P272: A Business Owners Guide

All you need-to-know about the Ofgem introduced P272

The energy market underwent a major shift when Ofgem, the UK's energy industry regulatory body, introduced P272.

Through this regulation, affected businesses experienced significant changes in how their power usage was recorded and billed because they were obligated to move to half-hourly electricity metering.

The ultimate aim for making these changes was to build towards a fairer, more balanced and more secure supply market.

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P272: The Balancing and Settlement Code

A modification to the Balancing and Settlement Code, called P272, was introduced in November 2014.

Through its implementation, all business electricity customers in profile classes 05, 06, 07 and 08 were to be moved to half-hourly electricity meters by April 2017.

Having energy usage recorded every thirty minutes through half-hourly electricity meters helps ease a process called settlement.

P272 applies to large business energy customers who use a lot of power. It usually doesn't apply to smaller organisations and it doesn't apply for domestic use.

P322: Balancing and Settlement Code

Another modification to the Balancing and Settlement Code, called P322, was introduced in August 2015.

This was intended to help both businesses and suppliers move to half-hourly settlement.

What P272 means for clients and suppliers

P272 is part of a move towards a smart energy market. It affected many non-half hourly electricity supply customers and brought them in line with half-hourly metering, creating a more balanced environment and encouraging more efficient and equivalent industry processes.

A mandatory regulatory change, it affected over 100,000 UK businesses with electricity meters in classes 05-08. This change meant their energy usage would start being recorded every thirty minutes. Businesses affected needed to appoint a Meter Operator (MOP) and Data Collector (DC) to cover maintenance tasks and energy consumption data retrieval and submission.

This regulation was a significant shift for energy suppliers because it asked them to improve the accuracy of their billing and provide more detailed data about their business customers' energy consumption.

What P272 means for settlements

Settlement refers to the process of concluding how much electricity was used compared with how much was bought. Through this process, a calculation can be made to determine if there was an imbalance between the electricity supply and demand.

During a settlement, the companies who supply energy to customers and the companies who generate the energy trade with one another. P272 means that energy suppliers have accurate energy consumption data for the settlement process, benefiting the business customer who they supply the energy to.

Every half an hour, updated data can be used to compare and calculate:

  • the amount of energy the supplier purchased from the generator on behalf of the business customer,
  • the amount of energy the business customer used, and
  • the price the supplier must pay to the generator to make up the difference.

Prior to P272, this trading would rely solely on the estimations provided by the supplier about the business customer's energy consumption. However, with half-hourly metering, real data is available and there is no need to rely on estimations that may well be inaccurate.

Benefits of P272 and half hourly settlements

With accurate and timely data that reflects your energy use as a business customer, half-hourly metering makes valuable insights into your energy consumption available.

Drilling down into the data enables a commercial business with large power needs to monitor their consumption more carefully. Greater transparency around their electricity usage can enlighten a business to the financial, environmental and practical implications of their business activities.

Making changes to manage consumption and reduce costs could involve limiting projects with high energy consumption so that they can only be delivered at lower-priced, off-peak periods.

Armed with the tools and resources for analysis, a business can identify how to improve energy efficiency and maximise the energy they get.

Furthermore, this information can be used for future energy contract negotiations and longer-term energy management strategies, with truly bespoke energy deals being accurately tailored to your business needs.

Ofgem estimated the overall value of implementing the P272 to be £1 million and identified the biggest benefit as customers being able to strategically move their electricity load away from highly-priced peak periods. For the energy industry as a whole, Ofgem expects greater engagement, better forecasting and more efficient settlements.

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How P272 changes billing

Ordinarily, a supplier will bill their energy customer using a single meter reading that is supplied once a year. This data is interpreted using industry calculations and your meter class, but these simple estimates are not reflective of how your organisation actually uses energy.

Instead, automatic meter readings every half an hour provide a much clearer depiction of your business' actual consumption. Tens of thousands of meter readings throughout the year builds a full picture and ensures each bill is accurate. This enables you to make adjustments to reduce your business energy consumption and costs.

Due to P272 and the move to half-hourly metering, your energy bill may appear more complex and, unfortunately, moving to HH metering sometimes brings new charges and unavoidable cost increases.

You may find new charges appear, relating to:

  1. Higher rates for electricity use during peak hours,
  2. Distribution Use of System (DUoS) charges, and
  3. Transmission Network Use of System (TNUoS) charges.

How to find out the profile class of your business

Your electricity bills will include a reference to your Meter Point Administration Number (MPAN), otherwise known as a Supply Number or simply an S Number.

All suppliers will include this information and it can usually be found in a text box printed on the top right or reverse of your bill. You'll know you are looking at the correct box if the digits start with the letter S. You can use this number to find out your profile class.

If the first numbers in the sequence after the S are:

  • 05,
  • 06,
  • 07, or
  • 08,

this means your business energy supply was or will be affected by P272 regulations. Suppliers are required to take reasonable steps to install HH meters at the premises of customers in profile classes 5-8.

If the first numbers in the sequence after the S are:

  • 01,
  • 02,
  • 03, or
  • 04,

your business is not currently affected by the changes. However, it's possible that future regulations could be rolled out to move profile classes 03-04 to hourly metering in an effort to create a wider smart energy market.

If the first numbers in the sequence after the S are:

  • 00,

then your business may already use a half-hourly metering system.

Changing or configuring electricity meters

Most electricity meters for customers in classes 05-08 will be Automated Meter Reading devices, otherwise known as AMR meters, in line with industry regulatory requirements.

This means that most of these meters won't need to be physically changed to install half-hourly billing but instead will need to be configured remotely to give HH readings.

The implementation of P272 through smart business meters is usually very straightforward and easy to manage.

The risks of migrating meters

Switching a large number of business energy customers to half hour metering is a complex process for the electricity industry to undertake and the move does not come without the following risks:

  1. First, this is a considerable change in the electricity market and any change brings uncertainty.
  2. Second, the upheaval and changing of metering methods is a multi-stage process.
  3. Third, there is a possibility of risks to the security and privacy of a company's energy usage data.

However, with this regulation first introduced in 2014 and most changes implemented by 2017, the risks have now been largely overcome.

Benefits of P272

The changes from P272 and smart metering led to benefits for both businesses and the energy industry as a whole.

Business energy customers have the opportunity to:

  • avoid tariff penalties,
  • identify energy consumption patterns,
  • improve energy efficiency,
  • reduce costs,
  • reduce energy waste,
  • secure better contracts,
  • shift electricity load to off-peak times.

The energy industry experiences improvements in terms of:

  • efficiency,
  • engagement,
  • forecasting,
  • managing supply and demand,
  • settlements.