Energy and Climate Change CommitteeWritten evidence submitted by National Grid Metering (SMR03)

1. Executive Summary

1.1 National Grid Metering (NGM) is a subsidiary of National Grid Gas, providing metering services to around 15 million traditional meters. Although not actively participating in the roll-out of smart metering for residential customers, NGM has an enduring interest in developments in the metering market, particularly in the transition to smart technologies. NGM will be impacted by the transition from traditional metering as it becomes a smaller, more marginal activity. The efficient transition to smart metering will, in part, depend on a clear understanding for all parties on the mechanisms to wind-down traditional metering. NGM is consulting with market participants to establish an agreed set of assumptions that will inform how meter rental charges are set through the period to 2020.

1.2 We believe completion of the mass roll-out of smart meters by the end of 2019 may be difficult to achieve, a view supported by stakeholder feedback received as part of our current pricing consultation process. Continuing uncertainties regarding the availability of smart prepayment (PPM) services may also delay the installation of these types of meter, thus deferring potential benefits available to consumers utilising them.

1.3 We also perceive several potential obstacles to the success of the smart roll-out programme, such as “dark” areas where the transmission of smart data cannot be maintained and consumer concern regarding data access and privacy. Providing a consistent definition to define technical end of life also remains a challenge, such that traditional meters at the end of their natural life can also be prioritised in Supplier roll-out plans.

1.4 We have submitted evidence against the terms of reference where we feel we have valid expertise or knowledge to contribute.

2. Are the Government’s cost and timescale predictions for roll-out realistic?

2.1 Feedback gathered through our pricing consultation regarding the smart metering mass roll-out has indicated a general view that completion by the end of 2019 remains highly challenging. The lack of a clear start date for the mass roll-out phase also creates a difficulty in predicting the exact shape of any displacement profile. The uncertainties that still exist regarding technical and infrastructure requirements result in a slower roll-out profile than currently expected. As a result, the majority of exchanges may not take place until the final few years of the programme. Some feedback has also suggested that a significant proportion of traditional meters may remain in situ beyond 2020, with smart meter roll-out completion taking several years longer than currently forecast.

2.2 Stakeholders expressed concern regarding possible delays to finalising the SMETS2 specifications, resulting in delays to the mass production and distribution of domestic-sized smart meters. The lack of a finalised technical specification, together with ongoing discussion regarding possible exemptions from exchange (DECC open letters published 22/12/11 and 19/01/12 regarding possible exemptions for small suppliers and for all suppliers from the smart meters roll-out obligation) may also have resulted in a possible reduction in the number of installations of early smart meters undertaken as part of the Foundation stage. As with any new technology, the degree to which meters may be affected by early failure and a shorter overall life may result in the first phase of smart meters requiring exchange before all identified traditional meters have been displaced. The overall volume of meter exchanges undertaken by the end of the smart meter roll-out may well therefore exceed the estimated 53 million traditional gas and electricity meters which current Department of Energy and Climate Change (DECC) modelling accounts for.

2.3 Completion rates for the roll-out of smart or advanced metering in non-domestic properties may be easier to achieve than for domestic properties. The drive for advanced metering in particular should not be misrepresented as always requiring a new meter to be installed. If a meter has a pulse output, the required data outputs can be achieved through the retro-fit of an automated meter reading (AMR) module or similar device. The existence of numerous market participants in this sector able to provide these technology and data solutions, together with the fact that non-domestic consumers are not required to participate in the DCC, provides a greater range of options for non-domestic consumers and Suppliers alike. As a result, we expect the government targets regarding smart metering in non-domestic properties to be achievable and a significantly lower proportion of non-domestic meters to require exchange to enable compliance.

3. Will consumers on pre-pay meters obtain the same benefits from smart meters as other consumers?

3.1 Consumers on PPM meters should, in theory, be able to obtain the same benefits from smart meters but may not be able to access these benefits as early in the mass roll-out as consumers on domestic credit (DCM) meters. In responding to our pricing consultation, consumer groups expressed concern regarding the costs of prepayment metering services. As a result, our proposals for pricing will continue the cross-subsidy between PPM and DCM meters because there is not yet an effective alternative. Uncertainty surrounding the readiness of the DCC, particularly in respect of managing PPM services, may create a disincentive for suppliers to displace traditional PPM meters. Concern centres mainly on the issues of managing remote disconnection, tariff switching and data security relating to account credit information. As a result, replacement of traditional PPM meters may occur significantly later in the smart roll-out than for traditional DCM meters.

