Ofgem is set to launch an electricity settlement reform and a review is currently taking place.
Ofgem are conducting a “significant code review” on electricity settlement reform and will assess the benefits of making half-hourly settlement (HHS) mandatory for small-scale domestic and non-domestic consumers.
Electricity settlement involves offering incentives to energy suppliers to purchase energy, in order to meet the demand of its customers in each half hour of the day.
Currently, large non-domestic users and profile classes 5-8 are settled on a half-hourly basis according to their meter data. However, smaller users do not have meters which can record half-hourly actual consumption data, as a result, the meters are settled using estimates which can be inaccurate. To tackle this inaccuracy, the roll out of smart meters is currently taking place which can record half-hourly and send data remotely.
The introduction of HHS is expected to increase competition on the energy market and will also present money-saving opportunities to consumers via smart tariffs. Smart tariffs allow suppliers to improve demand forecasts, improve demand-side response conditions, reduce costs and generally make the settlement process more efficient.
The main concern regarding the implementation of HHS is that vulnerable or disengaged customers may be unaware of the changes, or they are unable to alter their usage behaviour, leaving them with higher costs. Research also shows that only 8% of consumers would be willing to accept time-of-use tariffs in the current climate.
An implementation decision of the code review is expected to be made at the end of 2019, much later than initially planned, with the proposal, system and code changes originally expected in the first half of 2018.
It is hoped that delaying the implementation will ensure a larger number of smart meters will be rolled out, resulting in a more immediate impact. The postponement will also give suppliers and central systems more time to develop and install any system changes.
Ofgem are now requesting feedback on its initial proposals and is accepting membership applications until the 1st of September for the design working group.
Any final decisions will be made by Ofgem’s Senior Responsible Owner but advice will be offered throughout by the Design Advisory Board and the Ofgem TOM Board.