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The Topic: Smart metering SMART METERING THE TOPIC 14 | 27TH JANUARY - 2ND FEBRUARY 2017 | UTILITY WEEK Why water should join the revolution Smart meters can have an even bigger impact on reducing usage in the water sector than in the energy sector – so it's no surprise that early adopters are deploying the technology now. S ince its privatisation in 1989, the water industry in England and Wales has functioned as a non-competi- tive market in which regionally regulated businesses operate as both network provider and retailer – managing storage, treatment, supply, billing and customer experience. Customers, as a result, have not been able to switch provider to get a better deal or better customer service. This is about to change for business customers: competi- tion is being introduced for the first time for all business users in April 2017, in one of the most transformational changes to hit the water industry in decades. As participants and the interested public alike wait to see how this will materialise, it looks likely that domestic market competi- tion will not be far off. As water companies prepare for further retail competition, many – particularly in the south and southeast of England – have also begun universal smart water metering programmes for domes- tic customers as a means of future-proofing water supplies in areas which the secretary of state has deemed to be severely water stressed. In advance of a further shake-up, these companies can learn valuable lessons from the competitive energy retail sec- tor, where the adoption of smart meters in energy is transform- ing the way in which consumers interact with companies. Energy retailers are focusing on richer, data-driven customer experi- ences and are expanding their presence in the digitally-enabled "connected home". Smart meters can deliver sig- nificant opportunities to both customers and suppliers. Being conscious of this is critically important to the strategic deci- sions and direction taken by each organisation. As a result, water companies not in water- stressed areas may still opt to roll out smart meters (albeit not on a compulsory basis), so that they too can reap the benefits, some of which are briefly covered below: Reducing water usage. Smart water meters can help reduce water usage by making custom- ers more aware of what they use, helping them to reduce their water bills, and allowing water companies to better manage peaks and troughs in demand. There have been some successes: customers with smart water meters have reduced consump- tion by 10-15 per cent compared with 2-5 per cent in energy. There have also been some challenges: some households are more susceptible than others to bill increases compared with their historic rateable value charge, so are less willing to engage with companies trying to install them. Southern Water has been something of a flag bearer for smart water meter trials in the UK, with other companies start- ing to follow suit. A five-year scheme to install meters across the UK's water-stressed South East saved 27 million litres of water every day, according to the provider. Transforming the organisa- tion. Energy retailers have used new metering technology as a mechanism to deliver large-scale transformational change. Water companies could follow suit, using the opportunity to lower operational costs by investing in people, process, technology; or leveraging smart water meters as a proactive customer position- ing vehicle ahead of likely future domestic competition. Compa- nies with data-rich customer service and an ability to offer various tariffs, bundling utility or additional services together, may find this a valuable competitive advantage. Improving the network. Smart water meters allow utilities to better understand water usage and identify where usage is abnormal. They can act as addi- tional sensors on the network, identifying leaks and provid- ing information to enable bet- ter decision-making for capital investment. Better decisions translate to better allocation of large cash-intensive network replacement programmes, ulti- mately providing water to cus- tomers at a cheaper cost. In conclusion, Great Britain's smart metering programme has been transformative and placed pressure on all market partici- pants. Companies first off the mark, as well as fast adopters, are competing for a differenti- ated position in the marketplace while balancing the inevitable risks associated with large-scale rollouts of new technology. With water smart meters and the impact of competition, it is very likely that new challenger brands will emerge in the water industry and eat into market share. Horizontal growth is a key growth area – where mar- ket players can offer extra ser- vices related to the core product or a range of different product options. A different strategy is based on being "lean and sim- ple", targeting operational effi- ciencies and products and prop- ositions that reduce the effort of the customer to understand, pur- chase and transact. Smart meters are important components of evolving smart networks. Electricity and gas companies are increasingly able to predict and meet demand more effectively through smart meters. For water companies, they are – and will be – a key enabler to optimise the water resource itself and spend money in an optimum way to produce and deliver this essential resource into custom- ers' homes. Stephen Haw, partner, Steve Airey, senior manager, Hayley Speller, manager, Baringa Partners 53 – the number of smart gas and electricity meters that will be installed as part of the rollout. 30 million - the number of premises that will be impacted. 2020 – the deadline for the rollout. £11 billion – cost of the rollout of energy smart meters. 3.3 million – the number of properties in London that Thames Water aims to install smart meters into. 2030 – the date Thames water aims to have installed smart meters in all of its in-area properties. 4,200 – the number of leaks the programme has detected. 930,000 – the volume of water per day it has saved. ENERGY AND WATER GET SMART