British Gas seem to be laying down a smart metering gauntlet to the rest of the indusrty, who combined have the taregt of getting the entire UK onto smart meters by 2020 – no easy task!

British Gas estimates that the smart meters will save the 2 million households it’s targeting a combined £1billion over 10 years, which works out as £500 per household over the same period, at £50 per year.  Boiling it down to that level, presents a strange insignificance to the saving that might be achieved, but that must not be undermined by what a comprehensive smart meter roll out will deliver to the UK.

It provides home owners with ownership of their energy bills, creating an ability for them to radically decreases their energy usage, by providing a far better understanding and education to them of their actual usage.

This is incredibly powerfully.  What’s more powerful is the improved level of intelligence that suppliers and generators will slowly start to have of individual usage habits.  Creating tailored tariffs and bespoke charging structures that start to reflect the true cost of the energy that households consume.

This is by no means an easy undertaking, but the key is to start taking the little steps, and pushing the heavy flywheel – it will soon pick up pace when more players join the cause.

Whilst we’re probably still 5 years away fr0m a good proportion of the market, taking up the use of this service, which inevitably must be driven by suppliers, there is one stand-out utility here in the UK which is driving change.

First:Utility has integrated it’s own Smart Metering technology into the Google ‘Powermeter’ application, allow it’s customers to have real-time access to their energy usage.  What’s important is that First:Utility have not had to develop a tool or application to help publish their customers energy usage information.

One of the most daunting parts to technology build is creating a system / service / solution that is usable, and can keep up-to-date with technoogy advancements.  Partnering with Google, First:Utility will get this in spades, and will also be able to influence the future developments of the ‘Powermeter’.

The sooner the rest of the UK’s energy utilities get on board the better – in the meantime, if you want real ownership of your energy bills, you’d better make your way to First:Utility.

Li Ka-Shing holding company, Cheung Kong Infrastructure (CKI) and Hongkong Electric, is looking to pull together a joint venture with Hongkong Electric, which is 40% owned by CKI.

CKI has business interests throughout China, Australia, New Zealand and Canada, as well as Britain where it already has stakes in Cambridge Water, Southern Water and Northern Gas Networks.

In years gone by, these announcements have typically been marred by accusations of “profiteering” and “ripping customers off”. A lot of these comments often came from taking an overarching view of the Centrica business, rather than looking specifically at British Gas the retailer to residential and business customers.

Anyway, the highlights appear to be:

Centrica group revenue is flat from 2008 to 2009, current at £21.96bn (5% growth year on year)

• Centrica group (adjusted) operating profits £1.86bn (7% decline year on year)
• British Gas residential customer accounts 15.7m (a fraction 0.9% increase year on year)
• British Gas residential Operating profit £595m (an increase of £219m or 58% year on year)
• British Gas residential Operating margin 7.6% (up from 4.8% in 2008)

So what does it mean. In short, Centrica and British Gas have weather the 2008/2009 storm very well, and have come out smelling of roses. Full credit. Yes profits (for BG) are up, but at a meagre 7.6% operating margin (up from a tough 4.8% in the previous year) you have to say, they make an awful lot of effort for not a great deal of return.

That all said – consumer groups will look at this, especially following the drastically cold winter the UK has had, and will contest that British Gas should have passed on price reductions earlier that it did (which was earlier this month).  However, they do need to realise that British Gas is neither a charity nor a not-for-profit – they could of course ask for de-privatisation, but I’m not sure that will go down too well with anyone!

British Gas, I think, should no longer be seen as the lame ducks in the race to be Britain’s best energy supplier, rather the model for other to follow. They’ve broken the mould and have seemingly started to deliver something markedly better to the UK consumer than they’re used to receiving.

The worst position is that home owner will manage self-inflicted ‘zero-energy-usage’ policies, potentially placing lives at risk.  On top of homeowners feeling these rising costs, small business will also bear the brunt and ultimately feel the need to pass on these rising costs within the end price they in turn charge the customer, creating a double whammy of cost increases.  Something that many households will find extremely hard to cope with.

