less risky undertaking.
Supplier-led installation also provides a platform
for faster and deeper deployment of the CERT programme by enabling
the supplier to build a wider energy efficient relationship with
their customers on the back of the smart meter installation. This
model will also deliver the Government's desire for a neighbourhood-by-neighbourhood
roll out through geographically concentrated deployments. Such
a scheme would afford a great opportunity for a high-profile communications
campaign with roles for industry, Government and local authorities
in raising public awareness of smart meters and the benefits they
can achieve. In contrast, separation of the supplier from their
customer by a Government monopoly will simply lead to the supply
companies withdrawing from innovating around smart meters, leaving
Government to drive the initiative forward.
At British Gas we are developing plans to get
started on the huge roll out programme, including the creation
of "British Gas Metering" with a further 2,500 jobs.
We are keen to announce this as soon as the deployment decision
is made, but we will not do so if the monopoly franchise model
rather than our preferred supplier-led central communication route
is chosen.
Time is now of the essence and Government leadership
is needed. Whilst smart meters are being rolled out in many countries,
we are in the third year of consultation. Every day 10,000 conventional
meters are installed with an uncertain future. We share Government's
desire to get on with smart metering. A prompt decision in favour
of the central communications model would ensure this could happen
in the most efficient and effective way.
We hope that you will be able to support our
call for a central communications model for the reasons outlined
above.
Centrica plc
March 2009
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