Energy and Climate Change CommitteeSupplementary written evidence submitted by Ofgem

1. Will there be an obligation on suppliers to produce accurate bills for consumers once smart meters have been installed? If so, where will this obligation be set out? [see Qs 296–297 below]

In May 2013, the Government laid draft licence conditions before Parliament, which included an “Operational Licence Condition,” which requires energy suppliers to establish and maintain a remote connection with the smart meter.1 The provision of regular remote meter readings will be a core Data Communications Company (DCC) service that will be provided to the supplier, the per-read cost of which will be very low. Standard Licence Condition 21B of the gas and electricity supply licences requires suppliers to take all reasonable steps to reflect any meter readings that they take in the customer’s next bill. These obligations and associated commercial incentives together mean that suppliers can be expected to provide accurate bills to their customers using remote reads. However, we will keep this under review and consider further action if there is any evidence of problems.

2. Will there be any limitations on back-billing domestic and non-domestic consumers once suppliers have installed smart or advanced meters (ie, after any initial discrepancies have been dealt with)? If so, where will this be set out? [see Q298 below]

With regards to back-billing, consumers are currently protected in a number of ways.

Energy UK have developed a code on billing which, among other things, limits back-billing to domestic consumers to a maximum of one year.2 Five of the “Big 6” suppliers are signatories, the exception being Scottish and Southern Energy, which has a similar commitment with relation to back-billing in their Domestic Customer Charter.3

More recently, voluntary standards for back-billing micro-businesses have been developed by Energy UK and the Industrial and Commercial Shippers and Suppliers (ICoSS) Group.4 This commits signatories to limit back-billing to a maximum of three years for electricity consumers and four to five years for gas consumers (depending on the time of year the back-bill is issued). Most energy suppliers supplying micro-businesses have signed up to these standards and a number, including the Big 6, have committed to limiting back-billing to one year by the end of 2014.5

As part of our recent Retail Market Review, we plan to introduce new Standards of Conduct with regards to how suppliers interact with consumers. These Standards of Conduct will require that domestic and micro-business consumers are treated fairly in terms of the processes and procedures a supplier has in place. This will cover their procedures for accurate billing and the time a customer has to pay a back bill. Subject to the outcome of our Statutory Consultation, these new Standards of Conduct are due to come into force in late August.6 ^, 7

As stated in our response to your first question, smart meters should provide consumers with accurate bills. Setting aside any existing discrepancies which might be discovered during the meter exchange, this should make back-billing unnecessary, except in cases where the meter has been tampered with or damaged.

3. Will non-domestic consumers be entitled to free access to their energy consumption data from smart or advanced meters? If so, where is this set out? If not, what is the reason for this? [see Qs 319–320 below]

Larger non-domestic consumers are subject to an advanced meter roll-out, which is due to be completed in April 2014. Standard Licence Condition 12 of the gas and electricity supply licences requires that these consumers be given timely access to the data provided by their advanced meter, on request. The Government has said that it intends to extend this requirement to smaller non-domestic consumers (who are subject to the smart meter roll-out) as well.

In the non-domestic market, the level of data provision and the complexity of the data service offers may vary and there are no rules governing charging for metering or data services. In practice, early experience from the installation of smart-type electricity meters to smaller non-domestic sites indicates that consumers are not being separately charged for access to half-hourly consumption data at the moment.

Aside from receiving data from their suppliers, smaller non-domestic consumers with a SMETS 28 compliant meter will be able to directly access detailed consumption information held by the meter, for free. This will be done via the Home Area Network (HAN), using a compliant Consumer Access Device. SMETS 2 and the associated HAN specifications are currently being developed by the Government and industry.

4. Licence condition 39 in the Electricity Supply Licence standard conditions states that: “The licensee must take all reasonable steps to ensure that a Smart Metering System is installed on or before 31 December 2019 at each Domestic Premises or Designated Premises in respect of which it is the Relevant Electricity Supplier.” What does this mean in practice for suppliers? What is expected of suppliers when customers wish to opt out of having a smart meter or when there are communications issues with smart meter connection?

In December 2009, the Government concluded that suppliers are best placed to take on responsibility for the rollout of smart meters.9 As a result, an obligation was placed on suppliers to take “all reasonable steps” to roll-out the meters. The “all reasonable steps” caveat was included in recognition of the fact that there may be instances where installation is impossible.

Suppliers will generally be best placed to decide how to manage their own rollouts. They may face difficulties in certain installations that they need to overcome. It is important that they have the incentives to develop their own solutions in these situations. Although, Ofgem can issue guidance to suppliers as to what might constitute all reasonable steps we do not consider it appropriate to do so at this early stage. This is because the difficulties that suppliers may face when installing meters and the solutions they may deploy to mitigate these difficulties are not yet understood. Guidance without this information could be misplaced, resulting in lower incentives on suppliers to find best-fit solutions for difficult installations and, consequently, a worse outcome for consumers. We will, however, keep this under review as the rollout progresses.

With regards to customers who wish to opt out of having a smart meter, the Government has stated that it does not expect suppliers to take legal action to fit one if they cannot get the householder’s co-operation.10 However, consumer attitudes could change over time. For example consumers that do not want a smart meter now, may change their mind when they see them use in their friends’ and neighbours’ homes. Our understanding is that the Government is actively considering how the needs of consumers should be met in instances where there are communications issues with the smart meter connection.

June 2013