Why is P272′s quick win stuck in the slow lane?

In 2011 SmartestEnergy raised a modification (referred to as P272) to industry codes that would mandate the use of real half-hourly (HH) usage data to settle bills for larger energy users, instead of their bills being calculated using one of a variety of customer ”profiles” that correspond to average use.

It seemed relatively straightforward and sensible. Energy suppliers are required to install half hourly metering for commercial customers (in profile classes 5 – 8) by April 2014 and that requirement clearly envisaged that such sites would be settled half hourly. There are around 155,000 meters in this category making up 18TWh annual consumption. It would have been absurd to mandate the installation of half hourly metering without using that data. The modification would improve the accuracy of settlement. It would also allow customers to load manage, because it would allow suppliers to offer time-of-use tariffs.

Our proposal was put forward after a series of industry meetings, and became known as P272 Alternative because the revised implementation date was April 2015 (delayed a year from initial plans because of the time required for two impact assessments).

The complicating factor which has always hung over this modification is the fact that Distribution Use of System (DUoS) tariffs are higher for HH than profiled customers. Distribution Network Operators’ (DNOs’) systems may also have problems accommodating a large increase in the number of HH sites. However, the cost-control mechanism would ensure that customers as a whole did not pay more money in DUoS.

This modification should be implemented, regardless of DUoS costs, so that an incentive is created to make changes under other codes if that is necessary. It was always going to be difficult to implement simultaneous changes in different codes and we highlighted this.

Surprisingly, the BSC Panel voted unanimously to reject P272 in December 2012, a decision we could not understand. The cost-benefit analysis showed that in the median case the benefits outweighed the costs by £32 million. There were also good reasons to believe that this differential would be even greater: competition would force costs down and those with higher costs currently should be able to access lower costs. There were additional qualitative benefits.

After a lengthy impact assessment of its own (and further consultation) Ofgem indicated in October it would approve P272 Alternative.  So it was disappointing to read Ofgem’s recent direction to the BSC Panel to consult on implementing it later than planned.

Ofgem’s  letter states:  “We understand that the ambition is to implement changes to the DCUSA [Distribution Connection and Use of System Agreement] by April 2015. We urge industry to progress work to meet this target. Based on this timescale, we recommend that the BSC Panel consults on a revised proposed implementation date for P272 Alternative that would mandate that all consumers in Profile Classes 5-8 are settled HH by a date that falls between April and June 2016. Our recommendation is subject to the progress of relevant changes to the DCUSA, which might require the BSC Panel to consider a later revised proposed implementation date for P272 Alternative.”

It also says: “Alongside this letter, we have published today another letter that sets out our expectations with regard to industry’s role in helping to support realisation of the benefits of smart metering. The importance of this role has been highlighted by P272. The letter highlights our concern at the lack of co-ordination between industry parties – suppliers and electricity distribution networks (DNOs) alike – which is hindering the timely consideration of code modifications, the consideration of cross-code issues and delaying the realisation of smart metering benefits for consumers.”

It is now looking like this modification will have taken five years to implement, six if you include the period of previous industry work in 2010. In our initial modification proposal we highlighted the fact that there were interactions with DUoS charging and stated in the working group that there was a danger of one change waiting for the other, whereas accepting P272 would have precipitated the necessary DCUSA changes. Much time was also wasted as Ofgem spent most of 2013 repeating Elexon’s earlier impact assessment.

No new information has come to light since Ofgem indicated its intention to approve this modification in October 2013 (implying an implementation date of 2015); uncertainty over the timing of DCUSA changes has persisted throughout. Against this backdrop it was somewhat surprising that Ofgem blamed a lack of co-ordination between industry parties. Indeed, Ofgem themselves have displayed further inconsistency; just before February’s BSC Panel meeting Ofgem suddenly indicated that the consultation they had directed should not go ahead until there was more clarity on the DUoS tariffs. But in a more recent industry meeting Ofgem representatives suggested that P272 should begin implementation in April 2015. This, however, is unlikely because of all the previous indecision.

Colin Prestwich is Head of Regulatory Affairs for SmartestEnergy

 

This article is taken from New Power, February 2014 edition.  Also in this issue:

Think twice before making changes to the Carbon Price Floor

Power project monitor

How does wind turbine performance decline with age?

And much more. For a sample issue: subscriptions@newpower.info

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