Ofgem is preparing for a competitive process for a new licensee to undertake data and communications services for Great Britain’s smart energy meters. The licence – whose current cost to consumers is £600-700 million per year – is currently held by Smart DCC Ltd, a wholly owned subsidiary of Capita.
It is not yet clear when the current licence will expire. Its initial term ends on 22 September 2025 but Ofgem has already said it expects this to be extended by at least a year. It may be extended by up to 36 months, in which case Ofgem will give formal notice by 21 September 2024.
The length of the next licence holder’s term will be subject to consultation. But Ofgem said it expects it to be for an initial period of 12 years, with an option to extend the contract up to a further 6 years.
The licensee will have two core businesses, which Ofgem says should be conducted on a not-for-profit basis:
• To provide a centralised, secure data and communications service to transfer data between smart meters and energy suppliers, network operators and third parties.
• To provide smart metering communications hubs in homes and some businesses.
That will include procuring and managing communications and data services subcontractors. Ofgem is reviewing the regulatory arrangements and will be consulting on the content of the new licence but said:
• The company board should be majority stakeholder or independent controlled and include consumer representation.
• The core business should be conducted on a not-for-profit basis.
• Costs of activities deemed to be sufficiently stable should be subject to an upfront approval by Ofgem via an ex-ante price control or a budget-setting process.
• The operational model will remain primarily outsourced with key contracts procured competitively on the market.
• The core business will remain funded by charges on users.

Further reading:
INTERVIEW: Angela Love says it is time to think about long-term governance around smart meters