POWER and UTILITIES COMPANY A SM Factbook

POWER & UTILITIES COMPANY
A SMDP
Business Case
Factbook
Version 1.1
17th December 2009
Purpose of this document
 The Factbook provides a clear picture of cost and benefit areas identified in the historical business
case and details how the assumptions for each area were derived
 Each area has been reviewed to understand the confidence and the sensitivity of the data to achieve
a robust Gate B business case
 The Factbook is supported by two additional documents which have been attached below
 The Driver Assessment chart plotting the sensitivity vs confidence of each driver
 The Driver Map showing all drivers and how they link to cost and/or benefit areas
EMBEDDED FILES DELETED.
Revision History
Version Date Author Comment

1.0 15/12/09 E&Y 1st completed version of the Factbook
1.1 17/12/09 E&Y Amended to include comments from PERSON
Key conclusions
 The historical business case does a good job of covering a wide range of cost areas, as well as
benefits related to cost avoidance
 The structure of the business case needs to include scenario building, financing options, sensitivity
analysis, NPV calculations and follow a strong governance method
 The majority of key drivers require a fundamental review over the next phase to deliver the right level
of confidence for Gate B
These drivers include:

 The size of the meter portfolio
 Pace of roll-out
 Install rate per day
 Smart Meter asset unit costs
 The expected lifecycle of a Smart Meter
Key conclusions (cont.)
 We have identified a number of key gaps that need to be considered to deliver the Gate B investment
case. These have been explored in the Gap Analysis document
They key gaps include:

 Financing options & tax efficient supply chain opportunities
 Deployment scenarios (Installation customer experience, Value led deployment approach,
Deployment approach to maximise efficiency)
 Differentiated value propositions per customer segment
 Demand management benefits and the impact on the settlement process
 Security of procurement
 Leveraging group purchasing power
 Reverse logistics
 SME deployment
 Response to competitor action
 Partnering and outsourcing approach
 Scale of POWER & UTILITIES COMPANY A business transformation to deliver Smart
 Overlap with other ongoing POWER & UTILITIES COMPANY A programmes
 Smart Meter Installation Services provision to other Energy Retailers (through SERVICES)
SMDP Smart metering Factbook
 There are three sections to the SMDP Smart Metering Factbook
Please click on a section to see further details
1. Factbook Approach 2. Factbook Update Process
3. Smart Metering Factbook

SMDP Smart metering Factbook Approach
 The following approach was used to construct the Smart metering Factbook
Drivers Supporting Data
Cost & Benefit

• Driver label
Areas
• Definition
• Areas supported
• Business owners
Historical • Data approver
Business
Case • Supporting data
• Sensitivity
• Confidence
• Driver assumptions and risks
• Reference documents
1 2 3
Analysed the ‘driver equations’ Reviewed the supporting driver and
Identified each of the cost &
for each area to understand what provided a data snapshot along with
benefit areas within the
drivers have been used to support confidence and sensitivity analysis. Please
historical business case
the cost or benefit area see following slide for further details
The following structure has been used to provide information on each of the
drivers that have been used within the historical business case
Section Description
An ID and name has been assigned to each driver based on its description within
Driver label
the historical business case
Definition Definition of the driver
Areas supported Business case cost & benefit areas supported by the driver
The business unit within POWER & UTILITIES COMPANY A that is responsible for
Business owners
the data
The individual within the SMDP who is responsible for approving the data to be used
Data approver
(Asterisked names indicate person will be new data approver moving forward
Supporting data High level data supporting the driver
The sensitivity of the historical business case to the driver based on a +/- 10%
variation in the data (a qualitative assessment has been provided for drivers where
Sensitivity
sensitivity analysis is not possible within the historical business case model). Please
see following slide for further details.
Confidence A qualitative assessment of the driver’s supporting data
Driver assumptions and risks Assumptions, risks and dependencies related to the driver
Reference documents Documents providing further detailed information

Confidence & Sensitivity have been assessed using the following approach
Confidence RED: The data generation approach needs to be reviewed to ensure

