First Citizens’ Energy Forum, London,28 October 2008 Smart metering and its benefits for consumers Roberto Malaman General Manager, AEEG - Italy

2 First Citizens’ Energy Forum, London, 28 October 2008 Introduction In this presentation, smart metering refers to the entire meter infrastructure Introducing a smart metering infrastructure for consumers is not an objective in itself. International experience indicates that the reasons for metering innovation vary between countries. The first step in assessing the case for a policy that favours investments in more innovative metering is to carefully weigh the potential costs against the expected benefits

3 First Citizens’ Energy Forum, London, 28 October 2008 Assessment of costs and benefits A.Capital costs (meters, communication, associated system for data handling, etc.) B.Operational and management costs (reading, service and re-verification) 1. COST2. BENEFIT A.Improvements in reading and billing B.New price structure and services for customers C.Benefits for security and quality of supply

4 First Citizens’ Energy Forum, London, 28 October 2008 ERGEG activities on smart metering infrastructure  “Smart metering with focus on electricity regulation” (2007, available on  “Meter value management” (in progress)  Status Review Report on smart metering (under discussion for the 2009 Work Programme)

5 First Citizens’ Energy Forum, London, 28 October 2008 Policy aspects for regulators  Obligatory roll-out of smart meters  Financial incentives  Introduce minimum functional requirements  Require more frequent meter reads or bills based on actual consumption

6 First Citizens’ Energy Forum, London, 28 October 2008 ERGEG Recommendations (1/2) Minimum Functional Requirements Offer the same minimum options to all customers Apply at system level rather than the equipment level Be independent from architectures implemented by operators, manufacturers or system integrators Be independent from telecommunication systems Guarantee interoperability Standardisation Meter (– data concentrator) – AMR/AMM control centre; towards market participants; the customer (external display); home/building automation applications; gas, water, heat meters

7 First Citizens’ Energy Forum, London, 28 October 2008 ERGEG Recommendations (2/2)  Costs and benefits Country-specific assessment needed when a large-scale smart metering infrastructure is introduced  Access to meter data To ensure non-discriminatory access to meter data and functionalities  Market model New market processes (switching process, replacement of standardised load profiles with individual interval data for small customers, more frequent meter reads, quality standards, etc.)

8 First Citizens’ Energy Forum, London, 28 October 2008 Italy: 30 million smart meters installed Remote supply activation/deactivation Monthly/bimonthly readings  no estimated billings Temporary reduction of the contractual power for bad payers  less disconnections Disconnection/reconnection Easy switch Theft detection Supply interruptions will be individually recorded from 2010  quality standards and economic incentives/penalties

9 First Citizens’ Energy Forum, London, 28 October 2008 Italy: 30 million smart meters installed 4.5 Million customers’ consumptions recorded according to three bands (peak/off-peak/mid-level) 2.5 Million customers today in the free market with time-of-use prices All customers billed according to time-of-use prices (from 2010)  the distance between end-user pricing and volatile wholesale market prices is reduced Opex reduction X-factor is: metering activities: 5% distribution: 1.9%

10 First Citizens’ Energy Forum, London, 28 October 2008 Italy: Gas smart meters July 2006: smart metering implementation in the gas sector announced : cost-benefit analysis, technical benchmark, survey on the use of AMR/AMM systems in Europe, two consultation documents October 2008: Regulatory Order expected Main topics discussed:  Cost and benefit  AMM vs AMR  Safety  Potential synergies with AMM systems for electricity

11 First Citizens’ Energy Forum, London, 28 October 2008 Conclusions Smart metering is a revolutionary development Cost and benefits are (partially) country-specific The diffusion of smart meters can be promoted independently of the metering regime adopted Some degree of harmonisation is needed (minimum functional requirements)