Britain’s Smart Metering Rollout is About Customers

Britain's Smart Metering Rollout is About Customers

by John Peters, Engage Consulting

In Britain, the government’s target is for every home and small business to have gas and electricity smart meters installed by 2019.

Among U.K. energy suppliers, British Gas is a leader in new meter deployment with some 600,000 meters installed. According to a survey by the Energy and Utilities Alliance, 73 percent of customers said smart meters changed the way they thought about energy. Customer satisfaction also increased, and 56 percent of customers said they were very likely to recommend a smart meter to a friend or relative. Despite customer backlash in many countries, U.K. smart meter rollouts have been positive.

So, will smart meter rollouts increase customers’ trust in their energy suppliers? And how can utilities encourage smart meter adoption?

Traditionally, energy and utility companies have not been seen in a positive light. The 2012 U.K. Customer Satisfaction Index created by the Institute of Customer Service showed utilities to be among the worst performing companies for customer satisfaction. Smart meter rollouts and the associated tariff changes could reinforce that negative view. Many customers, however, hold energy suppliers as trusted sources of information about smart meters. Independent research from Ipsos MORI, the second-largest market research organization in the U.K., and British Gas’ experience show that handled appropriately, smart metering is an opportunity for utilities to change how customers think about their energy. Better expectation management and customer engagement can increase smart meter adoption and customer satisfaction.

WHEN CUSTOMERS HAVE NO CHOICE

Some early mandated deployments of smart meters in the U.S. and Australia were not received well by customers. It led to bad publicity for utilities, customer resentment and a swell of public opinion against smart metering.

In California, lack of public engagement and education led to a public backlash and complaints regarding meter accuracy when customers saw dramatic increases in their bills, according to a report by The Structure Group.

The activities in California led to the introduction of an opt-out program in November 2011. The outcome was not much better in Victoria, Australia, when new time-of-use tariffs introduced alongside smart meters were criticized for disproportionately penalizing the elderly and disabled.

The program was revised following government intervention. Victoria households will have smart meters installed by 2013, and customers who already have new meters can remain on flat-rate tariffs until 2013. In the California and Victoria rollouts, customers had little or no choice regarding new meters and tariffs. Customers didn’t change how they used energy, but their energy bills increased. Although the higher bills might have been the results of the new tariffs combined with old usage patterns, from a simplified customer perspective, it seemed like, “Get a smart meter installed, your bills go up.”

CARROT OR STICK? OPT IN OR OPT OUT?

Granting customers the right to opt in, opt out and access data usage shapes customer sentiment about smart metering. In Europe, government bodies in each country are developing their business cases for or against smart meter rollouts. Local infrastructure, politics and culture shape each business case.

Germany has taken a lighter approach with regulators, mandating a customer-driven adoption program where customers must opt in to the smart metering program.

In Britain, customers may choose not to have a meter installed, but it is assumed most will. The government’s business case for smart metering is based on 97 percent installation success.

Beyond meter installation is the level of data granularity customers are willing to share with their suppliers. Confidentiality must be handled carefully and transparently. British Gas found that 81 percent of its customers were interested in appliance-level billing, but it seems that price-sensitive and older households engage better with smart metering programs, according to U.K.-based energy company E.ON.

In Britain, government-issued guidelines define the type of data that suppliers can access and programs in which customers may opt in or opt out (see figure).

uk government

Customers dislike being forced to do something, and the benefits of sharing granular data seem to offer little to no benefit. Consequently, customer tariffs have been unpopular in some countries, particularly when tariffs seek to modify behavior by penalizing peak usage. Suppliers that take a customer-focused approach to metering data can use the data to change customer engagement. With granular usage data, customer service centers can resolve customer billing queries quickly, accurately and actively and market tariffs to each customer’s consumption pattern.

Smart meters will give suppliers the tools to reshape customer relationships. With this approach, rather than presenting new meters and tariffs as impositions, utilities’ message to customers can be much more positive: “Let us tell you which of our tariffs best suits your energy use.”

DO SMART METERS MANAGE THE CUSTOMER OR NETWORK?

The communications and approach to smart metering rollouts fall into three styles:

  • Government mandates;
  • National technology infrastructure upgrades; and
  • Money-saving or energy efficiency programs.

Across continental Europe and much of the world, the utilities industry is treating smart metering as a network issue: It’s about better load management, encouraging people to change their consumption habits, and husbanding resources. The benefits of more granular consumption data and reduced meter-read costs are clear for the network and suppliers, but it is not always clear for customers.

Telling customers they will save money or energy as a result of having smart meters can be risky. Despite an early California pilot that concluded 70 percent of customers saved money, these savings did not carry over into the full rollout, according to an interview published in The New York Times with Andy Tang, Pacific Gas and Electric Co.’s director of smart metering.

In Britain, customers are at the heart of smart metering. Britain’s rollout is one of the few supplier-led, rather than network-led, rollouts. This is attributed largely to the structure of the market in Britain, where meters are owned and managed by energy suppliers rather than the network. So far the customer-led approach has worked well, but British Gas’ high approval rates were achieved only after customers received their smart meters. One of the challenges for British Gas is to increase customer education and engagement prior to an installation.

BRITISH MODEL: RETAILERS RESPONSIBLE FOR SMART METERING

The smart metering mandate is on energy suppliers rather than the networks or customers, and the expectation is clear: Suppliers will not force smart meter installation (e.g., through their statutory powers to enter buildings to carry out works on meters).

Consistency and clarity in customer expectations during the rollout is key, and the U.K. regulator is working with suppliers to agree on a smart metering installation code of practice (SMICoP) that lays out how suppliers will engage with customers for installations. The aim of the SMICoP is to protect customers throughout the process and for customers to experience positive smart meter installations. For suppliers, the SMICoP is a key enabler in helping them deliver their smart meter rollout obligations. Its measures include:

  • No sales during domestic installation visits to avoid customers’ feeling pressured;
  • Ensuring customers have a clear explanation of the equipment and how it can be used;
  • Providing energy efficiency guidance;
  • Suppliers must direct customers to impartial information sources when promoting services related to reducing carbon emissions; and
  • Clear information will be provided to customers to assist with fault and complaint resolution.

Although neighbors might have competing energy suppliers and receive smart meters at different times from different companies, the SMICoP seeks to ensure consistency across those companies and protection for vulnerable customers. The development of standards such as the SMICoP reflects the collaboration between government and industry. Bodies such as SmartGrid GB are working with regulators and government to develop core communications materials and standards that all utility companies will adopt.

Whether the dramatic increase in British Gas customer satisfaction can be maintained through a national smart meter rollout is yet to be determined. For the British market, at least, adopting a customer-oriented approach and offering choice and consistent messaging is working.

John Peters is managing director of Engage Consulting, an energy and utilities consultancy that is a member of SmartGrid GB. Engage consultants have helped develop smart grid policy and strategy for the U.K. and international government, regulators and industry bodies.

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