For each business case driver, a
R the correct data source is being used and the appropriate external
factors have been considered
qualitative assessment of the supporting
data has been made to understand:
• Approach used to generate the data AMBER: The approach to generate the data is robust, however the
supporting each of the drivers (incl. A data and the impact of external factors needs to be refreshed
the source, consideration of external
factors and validation with POWER &
UTILITIES COMPANY A business
GREEN: The approach and timeliness of the data is appropriate for
owners) G use within the business case
• Timeliness of the data used
Sensitivity HIGH: A +/- 10% variance in the assessed driver results in a £30m+
Sensitivity analysis has been undertaken H variation to the historical business case
on each driver to understand how a +/-
10% variation in the underlying data will
impact the historical business case. The
MEDIUM: A +/- 10% variance in the assessed driver results in a
analysis has been modelled using the M £10m to £30m variation to the historical business case
Please note: The levels for determining
High, Medium Low will vary based on our
initial analysis (after which they will be LOW: A +/- 10% variance in the assessed driver results in a less
fixed) L than £10m variation to the historical business case
PLEASE NOTE: All sensitivity modelling has been conducted using the historical business case model developed by the SMDP which has not
been altered. Due to the nature of some drivers, a qualitative assessment has been given as the historical model does not
enable quantitative sensitivity analysis.
SMDP Factbook update process
 The following is a recommended process for ongoing management of the SMDP Factbook. This
process should only be used as a guide, with the final process to be agreed between the Performance
& Planning workstream lead and Project Director
 The SMDP Factbook document is to be owned by the Performance & Planning workstream
Document Ownership  Individual driver pages within the Factbook are to be owned by individual workstreams (as indicated by
the data approver)
 The Factbook is to be restructured to map to the structure of the new Gate B business case.
This will require:
Document Structure • Cost & Benefit areas to be updated
• Driver equations for each area to be updated
• Individual drivers to be deleted / added to match driver equations for each area
Every 3 months:
 Each driver slide is to be updated by the relevant Data Approver and signed off by the related Business
Document Maintenance Owner and Performance & Planning workstream lead (who will act as an independent approver)
 The Performance & Planning workstream will publish a new version of the Factbook to show progress
and communicate any changes in drivers
Each of the Cost and Benefit areas from the historical business case(1) have
been reviewed to assess the sensitivity and confidence in their drivers
Costs Benefits
C1. Smart Meter
C6. Repair Costs
Costs
B3. Meter
B1. Data Retrieval
Recertification
C2. Interface Costs C7. Safety Visit Costs
B2. MAP, MAM & B4. Debt
MOP Management
C3. In Area C8. Operational
Installation Costs Deployment Costs
B5. Improved
C4. Out-of Area C9. Systems & Tech Customer Service
Installation Costs Architecture Costs
C5. Communications
C10. One-off Costs B6. Other Benefit Areas
Costs
(Not costed within the historical business case)
C11. Contingency
Costs
£1.68 Bn(2) £1.82 Bn(2)
The following slides breakdown each area to its component drivers, and
provides a high level snapshot of each driver
(1)The Factbook has been based on version 9 of the Smart Metering business case as at the start of October 2009
(2) Figures have been taken from version9 of the Business case model and have therefore not been discounted for
C1. Smart Meter Costs
These are the total asset costs for the Smart Meters which will replace the existing Dumb meter assets.
Driver Equation
Total Smart
Meter Costs = ( A + B ) × C
C1.2 Cost of
C1.1 Smart
Meters in C1.3 Cost of
£505.4m year of Fixing Kit
Meter Rollout
Volumes
installation
Additional Factors
C1.4 • The expected life of a Smart C1.5 Meter • The specifications of the Smart
Economic Life Meter before it has to be Type Meters to be installed across
of Meter replaced Specification the portfolio
DEFINITION
C1.1 Smart Meter Rollout Volumes Volume of Smart Meters to be rolled out as part of the SMDP
deployment strategy to comply with Ofgem’s 2020 Smart Metering
mandate
Benefit / Cost Area Supported Business Owners Data Approver

Smart Meter Costs / Communications Costs SMDP PERSON
SENSITIVITY
Smart Meter Rollout Volumes 2009 - 2020 • This driver has been qualitatively assessed
1.4 9.0 as the historical business case model doesn’t
support quantitative analysis
Number of Smart meters installed per
Cumulative number of Smart Meters

