Who owns the meter?
In the traditional utility environment the question "Who owns the meter?" would have been treated with some mirth or even derision. It would have been clear to everyone that the meter was owned by the utility – who else?
However, in the post-Thatcher period, when questions are being asked about the most ‘obvious’ and well-established economic relationships, a fundamental reappraisal of these relationships is emerging. The question "Who owns the meter?" is, in utility circles, taking on the mantle of that other fundamental question "What is the meaning of life?". Readers of the Hitchhiker’s Guide to the Galaxy already know the answer to the second question (Forty-two – Ed) but no one seems to be sure of the answer to the first.
To a general public still trying to understand the practical implications of opening up the gas and electricity markets to free trading, the question appears to be academic and esoteric. For most customers a utility meter is an unsightly necessity tucked away in a corner – it is not an object of beauty, let alone interest. Meanwhile, in the utilities themselves, the ‘meter’ (and what it can do) is becoming a hot topic as a clearer understanding of its potential emerges.
Meters emerge from backroom
It is only in the last four or five years that the meter – and more particularly metering systems – has emerged from the back-room. Market forces and regulatory intervention have put meters on every chief executive’s agenda. The meter’s potential has altered from being a ‘dumb’ terminal, to being the key customer interface as a data collection and communications device. This new perspective has sometimes brought tensions within the utilities themselves, where meters have traditionally been seen as a purely engineering/network responsibility, and the intrusion of the customer service or supply dimension has been resisted.
Returning, therefore, to the original question, perhaps it is more appropriate to ask:
- Who owns the meter now?
- Who should own it and why?
- Who will own the meter?
- When will we know?
When the UK utilities were privatised, the distinction between supply and distribution businesses was not widely recognised or understood. The utilities – perhaps with the exception of generating companies – were largely seen as integrated units providing a coherent set of services to customers in a specific geographical area. Trading activities such as shops, contracting and appliance servicing were regarded as ‘competitive’ but the rest formed a comprehensive ‘statutory’ service.
As market liberalisation has progressed, the distinction between ‘distribution’ and ‘supply’ businesses has emerged. This has been particularly marked in the gas sector, with the separation of Centrica from Transco. In electricity the separation has been largely achieved through inter-departmental contractual arrangements and the creation of subsidiary companies, compared with the distinct split in British Gas. Water has been largely untouched by the competitive pressures experienced in gas and electricity and, therefore, the meter ownership issue does not have the same key focus of current attention.
The main players
Electricity, in fact, forms the best model for exploring the question of meter ownership in the UK. The market deregulation has placed the supplier at the hub of the trading arrangements and has required him to contract for services with the other players. This in turn, however, is complicated by the distinction between the half-hourly and non-half-hourly markets.
The principal players that relate to metering issues are:
- The distribution business, operated by the host Regional Electricity Company (REC)
- The meter operator, responsible for installing and maintaining meters
- The data collector, responsible for reading meters and passing this data to the supplier.
In both half-hourly and non-half-hourly markets the role of the distribution business remains common.
Meter ownership in the half-hourly market is based on a contractual relationship between the supplier and the customer. The meter can be – and often is – owned by the customer, but it is more likely that it will be provided and maintained under contract by a competitive meter operator. The meter operator may in fact be a subsidiary part of the host electricity company, but is nonetheless in competition with other RECs as well as independent contractors. Similarly, the data collection process is open to competition and, although the principal player remains UKDCS, one or two RECs and other independent organisations have set up their own data collection services.
In the non-half-hourly market the freedom to compete for metering services is in a state of suspended animation until the year 2000. The supplier contracts with the host REC – by implication its distribution business – for the provision of data collection (meter reading) and meter operation services. This situation has come about in an effort to avoid the chaos which ensued in 1994, when the half-hourly supply and metering businesses were opened up to competition simultaneously. The turbulence caused by 50 000 customers entering the market then would have seemed insignificant compared with the impact of 25 million on the scene!
In answer to my first alternative question, therefore, the meter seems to be owned by the customer in a small number of cases and by a meter operator (independent or REC subsidiary) in a larger number of cases. By far the majority, however, are owned and operated by the host REC’s distribution business. On the ‘might is right’ principle, therefore, the distribution business wins the argument. However, for the year 2000 the non-half-hourly market will be able to reflect the same circumstances as the half-hourly market.
Questions without answers
Before reaching this next step, however, there are important issues to address covering quality, safety, standardisation and asset valuation. A nightmare scenario in this argument is one where customers change suppliers – say monthly – and meters have to be changed with the same frequency, as different suppliers engage their own preferred meter operators. How will control be exercised over this transient stock of meters? How will quality of workmanship and safety be policed to ensure that risks to customers and employees are prevented? How will demands on the network be monitored in order to secure a quality supply? These are important issues that require practical resolution; while they remain unresolved, the answers we are seeking will not be forthcoming.
In resolving these issues our thinking can be constrained by the word ‘meter’. The word itself conjures up the image of a black box and a set of dials. ‘Metering system’ helps by causing us to think more widely, but even so there is a tendency to consider the ‘system’ as a meter with something attached to it!
The meter is, however, about information and services, and the people interested in these are distributors, suppliers and customers. Distributors have an interest in the load patterns on their network for use in system control and design. Suppliers are interested in consumption and usage patterns for trading, billing and tariff design. Additionally, this data offered as a differentiated service may interest the customer in determining his usage pattern and even his choice of fuel.
The strength of the residential customer’s interest in the meter itself tends to be dismissed as largely irrelevant. It is true that he is likely to be more interested in his mobile telephone or digital TV set – but let’s not ignore the potential. Ownership of the meter needs to address all of these markets, and there is therefore a strong case for this service to be provided by an independent metering organisation, unconstrained by sectoral interest.
But when will we know? The decision will inevitably emerge from the next regulatory review, but the delay is resulting in a paralysis in the market. Decision takers in utilities face huge uncertainty over this and many other issues, and are understandably unwilling to make substantial investments in new metering systems. In the meantime the robustness of the technology continues to be tested in trials; but the intended beneficiary of competition – the customer – must wait.