Smart Metering and Prepayment – Think Piece 2
The Government should prioritise the roll out of smart prepayment meters recognising that those in most need should be those who gain first from the provision of a smart meter. The introduction of smart prepay would shake up the energy market. It would create greater competition by allowing new entrants access to cash flow through “up front” payments. Bringing visibility to both real time usage and credit balances would give more power to consumers to change their behaviours and manage their energy bills.
As Chair of the NRFC’s Smart Metering & Prepayment Working Group, in recent weeks I have chaired a series of workshops to develop proposals that would revolutionise the way in which we help those who are suffering with cold, damp and poorly lit homes. The working group, which has representatives from local authorities, charities and the energy sector, has met to develop detailed plans that can support the NRFC’s overall campaign.
Prepayment meters are routinely forced onto consumers who have been unable to meet the rising costs of energy which perversely pushes them into higher prices, restricted competition and with no easy route out of the cycle. Energy suppliers see this as an area where the cash collection costs make it unattractive and as a result treat this market segment as a necessary evil rather than an appealing market segment. This has resulted in minimal competition and as a result premium prices hit hardest the section of society which can least afford them.
We want to see smart prepayment meters as an opportunity to remove any stigma; in the mobile telephone market “Pay As You Go” is a smart approach to budgeting, has very aggressive pricing and is a sector in which operators compete to gain market share. For the consumer it is seen as a smart choice for budgeting and carries none of the stigma associated with prepayment for energy.
So what can smart prepayment meters bring? They provide visibility of usage and credit remaining. A smart prepay meter creates the chance to show the consumer what they are using and what credit they have left expressed as money, units (kilowatt hours) or even time. For the first time it puts control back in the hands of this group of consumers. For the energy suppliers the smart prepay opens the door to simple low cost payment methods including pay by phone, a technology now been trialled by Transport for London. It provides an opportunity to work with trusted local partners (e.g. Housing Associations and Credit Unions). In short, it should be the moment to revolutionise the market and create a vibrant segment which is attractive and becomes price competitive.
Indeed the ability to switch a smart meter from prepay to Direct Debit, allows an element of payment flexibility that has been absent from this sector but would overnight create a dynamic market in which consumers and energy suppliers had real choice.
We need to seize the opportunity to make Pay As You Go Energy ‘the smart choice’ where energy suppliers want to be and create a perception that it is smart, budgeted, convenient and ensures you pay as you use so that there is no excessive prepayment. It would help people better understand their usage pattern and budget and it may even encourage an elderly person who has turned off their heating to save money, to put it back on.
At last we will be driving change for the people who need our help and support, creating an exciting vibrant market where suppliers will want to be, and it could also be a lever for new entrants to come into the market and expand competition.