Energy and Climate Change CommitteeWritten evidence submitted by E.ON

Executive Summary

A successful rollout of smart metering has potential to transform the relationships between suppliers and their customers and deliver a wide range of benefits for consumers. A successful rollout is also an important milestone in the facilitation of U.K. greenhouse gas reduction targets.

We have already started delivering benefits to our consumers by undertaking trials and installing over 200k meters to date. Our smart meter trials will ensure we are equipped to rollout in the most efficient way to minimise cost and disruption to customers. We have also shared practical learning with DECC to assist the industry programme. We believe a successful deployment can only be achieved by first understanding consumer attitudes along with practical trials to determine the most cost efficient way to rollout.

We have created two smart centres of excellence to provide specific help and advice to customers with smart meters and to ensure learning can be disseminated effectively across our operational businesses. In addition we will be shortly undertaking training of all our front line staff in the provision of energy efficiency advice and through our best deal for you we are ensuring all our customers have the opportunity to be certain that they are on the best tariff for their needs.

Learning from other smart meter rollout programmes is also vital for successful deployment. We believe the reviews undertaken by DECC and the steps taken to apply such learning will put the industry in a good position to deliver success. Deployments in other countries have on the whole been successfully delivered. However where issues have arisen this is usually down to poor customer communication from industry and the government/regulatory body responsible for overseeing the rollout. This has led to mistrust and failure by some customers to accept smart meters in their homes and businesses.

Delivery of the potential benefits depends on acceptance across a range of customers (eg residential, business, vulnerable, prepayment etc). We have been conducting trials with a range of customers to understand what works best to get them engaged with smart metering. It is important that customers are not excluded from the potential benefits through a lack of understanding or engagement. The recent confirmation that a Central Delivery Body (CDB) will be set up to raise awareness is a major step forward in this area.

Responses to Specific Questions

Are the Government’s cost and timescale predictions for roll-out realistic and will it deliver value for money?

1. The rollout predictions are realistic and it is on this basis that we submitted rollout profiles to DECC which we believe can successfully be achieved. We remain convinced that a successful rollout will deliver great value for consumers.

What are the potential benefits of smart meters for consumers, and what barriers need to be overcome in order for consumers to realise them?

2. Benefits include the removal of estimated bills and the provision of near real time views of consumption which will enable consumers to make informed decisions so that they can really take control of the energy they use in their homes. Smart metering could transform the traditional view of prepayment with new innovative ways to pay as an alternative for customers to visit shops to “top up”. There is also potential for consumers to benefit from improvements to the change of supplier process to facilitate quicker and easier switching and better engagement with the competitive market.

3. Customers need to see the installation of smart meters as beneficial to them. The work of the Central Delivery Body is therefore extremely important to create a positive image of smart metering and to swiftly address any unduly negative press.

4. A good customer experience of the installation is critical to ensuring customers become engaged and therefore take control. The new Smart Metering Installation Code of Practice will facilitate a good standard of service and this is something that we have voluntarily applied to our smart metering trials. The offer of energy efficiency advice, an in home display and an explanation of the newly installed technology will help consumers make the changes they need to take to derive full benefit.

Is there a possibility that suppliers will gain considerably more than consumers from smart meters? Is enough being done to ensure that any financial benefits accruing to suppliers will be passed on to consumers?

5. It should be noted that the Impact Assessment identifies a combination of consumer and supplier benefits that together provide a positive business case. Supplier benefits are important and will help transform the service suppliers give to customers. However supplier benefits alone do not provide the positive business case needed for the UK. Competition in supply and services will result in benefits being passed to consumers through the regime of consumer protection applied via new supply licence conditions and voluntary arrangements.

6. E.ON has already taken a number of steps to ensure customers can benefit. Our smart meter trials will ensure we are equipped to rollout in the most efficient way to minimise cost and disruption to customers.

7. We have opened two smart centres of excellence to provide specific help and advice to customers with smart meters and to ensure learning can be disseminated effectively across our operational businesses. We are also undertaking training of all our front line staff in the provision of energy efficiency advice and through our “best deal for you” we are ensuring all our customers can check they are on the best tariff for their needs.