Now is the time for the Government, and that includes Ofgem, and take action.  Which means rather than merely reporting on the potential consequences of what may or may not happen, they should be taking action and executing aggressive, wide ranging policies to ensure that all consumers are in some way protected, with added emphasis place upon currently vulnerable customer and those considered as a ‘high risk’ of becoming vulnerable.

Who’s managing the scheme?: The Energy Saving Trust (EST)

Is it available UK wide?: No.  It’s only available in England

Can every English household scrap their boiler and get a new one?: No.  The scheme is first come first served, open to the first 125,000 households.

What else makes a household eligible?: Your boiler need to have the energy efficiency grade of G.  Acoording to teh EST, they can quite easily be identified as boiler with a permanently ignited pilot light.

What’s it worth to me?: £400 towards a new boiler

How much does a new boiler cost?: The boiler itself could be anything from £800 up to £3000 – with a average cost of around £1200.  Then you need to consider the install.

How much is the total boiler and install cost?: Upwards of £1500 – with an average of £2000.

That’s still quite a bit of extra money. How do I know if I’m getting a good deal?:  Well you need to shop around.  Some boiler installers will be providing further incentives to install these new boilers, but you need to compare and shop around

Do you have a recommendation?: Yes.  I’d recommend getting a price from British Gas, Homeserve and a local proovider, trying using My Builder to get a competitive quote.  Make sure they offer you a price for a couple of boilers and you get the same boiler quoted from each supplier.

Whilst this might have subtle effects on certain manufactures, notably Vauxhall, Jaguar Land Rover and Cain, the Liverpool brewer (the latter being very risk looking to deprive Liverpudlians of a pint of beer), it seems to have maintained wholesale gas prices at a reasonable level.  Meaning that it’s unlikely we’ll have the usual stampede of suppliers threatening future price increases because it’s been a little bit colder for longer than usual.

What remains is whether the Government is going to force future investment into more gas storage facilities.  As these extreme winter event become more common, the government and the energy industry need to assess the viability of creating additional supply to counter these temporary blips in gas shortages,

However (and this is a debate which will probably be better answered once the Met Office publishes better data) despite the cold snap the UK saw in January 2009, temperatures on average are up. It’s generally warmer meaning the home owners will use less energy to heat their homes.

So the question is, has there been a real reduction in the usage of gas by consumers based on energy efficiency measure?  My hesitant answer would be ‘No’.

In Q1 (Jan-Mar) 2009 usage was only down 2.6% compare to the previous year, whereas in Q2 (Apr-Jun) 2009 usage was down 12.9%.  But if you add up the total domestic gas usage over that period Q1 makes up 72% of it, over two thirds.  A reduction of 12.9%, which is not consistently maintained quarter on quarter suggests some other variables impacting consumers usage habits.

For energy efficiency to demonstrate it’s working, usage must come down when householders are actually using a lot of it!

• British Gas profits soar – but prices remain high

• British Gas says it ‘can’t afford’ to cut bill despite huge profits: Central cheating

• British Gas profits set to rise

• British Gas announces soaring profits after REFUSING to pass on savings to customers

• British Gas profit rise fuels consumer anger

British Gas are seemingly being labelled the villains again in the eye of the UK public – it is pantomime season after all!

It’s unsurprising that there are profits and that profits are up. Wholesale energy costs have stabilised massively in the marketplace in 2009, meaning that customers have seen some price reductions but nowhere near to the extent that wholesale prices have come down.

Justifiable – I think so.

For no other reason than the fact that a supplier like British Gas, or even players like it’s parent Centrica, need to make profits. They need to make profits to have a strong and stable business, that can be confident to invest in the UK energy market, from the infrastructure used to pipe and distribute gas and electricity to home owners and small business, right to the need to invest some significant sums into new generation methods, renewable, nuclear and gas (perhaps even a little clean coal).

If Centrica can demonstrate it can invest in the generation and then supply it to an end consumer, on a massive scale, with a strong return, then they’ll get backing from investors. If they can’t demonstrate this, then they probably won’t have the confident to invest.

It’s pretty simple, it’s just a shame that some consumers suffer under excruciatingly high bills.