Smart meter-rollout -the-easter-package[1]

Smart meter roll-out––the Easter package
May 2012

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Contents

Introduction ................................................................................................................................................................................ 3
Major smart meter update issues on cue ............................................................................................................................ 4
DECC milestones ...................................................................................................................................................................... 5
No exemptions granted from smart meter roll-out ......................................................................................................... 6
DECC seeks views on proposals to put consumers at heart of roll-out..................................................................... 7
Government makes smart meter data pledge .................................................................................................................... 8
DECC sets out DCC licence conditions ............................................................................................................................. 9
Smart Energy Code takes a step forward ......................................................................................................................... 10
Sales banned during smart meter installation .................................................................................................................. 11
Costs of roll-out fall ............................................................................................................................................................... 12
Glossary .................................................................................................................................................................................... 13

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© Cornwall Energy 2
Smart Meter supplement—May 2012

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Introduction
Welcome!
On 5 April DECC published the latest round of documents regarding the Smart Metering Implementation Programme
(SMIP). The publications include a number of consultations and the government’s response to earlier consultations
issued in August 2011. Key documents published:
 programme update document
 consumer engagement strategy consultation—closes 1 June
 consultation on data access and privacy—closes 1 June
 data and Communications Company (DCC) Licence Conditions and Licence Application Regulations consultation—
closes 1 June (16 May for aspects concerning application regs.)
 Smart Energy Code consultation—closes 1 June
 government response to consultation on draft licence conditions and technical specifications for the rollout of gas
and electricity smart metering equipment
 government response to Consultation on draft licence conditions for a code of practice for the installation of smart
electricity and gas meters; and
 updated Impact Assessments
Introducing the documents energy minister Charles Hendry said: “In less than three years energy suppliers will begin the
mass roll-out of smart meters across the country and I am determined that consumers are at the heart of this ambitious
programme”.
As a package the documents provides much needed clarity for market participants, particularly suppliers who will be
responsible for the roll-out. Arrangements for the current “foundation” stage are clearer, but much still needs to be
completed to put in place the enduring arrangements for the beginning of the mass rollout in 2014.
This supplement provides an overview each of the key documents, summarised in a single page, and sets out what the
programme means for market participants and areas of work that are still to be concluded.
Nigel Cornwall
May 2012


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Major smart meter update issues on cue
The update, a raft of further consultations and other documents from the Smart Meter Implementation
Programme issued just ahead of Easter.
Energy suppliers are required to complete the roll-out of smart meters to domestic and smaller non-domestic
customers by 31 December 2019—a “challenging but achievable” timescale. The summary of the programme status
issued on 5 April provides detail on the smart meter roll-out strategy and supports further developments in the
foundation stage before the mass roll-out starts in 2014.
During the foundation stage the industry is to develop a framework to help the industry manage the transition to the
enduring arrangements and the period while the enduring system is being established. A proportion of existing meters
will need to be replaced, on a business-as-usual basis, before full specifications are finalised. The government’s plans aim
to provide industry with flexibility to manage the transition efficiently, as well as gradually increasing clarity on the
enduring solution by setting out the roll-out obligations and technical specifications.
Suppliers will be required to offer an in-home display as part of any compliant smart meter installation during both the
foundation stage and mass roll-out. But the government has decided not to introduce exemptions in relation to early
installations of domestic smart-type meters that do not meet the technical specifications.
The government also confirmed its intention to publish shortly the conclusions regarding the Smart Metering Equipment
Technical Specifications (SMETS). The SMETS will define the equipment, but not the communications technology (for
example the Home Area Network (HAN)), to be used. But it does require that HAN technology must be based on
open standards. The government believes this will give suppliers the freedom to select communication technologies that
will help support “a productive foundation stage”. But in the future the government does intend to develop a
specification for a communications hub, although this will not be required under the initial SMETS.
To ensure consumers receive the functionalities set out in the March 2011 prospectus response, the government has
decided to introduce a licence condition requiring suppliers to utilise the functionality of smart meters installed in
consumers’ premises. It will consult on proposals later this year.
The update also confirmed that DECC will not place obligations on suppliers to enrol meters with the DCC at this
point, and it does not intend to apply obligations retrospectively. To facilitate the enrolment of smart meters that
comply with the initial version of SMETS, the government will publish in the summer the enrolment criteria for meters
to be managed by the DCC. The government is also minded to introduce a general licence condition to ensure suppliers
take all reasonable steps to address residual risks.
As well as providing an update of the programme to-date, the supporting technical specifications and draft licence
conditions, the suite of documents issued on 5 April included a number of separate consultations which we have
outlined in this document.
Over the next 12 months the government intends to implement the licence changes and to further develop the
regulatory, technical and commercial framework (see p5). Measures relating to consumer engagement and protection
will also be finalised. Regulations governing the roll-out are expected to be laid before parliament in autumn 2012;
regulations relating to the installation visit and the associated Code of Practice will be progressed on the same
timetable.
The consultation on privacy and data access will run until late May; any necessary regulations are planned to be laid in
autumn 2012 and come into force around the turn of the year. Similarly the government expects any regulation relating
to the Consumer Engagement Strategy to come into force by the end of the year.
The publication of these documents is a key delivery milestone for DECC during the foundation stage.
There is a veritable feast of information here, which contains some important policy developments,
which we will address more fully in coming issues of Energy spectrum.
DECC