What lessons can be learned from successful smart meter implementation and usage elsewhere in the world?

8. Deployments in other countries have on the whole been successful. Government have taken good practice elements from other rollouts such as formal programme management and rich functionality. Where issues have arisen overseas, this is usually down to poor customer communication from industry and the government/regulatory body responsible for overseeing the rollout. This has led to mistrust and failure by some customers to accept smart meters in their homes and businesses. Examples include data privacy concerns in the Netherlands, introduction of new tariffs in Australia and health concerns in northern America.

9. Government have considered these issues which have resulted in the introduction of consumer protection measures. These include compliance with the new Smart Metering Installation Code of Practice, new data privacy framework and data charter. Through the implementation of the Central Delivery Body customers will have recourse to independent assurance to answer concerns.

Will smart meters empower customers to take greater control of their energy consumption?

10. Smart meters will provide customers with the tools to take control of their energy.

11. We have recently carried out research that has shown:

(a)94% of consumers with a smart metering in home display continue to use this over a year after the smart metering system was installed;

(b)78% say their behaviour has changed as a result of the smart meter installation; and

(c)42% of consumers have undertaken energy efficiency measures as a direct result of having the smart meter and display installed.

12. Customers will see factual information of the cost of energy via the in home display in near real time and their bills will no longer be estimated. This will provide better information and empower customers by having greater awareness of costs. We have also been taking steps to train all our front line staff in the provision of energy efficiency advice to customers and through our “best deal for you” we are ensuring all our customers can check they are on the best tariff for their needs.

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

13. Smart metering could transform the traditional view of prepayment. Smart meters remove the need for a physical device to be inserted in a meter to “top up” and instead offer new innovative ways to pay, negating the need for customers to visit shops to “top up” although this remains an option.

14. As customer convenience increases we expect prepayment will grow to evolve into a “Pay As You Go” lifestyle product such as that valued in mobile telecommunications.

Should vulnerable customers and the fuel-poor be first in line for smart meters so they can get the benefits sooner?

15. It is important that the benefits of smart metering are extended to all customers as soon as possible and that no customers are excluded. It is therefore important that the government procurement of the Wide Area Network for communications delivers a near to 100% coverage to ensure as many customers as possible will be able to receive the full potential of smart meters.

16. The success of the rollout depends greatly on acceptance of the benefits of smart metering across a range of customers. We have been developing different approaches for different consumer groups to ensure no single community is left behind and in doing so conducting trials with a range of customers to understand what works best, to get them engaged with smart metering. This approach has also facilitated improved access rates to customer premises.

17. There is a wider commercial driver on suppliers to maximise efficiencies in the way smart meters are installed by visiting all their customers (vulnerable or otherwise) within a given location over a defined period to maximise the efficiency of the rollout.

What is the best way of involving third-party trusted messengers, such as charities, consumer groups, community organisations, local authorities and housing associations in roll-out?

18. The recent confirmation that a Central Delivery Body (CDB) will be set up to raise awareness is a major step forward. It is also important that consumers can get independent advice from trusted organisations such as local authorities and other non governmental organisations.

19. We have been undertaking trials to raise awareness of smart metering. In doing so we have seen unprecedented levels of responses from consumers opting in to these trials through co branding exercises with Kettering Borough Council and more recently with AGE UK. Through a long standing relationship with AGE UK we have seen the great value that such a trusted organisation can deliver. This has included training AGE UK personnel to be able to provide smart metering help and advice.

20. We are very active supporters of research coordinated by Consumer Focus to identify the needs of differing categories of customers and have been a key contributor to the research by National Energy Action1.

What are the potential obstacles to rolling out smart meters in the UK and how should these be addressed? What pitfalls have hindered roll-out programmes elsewhere and are we doing all we can to avoid them?