8.0
1.2 • As rollout volumes influence all costs &
7.0 benefits, the sensitivity of this driver has
1.0
been assessed to be High
Installed (Millions)
6.0
year (Millions)
0.8 5.0
4.0
CONFIDENCE
0.6 • Rollout pace was assumed by the
3.0 SMDP team with partial input from
0.4
2.0 SERVICES. Pace should be reviewed
in line with a strategic approach to
0.2
1.0 R deployment.
0.0 0.0 • Customer growth forecast, provided
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 through MTP generated by the POWER
Total Residential & SME Electric Total Residential & SME Gas Total Cumulative Residential & SME & UTILITIES COMPANY A planning
team, account for approx 1.8m installs
Key Highlights:
• The expected total number of Electric and Gas Smart meters to be rolled is 8.115m DRIVER ASSUMPTIONS AND RISKS
• From 2013 onwards, mass deployment will begin and continue steadily until 2020 • Direct risks to roll-out volumes are: Availability of
sufficient Internal FTE to deliver and install
• Please note that the mandated completion date of 2020 may still be altered by the UK meters; Availability of External contractors to
regulator or by EU directive deliver OOA meter volumes; Manufacturer’s ability
to deliver sufficient meter asset volumes
Reference Documents • There is a significant dependency on the
Name Summary economic life of a meter as this will increase the
number of meters to be deployed over the 20
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case years
DEFINITION
C1.2 Cost of Meters in Year of
The unit asset cost of a Smart Meter, dependent on POWER &
Installation UTILITIES COMPANY A’s adopted supplier strategy
Areas Supported Business Owners Data Approver

Smart Meter Costs SMDP PERSON(PERSON*)
SENSITIVITY
Smart Meter Unit Costs and Blended Prices 2008 – 2020 Supplier Strategy
£160.00
• Altering this driver +/- 10% has an
PRI VOL
impact of +/-£46.1M on the historical
H
10%
£140.00
business case
£120.00
£100.00
£80.00
£60.00
CONFIDENCE
• Meter unit costs are for residential only and
£40.00
do not consider additional SME
£20.00 L&G VOL
requirements
90%
£0.00 • Data should be revisited as it’s is outdated
Electricity Gas (Credit & Prepayment) R and only considers two suppliers
L&G PRI
• It is likely a mix of meters will be used for
Blended Prices (2008-2012) Blended Prices (2012-2020) full deployment , especially in the case of
Key Highlights
value creation
• The data has assumed a supplier engagement split of 10% PRI and 90% L&G
• The cost of a Smart Meter is expected to drop by approximately 35% in 2012, in line with DRIVER ASSUMPTIONS AND RISKS
domestic and international evidence
• POWER & UTILITIES COMPANY A needs to engage
• A new tender report has been created based on supplier RFI responses as at Nov. 09. Once in further discussions with desired manufacturers over
this report has been validated, this slide should be updated to reflect the most recent data the next year to ensure; Sufficient numbers of Smart
Meters can be obtained, there is a stable supply of
Smart Meters will be available for mass deployment,
Reference Documents
an optimal price is obtained for Smart Meter assets
Name Summary • The cost of a Smart Meter could be leveraged across
POWER & UTILITIES COMPANY A’s global
RE Meter costs etc Summary of supplier costs from PRI and PLC
operations (e.g. France’s mass deployment)
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case • The opportunity to lease meters externally should be
assessed and modelled to understand how financing
Smart Metering – Tender Response Summary of supplier RFI’s and POWER & UTILITIES COMPANY A’s will affect the overall cost of the business case
Summary Paper v1_NPS (2) 12 11 09 evaluation of each
DEFINITION
C1.3 Cost of Fixing Kit The expected cost of a fixing kit required to fit a Smart Meter unit
safely and securely at either SME or Residential client site

Smart Meter Costs SMDP PERSON
SENSITIVITY

Electricity Fixing Kit £10 L impact of +/-£8.5M on the historical
business case
CONFIDENCE
Gas Fixing Kit £10 • Data should be revisited from
October 2008 estimates
R • Data should be validated with
manufacturers
Key Highlights:
• The price of fixing kits includes bracket, sundries and regulator (breakdown of costs have not been
provided within business case) DRIVER ASSUMPTIONS AND RISKS
• It has been assumed that the cost of fixing kits will
remain constant 2009 – 2020
• Dumb meter fixing kits can be used for Smart
Meters. This needs to be verified with Energy
Field Services
• Gas fixing kits tend to be more expensive than
electric fixing kits, this should be confirmed with
Reference Documents Energy Field Services
• Installation process & materials have not been
Name Summary
optimised. Costs are expected to decrease once
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case this has been done
DEFINITION
C1.4 Economic Life of Meter The economic life of a meter, after which it is expected a replacement
will be installed

