By Brendan McAndrew

In the UK, water industry metering is still far from being a universal means of charging customers. In England, Scotland and Wales the majority of households pay an annual water bill based on the value of their house, while in Northern Ireland householders do not pay water charges. Consequently, domestic meter penetration levels range from virtually nil in Scotland and Northern Ireland to between 28% and 76% for water companies in England and Wales.

But, for all the utilities, times are changing. The UK government’s Department for Energy and Climate Change (DECC) has implemented a policy for universal smart metering of all domestic energy supplies to be completed by the end of 2020. This ambitious programme will require the installation of 47 million smart meters from 2012. The key drivers for this initiative are to reduce demand for energy and thereby cut carbon dioxide (CO2) emissions.

At present, the main purpose of meters is to support revenue collection for utility companies. However, in conjunction with appropriate tariffs and more direct means of customer communication, they can play a key role in reducing average demand and shifting demand peaks to enable suppliers to balance supply and demand more effectively.

The idea of a smart meter, linked to a clear and simple in-home display – alerting customers to the cost of their energy or water usage, flagging excessive usage and promoting better conservation of precious resources – is compelling.

Nevertheless, the majority of the UK’s utility meters are simple, visually read “dumb-meters”, so there are a number of incremental steps towards more intelligent metering which could be considered. In particular there is a strong efficiency argument for moving from manual reading to some form of automatic meter reading (AMR) using walk-by or drive-by technology, which can lead to a significant drop in the cost of acquiring meter readings.

Moving to a fixed network based system for acquiring meter readings offers potentially further efficiency savings as well as the possibility of “smart networks,” where supplies and network capacity are adjusted to match demands in real time. In the energy sector, the DECC has agreed to a strategic central communications model required to underpin smart metering, which will entail procuring a service from the UK communications industry comprising a number of different technologies, both fixed-line and wireless.

The DECC has also outlined its view of governance structures required to deliver the initial stages of the programme. It has also confirmed its expectations in terms of the high level functional requirements of domestic smart metering and the central importance it places on well designed in-home displays as a way of influencing customer behaviour.

In the water sector, the extension of household metering in England and Wales has been given added momentum following a recent review of charging undertaken by Anna Walker on behalf of the Department of the Environment, Food and Rural Affairs (DEFRA). The report concluded that metering was the fairest means of charging and, subject to cost benefit assessment, should be extended to cover the majority of customers in time.

The Walker Review has recommended that a National Smart Metering Group for water be established, chaired by OFWAT, the economic regulator for water in England and Wales. The group is likely to have significant influence on the pace and scope of smart metering developments in the UK water sector.

In building the cost benefit case for more intelligent water metering, the local context is very important. For companies with potential supply-demand deficits, the value of any water saving is considerably higher than in companies with a surplus. Such companies may be able to justify more extensive intelligent metering programmes, including the use of in-home displays, on the basis of the potential water saving.

This argument pre supposes that intelligent meters linked to in-home displays will have a sustained impact on demand, an argument which is central to the UK’s energy smart metering programme. It has to be said that the evidence for this is slight, and the actual quantum of any predicted saving is inevitably uncertain. Sharing of data on this issue, from studies and pilot projects both locally and internationally, would be highly beneficial.

A key issue for the UK water industry to consider is whether it would be cost effective to access the energy sector’s central communications network, which will be rolled out between 2012 and 2020, or adopt its own localised solutions. Given that the energy sector model has yet to be procured, the ultimate answer to this question remains uncertain but at the very least, it is in the interest of “UK plc” that the water sector registers its interest in having fair and equitable access to that infrastructure, should the need arise.

Recognising the complexity of these decisions, and the uncertainty surrounding them, UK Water Industry Research Ltd (UKWIR) commissioned Mouchel to undertake a study of the case for more intelligent metering in the UK water sector. The report, published recently, sets out the arguments and evidence for a range of intelligent metering options and provides a cost benefits assessment tool, which enables companies to develop and evaluate a range of intelligent metering strategies.

Metering in the UK will inevitably become smarter over the next few years. In the energy sector the pace is already set, while the water companies may chart a number of different courses. As they do, it will be important to learn from each other’s experiences, those in other utilities and from international case studies in order to ensure that the potential of these exciting developments is fully realised.