Not everyone pays their electric bill in full and on time — but smart meters give electricity retailers more options for working with residential customers who get behind on their bills.

The UK’s nationwide smart meter rollout is accelerating. Some UK electricity retailers have already begun installing smart meters. On Aug. 16 the UK energy regulator, Ofgem, released interim guidance advising those retailers about practices for remotely disconnecting customers or switching those customers to prepayment. (In California a similar proceeding also is underway.)

Ofgem’s guidance aims to provide customers with at least the current level of protection and safety during the smart meter transition, in the event that remote disconnection or a switch to prepayment becomes necessary…

By Alicia Carrasco, eMeter Director for EMEA Regulatory Affairs

Both this interim guidance and Ofgem’s final strategy (expected in Spring 2011) focus on consumer protection. The goal is to help customers to enter a prepayment plan that they can afford. About 20% of UK consumers use prepayment for their electricity use.

According to Ofgem’s July 27 Smart Meter Prospectus, the UK is accelerating its rollout of 47 million smart meters. This document recommends that UK smart meters meters should be capable of switching between prepayment and credit mode. When operating in prepayment mode, customers must pay for their energy before using it.

In the meantime, for meters which technically allow prepayment (and until Ofgem’s final strategy is published next spring), Ofgem recommends that electricity retailers should:

• Offer a range of repayment options to customers who are behind on their electricity bill.
• Set repayment amounts such as prepayment, installment payments, and Fuel Direct (an option restricted to households that receive Income Support, Income-based Jobseeker’s Allowance, or Pension Credit; and who owe their electricity supplier at least £56.20).
• Consider safety by not remotely disconnecting certain categories of customers during the winter.
• Give appropriate notice — at least 28 days to pay their bill, with additional notice at least seven days before installing a prepayment meter.
• Notify customers again once they have been switched to prepayment.
• Identify customer status before taking action. This means confirming whether they understand and know how operate a prepayment meter, and that they must visit payment stations (such as PayPoint) to purchase top-up points as necessary.
• Consider customer constraints. For instance, Ofgem exempts from prepayment customers who would have to travel more than two miles to purchase top-up points.
• Limited disconnections are allowed, such as “load limiting” (allowing the use of certain appliances), as well as disconnections at a certain times of day.
• Follow the same procedures as for physical disconnection, such as making customers aware of their debt, and personal visits if needed.

Ofgem wants to ensure adequate protection for vulnerable customers, since no in-person visit to the affected household is technically necessary for remote disconnection. In manual disconnections, such visits are a key opportunity to identify vulnerable customers’ household conditions. According to Ofgem, in-person visits also allow retailers to assess whether it safe and practical for customers to use prepayment.

Under Ofgem’s guidance, energy retailers are expected to self-regulate the remote disconnection and prepayment switch processes according to the safety net recommendations from the Energy Retailer Association.

Ofgem is considering amending energy retailers’ licenses to require that they take all reasonable steps to assess the vulnerability and status of residential customers prior to disconnection. Ofgem also will consider the issue of remote disconnections or switching to prepayment in the context of the national smart meter rollout. (Comments on Ofgem’s plan are due Oct. 28.)

Meanwhile, Ofgem will keep observing how installed smart meters are meeting current requirements and whether retailers’ self-regulation is sufficient.