HC 1617 Smart Meter Roll-out

Supplementary written evidence from British Gas

About British Gas

British Gas is the UK’s leading energy supplier, supplying or providing energy services to half of all UK homes and c. 1 million businesses.

With 11,000 engineers, British Gas is the UK’s leading supplier of decentralised energy and energy efficiency measures

· We have insulated 200,000 homes in the past year alone and have gone early on the Government’s Green Deal through our "Home Energy Plan"

· We are leading the rollout of Smart Meters, installing c. 400,000 so far

· We are partners on over 50 Community Energy Saving Programme, or CESP, projects, giving whole-house makeovers to communities around the UK

· Our analysis shows that all of this can make a huge difference to energy use. To take energy efficiency alone, British Gas customers have cut consumption by over 22% over the past 5 years as a result of energy efficiency measures – with those installing loft insulation and new boilers cutting energy use by 44%

Smart Meters

British Gas will be responsible for installing around a third of the smart meters required in the UK. Already around 400k of our customers benefit from smart meters.

We are taking a leadership position and deploying smart meters now because we recognise that smart meters will transform our relationship with our customers by giving them real-time, transparent billing information – and by advising them on how best to cut energy use.   We have undertaken a huge amount of customer research, including trials with both the Cabinet Office and Ofgem, and interviews with over 20,000 smart meter customers to ensure we give customers what they want

 

British Gas fully supports a 2019 completion date. We firmly believe that the customer benefits of understanding energy bills – and how to tackle them – must be realised as soon as possible given the rising unit cost of energy and current consumer concern over pricing.  

 

Behaviour change

We agree with the NAO report that smart meters alone will not be enough to stimulate the behaviour change required of consumers if they are to reduce consumption. However, significant reductions in energy usage – above those set out in the Government Impact Assessment – can be made with proper support (12% according the world’s most comprehensive study of smart meter use), above all tailored building and the provision of energy efficiency advice.

Such savings will occur because there is an incentive for the energy supplier to engage with their customer – both to win them and keep them as energy customers, but also to ensure customers see British Gas as a leading provider of energy services such as energy efficiency (which is where our business model is going).  

We do need two things from DECC to ensure the consumption savings expected of smart meters can be realised:

 

        Firstly, customers must be able to receive holistic energy efficiency advice as they receive their smart meter. Some Consumer Groups are proposing to ban a conversation an Engineer might have when in the home, as they are concerned this could be a sales technique. This makes little sense particularly as we try to raise awareness of the Green Deal, but we have developed a Sales and Marketing Charter that, whilst preventing the completion of Sales during a Smart Meter Installation visit, does provide a clear choice for customers before the smart metering installation visit as to whether they wish to receive information about products and services.  We believe this protects the consumer but also ensures customers can get quality energy efficiency advice.

        Secondly, default access to half-hourly data is needed for maximum understanding and management of energy use. Without this data, tailored bills are difficult; appliance-by-appliance level analysis over how to cut bills is impossible, and Time of Use Tariffs will be ruled out. We therefore advocate default access to data, but with clear opportunities for "opt-out" for customers who wish to (less than 19 out of 100,000 we wrote to recently have done so).

Implementation

In the PAC Committee’s initial response to the NAO report, the Committee noted the importance of ensuring flexibility where technology changes so rapidly.

We agree with this, and would recommend that, where enduring solutions are not yet possible, DECC should isolate challenging design decisions in the foundation phase and make these nearer the "go live", specifying clearly which design exceptions are tolerable in the interim. This would improve market confidence and transparency whilst retaining control and confidence that sufficient functional richness is in place to deliver the Impact Assessment benefits. DECC must also provide those suppliers actively planning to install meters in foundation phase with an assurance that their assets, including the communications module, need not be replaced prior to the end of their natural life.

We do not believe that interoperability is the constraint that some may suggest. Ofgem has already developed a regulatory framework for Advanced Meters that can be extended to "compliant" smart meters in the foundation phase. In addition, we are aware of a growing presence in the market of interoperability facilitators that can provide pseudo-Data Communications Company (DCC) services on a commercial basis.

 

DECC does have a number of critical decisions to make in the coming months. A 2019 roll-out completion depends on DECC enabling active deployment in the foundation phase.  Without a 2012 start, we believe suppliers will be unable to complete its roll-out of 16m meters by 2019 without unacceptable increases in cost and degradation in quality arising. We see this being true for the industry the longer they wait. For example, without an active foundation phase, the peak number of meter installers required will be 2,600 more, leading to a premium cost of circa £120m per annum.  However, we believe that DECC is in a good position to make these decisions, provided they build in flexibility where necessary. 

 

Conclusion

We hope this information has been helpful in summarising our approach. British Gas is keen to do all we can to shape and ambitious and customer-centric rollout.

28 October 2011

Prepared 14th November 2011