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DECC target
DECC milestones
dates
2012 Implement the licence changes as outlined in the 5 April 2012 publications
2012 Notify the rollout licence conditions to the European Commission
5 April 2012 Notify first iteration of SMETS to EU (completed)
Publish “Monitoring & Evaluation Strategy” and consult on how powers granted
Spring 2012 under the Energy Act can be used to modify licences enabling them to gather data
from Suppliers on Programme costs and benefits
Consultation on Privacy and Data Access closes
Consultation on Draft DCC Licence and Licence Application Regulation closes
June 2012
Consultation on Smart Energy Code closes
Consultation on Consumer Engagement Strategy closes
Summer 2012 Consult on further version of SMETS
Government lays licence conditions relating to the Smart Metering Installation
Summer 2012
Code of Practice before Parliament
Summer 2012 Further develop the SMETS with a further version consultation
Consult on the necessary criteria to assist the enrolment of smart meters into the
Summer 2012
DCC and the novation of Foundation Stage contracts from Suppliers to the DCC
Summer 2012 Consult on the legal draft of the first version of the Smart Energy Code
Summer 2012 Commence the first DCC licence application process
Autumn 2012 Government lay regulations governing roll-out before Parliament Code of Practice
Any necessary regulations resulting from privacy and data access consultations are
Autumn 2012
laid before Parliament
Late 2012 EC approved SMETS regulations come into force
Late 2012 Installation visit regulations and the associated Code of Practice come into effect
Any necessary regulations resulting from privacy and data access consultations
Late 2012
come into force
Late 2012 Any regulation relating to consumer engagement strategy comes into force
Early 2013 Regulations on privacy and data access come into force
Obligations in place for the necessary criteria to assist the enrolment of smart
Early 2013 meters into the DCC and the novation of Foundation Stage contracts from
Suppliers to the DCC
March 2013 Procure the Data & Communication Service Providers on behalf of the DCC
April 2013 Award the DCC licence
H2 2013 Central delivery mechanism for consumer engagement in place
Initial review of benefits realisation against those forecast in the Impact
Before 2014
Assessment
Further review of benefits realisation against those forecast in the Impact
By 2018
Assessment


