Smart Meters Act 2018

Added on: 28/06/2018

The Act deals with three matters related to smart meters and smart metering data.

This Act makes provision for: 

  • The extension of existing powers the Secretary of State has to develop, amend and oversee regulations relating to smart metering. 
  • The introduction of a special administration regime for the national smart meter communication and data service provider to ensure the service continues to be provided in the unlikely event of its insolvency. 
  • New powers allowing Ofgem to directly modify industry codes and documents for the purposes of delivering market-wide half-hourly settlement which uses smart metering data.

Smart meters, rolled out as part of the Smart Metering Implementation Programme (the 'Programme'), are the next generation of gas and electricity meters. They provide consumers with near-real time information on their energy consumption to help them control and manage their energy use and in turn save money and reduce emissions.

The Government is facilitating the smart metering rollout by developing a regulatory framework comprising licence conditions (in supply licences, network operator licences, and smart meter communication licences) and a new industry code called the Smart Energy Code (the SEC). Together, these establish the rights and obligations for all aspects of smart metering design, development, installation and operation, as well as monitoring and reporting.

Central to the operation of smart metering is the activity of communicating to and from smart metering systems. The GB-wide smart meter communication service is provided by a national smart meter communication and data service provider called the 'Data and Communications Company', or 'DCC'. The DCC is a licensed entity (Smart DCC Ltd) regulated by the Gas and Electricity Markets Authority ('the Authority') and holds smart meter communication licences (the 'DCC Licence') awarded under the Electricity Act 1989 and the Gas Act 1986 (the 'Electricity and Gas Acts').

Smart meters can record the amount of electricity consumed within every half-hour period and provide this data to energy suppliers remotely, which presents an opportunity to improve the accuracy and timeliness of the electricity settlement process. In particular, smart meters will enable half-hourly settlement by improving the process by which the volume of electricity purchased by a supplier for a particular half-hour period is compared to the volume of electricity consumed by the supplier’s customers for the same period using information about customers’ actual consumption of electricity on a half-hourly basis.

Extension of powers
The Energy Act 2008 and the Electricity and Gas Acts provide the Secretary of State with a number of powers in relation to smart metering including powers to: 

  • make activities relating to smart metering licensable
  • modify licence conditions and industry codes; and 
  • veto any proposal by the Authority to consent to the transfer of the DCC Licence.

The Government has used the first of these powers to make the provision of the smart meter communication service licensable, and the second to develop the regulatory framework. The regulatory framework continues to develop to facilitate the realisation of a full DCC service to cover all premises and smart meter types. The third power has not yet been used but is provided in order to maintain regulatory stability and Government oversight of smart metering.

These powers are currently due to expire on 1 November 2018. This Act provides for these powers to continue to be available to the Secretary of State until 1 November 2023 so he or she has the ability to intervene where required to drive the timely completion of the rollout of smart meters by the end of 2020, to protect consumers and to ensure benefits enabled by the rollout are being fully realised.

Special administration regime
Through the DCC, energy companies (alongside networks and other third parties) can collect energy usage data remotely to deliver the benefits of smart metering, including bringing an end to estimated consumer bills and facilitating faster switching between energy suppliers.

The DCC's continued operation is fundamental to providing uninterrupted services, protecting consumers and securing benefits for both consumers and industry. Whilst the DCC is subject to the provisions of the Insolvency Act 1986, there are currently no special statutory provisions to deal with the threatened or actual insolvency of the DCC. This is in contrast with the position for water, railways, the transportation or supply of gas and the transmission, distribution and supply of electricity.

The Government considers that the risk of the DCC’s insolvency is very low. However, the Government is concerned that the impact for consumers would be high, potentially resulting in a loss of energy billing services, including prepayment services which would particularly affect vulnerable consumers. This Act introduces a special administration regime (‘SAR’) for the smart meter communication licensee, which is currently the DCC. The objective of the SAR is to ensure the continuity of the smart meter communication service.