Regulatory framework for smart metering
Overall approach to regulation
The GB energy sector is regulated primarily through the Electricity Act 1989 and Gas Act 1986, both of which have been amended on numerous occasions to reflect developments in Government policy. These Acts prohibit a number of activities, such as the supply of electricity, except under licence. Licence holders are then required to comply with the relevant conditions contained within their licence; non-compliance with these conditions is enforceable by the Gas and Electricity Markets Authority or Ofgem. Below these licence conditions sit a number of industry codes which contain the technical and commercial obligations that govern participation in licensed activities.
Significant changes to this regulatory framework will need to be made in order to achieve the Government’s vision for every home - and smaller non-domestic premises - to have smart metering equipment. These changes will include:
- Amendments to existing energy licences and industry codes, for example to require suppliers to roll out smart meters by a date in 2019, and consequential changes to legislation, licences and codes
- The introduction of a new licensable activity relating to communications between suppliers and other parties and smart meters in consumer premises and the appointment of a Data and Communications Company to carry out this licensed activity; and
- The introduction of a new Smart Energy Code; this will set out the rules, right and obligations for all parties for the new enduring metering arrangements in GB
Process for carrying out regulatory change
The Government will, after appropriate consultation, make the regulatory changes that are necessary to implement these arrangements, principally using powers conferred on the Secretary of State by the Energy Act 2008 (and extended by the Energy Act 2011). These powers provide for the Secretary of State to make changes to legislation, licences and codes, and to introduce a new licensable activity for the purposes of supporting the roll-out of smart meters. These changes will be made in a number of phases over the duration of the Smart Metering Implementation Programme. Further information will be published on this webpage as appropriate.
Principal areas of activity include:
Licence conditions for roll-out and technical specifications of smart metering equipment
This will provide for:
- Creating the supplier licence conditions to require the roll-out of smart metering equipment by a specified date, including, where relevant, an obligation to provide an In-Home Display (IHD). Proposals for changes to the licence conditions are set out in the Consultation on draft licence conditions and technical specifications for the roll-out of gas and electricity smart metering equipment. (This consultation closed on 13/10/ 2011). It is envisaged that the licence conditions will be laid before Parliament in the first half of 2012; and
- Smart Metering Equipment Technical Specifications (SMETS). The Government proposes that suppliers must take all reasonable steps to install smart metering equipment which meets the requirements of the SMETS. The Government is seeking views on the content of the SMETS, including on the recommendations made in the Industry’s Draft Technical Specifications (IDTS) and on several remaining technical issues.
Regulatory changes for establishing and licensing the Data and Communications Company (DCC)
Regulatory changes will be required for establishing and licensing the DCC – the new entity that will coordinate communications between smart metering equipment in domestic consumers’ homes and authorised smart metering data users. Further information on the DCC can be found on the Data and Communications Company Group web pages.
The Smart Energy Code
The Smart Energy Code, spanning gas and electricity supply, will be established to provide arrangements for the introduction and ongoing operation of the end-to-end smart metering system. Among other things, the Code will detail the relationships between the DCC and the users of its services as well as between users. Energy suppliers, network operators and other users of the DCC's services will be required to comply with the Code.
Further Regulatory changes
The Government is also considering regulation in a number of other areas which the introduction of smart metering may necessitate, including with regard to consumer engagement, privacy and data security. The Government has so far launched a Consultation on licence conditions for a code of practice for the installation of smart electricity and gas meters (closing date: 10/11/2011) and a Call for evidence on data access and privacy. (This closed on 13/10/2011). Depending on the outcome of the current and future rounds of the Smart Metering Implementation Programme consultations, it may be necessary to undertake further regulatory changes.
Any necessary consequential changes to existing legislation, licences and codes
The Government expects there to be a number of consequential changes to legislation, licences and codes relating to the Smart Metering Implementation Programme and will be consulting on these as necessary.