New consumer protection measures needed in U.K. smart meter rollout


London, U.K. — (METERING.COM) — August 18, 2008 – A smart meter rollout in the U.K. must be accompanied by some new consumer protection measures and as much transparency as possible, especially in relation to retail pricing, as well as appropriately targeted consumer information, advice and education, according to a new report from the National Consumer Council (NCC).

The report, “the consumer implications of smart meters”, compiled by energy policy specialists Gill Owen and Judith Ward from Warwick Business School, assumes two main smart meter rollout options – a “supplier hub” model in which energy suppliers decide how to provide the rollout and a “regional franchise” model in which suppliers will be required to use smart meters installed by companies awarded regional franchises – but finds that measures are needed whatever model is adopted.

One of the major issues for consumers is the potential cost of a smart meter rollout and how they would be asked to meet these costs, which could be well upwards of £5 billion in today’s prices. Accordingly additional costs to consumers should be minimized, while the benefits which should flow to them should be maximized.

Smart meters are expected to lead to fewer complaints over the medium to longer term, but during the rollout there are likely to be technical problems, for example installer quality, meter malfunction, communications or billing system interface, and also customers could experience billing and switching problems while smart meters and mechanical meters continue to exist side-by-side. Energy suppliers need to ensure they have adequate numbers of properly trained customer service staff to deal with consumer queries and complaints arising from the installation of smart meters, including home-access problems.

Energy suppliers already have to comply with data protection laws so data protection should not create any significant problems for consumers in a smart meter rollout. However there needs to be a look at data capture, use, storage, sharing and ownership issues to ensure consumer protection is adequate. Energy suppliers need to ensure that technical problems between home networks are avoided or effectively managed, and they need to provide consumers with adequate information and clear procedures for resolving problems.

Smart meters will benefit prepayment customers but much of the benefit may be in the form of better and new services rather than dramatic price cuts. Whilst improvements in technology may tackle some of the causes of higher additional charges, there are also other factors causing the differentials between prepayment and direct debit, plus an expansion of payment options could raise the additional costs for prepayment.

Smart meter functionalities, such as switch between credit and prepayment, remote disconnect and load reduction as an alternative to disconnection, will reduce suppliers’ costs and thus should benefit consumers, provided that adequate consumer protection safeguards are in place. While the existing consumer protection measures that apply to debt should still apply when smart meters are introduced, Ofgem needs to review the legislation, licence conditions and codes of practice governing the final stages of debt recovery/disconnection, and any potential uses of load limiting, to ensure customers are adequately protected.

Smart meters will have the potential to provide some valuable new services for vulnerable consumers. However, because they can provide more information on energy costs, they could increase the incidence of self-rationing and self-disconnection, unless other action is taken. Suppliers should be required to provide effective energy efficiency advice, alongside the smart meter installation, in order to encourage people to take up energy saving measures. For those with sight problems there may be technology solutions that can help, such as a talking display.

Effective feedback on expenditure and consumption also will be critical in increasing consumer awareness of energy use. A user-friendly and accessible electronic display, linked to the electricity and gas smart meters could provide this but some consumers may prefer other feedback methods, such as via the internet, the bill or text message, so there should be choice in the form of feedback.

In time, there is likely to be a multiplicity of new tariffs and services offered in tandem with smart meters. However, there will be considerable scope for more complexity and confusion as a result of the different offers. Much will depend on how sensitively energy suppliers develop and market new tariffs, as well as consumers’ willingness to alter usage patterns and their understanding of new tariffs. Comparative information about tariff offers on utility switching sites will be very important to help consumers choose between supplier offers. Choice of new tariffs should be voluntary and tariffs should continue to be offered competitively.

Ofgem also should ensure that consumers are safeguarded from inappropriate marketing and/or mis-selling by energy suppliers in the wake of a smart meter rollout.