The end of spring normally marks the end of the football season, in normal times leading to a busy summer of transfer activity. In lieu of the normal transfer gossip and speculation of the football off-season, we thought we’d fill the column inches with another type of transfer – that of heat network payment meters.
Metering and billing is one of the main issues we get asked for support from social housing providers and there has been a lot of talk recently (well in heat network metering and billing circles at least) about ‘open’ versus ‘closed’ metering systems. Our thoughts below are drawn from our first-hand, and at times painful, experience of managing individually metered heat networks for a housing association and in more recent times helping clients in the sector with their issues.
Through the introduction of individual metering and billing on heat networks, housing associations and local authorities have become what we like to call ‘accidental energy suppliers’; needing to purchase gas or electricity and then sell heat, whilst managing the system and providing the customer service in the middle.
Heat networks are a small part of what social housing providers do – generally from our experience they account for less than 10% of their stock, dropping to less than 5% of their stock in terms of individual metering and billing. Due to this, any issues created are largely ‘hidden’ internally until generally one of two things occurs:
1. Financial losses
2. Customer complaints grow
One of the main issues we see is that social housing providers ‘get what they are given’ on each new development with a heat network. Most do not specify what they want to see in terms of design or performance standards for management and operation. This especially applies to specifying the type of payment meter and therefore metering solution that gets installed.
This situation needs to change and change quickly. We are trying to encourage and facilitate a change of mind-set in the sector, switching away from ‘Design & Build’ to ‘Design to Manage’.
Why are transferrable meters now seen as the best solution for social housing providers?
1. Customer service: Non-transferrable (or closed) payment meter systems do not create the ultimate incentive for a metering and billing agent to keep service levels high, innovate and ultimately keep their customers happy; the option for the customer to easily end (or at least not renew) the contract if they are not happy or performance targets are not met.
Transferrable meters* allow this element of competition to be introduced. To revert to the football analogy, no football club would give a 20-year contract to a youth player or a new signing (especially at full pay). Football contracts are generally 3-5 years with contracts renewed or renegotiated based on performance. We recommended this model be replicated in heat network metering and billing for social housing.
2. Demonstrating value for money: unlike other utilities, customers on heat networks have no ability to switch away from their provider if they are unhappy with the price or quality of service. It’s up to the heat network operators – in this case the social housing providers – to demonstrate value for money (VfM) for their customers living on a heat network, but how do they do this?
Transferrable metering allows the housing provider to demonstrate VfM by running a competitive tender process for the metering and billing provider every few years to ensure that residents are getting a good level of service at a fair price.
3. Risk management: What happens if a non-transferrable metering and billing provider goes bankrupt or decides to stop operating for another reason? Transferrable meters provide a flexible and resilient option so that if the worst-case scenario happens, the meters can be transferred to a new metering and billing provider at minimal financial cost and operational disruption.
4. Replication of other utility markets: There’s no point reinventing the wheel: we should be look at which good practices of the gas and electricity markets can be adopted to heat networks to help explain and demystify them for customers. This includes many aspects covered above such as the ability to switch provider, customer service standards, and risk protections if the metering and billing supplier goes out of business. These elements are all made a lot easier and more comparable through the use of transferrable meters.
Taken together, we believe these four reasons provide a compelling case for social housing providers to choose transferrable metering as their preferred approach – firstly by changing their specification on new build and then looking at replacing meters on existing networks.
The good news is that times are beginning to change. Chirpy Heat is already working with numerous social housing providers to review their approach to metering and billing approach and develop a strategic way forward and we encourage all social housing providers to do the same. To find out more and to chat through where you need to start, drop us a line to email@example.com.
(* It’s complicated, but we all need to stop using the term ‘open protocol’ as it’s misleading and implies truly, fully accessible data. In fact, there are gateways and permissions that have to be granted to keep the data secure and systems protected, so ‘transferable’ is a more accurate term.)
Is the meter your being offered ‘transferrable’? Key questions to ask your meter provider:
1. Feasibility: which of your meters models are transferrable to other billing providers? Which are not?
It is important to understand what percentage of your current heat network payment meters can actually be transferred and that any models you may purchase from a meter provider are transferrable.
2. Experience: how many and which metering and billing agents operate your meter?
a. How long has each metering and billing agent operated your meter?
b. How many domestic customer heat meters does each of them currently operate?
c. How many additional metering and billing agents do you expect to be able to operate your meters in the next 1-3 years?
To run a competitive tender, Chirpy Heat would expect to see a minimum of three metering and billing agents operating the organisations meters as well as plans to bring additional billing agents on board as the number of deployed payment meters increases.
3. Cost: is there a cost for a social housing provider to change from one metering and billing provider to another using your meter?
a. Is there any set up costs for new billing providers looking to operate your meters (including where a social housing provider might want to do this in-house)?
There should be minimal, if any costs for social housing providers to switch their heat payment meter portfolio. Any set up costs for new billing providers should be borne by them and not passed on to the social housing client directly (with the exception being of bringing billing services in-house).
4. Functionality: is there any loss of functionality when different billing providers operate your meters?
There should be no loss in meter functionality when it sw