What is P272?
All electricity supply companies have a regulatory obligation directed by Ofgem to change the way customers with Profile Classes of 05 to 08 meters (known as Maximum Demand meters) are billed. The supplies will be converted to HH meters (Profile Class 00). This change is known as P272 or the Balancing and Settlement Code Modification Proposal 272, and is a requirement on all suppliers. You may also have heard of P322 – this is basically an amendment to P272, enabling a phased introduction with a final implementation date of April 2017. So by April 2017, all suppliers have a commitment to settle half-hourly.
Why are the changes happening?
Ofgem have committed to converting or reprogramming all electricity meters to allow them to be read remotely and measure on a HH basis. This will ensure that costs are reconciled accurately between customers and suppliers and between suppliers and generators, a process known as ‘settlement’. HH data improves the accuracy of the settlement process.
By recording HH data, AMR meters can provide an accurate profile shape of usage for each meter as well as measuring total consumption. Currently the profile shape is estimated. In the long term, it will enable businesses to monitor their energy usage more accurately, and subsequently take actions to reduce their consumption.
What will it mean to me?
This change doesn’t affect customers with Profile Classes 01, 02 (domestic) or 03 and 04 (smaller business). It only affects those with meters with a profile class of 05, 06, 07 and 08.
HH metering will (certainly in the short term until customers’ data can be profiled) cost more than the current NHH pricing. See “How will charging structure be affected?” below for more info on these charges. Also, even though the changes have to be implemented by April 2017, it is likely suppliers will be moving supplies over to HH status during 2016.
How will charging structure be affected?
The changes from P272 do not require suppliers to bill a customer as HH, only to settle as HH. So even though suppliers will be paying for electricity and associated HH costs, they may choose not to split these out and offer an all-in rate, certainly in the short-term. Not all suppliers have yet communicated how they are going to structure their billing.
Ultimately actual rates on a HH tariff can be lower (and for high users this has always been an advantage for HH contracts), but with HH there are extra charges, and bills will become more complex than businesses are used to with their current NHH maximum demand meters. There will potentially be charges for Tuos and Duos, Available Capacity, Data collection and aggregation (DC/DA) as well as Meter Operator agreement (MOP) charges. These are costs in addition to the unit rates so could increase the costs of current maximum demand meters significantly. To give you an idea, Metering (MOP) charges can be £300 upwards per meter per year, and Data collection and aggregation (DC/DA) charges can be similar.
What can we do to mitigate extra costs?
Unfortunately there is nothing we can do to change this – it is a mandatory ruling. We have clients with maximum demand meters which really are legacy profiles, installed or assigned by a previous tenant with different usage requirements. For several of these we have organised meter re-profiling in the past, however there are costs involved in fitting a new meter, so often a decision has been taken to leave an over-specified meter in place as the costs involved of fitting a new meter out-way any benefits. Now that there are bigger benefits to be gained by downgrading meters to an 03 or 04 profile class, most suppliers will not entertain the idea due to ruling not allowing downgrades during P272.
A Meter Operator agreement or (MOP contract) is a legal requirement for all half hourly electricity supplied meters. So by maximum demand meters being migrated to HH, a MOP will be required. A MOP supplies the necessary telecommunications for sending consumption data to the energy supplier. They will also provide ongoing meter maintenance. Businesses could allow suppliers to nominate a MOP (most suppliers will have a preferred Meter Operator), however they can also choose who these agreement would be with and there are several providers. Businesses should shop around for best deals, and nominate their own MOP provider.
What do I do next?
Businesses should speak to their suppliers and understand what their plans are for their maximum demand meter/s. This will depends on several things: (1) if supplies are in contract, (2) if they are, when do the contracts come to an end and (3) when does the supplier plans to make the change to HH settlement.