UK energy suppliers could be forced to revise smart meter roll-out plans

The UK government has set a target for the roll-out of smart meters across the UK by the end of 2020 as a means of helping reduce unnecessary energy use and emissions and to cut consumers' energy bills.

According to government statistics, there are already over 3.6 million smart and advanced meters operating in Great Britain, but more than 50 million smart meters could be installed under the initiative as the mass roll-out programme is delivered.

UK electricity and gas suppliers are under an overarching obligation all reasonable steps to ensure that a smart meter is installed on or before 31 December 2020. To aid the scheme, the suppliers have been under a licensing obligation to submit smart meter roll-out plans. The largest of those suppliers – those that supply to 250,000 or more gas, electricity or dual fuel customers – have also been required to submit binding annual milestones for the installation of smart meters alongside those plans.

Under the current framework the suppliers would have the chance to amend their plans for roll-out in the early part of 2018. However, Ofgem said it now wants to make revisions a requirement if a supplier "has, or could be expected to have, knowledge or information that will or could have a material effect" on the annual milestones, or the assumed installation completion rates, set out in their existing roll-out plan.

It has drafted a legal direction (4-page / 70KB PDF), which is open to consultation until 15 February, to affect the change.

The regulator said, though, that suppliers subject to the requirement would need to justify any changes they make to existing plans.

"Through our monitoring activities (including regular meetings with suppliers), we will know when the evidence unpinning certain assumptions has changed," Ofgem said in an open letter (3-page / 126KB PDF). "Where a supplier submits a revised roll-out plan in 2018 (with revised annual milestones for 2018 and 2019) and we consider that the reasons given for the annual milestones are not duly justified, then the milestones from their previous roll-out plan in respect to 2018 and 2019 would continue to remain binding and enforceable (until the supplier provides a revised roll-out plan with duly justified reasons for the annual milestones within it)."

Ofgem said that large suppliers will be required to achieve a 95% completion rate against their stated annual milestones for the years 2018 and 2019 to satisfy their licensing conditions.

"We consider that suppliers are best placed to determine the impact of new evidence on their assumptions, and therefore whether something is material for the purposes of submitting a revised roll-out plan," Ofgem said. "We have therefore deliberately not specified a materiality threshold in the proposed direction. We expect suppliers to take into account examples of materiality thresholds elsewhere, for example, the thresholds relating to the enforcement of supplier annual milestones in the licence."

"These proposed amendments will ensure that suppliers continue to have in place roll-out plans that accurately reflect their capacity to install smart meters as their experience of the roll-out increases. This experience could relate, for example, to the impact of certain challenges suppliers had previously factored into their annual milestones (such as the productivity of their meter installers, number of aborted installations etc.)," it said.