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Government report calls for caution over half-hourly settlement changes

The select committee's report has raised concerns over mandatory switching to HH settlements and the progress of the government's smart meter roll-out. Image: Ofgem.

The select committee's report has raised concerns over mandatory switching to HH settlements and the progress of the government's smart meter roll-out. Image: Ofgem.

A government report has said that energy regulator Ofgem must conduct an impact assessment before any mandatory enforcement of switching to half-hourly settlement can take place.

And the report, published this morning by the Energy and Climate Change Select Committee, has also recommended that the government include in future legislation the scope for quarter-hourly settlements should technological advances allow for it.

This morning the select committee – which holds the Department of Energy and Climate Change to account – published its pre-legislative scrutiny of the government’s draft energy legislation and proposed several amendments.

Mandatory half-hourly settlement had been proposed, which would see all households and businesses switch to half-hourly settlements to more accurately bill consumers for their energy consumption.

Suppliers and consumers have been able to switch voluntarily, however it had been proposed to make it mandatory with a decision on the timescale and approach to be taken by 2018.

The move would expand on Ofgem’s P272 legislation which has paved the way for all meters in profile classes 05-08, typically used by businesses, to switch to half-hourly settlement by 1 April 2017.

However the select committee’s inquiry into the legislation received evidence from the energy industry, which suggested that the costs associated with the changes were currently unknown, could be significant and would ultimately be passed onto bill payers.  

British Gas said that a full cost benefit analysis would be required “to understand the impact of half-hourly settlement on different types of customers and consider the optimum timescales for introducing this change”, evidence which was echoed by both Utilita and E.ON.

The select committee agreed. “In order to leave no room for uncertainty we recommend that the legislation include the provision that Ofgem must conduct an impact assessment of mandatory half-hourly settlement,” today’s report stated.

And the report has also called on the government to be open minded about potential technological advances which could enable quarter-hourly settlement in the near future.

“Such innovation is pushing the boundaries of existing regulation here and abroad, so the government must ensure that the draft legislation and the detailed licences, codes and regulations that flow from it are, as far as possible, future-proofed, particularly in relation to moving beyond half-hourly settlement, should consumers and suppliers choose to,” it said.

While more accurate billing is likely to be welcomed, it does stand to increase the standard energy bills of businesses particularly during winter months when peak energy prices are more volatile.

During last week’s Clean Energy Summit, a number of energy managers present voiced their concerns over the introduction of P272 and other legislation establishing half-hourly settlement as the new standard, remarking that it was vitally important that energy managers were aware of the changes and their ramifications.

Meanwhile today’s report has also raised serious concerns about whether or not the government remains on target to install smart meters in every home and business by 2020.

After compiling evidence, the select committee has concluded that the government’s extension of the energy secretary’s powers on smart metering beyond 2020 “has raised legitimate questions about whether the smart meter roll-out programme is on track to meet its 2020 target”.

Nevertheless, the committee has sanctioned the extension but recommended parliamentarians continue to press the government over the programme’s advancement.