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No exemptions granted from smart meter roll-out
DECC has published the government’s response to the August 2011 consultation on draft licence
conditions and technical specifications for the roll-out of gas and electricity smart metering equipment.
The government previously determined the roll-out should be completed in 2019 but asked what specific date should be
set in licence. Acknowledging respondents’ concerns regarding the timetable the government has landed on an end-date
of 31 December 2019.
A major focus of the previous consultation was the Smart Metering Equipment Technical Specifications (SMETS). Views
were invited on the proposed approach to developing the SMETS and on the Industry’s Draft Technical Specifications,
which the government proposed would be the basis for the SMETS. In recognition of concerns over the time it will take
to resolve all the technical challenges involved in developing the specifications, the government has chosen to adopt an
“evolutionary approach” to their design.
The first iteration of the SMETS will provide for core functionality and interoperability of smart metering systems. This
confirms the position set out in the December 2011 revised Programme Delivery Plan. Although the majority of
respondents believed the roll-out licence conditions as drafted and the associated technical would support the Smart
Metering Implementation Programme’s (SMIP) objectives, the government has decided it is necessary to introduce
another licence condition that will require suppliers to utilise the functionality of smart metering systems, including for
example a requirement for suppliers to make consumption data available to consumers. A consultation on proposals for
this will follow later in the year.
Summary of supplier obligations
Separate from the August consultation the government canvassed opinion  New supplier licence conditions
in early 2012 on possible exemptions from the roll-out obligations to expected to go live by end of 2012;
enable smart-type meters to remain in place beyond the roll-out
 roll-out to be completed by 31
completion date in 2019. The government recognised the potential December 2019;
benefits of an exemption ahead of the confirmation of SMETS but
 no exemption from roll-out completion
concluded that the benefits are outweighed by the risks involved. It noted date obligation for smart-type meters
that an exemption for smaller suppliers could produce further benefits it already installed;
said it is unlikely to address the financial investment challenges faced by
 mandatory installation of smart meters
some. As such all smart-type meters not compliant with SMETS must be on replacement or installation of
replaced before the end of the roll-out. existing meters not confirmed, but
expected to coincide with start of mass
Another key aspect of the draft licence conditions was the period of
roll-out;
notice suppliers should be given before obligations take effect to install a
smart meter when a traditional meter is being replaced or installed.  further iterations of SMETS to follow
“evolutionary” approach;
Respondents saw the need for a notice period, but views were varied on
how long this should be. The government said it will work with industry  IHDs to be installed with SMETS
to establish the criteria to be met before the obligation enters into force, complaint meters; and
but it expected the replacement obligation will take effect when the mass  additional consultations expected during
roll-out commences. the year on requiring suppliers to
provide customers with consumption
The amount of notice suppliers should be given before obligations to data
offer an in-home display (IHD) take effect was also consulted upon. As
with the new and replacement obligation, many respondents agreed a notice period was necessary but believed less
time was needed for IHDs as the technical complexity of these devices is much lower. As the licence conditions are
now expected to take effect in late 2012 the government considered the need for additional notice is no longer needed.
Suppliers will therefore be required to: offer an IHD at the time of installation of any SMETS-compliant meter; keep the
offer open for 12 months after installation if initially refused; and within the 12 months of installation repair or replace
faulty IHDs. Obligations on suppliers to supply, repair or replace an IHD, following change of supplier, will take effect
when the technical specifications are further developed.
There is a lot of welcome detail here but we are still not at the end point.
DECC


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DECC seeks views on proposals to put consumers at heart of roll-out
A key element of the SMIP is the consultation on the Consumer Engagement Strategy.
DECC reiterated that the national roll-out of smart meters will bring significant benefits. But for the devices to achieve
their full potential consumers must understand what they are and the opportunities that they could bring. It has
proposed the high-level aims for the Consumer Engagement Strategy should include: boosting consumer support for the
roll-out by building confidence in benefits and providing reassurance on areas of consumer concern; delivering cost-
effective energy savings by helping all consumers to use smart metering to better manage their energy consumption and
expenditure; and ensuring that vulnerable and low income consumers can benefit from the roll-out.
These aims are to be delivered by meeting a number of more specific objectives for the Consumer Engagement Strategy:
 to develop understanding of consumer attitudes and the drivers affecting energy-consuming behaviour relating to
smart meters, and to conduct further work in this area during the foundation stage;
 to establish which parties are best placed to undertake different aspects of consumer engagement;
 to set a delivery mechanism for centralised engagement activities;
 to determine how non-domestic consumers can be most effectively engaged with the programme; and
 to determine how smart metering consumer engagement can help ensure the success of the roll-out.
Views are sought on whether these objectives are the appropriate approach.
Given the roll-out is supplier-led, the government believes that benefits will be maximised if some elements of
engagement are managed centrally. It outlined a number of behavioural theories, which strongly point to the importance
of the messenger in conveying information or advice. Although it was acknowledged that suppliers will have an
important role in engagement, third parties such as charities and consumer groups can be more effective and credible
messengers. DECC also noted that encouraging households to use
Organisation of interventions less energy does not align with suppliers’ commercial interests. It has
therefore proposed a mechanism for some centralised engagement,
established by suppliers, but with clear routes for consumer
representative input to ensure credibility. Centralising some
engagement activities under one delivery mechanism would allow for
the possibility of an umbrella brand to position individual suppliers’
roll-outs as part of a national programme. As such DECC has set out
a number of proposals for how engagement should be undertaken
on an individual supplier, co-ordinated and centralised basis.
On individual engagement activities suppliers will be required to
develop, and work in-line with, a licence-backed installation Code of
Practice (see p9) that will aim to ensure customers receive a good
service throughout the installation process. The government is also
Source: DECC
working with suppliers to implement proposals for a domestic
energy consumption comparison tool. For the centralised approach the government is intending that suppliers establish
a joined-up engagement programme with appropriate checks and balances. DECC’s current thinking is that this
integrated programme would be delivered through placing licence conditions on the larger suppliers. These conditions
would oblige suppliers to establish and fund a central delivery body (CDB) (or put in place arrangements to use an
existing body) to deliver objectives relating to consumer engagement for smart meters set by government. Obligations
could be in place by the end of 2012 with the CDB being established in the first half of 2013.
In the non-domestic sector the programme will require suppliers to comply with standards in relation to the installation
visit, and to produce and operate in line with an installation Code of Practice. Responses are requested by 1 June.
Given the experience from other roll-out programmes a successful engagement is essential.
DECC


