CMA price cap remedy ‘undermines smart meter rollout’

A price cap for prepayment meter customers until the full smart meter rollout is complete could discourage customers from installing a smart meter, three of the UK’s the largest suppliers have warned.

British Gas, EDF and SSE said that the transitional price cap remedy from the Competition and Markets Authority’s (CMA) probe could have a “number of adverse unintended consequences” and implications for the smart meter rollout.

In a response to the draft orders from the CMA, Centrica – which owns British Gas – said that the competition watchdog “continues to risk creating a disincentive for customers on traditional prepay meters to take up smart meters” by guaranteeing protection from rising prices for these customers.

Centrica urged the CMA to remove the paragraph that states the cap will apply to customers where “no excluded smart meter” has been installed – which currently includes SMETS1 foundation meters. The supplier requested that the statement instead reads: “The price cap shall apply solely to the provision of traditional prepayment meters”.

EDF agreed that the remedy could undermine the rollout, stating in its response that “there is concern that customers may refuse a smart meter if they wish to keep the price cap”. EDF suggested that the CMA and Ofgem should review the evidence as to whether customers are being discouraged from fitting a smart meter in the planned mid-term review in 2019.

SSE also said it “firmly believes” that consumers could refuse installation of SMETS2 meters in favour of the Charge Restriction. “This risks creating a paradoxical situation whereby the lifetime of Prepayment Charge Restriction could be further extended due to a lack of SMETS2 metering installations…,” it said.

“Similarly, there may also be a risk that credit meter customers might opt for a legacy PPM over a smart meter, in the belief that the PPM price cap is more beneficial to them,” SSE added.

Centrica also warned that the price cap risks becoming more permanent and that by questioning whether SMETS1 meters enrolled on the Data and Communications Company (DCC) network are fully interoperable, the CMA “appears to be contesting whether Government will deliver its policy intent.”

The CMA completed its two-year investigation into the energy market in June 2016 and released its final report for the energy market to increase competition and engagement for consumers. Other remedies included forced data-sharing through an Ofgem-controlled database for disengaged standard variable tariff customers and the removal of the four tariff rule.