Competitive meter operation in the UK – four years on
Metering is seen as an exclusive prerogative of electrical utilities – a necessary function to record customer consumption, which in turn allows costs of supply to be recovered. The meter is the organisation’s property, and its calibration, installation and maintenance is restricted to specialised staff, essential to maintain suitable standards of metrology and security. Associated with this is an infrastructure of meter testing and repair stations. It all adds up to a considerable asset base with significant value.
In 1990 this tradition began a process of change in the UK, starting with transformation of the electricity industry from a state-owned integrated monopoly into a mix of private companies in the generation, transmission and distribution sectors. The legislation requiring this unbundling of functions did not in itself call for changes in metering arrangements, but developments since have drastically affected such arrangements, particularly as to who should own and operate the meter.
THE COMPETITIVE SUPPLY MARKET FROM 1990 TO 1998
The competitive supply market started in 1990 by allowing customers taking above 1 MW to choose a supplier (Figure 1). The split between the supplier providing contractual (competitive) supply and the distributor – the Public Electricity Supplier (PES) – providing physical supply led to consideration of where metering and data collection belonged.
It was concluded that provision, installation and maintenance of the requisite metering equipment should be carried out through a meter operator (MO), who would also register the meter with settlement on behalf of the supplier. This was necessary in order to identify who should pay the electricity pool for the energy recorded. So as to facilitate commencement of the market, the host PES was given the franchise for meter operation, as well as collection of metering data, until 1994. Indeed, UK law at that time did not permit any other party to own a meter, although this was changed in 1992 to allow a customer to provide his meter.
When the market was extended in 1994 to take in 100kW and above customers, competition in metering provision was introduced as a way to reduce metering costs. This took the form of abolishing the PES franchise and allowing the customer to appoint the MO. The new arrangements were therefore essentially as Figure 1, albeit with meter operation ‘under new management’. To take advantage of new business opportunities, all PESs set up a meter operator business, as did some independents, including one meter manufacturer and a subsidiary of the grid operator. A total of 19 companies entered the market as MOs in 1994.
MO CODE OF PRACTICE
Before market extension, concerns were expressed about maintaining safety, security and technical standards, since operatives of the new competing companies – many without a traditional background – would require access to the PES distribution system to install meters. A voluntary Code of Practice for Meter Operators was agreed early in 1994 which addressed responsibilities and interface issues.
The start-up of the new market was not a success, for a number of reasons well documented elsewhere. Timely data was not available from many sites for some time, caused by, for example, such things as unavailability of sufficient telephone lines for communications links and problems with a newly introduced Electronic Registration System operated by settlement. Although this was not the fault of the MOs, the blame tended to rub off.
Settlement subsequently appointed an auditor with powers to visit sites and record non-compliances against MOs if pool agreed procedures were not strictly followed. (Some of these procedures introduced time limits for actions). These non-compliances were – and still are – reported at meetings of the pool executive. It was apparent that the MO’s pivotal role carried heavy responsibilities and that the risk of being non-compliant was ever present, even when the fault was that of another party.
An Association of Meter Operators was formed in 1996, partly in order to close ranks for self protection. This offered the platform for a common lobbying position and employed a consultant to attend key meetings on its behalf to present unified views. Some considerable benefits have resulted from this strategy.
The new trading arrangements for 1998 (the full market covering all the UK’s 22 million customers, which has now started) allow use of metering or profiling – the use of estimates of consumption based on standard load shapes for different customer types – for below 100 kW supplies. Daily settlement (termed primary settlement) continues as at present, but encompasses two distinct sources of data.
The first encompasses the existing above 100 kW metering and data collection systems, which provide half-hourly remotely collected metered values to pool timescales. It is known as MIST (Metering Inside Settlement Timescales). In addition to existing systems these now include PES customers who have not opted for competitive supply since, to facilitate the market, it was agreed that it should be mandatory for all 100 kW sites to be fitted with MIST metering.
The other source is MOST (Metering Outside Settlement Time-scales). Each supplier provides estimates of the 48 half-hourly values of energy it will take at a particular grid point (GSP) by summating profiles and expected demands of each individual customer supplied from that point. All suppliers’ submissions are then aggregated, adjusted to match the GSP residue, and used in the settlement process for that day as if it was real metered half-hourly data. Figure2 illustrates this process.
At a later stage a secondary reconciliation takes place for MOST supplies. As meter readings come in various forms to various time-scales, the supplier verifies his estimated profiles, either fully if there is a meter recording half-hourly values, or partly (the volumetric element) for monthly and quarterly read meters. Over a period of 14 months readjustment of supplier estimates and of consequent payments made is then carried out between the relevant suppliers.