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Government makes smart meter data pledge
DECC is seeking views on a proposed framework for securing and protecting consumers’ data that is
transmitted from smart meters.
The consultation noted that access to detailed and more accurate energy consumption data from smart meters has the
potential to deliver benefits for consumers, suppliers and the energy system more widely. It will also stimulate
innovation and competition in the developing energy services market.
But the document stressed that “consumers' interests must be protected in the smart metering world”. Concerns about
privacy have been raised in many countries already rolling-out smart meters. “It will be important to give consumers
clarity and reassurance about the ways in which their energy consumption data can be accessed, by whom, for which
purposes, and the choices that consumers have about this”, it added.
As such the proposed regime may impose tighter restrictions on the collection and use of energy consumption data
than the Data Protection Act 1998 would on its own. But this legislation would continue to apply in conjunction with any
smart metering regime. Suppliers and other data users would continue to have to comply with relevant requirements
under the Act (for example, obligations to register with the Information Commissioner’s Office and inform it about
personal data being processed, and to comply with data protection principles). Consumers would also retain their rights
under the Act, including rights to access information held about them, to object to processing that is causing them
distress, and to prevent data being use for direct marketing.
Consumers will be able to easily access their own consumption data through their in-home display, through the
connection of additional devices to the Home Area Network, or by requesting information from their supplier.
The proposed framework for supplier access to domestic consumers’ energy consumption would:
 allow suppliers to access monthly (or less) energy consumption data to bill customers or in order to fulfil “any
statutory requirement or licence obligation” without having to ask a customer’s permission. The suppliers will also
have access to daily energy consumption data “for any purpose except marketing” but there must be a “clear
opportunity” for consumers to opt-out of that collection. Other uses for consumption data may include better
detection and prevention of theft, and the development of more appropriate debt management processes;
 require distribution network operators (DNOs) to develop and submit plans for approval detailing how privacy
concerns would be addressed and what half-hourly energy consumption data would be used for. DECC is seeking
views on what the arrangements should be in circumstances where DNOs have not submitted plans or they have
not been approved; and
 allow consumers to share their data easily with third parties, such as switching sites and energy services companies.
But safeguards will be put in place to verify the identity of the person where permission has been given to third
parties to access the consumption data from the Data and Communications Company. The government proposes to
use the Smart Energy Code (see p8) to ensure third parties have arrangements in place to protect consumers.
Views are also sought on the approach to data access in the non-domestic sector, including how to enable business
customers to access their own data and understand the implications of their choices.
As with domestic consumers there would be some exceptions to this basic framework, for example to allow half-hourly
energy consumption data to be used for the purposes of approved trials, provided that the consumer had the
opportunity to opt out of the trial.
Responses are requested by 1 June. The government intends to prepare a response to this consultation, and
provide any necessary regulations for parliamentary scrutiny, later in 2012.
This seems a sensible (and necessary) set of guidelines. Consumers will be reassured the government is
taking data security so seriously.
DECC


