1. Beyond The Prospectus: The Retailer’s Challenge Iain Matthews Smart Metering Market Development Manager, Energy Retail 18 th May 2011

2. The expectations have been set... This programme will directly affect us all. For Great Britain, it provides a platform to help us meet those challenges of energy security and climate change.…” We have…made a full rollout of smart meters to homes and businesses a key part of our Programme for Government” “The Foundation Stage will be critical. By delivering a positive consumer experience of smart metering, by ensuring that industry is ready and able to roll out millions of meters, it will build a solid platform for the mass rollout” “The central Programme will be managed by DECC, but its success will depend on the engagement and expertise of industry, national representative organisations, local organisations and individuals......” Source: DECC SMIP Prospectus Response Briefing, April 2011 Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011 2

3. The timelines have been set... 2012 2013 2014 2015 2016 2017 2018 2019 2011 DCC Go Live DCC Go Live Rollout Completion Rollout Completion Approved Tec Spec Approved Tec Spec Compliant Smart Meters Mass Rollout Commences Phase 2 Go Live Phase 2 Go Live MASS ROLLOUT FOUNDATION Regulatory Obligations incl. ICOP Regulatory Obligations incl. ICOP DCC Licence Award DCC Service Provider Appt DCC Licence Award DCC Service Provider Appt Foundation Change of Supplier Foundation Change of Supplier Registration Migration Registration Migration Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011 Source: DECC Prospectus Consultation Response, March 2011 3

4. The Retailer’s challenges remain... TechnologyDataCommercials Consumer Engagement MobilisationResourcing Smart Metering Implementation Future Smart Grid Requirements Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011 Fully Competitive Market Components of smart metering rollout are many and complex in their execution More complex in execution than other world-wide deployments Future Smart Grid Requirements EU Directives – Smart Metering/ Grid 4

5. Technology Beyond The Prospectus: The Retailer’s Challenge

6. Multiple technical challenges Combination of multiple new components and technologies –Technical interoperability –Potential for deployment of multiple technical end to end solutions –Robust, secure end to end solutions New complex processes –customer consent –asset tracking and maintenance Support of a smart data catalogue –New DCC interfaces Multiple technical implementations –Foundation Change of Supplier –Mass rollout –Future central Registration Potentially complex market entry testing arrangements Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011 6 Our commitment is clear.... Our future investment remains uncertain....

7. Achieving the technical challenge Comprehensive and timely technical specification –smart metering system components –final communications technology Clearly defined –market entry processes –security requirements to operate within a critical national infrastructure Timely availability of –a full smart data catalogue –detailed definition of DCC interfaces Programme timescales which recognise the necessary levels of testing –component –interface –end to end –penetration Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011 7

8. Data Beyond The Prospectus : The Retailer’s Challenge

9. The data challenge Cleansing Maintenance Smart Data Catalogue Security Migration Critical National Infrastructure New Data Items and Interfaces Cross Industry Initiatives Alignment There is an opportunity to ensure industry data is of the best quality prior to migration to the DCC Accuracy Legacy to Smart New World Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011 9

10. Data improvements require cross-industry sign-on Timescales and scope require recognition within DECC Programme Clearly defined objectives with central co-ordination Alignment of electricity and gas data items to a common standard Linking of data items at an individual premise level Opportunities now for proactive measures during scheduled site visits Data is a key programme component... Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011 10 Our commitment is clear.... Our future investment remains uncertain....

11. Commercials Beyond The Prospectus: The Retailer’s Challenge

12. Investing in smart... Smart Commercial Delivery 12 Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011

13. Embedding the commercial model Significant dependencies on DECC programme delivery still remain –Delivery of an approved technical specification –Development of arrangements for the novation of commercial contracts and meter volumes into the DCC –Confirmation of lead times for technical components –Full and detailed understanding of consumer protection measures –Clear definition of DCC operation and the cost recovery model –Engagement between market participants to address remedial issues with appropriate funding arrangements in place 13 Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011 Our commitment is clear.... Our future investment remains uncertain....

