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Getting the smart meter rollout right for prepayment households

More than 18 months ago I wrote a blog for Smart Energy GB outlining the importance of smart meters in our attempts to alleviate and end fuel poverty. I wrote specifically about the benefits of smart meters for households that use prepayment meters, and the importance of ensuring that the poorest households, using these legacy meters, receive smart meter upgrades as soon as possible.

Little did I know what those next 18 months would hold for people that use prepayment meters. Imagine being told to stay at home by the Government, then running out of credit on your meter. Having to make the choice between warmth, and exposure to the pandemic is not an easy choice, particularly for those households who were most vulnerable to Covid-19. It’s best said by a household that was using a prepayment meter while they contracted Covid-19:

I had COVID in January and I’ve had two chest infections. So, if you’re ill, safety-wise, you don’t want to go out because I don’t want to catch something else. I think I’ve got long COVID because I’ve got moderate asthma. I’ve not recovered from it since, and that w[ould] be good not to…go to the shops.”

Over the last 6 months, we at NEA have worked with our partners at Energy Action Scotland on a research project aimed at maximising the benefits from the smart meter rollout. Through engaging with more than a hundred organisations, as well as hearing the stories of fuel poor households themselves, we have been able to estimate the benefits of smart meters for prepayment users, better understand the barriers to replacing legacy prepayment meters with new smart ones, and to suggest new interventions for overcoming these barriers to access the benefits.

And these benefits are huge. We estimate that there are more than £5bn in benefits for households alone. This includes the ability to remotely top up, easier switching between suppliers to access the best deals, and being able to choose new innovative time of use tariffs that could help to achieve bill savings too. We found that the benefits to suppliers of the rollout for these customers is substantial too – at £1bn for the lifetime of the meters. 

So why haven’t all legacy prepayment meters been replaced? We learnt a lot from the participants of the research on this, and there are many different factors. These include the lack of tariffs aimed at the smart prepayment market, poor awareness of the benefits of smart meters, and that there are no bespoke targets specifically for replacing old prepayment meters. We found that many barriers are starting to be overcome, and that there is growing momentum, but also that there are many more hurdles to conquer before we reach the end. 

So what do we do about it? How do we overcome these barriers so that those households that have so often got the worst deal in the energy market can benefit from this new system? The insights we have from our research has led us to the following recommendations:

  1. Ensure that policy and regulation is in the right place to support the rollout to prepayment households. This means specific targets for replacing prepayment meters and ensuring that whenever a legacy meter is replaced or moved, a new smart meter is installed. No new legacy prepayment meter should ever be installed.
  2. Create a mechanism so that households can take a share of the benefits of smart metering more easily. This could be through a cashback system, with credit applied to the meter when the prepayment customer takes up the offer of a smart meter.
  3. Make sure that awareness and advice is in the right place. There should be a concerted effort to improve advice surrounding smart prepayment meters by building on existing advice packages, using data better and leveraging household contacts. And energy suppliers should commit to activities that can help build better trust with their legacy prepayment customers, including specific sessions to discuss the benefits of smart prepayment.

If we take these steps, we will be well on our way to breaking down the barriers. If not, then there is a real risk that the millions of vulnerable pay-as-you-go energy customers put at risk during the pandemic will continue to get a poor energy deal, with meters that don’t work in their best interest.

NEA will be working in the coming months to make our recommendations a reality, working with EAS to engage stakeholders spanning governments, regulators, Smart Energy GB and private companies to ensure that the recommendations we make are embraced. We will look to communicate the benefits found to our partners, stakeholders, and households, so that these important benefits of the rollout can be maximised for prepayment households.

Together, we can make the smart meter rollout for prepayment households a success.

Our press statement can be found here.

Matt Copeland
Head of Policy & Public Affairs
NEA