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DECC sets out DCC licence conditions
Views are sought on a set of draft licence conditions for the Data Communications Company who will
oversee communications between smart meters and other parties.
The Data Communications Company (DCC) licence will be the key tool used by Ofgem as the regulator overseeing the
conduct of the DCC. The licence will establish the overall objectives for the DCC to ensure efficient delivery of
communication services for smart meters under the new Smart Energy Code (see p8).
The DCC will have obligations to facilitate effective competition in the energy market, innovation in energy supply
networks and price reductions. But as the DCC is not a consumer-facing body, the government does not propose to
give it a consumer-related objective. Instead it will serve consumers indirectly by providing “efficient and effective
services” to suppliers and networks.
The DCC will provide core and elective communications services, associated enabling services, and value-added
categories. To ensure customers are not disadvantaged in terms of access to the benefits of smart meters as a result of
their location, core communication services must be provided on a standard (socialised) basis.
The DCC will be appointed following a competitive licensing process run under the Licence Application Regulations,
which are to be laid before Parliament in summer. The application process will involve four mandatory stages:
qualification; proposal; best and final offer; and preferred applicant. Each stage will have a declining number of bidder
participants until a single successful applicant is selected, to whom the DCC licence will be granted.
A licence will be granted for a fixed, non-rolling term of 12 years, with a potential six year extension. Over the summer
the government will publish the qualification documentation for the initial licence competition. The Licence Application
Regulations are expected to take effect towards the end of the summer, after which the government will commence the
initial DCC licence competition via advertisements in the national and international press inviting bidders to submit a
completed qualification questionnaire. Current proposals for the DCC licence consist of terms relating to its grant and
revocation (including handover requirements) and a range of conditions covering:
 the division of the DCC’s licensed business into mandatory business (comprising the provision of core and elective
communications services as well as associated enabling services) and permitted business (comprising the provision
of value added services and minimal services);
 obligations to offer certain types of smart meter communication services and restrictions on undertaking other
types of activities;
 security obligations to maintain an adequate and proportionate level of security on its systems and assets;
 independence requirements so that the DCC would not be unduly influenced by its users or service providers;
 start-up and transitional obligations, giving powers for the DCC to be involved in smart meter market readiness
activities;
 high-level principles controlling how the DCC is allowed to charge its users for its mandatory business services;
 an obligation to maintain and comply with the Smart Energy Code;
 price control licence conditions that will limit the amount of revenue the DCC will be able to recover from its users
for operating its mandatory business, and set appropriate incentives for increasing efficiency; and
 provisions to ensure continuity of service in the event of a serious deterioration in the DCC’s financial health.
It is also proposed that the DCC licence could be revoked in the event of serious underperformance.
Responses are requested by 1 June. But responses to the Licence Application Regulations (questions 15-18 in the
consultation document) are requested by 16 May.
This is an important consultation and ensuring the DCC is managed by the most suitable organisation is
vital to the programme’s overall success.
DECC


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Smart Energy Code takes a step forward
The fourth and final consultation sets out the proposed arrangements under which energy market
participants will access and use the services of the DCC to communicate remotely with smart metering
equipment in consumers’ premises.
The industry’s new Smart Energy Code (SEC) will govern the relationship between the DCC and the users of its
services, including energy suppliers, electricity and gas network operators and other parties.
Views are being sought on key features of the SEC including:
 the overall scope of the matters that will be included in the SEC, and how it fits into the wider regulatory
framework for smart metering;
 terms for the provision of smart meter communication services by the DCC;
 arrangements to ensure systems comply with the SMETS, and requirements in relation to Communications Hubs;
 how participants will become parties to the SEC and the rights and obligations that will apply to them;
 the framework governing the services that are to be Overview of smart metering regulatory regime
provided by the DCC, eligibility of participants to receive
those services, and the terms on which they will be provided
(including charging, billing, and payment arrangements);
 how the SEC will be governed, administered and modified;
 how the SEC will ensure parties meet their obligations, and
that there are appropriate arrangements to deal with
breaches, liabilities and disputes where these arise; and
 arrangements for withdrawing from the SEC, and treatment
of intellectual property rights and confidential information.
The government has also made a number of proposals to enable
the delivery of the SEC, including: Source: Ofgem

