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February 7, 2007

UK energy: smart money on distribution companies

A UK government white paper due to be published in March is believed to state that smart energy meters will be made mandatory in UK homes. Although advocates claim that the widespread introduction of smart meters will provide a major step towards meeting environmental goals by reducing energy wastage, the question of who the responsibility should be placed with to deliver the best results remains.

By CBR Staff Writer

An upcoming white paper is expected to call for smart meters to be made obligatory in UK homes.

Investment into advanced metering solutions for the domestic UK energy market has been minimal and had little effect to date due to suppliers being rightly concerned about stranded assets and lack of regulatory direction. To make matters worse, meter companies that should be relishing the chance to step in as the middleman also fear that an unregulated platform is hard to work effectively in.

The answer is therefore clear: legislate and regulate metering and then appoint suitable controls. The difficulty may be in deciding who would be best placed to cope with such an intensive capital expenditure project.

Suppliers working together to manage a large capital outlay is not something that is likely to sit comfortably with everyone given the inexperience in these types of projects. This leaves the most natural benefactors, the distribution network operators (DNOs).

The next distribution price control period, which runs from 2010 to 2015, would be an ideal opportunity to introduce smart metering, and Ofgem could regulate the DNOs carrying out capital investment programs for customers connected to their networks. DNOs are highly experienced at managing large capital programs such as upgrades and extensions to the distribution network and are ideally placed to manage the rollout of smart metering efficiently.

The introduction of mandatory smart meters should be relatively easy to legislate; the key to its success will be putting it under the control of a body well placed to implement it successfully. Crucially, this must go beyond the initial implementation period of the new technology, to ensure that the increased distribution costs passed via the supplier to the consumer are created with a view to fairness for both small and large energy consuming customers.

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