Advanced meter deadline fine sets precedent for smart meter rollout

Last week we saw npower fined £2.4mn by Ofgem for failing to take all reasonable steps to install advanced meters at around 4,000 meter points before the April 2014 deadline. The regulator warned that suppliers should ensure that similar mistakes are not repeated in the smart meter rollout.

In issuing its decision, Ofgem said that npower had not taken all reasonable steps to install advanced meters. It took the view that npower had left it too late in the roll-out period for its efforts to install advanced meters to be effective, that sufficient efforts to engage with customers to resolve installation difficulties had not been made, and that the supplier had not ensured that all meters were able to send meter readings. The regulator said that as a result of npower’s actions, business customers had lost out on the benefits of advanced meters, including the opportunity to save money on bills.

Although this case concerns the non-domestic advanced meter rollout, it sets a precedent for how potential failures in relation to the domestic smart meter rollout could be handled. npower had approximately 22,400 meter points at which it needed to install advanced meters, and in comparison, our market share data suggests that npower has over 8mn domestic meter points. This highlights the differences in the scales of the two programmes, and, we can only imagine what Ofgem’s stance would be if it judges that a supplier has failed to take all reasonable steps to install smart meters at the properties of their domestic customers. Given that the consumer detriment would likely be viewed as being greater for domestic customers than for business customers, the regulator may seek to impose even greater penalties.

The first financial penalty in relation to the smart meter rollout was issued in June when Ofgem announced that EDF Energy would pay out £350,000 after it missed its target to install meters for 2017. Although the supplier met its target less than a month later, the regulator’s approach signals that it is taking the enforcement of smart metering obligations very seriously.

All suppliers are required to take all reasonable steps to install smart meters at their domestic customers’ properties by the end of 2020. The regulator’s view that npower had not acted early enough to ensure its advanced meter rollout would be effective should send a signal to suppliers that they need to act now to ensure that they can effectively participate in the smart meter rollout while meeting all of the complex regulatory requirements that the programme requires.

We’ve launched a service to help suppliers untangle the world of smart meter regulation. By providing a clear, plain English version of all the smart metering obligations in one place, suppliers can easily understand what they need to do in order to successfully roll out smart meters. The service also includes a monthly update report, which tracks all the latest developments in the world of smart meter regulation, including policy developments, changes to code governance, and Ofgem decisions.

For more information on the Smart Meter Regulation Service please contact Rowan Hazell at r.hazell@cornwall-insight.com

Related thinking

Business supply and services

A look back at 2020 part 3

As we take our first steps into 2021, we continue to look back at the biggest developments in the UK energy markets in 2020, setting us up for the significant year ahead. The mergers and exits from the supply market that were seen in 2019 continued into 2020 and led...

Regulation and policy

What will the introduction of the Retail Energy Code mean for metering companies?

Ofgem has proposed that certain metering companies will need to become full parties to the new dual fuel Retail Energy Code (REC). What will this mean in practice? Metering Equipment Managers (MEMs) is a term introduced for the REC, encompassing electricity Meter Operator Agents (commonly termed MOPs) and gas Meter...

Energy storage and flexibility

FiT costs to reach all-time high amid COVID outbreak

Energy Third Party Charges (TPCs) have certainly been in the limelight recently, and rightly so as less consumption from non-domestic sectors is resulting in a greater recovery of money from domestic households amid the COVID-19 outbreak. Several measures have been taken to date to protect domestic suppliers and consumers from...

Home supply and services

DCC systems now supporting over 4mn meters

One year ago, the SMETS1 end date was approaching for suppliers with derogations and for smart meters installed for prepayment customers. At this time, there were only around half a million SMETS2 meters installed, with almost 12mn SMETS1 meters deployed. A year on, SMETS2 installs have ramped up significantly, and...

Home supply and services

The competition is on in the domestic energy market

It is difficult to deny that the Big Six have faced significant competitive pressure in the domestic market over the course of the year. Despite the 11 domestic market exits recorded since January 2019, new entry, new propositions and revitalised sales channels have resulted in some of the highest switching...

Home supply and services

Match abandoned: SSE and npower exemplify tough playing conditions in supply

SSE has announced that the merger of its GB retail supply business with npower has been called off. It was clear that the deal was in trouble back in early November when SSE told the stock market that the terms of the merger were being re-negotiated. This was always a...

Home supply and services

What should be the smart response to the smart meter rollout deadline?

Suppliers are expected to take all reasonable steps to complete the smart meter rollout to all homes and eligible small businesses by 31 December 2020. With just 25 months remaining the National Audit Office’s (NAO) recent report on the programme has found that the number of meters that will be installed will...

Announcement

Cornwall Insight Response to MMO

Ofgem has just put out its decision on the Market Making Obligation. The headline is that the regulator will not suspend this year the initiative that helps smaller parties access electricity wholesale products, but is likely to do so once the SSE/ Npower merger and the acquisition of Scottish Power’s...