 changing existing licence obligations and industry codes to provide an end-to-end regulatory framework for the
arrangements for smart metering;
 giving effect to the SEC being a multilateral agreement, which will include appropriate governance and change
control mechanisms to oversee its operation and development;
 identifying parties that might accede to the SEC: the DCC; gas suppliers; electricity suppliers; gas transporters;
electricity distributors; and other users of the DCC’s communication services;
 the rules and procedures that should apply when parties seek to accede to the SEC. It outlines the information that
acceding parties will have to provide and other requirements that will have to be satisfied;
 the provisions for the governance and change control process; and
 proposals for the assurance and enforcement of obligations and liabilities.
DECC also recognised that, as a result of ongoing work within the SMIP, policy will continue to develop in relation to a
number of matters that will have implications for the detailed content of the SEC. These arrangements include
development of communications hub standards; security requirements for the enduring arrangements; and requirements
relating to the technical characteristics of smart metering systems.
Responses are requested by 1 June. The government will publish its conclusions and a draft legal text this summer.
Further work to address transitional matters is ongoing. We await the publication of further papers
relating to these and other aspects affecting the SEC over the next 12 months.
DECC


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Sales banned during smart meter installation
As part of the tranche of documents issued on 5 April DECC published the government’s response to its
August 2011 consultation on licence conditions for a code of practice for installers of smart meters.
The 50-page consultation, opened on 18 August 2011 (ES294, p5, 22/08/11), sought views on new conditions that
would require suppliers to develop and adhere to Code(s) of Practice (CoP) governing the installation of smart meters
in both domestic and micro-business properties.
At the core of the CoP is a desire to ensure that during the installation consumers receive an appropriate standard of
service, are treated fairly and transparently, and understand how they can use their smart metering equipment to
improve the way in which they use energy.
In its response to the consultation the government concluded that:
 suppliers will be required to operate in-line with a set of overarching objectives governing the way they interact
with their domestic and micro-business customers when they install smart metering equipment. The focus of the
objectives will be on: standards of conduct and service; fair and transparent behaviour; accuracy of information
provided; and the avoidance of unwelcome sales and marketing activities;
 suppliers will be able to use the information they collect about customers’ responses to the installation to inform
their continuing approach to the roll-out;
 licence conditions will be introduced to require suppliers to develop a smart meter installation CoP, submit it to
Ofgem for approval, and monitor its implementation. Monitoring will also allow Ofgem to take enforcement action
where suppliers are non-compliant;
 the process for establishing and maintaining the CoP will be defined at a high-level in licence conditions and, in areas
that are of particular concern to the government or consumers, more detailed requirements for the content of the
CoP will be specified. These include requirements: to provide energy efficiency advice related to the smart meter;
not to charge domestic customers up-front for installation of standard smart metering equipment (including the in-
home display); to identify and meet the needs of vulnerable domestic consumers;
 suppliers will be able to provide written marketing material without restriction, but may only carry out face-to-face
marketing discussions during the visit with the prior consent of the customer. In addition no sales should be allowed
to be completed at the visit; and
 licence conditions will apply to smart meters that comply with the SMETS rather than other smart-type meters.
The high-level process for establishing and maintaining the CoP will be defined in the licence conditions, and will include
requirements that:
 suppliers collectively develop a CoP covering the customer experience throughout the smart meter installation
process. This must take into account the views of consumer groups and other interested parties;
 where suppliers fail to submit an acceptable CoP to Ofgem for approval the regulator will be able to direct changes
to the submitted document or designate another in its place; and
 suppliers put in place monitoring arrangements and procedures for reviewing and updating the CoP, consulting
consumer groups and seeking the views of their customers. Ofgem will also have the right to instigate changes to
the CoP once it is in operation.
Due to the EU notification process there will be a period of time before the government lays the licence conditions
before Parliament, although it expects to do so this summer, with a view to their entering into force in late 2012.
In the meantime suppliers will continue to develop the CoP and must submit it to Ofgem for approval within one month
of the licence conditions taking effect.
There are some sensible suggestions here. It is vital a robust CoP is in place to protect consumers from
unwarranted sales and marketing activity.
DECC