SENSITIVITY
Manufacturer RFI Responses Key Highlights: • This driver has been qualitatively
• The economic life of a meter has been assessed as the historical business case
Manufacturer Type Cert Life assumed to be 20 years model doesn’t support quantitative
Actaris/Schlum/Sangamo ACE 1000 SMO 20
• Economic life of meter has been H analysis
Actaris/Schlum/Sangamo ACE 1000-282 20 estimated based on based on • As Economic Life impacts all costs &
Actaris/Schlum/Sangamo ACE 2000-292 20 conversations with manufacturers and benefits, the impact of this driver has
Actaris/Schlum/Sangamo KBD 20 advice from SERVICES been assessed to be High
AMPY 5193 20
• For accounting purposes, depreciation
AMPY 5194 15
AMPY 5196 20 will occur over eighteen years
AMPY 5246C-* 20
CONFIDENCE
AMPY 5258*-* 20 • The current generally accepted
AMPY 5254E 20 industry average for economic life of
Echelon EM-1021 15
a meter is closer to 10 years
Elster/ABB/GEC/EE SD1 and SB1 20 R • The data has been based on
Horstmann S1**** 20
Iskra ME 100 & 200 20 outdated manufacturer RFIs and
Iskra ME160 20 appears overly optimistic
Siemens/L&G/FML/Ferranti S2AM-100 20
Siemens/L&G/FML/Ferranti S2AT 20
Siemens/L&G/FML/Ferranti S2BS 20 DRIVER ASSUMPTIONS AND RISKS
Siemens/L&G/FML/Ferranti ZCE 527 20
• The expected lifecycle average is a more conservative
10 years as this is untested technology and due to future
technology stranding risks
Reference Documents • It has been assumed that there will not be a need to
replace a meter before the end of its certified life other
Name Summary than for technical failure
• The impact of the economic life of the CDU needs to be
Smart Meter Life vn0.4 Proposal for meter asset life within SMDP considered within the business case (separate to the life
Assumptions Version 9 Assumption calculations to support version 9 of the historical business case of a meter)
DEFINITION
C1.5 Meter Type Specification Details the meter functionality requirements required by POWER &
UTILITIES COMPANY A to deliver their Smart Metering strategy to their
customer portfolio

SENSITIVITY
• This driver has been qualitatively
assessed as the historical business case
model doesn’t support quantitative
Please Refer to Reference Documents for specific Smart H analysis
electricity and gas meter specifications analysis details, • As Meter Type Spec. impacts all Smart
unit costs, the impact of this driver has
especially SMOF v.1 (pages 144 – 172) been assessed to be High
CONFIDENCE
Key Highlights: • Specifications have been rigorously
• Component specifications are the current minimum standards agreed between Ofgem and the Power 6 analysed to date and tested against POWER
organisations A & UTILITIES COMPANY A’s strategy
• Smart Electricity meter specifications have been agreed by Power Six for over 12 months. However • Final outcomes have not yet been decided
Ofgem is yet to announce their final requirements
• Gas meter specifications are still in dispute as to whether or not there is a need to include a gas valve as
mandatory. If additional cost is less than £5, it is expected that valves will be accepted by all Energy UK DRIVER
• POWERASSUMPTIONS AND A
& UTILITIES COMPANY RISKS
has
retailers (ie, Power 6) assumed to use the minimum specified
Government mandate
• Additional specifications should also be
Reference Documents considered as this will impact on future costs /
Name Summary benefits and may limit ability to provide
sophisticated customer propositions.
Meter’s function.ppt Overview of operability of Smart Meters
• POWER & UTILITIES COMPANY A’s
SMOF v.1.pdf ERA Overview of Smart Metering Operational Framework Proposals and business requirements should be
Options
synchronised to industry moving forward
C2. Interface Costs
Interface costs cover the costs of installing government mandated interface devices. An interface, for the
purposes of the Smart Meter business case, is a means by which information from the Smart Meter and
other information from the supplier is communicated directly from the meter (or indirectly via the supplier) to
the customer.
Driver Equation
Total
Interface
Costs
= A × B × C
C2.1 Cost of
C2.2 Interface C2.3
Interface in
£68.8m Year of
Percentage Customer
Take-up Volumes
Installation
DEFINITION
C2.1 Cost of Interface in Year of Refers to the cost of the interface which will allow information to be
Installation communicated directly or indirectly and in real time between the Smart
Meter and energy supplier

