Why are Big Six energy suppliers pushing customers so hard over ‘optional’ smart meters?

By TIM GOSWELL

As the 2020 deadline for domestic smart metering looms, suppliers across the board are ramping up their install rates. During the first three months of 2018, we’ve witnessed a variety of tactics used to increase installation rates – some of which have drawn criticism from the press.

So why the big push? Smart metering is optional for consumers, as highlighted by a range of media when Prime Minister Theresa May said the programme to “offer” consumers a smart meter by 2020 would continue. Consumers have always had a right to refuse a smart meter, and there have been campaigns highlighting the purported health and data security risks of smart metering.

However, the programme is not optional for suppliers. There is continued pressure from Ofgem, mostly through agreed targets with suppliers, but also through expectations set out in open letters, most recently in December 2017. And of course, the obligation to take “all reasonable steps” to install (not offer) smart meters by 2020 is still a licence condition.

There is also a commercial pressure to install SMETS1 meters (the first version of technical standards, which is now being surpassed by SMETS2) before the end date for that technology. That date has slipped back, most recently to 5 October 2018, and 12 suppliers (including all six large suppliers) have additionally been given a derogation to install further SMETS1 meters (in limited numbers) until January 2019. But once those dates have been reached, any uninstalled SMETS1 meters will be stranded assets.

As these commercial pressures have aligned with a fairly negative press coverage of the smart metering programme, suppliers have made moves to increase uptake. The tactics used so far can be broadly split into two categories: incentives and messaging.

One obvious incentive is to offer a cheaper tariff to customers willing to have a smart meter installed.

First Utility and EDF Energy are amongst the suppliers to take this approach, with “smart tariffs” becoming their cheapest offer in at least a few regions.

A different approach has been taken by SSE, which recently launched a £10 cashback offer for existing energy customers that book a smart meter installation.

Whilst the offering of a cheaper tariff has been criticised in the media for being a “desperate attempt” to increase uptake of smart, some of the ‘messaging’ approaches from suppliers have proved more controversial. Large suppliers have been lambasted by Citizens Advice for “bullying” tactics in relation to the smart roll-out, with reports of letters to customers saying there is a “need” to replace old meters with a smart equivalent. In the aftermath of them media coverage, E.ON UK agreed to review its communications around smart metering.

With a continued, significant ramp-up in installation rates required to meet the 2020 target, and pressure from BEIS and the regulator, these tactics to drive consumer demand look set to continue.

Many suppliers have long argued that the 2020 deadline is overly ambitious, and the way in which they are trying to get the programme done may demonstrate that this is true.

TIM GOSWELL is a senior analyst at Cornwall Insight.

16 Mar 2018

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