Government reduces thresholds for smart metering for SMEs

03 May 2008

ESTA believes that the Government’s response to the Energy Billing and Metering Consultation represents a missed opportunity to make real inroads into carbon emissions from the Industrial and Commercial sector – especially smaller businesses.

ESTA (Energy Services and Technology Association) says: "A key element in its strategy to move the country’s energy supplies to a more sustainable basis was the provision of ‘smart metering’ to all but the smallest businesses. However, the Government announced after the consultation on smart metering had ended that it had changed the threshold so that only a small fraction of those businesses originally covered would now benefit from smart metering technology.

"ESTA believes this is short-sighted and timid. Professor Martin Fry, the Association’s chairman commented: “What is the point of publishing a White Paper setting out how the UK will meet its climate change and energy security goals if the Government then revises its own targets downwards without any discussion with either industry or consumers? We need strong leadership and challenging targets if we are to make real progress. This Government response fails to provide either.”

"The Government amendment of the threshold means that instead of gas consumers who used more than 73,200kWh being included, now only those with more than 732,000kWh are involved. This is a significant change and reduces the target from 400,000 metered points to around 40,000. The Government argues that this is the real ‘cost-effective level’ but ESTA’s research suggests that, because of recent advances in technology, businesses with much smaller energy demand could benefit from smart metering."

The May 2007 Energy White Paper says that the smart metering scheme would exclude those “non-daily read gas customers whose consumption is less than 73,200kWh per year". The Government consultation on smart metering stated that: “We therefore propose that smart metering be installed for specific segments of the SME market as follows: Profile Classes 5-8 of the electricity markets, which reflect the highest energy users in the sub-100KWh market that currently require metering to record maximum demand peaks and load factors; all non-daily metered gas sites consuming > 73,200kWh per annum”

The change in the threshold from 73,200kWh to 732,000kWh was signalled by officials at the Department for Business, Enterprise and Regulatory Reform (BERR) on 4 April 2008.

The Government response to the smart metering consultation was published on 29 April 2008 and is available at: www.berr.gov.uk/files/file45996.pdf The Executive Summary is as follows:

In August 2007 the Government published its consultation, “Energy Billing and Metering – Changing Customer Behaviour, A Consultation on Policies Presented in the Energy White Paper”1. This consultation followed publication of the Energy White Paper in 2007 which underlined the Government’s commitment to the reduction of carbon emissions and highlighted the role that individuals could play by reducing their own energy consumption. The consultation invited views on proposals to require:
• the provision of comparative historical consumption data on bills for all domestic gas and electricity customers;
• electricity suppliers to provide (where technically possible) a real-time display unit when a meter is replaced or newly installed in domestic premises;
• electricity suppliers to provide a real-time display to all consumers who request one until 2010; and
• gas and electricity suppliers to install smart meters in those parts of the SME sector, above a certain usage threshold, where it is cost-effective to do so.

Views were also invited on the Government’s expectation that, over the next ten years, all domestic gas and electricity customers will be given smart meters with visual displays and on how smart metering could be delivered to smaller businesses.

The consultation closed for responses on 31st October 2007. The responses are available on the BERR website2 and the key themes evident were:
• widespread support for a full roll-out of smart meters to all electricity and gas consumers, with differing views on how best to achieve a roll-out;
• support for the proposals for smart metering for businesses;
• broad support for the proposal to provide historical consumption data on energy bills, as long as flexibility was allowed in its provision; and
• a majority of respondents were for a variety of reasons against the proposals to require the provision of real-time display devices particularly in the context of a wider smart meter roll-out.

There were few comments on the proposals covering heat metering and unlicensed suppliers. In neither area was there any support for Government intervention.
In addition to this consultation, the Government has also undertaken a detailed economic impact assessment of the costs and benefits of different options for rolling-out smart meters. The impact assessment was informed by analysis provided in consultation responses and independent analysis commissioned by BERR.

Following the consultation, the Government has taken decisions in the key areas covered. In summary, it will:
• require historical consumption data to be provided on all domestic customers’ electricity and gas bills and statements (Section 2);
• request electricity suppliers to provide on a voluntary basis real-time display devices to particular customer segments, but will not pursue proposals for provision of such devices when a meter is replaced or newly-installed or for provision 'on-request' (Section 3);
• require electricity and gas suppliers to provide smart meters to all business customers above a certain usage threshold by 2013 (section 4); and
• to complete further economic assessment work and consultation to finalise policy position in respect of smart metering for small businesses and domestic consumers (Section 7).

Metering and billing changes are not envisaged for heating schemes or in respect of unlicensed supply, but this situation will be kept under review in respect of the ongoing Heat Call for Evidence (Sections 5 and 6).
In taking these decisions on metering and billing proposals the Government is also implementing the requirements of Article 13 of the Energy End-Use Efficiency and Energy Services Directive (Annex A).
The proposals set out here apply to Great Britain only.

1 Energy Billing and Metering: Changing Customer Behaviour – an Energy Review Consultation (www.berr.gov.uk/files/file35042.pdf)
2 www.berr.gov.uk/energy/whitepaper/consultations/billing-metering/consultation-responses/page43790.html