Interface Costs SMDP PERSON
ü ü
SENSITIVITY
£40.00
£35.00
impact of +/-£7.2M on the historical
£30.00
L business case
£25.00
£20.00 CONFIDENCE
£15.00
• Data should be revisited from
£10.00
September 2008 estimates
£5.00 A • Additional supplier should be engaged
£0.00 to support the estimation of costs
PC dongle TV box Mandated Wall Panel Mandated Wall Panel
Key Highlights: 2009 - 2012 2012 - 2028
• POWER & UTILITIES COMPANY A have opted for the mandated wall panel display over the TV Set
top box and PC dongle as the interface to be used for mass deployment DRIVER ASSUMPTIONS AND RISKS
• In line with industry expectations, the price of the wall panel is expected to fall in 2012
• The business case assumes government
• Please refer to C1.2 Cost of Meters in Year of Installation for information on supplier strategy mandate will rollout on 100% of customer
portfolio
Reference Documents • It is advisable to use the preferred
Name Summary manufacturer solution (as interfaces will be
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case
proprietary) to ensure communication
compatibility with the meter
Assumptions 170908 Summary of overall assumptions which support Business Case
• Issues could arise due to regulatory changes
Cost Model Version 9.xls Cost Calculations to support Version 9 of the historical business case
DEFINITION
C2.2 Interface Percentage Take-up Specifies the type of interface which will be used to display real time
information on power usage

SENSITIVITY
Percentage
Solution Type assessed as the historical business case
Take-up
analysis
M • As interface percentage take-up directly
Wall Panel 100%
impacts interface costs, the sensitivity
of this driver has been assessed to be
Set Top Box 0% Medium
PC Dongle 0% CONFIDENCE
Mandated
Wall Panel • This data should be revisited when the
Key Highlights: A government announces its mandated
• The government mandated the use of a Plug in Display Wall Panel for every Smart Meter as the interface specifications solution
minimum requirement
• Although a more expensive Wall Panel has been costed, it has been assumed that all POWER &
UTILITIES COMPANY A customers will opt for the mandate as part of their contractual agreement DRIVER ASSUMPTIONS AND RISKS
• The take up of interface solutions needs to be re-visited based on assessment of customer preference and
potential propositions which encourage preferred options • The government is yet to announce the
mandated solution for interface specifications
Reference Documents • The choice of interface should be tested
through trials on a recurrent basis to analyse
Name Summary
customer reactions
DEFINITION
C2.3 Customer Volumes Number of customers across POWER & UTILITIES COMPANY A’s
Residential and SME energy supply portfolio

SENSITIVITY
Customer Volumes (2009 – 2028)
5.0 • This driver has been qualitatively
4.5
H model doesn’t support quantitative
4.0 analysis
3.5 • Rollout volumes influence all costs and
benefits therefore sensitivity of this
Millions
3.0
driver is High
2.5
2.0
1.5 CONFIDENCE
1.0
• Analysis has focused on the medium
0.5 term to date until 2014
0.0 • More robust information is needed to
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 A determine how mass deployment will
affect customer numbers
Dual Fuel Customers Electricity Customers Gas Customers SME Customers
Key Highlights:
DRIVER ASSUMPTIONS AND RISKS
• Costs have been calculated based on one interface unit per customer (regardless of the number
of meters they use)
Reference Documents • N/A
Name Summary
C3. In Area Installation Costs
This section covers the costs of installing the Smart Meter(s) and an interface, where appropriate, for each
of POWER & UTILITIES COMPANY A’s residential and SME customers
Driver Equation
Total In Area
Installation = A × B × C
Costs
C3.2 In Area C3.3 In Area