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Costs of roll-out fall
The government’s revised impact assessments for rolling-out smart meters to every home and micro-
business in the country by the end of this decade were recently issued.
The cost-benefit case of a mandated roll-out of smart meters has been carried out and developed over the last four
years. The analysis and evidence base has been re-assessed and updated at each key programme decision point. The
revised impact assessments take into account the latest programme assumptions.
Implementation of the programme is expected to cost just under £11bn for the domestic sector and nearly £600mn in
the non-domestic sector. But with benefits over £15bn and almost £3bn expected respectively, the net benefit (based
on 2011 values) is estimated at £7bn in total over a 20-year-time period.
With near real-time information on energy consumption, consumers are expected to make energy savings through
enhanced energy efficiency behaviour. This reduction in energy use also implies carbon savings, in the form of reduced
EU Emission Trading Scheme allowance purchases.
Overview of benefits—domestic
In parallel, smart meters will allow suppliers to make a range of
operational cost savings. They remove the need for site visits to
complete meter reads and are expected to reduce suppliers’ call
centre traffic, with fewer queries about estimated bills. Smart meters
are also expected to make the consumer switching process cheaper
and simpler, thanks to accurate billing and more streamlined
interaction between involved parties. Suppliers should see improved
theft detection and debt management; and improved consumption
information should enable consumers better manage debt.
Network operators will be able to improve electricity outage Overview of costs—domestic
management and resolve any network failures more efficiently once a
critical mass of smart meters has been rolled-out. It is now expected
these benefits will total £15.68mn, down slightly from the August
2011 estimate of £15.97mn.
Suppliers will be required to fund the capital costs of smart meters,
in-home displays and potentially the communications hub that links
the meter(s) in a property to the supplier via the DCC. Suppliers will
also have to pay for the installation, operation and maintenance of
Source: DECC
equipment. The roll-out also implies upfront investment in supporting
IT systems and the DCC, as well as their on-going maintenance. Other industry participants such as distribution
network operators will also need to upgrade their systems to integrate into the smart meter network. Further costs
include the accelerated disposal of basic meters being replaced, the energy consumed by the smart meter equipment
itself and the launch and support of a Consumer Engagement Strategy (see p5). The government expects these costs to
reach £10.85bn, down on the £11.06bn predicted last summer.
With total expected present value (PV) costs of £10.9bn and total PV benefits of £15.7bn up to 2030, the net present
value (NPV) for the domestic roll-out of smart meters in GB is estimated to be £4.8bn—down slightly on the August
estimate. The roll-out is now expected to reduce the average household electricity and gas bill by £25 in 2020, and by
£40 in 2030. The changes in costs are mainly driven by the updated assumptions regarding timing and roll-out profiles
and new assumptions about risks from early meters. Changes to external input parameters has had a smaller impact on
costs; most notably moving the PV base year into 2012 and increasing projected fossil fuel and carbon prices.
The government has committed to publish a smart meters monitoring and evaluation consultation and strategy before
summer.
At this stage there is no material change in predicted costs of the programme, but the monitoring and
evaluation strategy is a welcome and necessary development.
DECC––domestic DECC—non-domestic


cornwallenergy
Glossary
Advanced Meter Reading (AMR)––Meter that, either on its own or with an ancillary device, and in compliance with
the requirements of any relevant industry code provides measured energy consumption data for multiple time periods
and is able to provide the remote access to such data. Energy suppliers are under licence obligations to supply larger
customers through AMR equipment from April 2014. Smart meters have additional functionality to AMR equipment.
Codes––Industry codes establish detailed rules that govern market operation, the terms for connection and access to
energy networks. The supply and network licences require the establishment of a number of industry codes that
underpin the gas and electricity markets. The electricity codes are: Balancing and Settlement Code (BSC), Connection
and Use of System Code (CUSC), Distribution Code, Grid Code, Master Registration Agreement (MRA), System
Operator-Transmission Owner Code (STC) and Distribution Connection and Use of System Agreement (DCUSA). The
gas codes are the Uniform Network Code (UNC), Independent Gas Transporter (IGT) Network Codes, and Supply
Point Administration Agreement (SPAA). The Smart Energy Code (SEC) constitutes a new industry code that will apply
to gas and electricity markets.
Commercial interoperability––Contractual arrangements to ensure suppliers can make use of all smart metering
equipment functionality following a customer switch.
Customer–– Any person supplied or requiring to be supplied with electricity or gas at any premises in Great Britain
(supply licence definition)
Data Communications Company (DCC)––New proposed entity which would be created and licensed to deliver
central data and communications activities. DCC would be responsible for managing the procurement and contract
management of data and communications services that will underpin the smart metering system.
Data Protection Act 1998––Defines UK law on the processing of data on identifiable living people. It is the main
piece of legislation that governs the protection of personal data in the UK.
Electricity meter–– A meter which conforms to the requirements of paragraph 2 of Schedule 7 to the Electricity Act
1989 and is of an appropriate type for measuring the quantity of electricity supplied. (Supply licence definition)
Supplier––Any person authorised to supply gas or electricity to consumers. This is a licensable activity, but exemptions
from needing a licence are permitted under the Electricity (Class Exemptions from the Requirement for a Licence) Order
2001.
Estimated bills––Where a supplier is unable to obtain a meter reading, a customer’s bill will be estimated based on
past usage.
Foundation phase––This is the period up to 2014, when mass roll-out begins. The Foundation Phase provides an
opportunity to test, trial and learn ahead of mass roll-out
Functional requirements––The minimum functions that must be supported by the different elements of the smart
metering system to ensure the delivery of the benefits of smart metering. Describes what the smart metering system
must do (not how it must do so).
Gas meter––a meter which conforms to the requirements of section 17(1) of the Gas Act 1986 and is of an
appropriate type for registering the quantity of gas supplied. (Supply licence definition)
Home Area Network (HAN)––The smart metering HAN will be used for communication between smart meters,
IHDs and other devices in consumers’ premises.
In-home display (IHD)––An in-home display is an electronic device, linked to a smart meter, which provides
information on a customer’s energy consumption.
Industry Draft Technical Specifications (IDTS)—Issued in August 2011, these documents are designed to
describe, in detail, the requirements for domestic and smaller non-domestic Smart Metering equipment in Great Britain
Licence Application Regulations—These regulations will provide the regulatory framework for the award of the
DCC licence through a competitive process.


