Smart meters: handing over control of electricity usage

This month saw a flurry of negative press about smart meters as journalists awoke to the implications of some proposed industry changes that could lead to suppliers remotely switching off appliances used by domestic consumers.

Back in July, SSE proposed a modification to the Distribution Connection and Use of System Agreement (“DCUSA”): DCP 371 – Last resort arrangements for Distributors to manage specific consumer connected devices. This innocuous-sounding modification suddenly hit the mainstream media in mid-September when various journalists reported that energy companies would have the power to disconnect people’s central heating or electric car chargers by sending instructions through their smart meters.

A comment piece in the Telegraph, sums up the sentiment:

The Energy Networks Association hit back, saying that the articles are “inaccurate and misrepresent the measures energy networks have in place to ensure security of supply”:

“Networks are there to keep Britain’s energy flowing and are doing exactly that. The proposed modification makes it clear that this would only take place as a last-resort contingency measure and only with the consent of the customer, taking place where new, innovative and flexible solutions have not been able to protect the whole network. The claims that have been made are irresponsible and misleading and may hinder the move to smart meters which is vital to achieving net zero emissions,”
– Ross Easton, Director of External Affairs, Energy Networks Association

So who’s right?

Reading the proposal, it says that: “electricity networks in Great Britain were not designed to accommodate the significant additional demand that certain consumer devices (such as electric vehicle (EV) chargers) presents (sic).”

It goes on to say that “Distributors recognise the important role that flexibility services providers and market solutions will play in delivering efficient future networks. In the event that market mechanisms fail or do not deliver to the extent anticipated the Distributors will still need to protect physical assets from overload caused, for example, by the take up of low carbon technologies (LCTs) by domestic customers. This change proposes a Distributor smart intervention as a last resort, emergency measure, to protect customers security of supply and the network assets. This proposal is not to enable the Distributor to become a flexibility service provider or to subvert market solutions.”

The proposal states that customers would be contacted, and the need for demand reduction explained to them in order to obtain their consent. This is acknowledged in the Telegraph article, but the newspaper suggests that this is the start of a slippery slope and that case-by-case customer consent can easily evolve into an automatic feature of supply agreements as the costs of balancing an increasingly intermittent electricity system grow.

In a nutshell, this captures one of the main consumer fears around smart meters – that they would be used to control their supply and the amount of energy they are allowed to use. Another fear relates to time-of-use pricing, sometimes rather sensationally referred to in the press as “surge pricing” where consumers could see prices ramping up at times of the supplier’s choosing.

Smart meter roll-out under pressure

Not surprisingly, this translated into reluctance by some consumers to accept the installation of a smart meter. Installations of SMETS2 smart meters passed the 5 million mark recently, while there are still some 14 million SMETS1 meters of which over 4 million are operating in “dumb” mode, as they lost smart functionality when the consumer switched suppliers.

As expected, installations all but halted during lockdown, and the deadline for fixing the problems with SMETS1 devices has been pushed back to the end of 2021. Over the summer, Ofgem fined Ovo Energy £1.2 million for the failure by its new acquisition SSE to install enough smart meters in 2019. SSE paid a £700,000 fine in respect of insufficient installations in 2018. Although it is not mandatory for consumers to accept a smart meter from their supplier, suppliers must meet installation targets, which has led to hard-sell tactics as suppliers seek to avoid such fines.

According to Ofgem, half of the larger suppliers failed to meet their annual installation milestones in 2019 and were outside the 10% tolerance allowed. As the technology develops, there are now customers that could have smart meters, that previously could not – unsurprisingly, suppliers report higher rates of uptake among these newly-eligible consumers than among consumers that had already declined (or at least failed to accept) the offer of a smart meter. Ofgem requires suppliers to step up their consumer engagement in order to incentivise uptake:

“We have observed that one way energy suppliers have been encouraging customers to accept the offer of a smart meter is through their product and service offers. We expect the range of innovative products and services linked to smart metering to grow over time, providing benefits to consumers, and note that energy suppliers are permitted to charge different prices for tariffs that require a smart meter and to apply entry criteria to a tariff. Such criteria may include the requirement to have a smart meter or indeed to register an interest in having one installed,”
– Ofgem

Such measures are unpopular among consumers as the letters pages of British newspapers suggest. Some consumers that cannot have a smart meter due to technology constraints such as lack of local communications connectivity object to being unable to benefit from the cheapest tariffs, while others simply object to being blackmailed into accepting a device they do not want for whatever reason.

Negative sentiment is further supported by a steady drip of media reports such as this article about a vulnerable pensioner left without a working boiler, or this about a customer who eventually had a non-smart meter reinstalled following two faulty smart meters, or this about a pensioner whose smart meter was installed 9ft above the ground due to the poor mobile phone signal, which then didn’t work with the customer being asked to take readings herself, presumably with the aid of a ladder.

According to a 2019 survey by price comparison service uSwitch:

31% of households with smart meters had reported issues with their devices since they were installed –

• 39% said that their smart displays stopped working;
• 32% said that their devices went dumb after switching;
• 13% said that their meters stopped functioning entirely.

The survey also found that, a third of households with SMETS2 meters have encountered issues since they were installed.

Despite the costs increasing and benefits shrinking at each review, the Government remains bullish insisting they will make the road to net-zero emissions faster and cheaper while reducing energy costs for consumers; however, as I have described previously, the idea that smart meters save either money or carbon emissions is a myth.

Handing over control

In Britain, we are used to unlimited domestic electricity supplies. Those of us living in rural areas know all too well that security of supply is far from ubiquitous, with fairly frequent micro-outages lasting just long enough to re-set the clocks on our kitchen appliances (ours is the last house on the local network with only a single-phase supply available. We’re also on the very end of the gas main!)

This means that the idea that someone other than ourselves could choose our levels of consumption is disturbing, but that is already the case in other countries. France, with its low levels of domestic gas use, has an electricity system that provides households with heating as well as all other power needs, and is therefore significantly more temperature-sensitive than our own. There, customers agree a consumption level with their supplier, and if they exceed that level the power cuts out – connecting one more appliance can cause the main fuse to trip. There are also peak-off-peak tariffs available, and some consumers have alarms fitted to their meters to notify them when peak hours begin.

There is also a tariff called “Tempo” in which the year is divided into days: “blue” days are the cheapest, and there are 300 blue days per year. Next are “white” days, of which there are 43 per year, and finally the coldest, most expensive days are “red” days. There are 22 red days in a year which fall between 1 November and 31 March, but not on weekends or public holidays. Each day is then broken up into 2 tariffs, so there are 6 different prices in total for a kWh of electricity.

A small box provided by the supplier, which is plugged into a power socket, lights up at 8pm each evening with the colour of the next day’s electricity tariff, beginning at midnight. The idea is that on red days, people will spend more time outside the house, keeping their consumption to a minimum. Consumers are not disconnected by the suppliers, but are strongly incentivised through higher prices to reduce their electricity usage.

A letter published recently in the Telegraph from an ordinary householder said that following the disruptions of the 1970s, they had decided to never live in a house where they could not activate a hob or heating using a match. As the drive towards net-zero is pushing people towards electrification, people may do well to remember this and diversify their heating and cooking sources.

Although some are lobbying for an end to use of natural gas for domestic heating and cooking, consumers will not be encouraged by the measures being proposed under DCP 371 and may seek to hang on to their traditional boilers and cookers, as well as solid fuel heating. Others may try to diversify with solar panels and batteries. And keeping small petrol-fuelled domestic back-up generators primed just in case.