C3.1 Meter
Vs. Out of Install
£198.8m Installer
Area Meter Success Rate
Salary
Volumes per Day
Additional Factors
• The estimated time required to install a Smart

C3.4. Minutes Meter. This factor directly relates to the
per Install C3.3 In Area Install Success Rate per Day
driver
DEFINITION
C3.1 Meter Installer Salary Meter Installer Salary encompasses all costs that related to daily
activities of an installer, including vehicle and mobile phone costs

In-Area Installation Costs Energy Field Services PERSON
SENSITIVITY
Total Meter Install Salary (2009)
£50,000
£45,000
£40,000 M impact of +/-£25.1M on the historical
£35,000 214 business case
£30,000
£25,000 Working
£20,000 Days per
£15,000
£10,000 year CONFIDENCE
£5,000 • The data from SERVICES is reliable
£0
Gas Electricity Dual Fuel A and SMDP PMO is confident with
information gathered
Basic Salary Miscellaneous Costs Total Vehicle Costs
Key Highlights:
• Total Installer Salary rates for 2009 are Electricity (£41,702), Gas (£39,875) and Dual Fuel DRIVER ASSUMPTIONS AND RISKS
(£45,822) and include pensions, overtime and general expenses amongst other things • Application of wage inflation rates should be
• Vehicle costs (£6,853) include van rental, insurance, fuel and congestion charges reviewed as this has a significant impact on
salary
• Miscellaneous costs include mobile phone usage as well as toolkits and uniforms
• Costs could be inflated beyond expectations due
• The stacked bar charts for 2009 will be increased over time by applying wage inflation rates to increased demand for installers during the
mandated rollout period
Reference Documents • Costs could also increase due to the business
Name Summary may introduce an incentive scheme to stimulate
productivity and additional health & safety
PERSON Email 26 November 2008 Breakdown of gas, electricity and dual Fuel salaries, (Includes: pension contributions ,
mobile phone costs, expenses and Van Costs
requirements
• The business case data assumes in-area staff
PERSON Email 03 September 20Q09 Clarification on Mobile phone and tool costs per installer per annum
(in-house) and OOA staff (outsourced) will cost
CFS Resi meeting output Overview of a meeting held between CFS and SMDP team to discuss quality and the same. This should be revised
appropriateness of CFS assumptions in the MTP workings.
DEFINITION
C3.2 In Area Vs Out of Area Meter
The expected number of POWER & UTILITIES COMPANY A customers
Volumes categorised into In and Out of Area.

In-Area Installation Costs / Out of Area Installation Costs SMDP PERSON
SENSITIVITY
Expected Customer Volumes for In and Out of Area (2009 – 2028)
7.0 • This driver has been qualitatively assessed
6.0 L as the historical business case model doesn’t
support quantitative analysis
5.0
• As costs for In Area and OOA meters are
Millions
4.0 similar, the impact of this driver has been

assessed to be Low this may change if In
3.0 Area and OOA costs differ greatly after
future revisions
2.0
1.0 CONFIDENCE
0.0 • In and Out of Area analysis has focused
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
on the medium term to date until 2014
In Area Out of Area and Halo • More robust information is needed to
Key Highlights: R determine how mass deployment will
• Out of Area volumes include Halo customers 2009 2028 affect customer numbers
% Increase
• Out of Area meter growth is expected to accelerate Customers Customers
over the next few years, eventually overtaking In
In-Area 3,484,425 3,169,137 -9.0%
Area customers DRIVER ASSUMPTIONS AND RISKS
• All SME customers have been categorised In Area Out of Area 2,115,702 4,610,680 117.9% • The dependency of increasing customers by
2m should be evaluated considering
saturation levels in the market
• Value propositions and speed to market will
Reference Documents affect customer retention
Name Summary • It is essential for SMDP to be comfortable with
these numbers
DEFINITION
C3.3 In Area Install Success Rate
Relates to how many Smart Meter units could potentially be installed
per Day on a per day basis for both trials and mass deployment