It is the supplier’s responsibility to bring data to settlement. He discharges this by appointing three agents for each of his customers – a meter operator to provide, install and maintain the meter; a data collector to collect and validate the data; and a data aggregator to collate and process the data and submit it in a format suitable for settlement. The supplier will tie these agents into contracts incorporating service level agreements. For the next two years the host PES has been given a franchise in meter operation, data collection and data aggregation where a customer has a non-half-hourly recording (MOST) meter.
CHANGE OF SUPPLIER
One important facet which affects metering is the identification of metering points to facilitate change of supplier under the new arrangements. Each PES has been required to establish a meter point administration service through which it registers customers. Each customer has a unique reference number. This number indicates both the fixed criteria, such as meter identifier and physical supplier, and changing criteria, such as contractual supplier and his agents. Having signed up a customer, the new supplier asks the PES to register him and to make the necessary changes to the customer number. This is ratified after clearance with the previous supplier (to ensure there is no outstanding debt or other problems).
IMPLICATIONS FOR METERING
It should be noted that up to now meter ownership has been split between MOs and customers, the latter either leasing the meter from the MO or buying it outright. Additionally, the arrangements have meant a requirement for new metering equipment, whose costs have been separated out as a specific annual charge, taking in the equipment capital element, the communications link (to enable data collection) and the provision of the meter operation service. This will continue for the larger customers.
However, for smaller customers the new arrangements allowing profiling mean that in practical terms there is no need to change an existing meter to change supplier – the supplier can decide whether or not it wants to change. The incentive in fitting a half-hourly recording meter is that the risk of trading on profiled (estimated) data is eliminated. Suppliers are expected to regard the cost of full MIST arrangements as viable for customers with a demand in excess of about 70 kW. For those below 70 kW the existing meter will probably be left in place and MOST arrangements will be used.
As a ‘half-way house’, a meter without communications links but with the ability to record half hourly values and store them for a set period is now available. When it is fitted, it allows the supplier effectively to trade on actual readings rather than estimates in the secondary reconciliation process (but not in primary settlement). However, it is too early yet to evaluate the relative values of the risk of trading on profiles as against the cost of providing and fitting this risk-avoiding meter.
The PES franchise means that competitive meter operation and data collection will only apply to sites with half-hourly metering until 2000. Until then the host PES has to offer these services to any supplier on a non-discriminatory basis, and they are defined in service level agreements which form part of the Distribution Use of System (DUoS) agreements which exist between each PES and each supplier in that PES area. After 2000, meter operation will be fully competitive for all types of metering. It was thought unlikely that any but the PES MOs would then offer services for non-half-hourly meters, but recent regulatory moves have opened this up to question.
All agents, including MOs, have been required to be accredited by the pool, a process to ensure that they can operate within the new arrangements for data exchange between market entities using a data transfer network which has been established by each PES. It was originally expected that new MOs would enter the 1998 market – perhaps smaller companies which might offer lower cost services to domestic customers.
However, only 16 of the original 19 MOs are still registered, the smaller independents having come out of the business. In view of this, and since accreditation is an expensive process for any new entrants (and indeed is not the only expense of being able to operate) new small entrants may be unlikely. The UK regulator (OFFER) does, however, expect to see new entrants offering bundled metering services.
The regulator is currently proposing that PESs should be required to separate their supply and distribution businesses. There is then the related possibility that supply, distribution and metering might be separately licensed. Although many PESs have established metering businesses to deal with all their metering interests, and already effectively operate supply and distribution as separate functions, they have not welcomed proposals for a complete split into separate companies.
In the latest consultation paper, OFFER has confirmed that it wishes to see eventual full competition in metering services, to include meter provision, meter operation and data collection which will be carried out by the PES or an independent meter services provider. It sees data processing and aggregation as a supplier-linked function, however. There are still questions about a provider of last resort, and whether minimum technical standards should be imposed for new meters. Two approaches as to the future structure of competitive metering services have been identified for debate, one of which envisages PESs having to auction off part or all of their asset base.
Despite initial concerns with regard to maintaining safety, technical and security standards if metering was allowed to be undertaken by parties other than the traditional supply utility, there is no evidence to suggest that there have been significant problems after more than four years of competitive meter operation in the UK. This has undoubtedly been aided by procedures laid down in the MO Code of Practice. The continuing role of this code has been accepted for activity post-1998.
In the short term it would appear that there is likely to be little or no change in the metering arrangements for the majority of customers. In the longer term, it remains to be seen who will be providing metering services post-2000. There is evidence of a critical mass being necessary for success in the business and PESs, with their long experience and large resource base, are well placed to provide such services.
However, the regulator seems determined to ensure that PESs do not have an advantage over potential new entrants – the independent meter service providers – who he sees as essential for full competition to be successful. The dramatic changes and paradigm shifts which the UK has experienced since 1990 look set to be a continuing process!