14. Consumer Engagement Beyond The Prospectus: The Retailer’s Challenge

15. Consumer Engagement DPA Smart Energy Code Data Privacy Charter Installation Code of Practice Behavioural Change DPA Regulated Duties Consumer Engagement Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011 From.... To.... 15 Detailed clarification is still required Benefit Delivery Consumer Expectation

16. Future engagement Regulated duties and access to consumer data requires further analysis Installation Code of Practice will determine on-site activities Data Privacy Charter will provide consumers with greater clarity Education of customers will be in a environment of increasing consumer protections Complex consumer consent processes will need to be managed Delicate balance between technical advances, education, perception and communication A level of intrusion cannot be avoided in order to deliver the behavioural change and energy education measures which the Government business case demands... A level of intrusion cannot be avoided in order to deliver the behavioural change and energy education measures which the Government business case demands... 16 Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011

17. Resourcing Beyond The Prospectus: The Retailer’s Challenge

18. The resourcing challenge Multiple aspects to resource demands –On-going support of the DECC Programme and working groups –Internal smart programme requirements Rollout Multiple resourcing challenges On-going support of DECC’s Programme Working Groups Decision Groups Milestones in the future to be planned for such as Registration migration Internal smart mobilisation and delivery programme demands Field force recruitment Direct dependency between rollout and recruitment profiles Avoidance of large field force post mass rollout completion / ramp down Field force training New technology deployment = new technical skills Education of consumers at point of install = new training skills 18 Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011 Our commitment is clear.... Our future investment remains uncertain....

19. Resourcing A number of key factors will still determine the resourcing in terms of: Numbers Skill sets Balance between internal and external resourcing Key factors include: Programme timetable delays Roll out volumes caps during the Foundation Stage Complexity of final smart metering infrastructure The level of consumer engagement required during individual installations Obligations around asset maintenance 19 Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011 Our commitment is clear.... Our future investment remains uncertain....

20. Smart Implementation Beyond The Prospectus: The Retailer’s Challenge

21. The rollout task ahead... As an industry we have undertaken may implementations –we install and replace millions of meters each and every year –we recruit and train resources to ensure they have the correct skills in order to work in a safe and proficient environment –we already manage contracts with third party service providers We operate in a complex and highly competitive market We are used to implementing technical and business change 21 Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011 The task ahead presents new and numerous challenges...

22. Same challenges...new context... Challenging timescales –Rollout of significant volumes of smart metering systems by 2019 –Against the potential for significant financial penalties Compliance measures –Regulation – Smart Energy Code; Installation Code of Practice, –Potential for new accreditation and certification processes –Security –Consumer protection Dual focus –Foundation Stage obligations –Mass rollout and beyond Deployment of new technologies –Sufficient testing of both individual components end to end infrastructure –Resource skills Benefits realisation 22 Our commitment is clear.... Our future investment remains uncertain.... Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011

23. Smart Grid Beyond The Prospectus: The Retailer’s Challenge

24. Development of a secure yet agile critical network infrastructure from which benefits for all market participants and consumers can be realised..... Development of a secure yet agile critical network infrastructure from which benefits for all market participants and consumers can be realised..... The Smart Evolution Significant challenges lie ahead Increasingly complex offerings to the end user as time goes on Smart metering will be a critical step towards delivering an enduring smart grid capability in the UK Need to ensure investment in solutions now delivers the future smart grid model Increasing data volumes which must be used and stored appropriately Potential command and control conflicts between the Retailer and DNO Increasing numbers of entry and exit points –Electric vehicle charging –Solar and wind contributions 24 Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011

25. Single Approach Need to work together as an industry to ensure the correct levels of investment are made Assurance that the correct technologies are adopted Return on investment are not reduced by incorrect decisions Ensure engagement at an EU level takes account of EU roadmap aspirations and that lessons learnt from around the world are properly assessed 25 Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011

26. Conclusions Beyond The Prospectus: The Retailer’s Challenge

27. Delivering the expectations... Programme timescales are realistic... Requirements are clearly defined... Investment certainty increases... Flexibility to allow innovation... 27 Considerations today must not limit the energy market of tomorrow.... Considerations today must not limit the energy market of tomorrow.... Beyond The Prospectus: The Retailer’s Challenge 18 th May 2011

28. Questions?

29. Thank you Iain Matthews Smart Metering Market Development Manager, Energy Retail iain.matthews@scottishpower.com