cornwallenergy
Mass roll-out stage—The period between the dates at which the DCC starts providing core communications services
and the fulfilment of the roll-out obligation as specified in the roll-out licence conditions.
Network operators––The companies that are licensed by Ofgem to maintain and manage the electricity and gas
networks in GB.
Prepayment meter (PPM)––Meters that require payment for energy to be made in advance. A PPM customer pays
for energy by inserting electronic tokens, keys or cards into the meter. References to the installation or removal of a
PPM includes the switching of any meter to or from such a mode.
Smart Energy Code—An industry code that will underpins operation of the smart arrangements. The code will
include an explanation of the roles and responsibilities of suppliers, network owners and the DCC and agreements
regarding data access and privacy and cost-recovery.
Smart grid––An energy system that can intelligently integrate the actions of all users connected to it in order to
efficiently deliver sustainable, economic and secure supply.
Smart meter––Metering equipment in Great Britain that complies with the Smart Metering Equipment Technical
Specifications (SMETS). In addition to traditional metering functionality (measuring and registering the amount of energy
which passes through it), smart meters are capable of two-way communication allowing them to transmit meter reads
and receive data remotely. They also have the functionality to allow for remote switching of payment methods, updating
of tariffs, and load-limiting/ disconnection.
Smart Metering Implementation Plan (SMIP)—This is the plan that the government will follow to install 53mn
smart meters in homes and businesses across the UK.
Smart Metering Equipment Technical Specifications (SMETS)—Formal specifications describing metering
equipment that complies the Measuring Instruments Directive. Energy suppliers will have to install SMETS compliant
meter once licence conditions have been enacted (due late 2012)
Smart metering regulatory regime––Provision of arrangements for the introduction and ongoing operation of
smart metering. These regulatory arrangements will be introduced using powers under the Energy Act 2008 to amend
existing licences and codes, and to create a new licensable activity and a new licence for the DCC role.
Technical interoperability––The capability of systems or devices to provide and receive services and information
between each other, and to use these services and information exchange to operate effectively together in predictable
ways without significant user intervention. Within the context of the smart metering system, this means the seamless,
end-to-end connectivity of hardware and software from customer premises equipment through to DCC, suppliers,
network operators and other authorised parties.
Time-of-use tariff––A customer offering where the supplier varies its charges based on when energy is used (e.g.
day/night; peak/off-peak; or by season). Such tariffs can be dynamic (changes in real time) or static (changes at
predictable times).
Wide area network (WAN)––The smart metering WAN will be used for two-way communication between smart
meters and DCC (via the WAN communications module in the customer’s premises).

If you would like further information please contact:
Ed Reed ed@cornwallenergy.com 01692 407865
Alison Morris alison-m@cornwallenergy.com 01603 283635


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