On 4 February 2016, DECC published its response to the August 2015 consultation on whether electricity and gas suppliers could offer consumers an alternative to an in-home display.
Obligation to offer an in-home display
Since 2012, as part of the smart meter roll out, the standard electricity and gas licence conditions have required suppliers to offer all smart meter customers an in-home display (IHD) showing real-time energy consumption and tariff information. This is based on strong evidence that consumers on average reduce their energy consumption more when they have an IHD. It is not difficult to see why.
But that evidence is from a good few years ago and technology has moved on since then. Now consumers might want to check their energy use via their smart phone or tablet, even when they are away from the home. Under the current licence conditions, suppliers cannot offer this option instead of an IHD, they have to offer an IHD and only if the consumer declines can they then offer an alternative.
However, the current licence conditions are worded somewhat ambiguously and some suppliers have interpreted them as meaning they could offer consumers a choice of an IHD or an alternative. DECC have decided to clarify them to reflect the original policy intent that all domestic consumers receive an unconditional IHD offer. In other words, the customer must still be offered an IHD as well as an alternative; it is not an "either/or". This change of wording will come into force on 1 July 2016 so that suppliers have time to "adjust their consumer offers".
Trialling IHD alternatives
Although there is no existing evidence base that IHD alternatives can provide benefits equivalent to IHDs, DECC is prepared to let suppliers carry out trials where they offer IHD alternatives. They will insert new wording into the licence conditions allowing suppliers to apply to DECC for a derogation, from the end of March 2016 to 30 September 2016. There will be a guidance document published in March before the derogation window opens. There are criteria that the trial application must meet, but they are fairly flexible, for example they do not set a size limit and they allow for agile and flexible approaches. All trials must meet the terms of DECC's approval letter including submitting all evidence the letter requires.
At the end of a trial, suppliers will only have to offer an IHD to customers where the trial has been unsuccessful – and DECC will decide, on the trial evidence that the supplier has to submit, whether it has been successful or not. If a customer changes supplier part way through a trial, the outgoing supplier (i.e. the one that has been trialling an IHD alternative) has to offer the customer an IHD before they switch.
Allowing suppliers to trial IHD alternatives will mean DECC will get an evidence base of IHD alternatives to see if IHDs are still the best way of achieving savings. With £4 billion in energy saving benefits at stake we can understand why DECC is reluctant to let go of the IHD requirement. But we query, if the consumer can still get both the IHD and the alternative, how will the supplier be able to evidence that the alternative has resulted in energy savings?
Legal text amending the licence conditions has been laid before Parliament on 4 February 2016 and will come into force during March 2016. The guidance on applying for a derogation is expected during March 2016 and the window for applications opens at the end of March and lasts for six months until 30 September 2016. The requirement to offer an alternative as well as an IHD (electricity licence conditions 40.3 and 40.4, gas licence conditions 34.3 and 34.4) has effect from 1 July 2016.