Preferred bidders for smart metering contracts announced by DECC

The selection of Capita, CGI IT UK (CGI), Arqiva, Telefónica and Gemserv Limited (Gemserv) as preferred bidders for contracts the Department of Energy and Climate Change (DECC) put out to tender will be seen by service providers as being "an important milestone in the smart metering rollout", smart metering expert Chris Martin of Pinsent Masons, the law firm behind Out-Law.com, said.

DECC said that it hoped to finalise contracts with each of its preferred bidder over the next couple of weeks.

"Smart meters will mean an end to estimated billing and will enable consumers to cut their energy bills and better manage their energy use," a DECC spokesperson said. "In preparing for the roll out of smart meters, we have ... informed bidders of the outcome of the competitions to put in place the Data and Communications Company which will link smart and electricity meters with energy suppliers and network operators. These decisions remain subject to contracts being concluded, which will occur in the next few weeks after which we will make a statement to Parliament."

Outsourcing company Capita has been named as the preferred bidder for contract for performing the role of Data and Communications Company (DCC) under the smart metering framework. The DCC would be responsible for operating the data and communications hub that sits at the heart of the smart metering system. If a final contract is signed between the DECC and Capita, Capita would be expected to perform the role of DCC licensee for 12 years and could earn approximately £175 million for doing so.

"Managing the national rollout programme is a huge logistical and technical challenge but Capita’s scale and pedigree in achieving large transformation projects will help to ensure that this programme meets its milestones in a cost efficient manner," Capita chief executive Paul Pindar said in a statement.

CGI has been selected as DECC's preferred bidder for the role of Data Service Provider. Under this role the DSP would be responsible for developing and operating the system that would control the movement of messages to and from smart meters, DECC said. The contract is for eight years and is worth approximately £75m.

"We are looking forward to working collaboratively with the stakeholders in delivering a reliable solution that delivers a smart energy future for the UK, based on our long heritage and strength in delivering for the UK utilities sector," Tim Gregory, the UK president of CGI, said.

Arqiva is DECC's preferred bidder to become the Communications Service Provider in the north of England and Scotland. The 15 year contract would be worth approximately £625m to Arqiva if a deal is finalised with DECC and the company would be responsible for providing smart metering communications across the region.

Arqiva said that the 'Sensus' technology behind its systems for smart metering communications has already been used in 16m smart meters and devices around the world. Trials conducted in the UK have proven that the technology "can communicate with smart meters across Great Britain, including locations deep inside buildings that other communications technologies have struggled to reach," the company added in a statement.

The preferred bidder for the contract to provide communication services in the Midlands, East Anglia and Wales, as well as in the South of England area, is Telefónica. DECC said that the two prospective contracts would span 15 years and be worth approximately £1.5 billion to the company.

Telefónica said the announcement is a "huge endorsement" for the use of 'cellular' technology.

"Telefónica’s proposed communications solution is based on its cellular network in the UK which is ready to support the requirement of smart meters," Telefónica said. "This will be backed up by the use of mesh technology to connect meters in areas without cellular coverage."

DECC also announced that Gemserv is its preferred bidder for the contract to become the Smart Energy Code Administrator and Secretariat. That role involves undertaking day-to-day governance activities in relation to the Smart Energy Code, which will establish the rules on smart metering which operators, such as energy suppliers, will have to adhere to. The contract for the Smart Energy Code Administrator and Secretariat role is worth approximately £10m and would span four years.

Smart metering enables a two-way flow of information, including consumption information, from electricity and gas meters to a central communications hub. The Government expects this will bring a number of benefits – for example, it will bring an end to estimated billing and the need for meters to be read manually. It is also anticipated that the roll-out of smart meters will enable a more sophisticated approach to the management of supply and demand than is possible with conventional meters.

The Government hopes that by giving consumers near real-time information on energy use that shows them how much they are paying for energy at particular time they will reduce users’ consumption of energy at peak times. The ultimate goal is for a smart grid energy infrastructure to be implemented that will deliver supply more efficiently to meet demand

"This announcement is important, because delivery of this project, which is, essentially, a major public sector IT project, sits at the heart of the roll-out. The potential for the project to be delayed or to fail has to be regarded as one of the key risks that could impact on the success of smart metering and the timeliness for the rollout," Chris Martin of Pinsent Masons said.

In May DECC announced a new deadline of 2020 for the rollout of smart metering by energy companies to be finalised in the UK. The previous target was for the systems to be in use before the end of 2019. Suppliers are now expected to begin the rollout by autumn 2015, it said at the time.