4. What are the potential obstacles to rolling out smart meters in the UK and how should these be addressed?

4.1 We believe that maintaining robust and efficient traditional metering services remains important in the successful deployment of smart metering. For those consumers that do not wish to have a smart meter, traditional metering services must remain available but traditional metering will inevitably become a smaller, more marginal activity as the smart roll-out progresses. Gas distribution networks currently carry an obligation in their transportation licence to comply with any reasonable request from a Supplier to provide traditional domestic metering services. This obligation is known as the Meter Provider of Last Resort (MPoLR). Following the implementation of the new Supplier obligations to install smart meters, this supply of traditional meters will fall away following the sunset of the MPOLR obligation. The ongoing maintenance of installed traditional meters prior to displacement will be addressed through the new National Metering Manager (NMM) obligations NGG will undertake later this year. However, like-for-like replacement of traditional meters reaching the end of their technical life will still be required in properties where the consumer declines to have a smart meter installed. We recognise this continuing demand but would expect any new traditional meters required after the start of the mass roll-out to be offered under commercial terms.

4.2 Data access and privacy has been a key consumer issue in other smart metering programmes. Despite the DECC consultation on this area (reference URN 12D/024), there is still a lack of clarity regarding the likely approach and structure to be implemented. This is particularly true for third parties (such as landlords, managing agents or commercial chains) with responsibility for several separate properties or for meter operators wishing to utilise smart technologies to remotely assess meter safety, fitness for purpose, tampering or theft of gas. We acknowledge previous recommendations regarding the introduction of a Customer Identification Number (CIN) to verify third parties and obtain customer consent. For domestic consumers, a consistent and straightforward approach which is clearly communicated would be beneficial. For those non-domestic consumers who utilise third parties to support their energy management and metering arrangements, any approach should accommodate the collection of data from multiple sites without creating a perverse incentive not to participate in the DCC.

4.3 We would suggest that greater clarity of Suppliers’ smart metering strategies would be beneficial to consumers and other industry parties alike. Where suppliers have differing strategies and degrees of smart-readiness, consumers may be reluctant to take up a smart meter if they feel their ability to switch suppliers is compromised. Greater visibility and alignment of Supplier mass roll-out plans may also assist in ensuring the optimisation of traditional meter displacement.

4.4 Although the smart meter roll-out will result in many traditional meters having a shorter than normal working life (10 years for a PPM and 20 years for a DCM), there will still be drivers to “retire” certain traditional meters due to the asset reaching the end of its technical life. Factors such as degradation of accuracy or condition as well as asset age may require the meter to be removed prior to a Supplier’s intention to displace it for a smart meter. It is important that Suppliers, in devising their roll-out plans, take account of these meters at end of life to maintain the quality of service to their consumers. We propose to support Suppliers by offering the use of NGM’s Holistic Asset Management (HAM) approach which we believe could assist by providing a consistent end of life definition for traditional meters. This would allow Suppliers to optimise their smart meter roll-out.

4.5 Agreement on the most appropriate signal frequency for the transmission of smart data remains important to minimise instances of “dark” metering (where a smart meter cannot operate in a fully remote fashion, effectively operating as a traditional meter). Without the benefits that remote data and tariff options can provide, to both Supplier and consumer, a disincentive to progress smart metering may be created, potentially undermining the business case the smart metering programme is based on. Should “dark” metering remain an issue, this could result in a greater number of traditional domestic meters remaining in situ for longer than anticipated, which would require ongoing maintenance and support prior to eventual displacement. This would directly impact NGM by increasing the extent of the NMM obligation (as outlined in 4.1) which NGM will shortly be undertaking in respect of traditional meter maintenance activities. It could also potentially increase the number of traditional meters requiring end of life replacement in locations without a viable smart alternative.

January 2013

Prepared 26th July 2013