U.K. energy regulator releases response to government consultation


Energy Smart

London, U.K. — (METERING.COM) — February 8, 2007 – Ofgem, the U.K. energy regulator, has released its response to calls by the government for consultation on the topic of energy billing and metering: changing customer behaviour.

Noting that the consultation is driven both by a need for the UK to comply with the EU Energy Services Directive as well as by a desire to secure a contribution from energy billing and metering towards carbon reduction objectives, Ofgem says that the starting point should be to recognize that the UK has a well-functioning, competitive retail market, in which suppliers compete not only on price, but also on the service they provide to meet their customers’ needs.

“A key element of this service competition is the information suppliers provide to customers to enable them to manage their energy use and their bills. As the costs of new metering technology decline and the costs of reducing carbon emissions from energy prices put pressure on energy prices, we expect competition in these sorts of products to intensify in the industrial and commercial market, as well as becoming more widespread in the domestic market.”

Ofgem says that there is evidence that attitudes and behaviours in the retail energy sector are being transformed. Thus government should try to avoid introducing new policy measures that replicate actions that suppliers are already taking or that undermine the incentives that the market creates for suppliers to innovate in this area and gain market share by being the first to offer new services in this area.

Furthermore, intervention of a prescriptive nature, such as requiring suppliers to install energy display devices to all households, could cause long-term damage. With a cost of such a roll-out estimated around £750 million (US$1.5 billion), Ofgem says it is very concerned about the cost implications to consumers, particularly given the limited evidence so far on their likely response to such devices.

On the question of smart meters Ofgem says its investigations have shown that suppliers are best placed to understand their customers and deliver the most cost effective solution that meets their needs.

“Suppliers are best placed to understand how different groups of customers are likely to respond to the information that smarter meters will provide. Suppliers are also better placed to understand the costs and benefits to different groups of customers of the different technologies available.”