Smart meters – how can firms minimise the conduct and operational risks and maximise the benefits?

Posted: 11th November 2016

Smart meters are heralded as the future of improved consumer choice and control for the gas and electricity markets. They will provide a real-time, pounds and pence view of energy usage, communicate directly with suppliers to provide meter readings and provide easier switching to help consumers get the best deal.

Sounds brilliant! But only if it works, and this is where I and many energy suppliers have some serious concerns.

The ‘Internet of Things’ constantly threatens to become a reality. From phone apps that control home heating to self-driving cars, society is becoming better connected and beginning to reap efficiencies as a result. Smart meters are clearly a positive step, then, for consumer control.

The government has thrown its weight behind the rollout by asking suppliers to commit to having smart meters installed in (or at the very least, available to) all homes by 2020. That’s 26 million homes in a little over 3 years.

Firms will be well aware that this commitment could result in significant operational challenges. How realistic is the government’s goal? What are the conduct, governance and oversight considerations in this area, and what can firms do to ensure they consider all of the practical issues that might present themselves as they move towards their 2020 obligations?

Demand

Surges in consumer demand could create both regulatory and resource challenges for energy firms.

As the 2020 deadline nears, suppliers are going to need to be well prepared to communicate clearly with their customers on the phone, by post and through digital channels.

There will likely be an influx of inbound enquiries as more people seek to gain the benefits of having a smart meter in their home, and firms will need to make sure they have the bandwidth available to deal with any uplift in enquiries. As a result, firms should consider:

• How they will model demand and plan resource given the many factors involved
• What their communications will look like for existing customers. Will the frequency of communications ramp up as the deadline nears? How can communications best present the benefits in order to create brand advocacy and trust in smart meters?
• Whether they are prepared for an uplift in enquiries in line with any consumer marketing/awareness campaigns (which may or may not be firm-driven)
• How they will help vulnerable customers complete the process and treat third parties, such as carers or those with power of attorney

Fulfilment

Large–scale installation of smart meters could present challenges, and energy firms will need to think about the impact of these challenges on their approach.

Firms will need to ensure they adopt robust frontline processes – including effective customer appointment management – to ensure successful execution of installation work, as well as effective training and support for engineers in the field. Firms should consider:

• The volume of internal staff needed to manage the fulfilment process, and the skills they must have in order to communicate with all types of customers, plus engineers in the field
• Whether, given the above, training and competency is effective (for example, in dealing with vulnerability, especially given the potential for access issues to be caused by a lack of technological knowhow on the part of the customer)
• Whether systems and processes are sufficiently robust to deal with a period of concentrated activity

As well as this, any vulnerable customers could well have outdated or non-compliant appliances in their homes, which would place an onus on energy firms to help those consumers manage the transition to approved, safe equipment. Will this have resource implications?

Ongoing use

Once in place, smart meters will provide real-time data to suppliers, eradicate the estimated billing fees and associated bill shock that many consumers face, and allow people to make more informed decisions. This should mean a real reduction for suppliers in the amount of enquiries and complaints.

However, customers won’t want the data to be used in a way that is perceived to be intrusive. Many people are sceptical of having a physical item in their home that is giving lifestyle insights to corporations.

As a result:

• Can you regularly assess customers’ experiences with your firm through outcomes testing?
• How will the extra usage data available to your firm prompt innovation and lead firms to offering improved products?
• Will customers with smart meters get the same attention as those without? There is a risk that the extra data available via smart meters will lead to firms taking a ‘lighter touch’ approach to those customers who have them in their homes. Could overconfidence over the experience of smart meter customers become an issue here?

Switching suppliers

If a customer has a smart meter, but has seen a better deal with an alternative energy supplier, how easy will it be for them to switch suppliers? Work needs to continue to ensure that the technology that sits behind the physical meters is universally compatible. At the moment, there is no standard in place and meters are being installed with no guarantee that their users will be able to switch easily in the future.

There are several governing bodies in the background who are trying to resolve this issue, but with meters being installed up and down the country every day, there may already be cohorts of customers who have to undergo a switching experience when their deal expires and/or a better one is available.

To combat this, firms should be upfront with customers and clear in their capabilities for the entire product lifecycle. Some have stated that their meters will be compatible with all currently available models, but this is dependent on a unifying standard being created that allows the various smart meters to ‘speak’ to each other.

With this not yet in place, this statement could have implications if consumers begin to complain and become dissatisfied. A key aspect here is how geared up firms are for any unexpected surges in complaints volumes, especially in the near-term from those customers who are switching early.

Smoothing the transition

Overall, smart meters do promise some fantastic benefits for both consumers and suppliers, including increased communication and control, fewer enquiries and complaints and the ability to better work proactively to assist customers. Areas that firms could look to prioritise in order to improve the customer journey are:

The complaints cycle

Recognise that you’re about to embark upon a very different form of customer engagement, and that customers’ expectations throughout the entire journey will be high. Therefore, it is important to be prepared for increasing inbound contact with customers, including the potential for complaints volumes to increase.

Outcomes testing

Four million of the expected 26 million meters are already installed in homes, and some of the issues already being called out here are:

• Individual meters failing to actually provide data to an energy firm
• Long waits to fix faulty smart meters (once customer waited 11 months)
• Swings in energy usage measured by smart meters being reported
• Mobile displays for smart meters being proved to be inaccurate in some cases
• Firms’ computer system updates having caused issues for hundreds of thousands of smart meter customers

Monitoring the experiences of those customers who are early-adopters of smart meters can allow you to better understand any issues and deliver service improvements in a proportionate way.

If your firm’s sampling is risk-based, then you need to ensure that smart meter customers aren’t considered ‘lower risk’ due to the advanced data you are receiving from their meters, as clearly, there are areas where the experiences of smart meter customers need more focus. Evidencing this work is an important step towards satisfying regulatory scrutiny.

Root-cause analysis

Combining great management information (MI) throughout the complaints, collections and arrears cycles will provide valuable insight on where potential problems lie. Committing to proactively seeking out root-causes and following up with actions will set apart firms who are ‘going through the motions’ from those who are intent on providing a continually improving service. In the new world of principles-based regulation, this will be a major proof point for firms under Ofgem supervision.

A tough but beneficial Journey

Avoiding the pitfalls and taking advantage of the huge advocacy opportunities in the lead up to (and post) 2020 will require firms and the regulator to work collaboratively and openly.

The scramble to get over the line by 2020 – especially if a common standard for smart meters is not reached – may prove to be a challenge, but firms who are meticulous in their approach to communications, considerate of vulnerability issues and easy to deal with for consumers throughout the product lifecycle will be those tapping into the potential advocacy and trust smart meters will offer.