21. There are major challenges in the sheer scale of changing c.53m meters within a short timescale and using new technology, processes and communications systems. We see significant value in using time now to gain practical learning prior to the mass roll out. We are doing this by inviting customers to join trials to understand the best way to engage with different customer groups and to gain practical experience in the field. Our smart meter trials will ensure we are equipped to rollout in the most efficient way to minimise cost and disruption to customers. We have already gained valuable practical learning which we have shared with DECC.

22. Where issues have arisen in rollouts overseas this is usually down to poor customer communication from industry and the government/regulatory body responsible for overseeing the rollout. This has led to mistrust and failure by some customers to accept smart meters in their homes and businesses. Examples include data privacy concerns in the Netherlands, introduction of new tariffs in Australia and health concerns in North America.

23. Government have considered these issues which have resulted in the introduction of consumer protection measures. These include compliance with the new Smart Metering Installation Code of Practice, data privacy framework and data charter. Through the implementation of the Central Delivery Body customers will have recourse to independent assurance to answer concerns.

Are levels of public awareness of and support for smart meter roll-out increasing?

24. From our experience we have seen an unprecedented level of response to our trials compared to traditional direct marketing campaigns.

25. We have been developing different approaches for customer groups to understand what works best to get them engaged with smart metering. This approach has also facilitated improved access rates to customer premises.

26. We expect awareness to grow as mass rollout approaches and the Central Delivery Body becomes operational.

Is enough being done to increase consumer awareness about smart meters? Could DECC’s consumer engagement strategy be improved?

27. The recent confirmation that a Central Delivery Body will be set up to raise awareness is a major step forward. There has been a need for some time to ensure consistent messages are made available in a timely manner to counter negative media articles and facilitate responses to specific customer concerns. We are actively involved with the positive steps that are being taken to facilitate some early work in this area led by Energy UK prior to the formal start of operations of the Central Delivery Body.

Are consumers’ concerns about privacy and health being addressed adequately?

28. Data Privacy has been a cause of concern for a number of smart meter rollouts most notably in the Netherlands where adverse reaction resulted in a cessation of the rollout. Lessons have been learned and the recent publication of the Data Privacy Framework by DECC is the culmination of work in this area to address similar concerns in G.B.

29. Following extensive consultation and stakeholder engagement work is soon to complete, between consumer groups, government and suppliers on development of a Data Charter to provide assurance to customers regarding the safety and security of their data.

30. Consumer opposition to smart meters on grounds of health has also caused issue elsewhere, most notably in North America. We are pleased with the efforts made by DECC to engage with a wide set of stakeholders on this issue. Maintaining an open and honest dialogue with key stakeholders will help alleviate concerns in this area.

31. We believe that utilising and making available the latest advice from the Health Protection Agency as the right action to take at this time. Independent expert advice is also required from trusted parties for both Health and Privacy issues to stop myths permeating in the media, creating unfounded unease amongst consumers.

Is there any evidence that consumers’ concerns about smart meters are declining or growing?

32. We have no evidence of consumer concerns growing. Our own direct marketing campaigns have seen unprecedented positive levels of response to take part in our smart metering trials.

Will the commercial benefits of smart meter roll-out be captured within the UK?

33. We are already seeing the creation of new “green” jobs and have plans for many more. As a result of our trials we have opened two smart metering centres of excellence, we have trained over half our in house meter installation workforce to complete both gas and electricity installations and will be recruiting further to up-skill and address resourcing issues for the rollout.

Will DECC’s current approach to roll-out, including on procurement and establishment of the central Data and Communications Company, deliver an optimal data and communications strategy?

34. We support the approach taken by DECC. The procurement activity appears to have identified a number of high quality contenders for data and communications service provision.

35. The Data Communication Company delivers interoperability and provides further opportunities to simplify industry processes, to enable a better customer experience and deliver better value for customers.

What criteria should DECC use to measure the ongoing success of roll-out?

36. The DECC impact assessment includes costs and benefits. The ultimate measure will be the extent to which these are delivered and in particular the sustained reduction in energy consumption which is the prime driver. A key early measure will be the level of customer acceptance of smart metering as a positive initiative. DECC recently published a framework for measuring and monitoring the rollout and potential benefits which they along with Ofgem will use to track and report on progress.

February 2013