SENSITIVITY
Success rate = installation/day × net access rate (89.5%)
Smart Meter Install Success Rates per Day (2009 – 2020) impact of +/-£31.8M on the historical
6
H business case
5
Installs per Day
4
3 CONFIDENCE
2 • The data should be reviewed from
1 September 2008 figures
0
Electricity Gas Dual Fuel R • If deployment is planned
appropriately, significantly higher
Potential Installations / Day Actual Success Rates
Key Highlights: rates can be achieved
• Gross access rates are currently calculated to be 79%. The failure rate (21%) has been halved (to 10.5%)
to calculate actual success rates as the installer will only lose drive time and not installation time when DRIVER ASSUMPTIONS AND RISKS
he is unable to enter into household. • SERVICES have based this information on
• Dual Fuel installations are, in effect, double as they account for both Electricity and Gas current experiences. These are believed to
• Contributing factors towards success rates include meter failure, non-access to property, installation be significantly lower than what can be
difficulties and communication failure achieved in the marketplace
• Install success rate is dependent on; efficient
Reference Documents customer communication, scheduling,
installation activities and geographic
Name Summary
deployment strategy. These factors need to
CFS Resi meeting output Overview of a meeting held between CFS and SMDP team to discuss quality be considered
and appropriateness of CFS assumptions in the MTP workings. • There is a significant dependency on
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case deployment and service offerings
DEFINITION
C3.4 Minutes per Install The estimated time required to install a Smart Meter at client site

SENSITIVITY
Electricity Smart Meter 89 minutes assessed as the historical business case
analysis
Gas Smart Meter 89 minutes • As Minutes per Install influences Install
rate, the impact of this driver has been
assessed to be High
Dual Fuel Smart Meter 148 minutes
CONFIDENCE
Key Highlights:
• Data based on previous experience
• Analysis to date has focused on overall time taken to install the Smart Meter
with EDRP and current
• Includes travel and customer interaction time recertification rates
• Dual Fuel Smart Meters installation time accounts for two Smart Meters (Electricity and Gas) R • More robust analysis (e.g. process
• This informs the number of installs that can be achieved per day (See 3.3 Install Success Rate per Day) flows) is required to complete data
• Improvements to meter installation process and technology (eg. Plug & play) could make a significant moving forward
impact to installation times

Reference Documents • Timing, especially for travel, is highly
dependent on deployment strategy
Name Summary
• The information is dependent on adopted
BPD Customer Registration v0.3 Design of business processes relating to the registration of a customer onto an
SM product for SMDP 20k project
deployment strategy
• Onsite remedial activities required at time of
install need to be considered
C4. Out of Area Installation Costs
Out of area costs are the full costs of the out of area (OOA) contractor including overhead and profit.
Driver Equation
Total OOA
Installation
Costs
= A × B × C
C4.1
C2.3 C2.2 Interface
Contracted
£234.5m Install Charge
Customer Percentage
Volumes Take-up
(per Meter)
DEFINITION
C4.1 Contracted Install
Charge (per Meter) Per meter installation costs charged by external contractors

Out of Area Installation Costs Energy Field Services PERSON
SENSITIVITY
Contracted Install Charge per Smart Meter (2009)
£80.00
£60.00 M impact of +/-£23.4M on the historical
£40.00 business case
£20.00
£0.00 CONFIDENCE
• These costs are based on

recertification rates
• Service providers should be
A engaged through an RFI
process to estimate potential
charges

Key Highlights:
• 2009 costs will be indexed for wage inflation for subsequent years
• Actual rates will be lower due to economies

Reference Documents of scale achieved through mass deployment
Name Summary
C5. Communication Costs
These are the costs of the communications between POWER & UTILITIES COMPANY A internal systems
and the Smart Meter. These communications are managed by middleware software.
Driver Equation
Total Comms
Costs = A × B
C5.1 Cost of
C1.1 Smart
Comms
£220.4m solution per
Meter Rollout
Volumes
meter
Additional Factors
• The chosen communication solution • The amount of data that will be

C5.2 Solution
to be used to transfer customer C5.3 Data transferred on a monthly basis
Type between the Smart Meter unit and
consumption data to POWER & Load
Specification UTILITIES COMPANY A POWER & UTILITIES COMPANY A
DEFINITION
C5.1 Cost of Communications
The cost of sending all consumption information from the Smart
Solution per Meter Meter unit to POWER & UTILITIES COMPANY A

Communications Costs SMDP PERSON(PERSON*)
SENSITIVITY
GPRS Communication Traffic Costs (2009 – 2028)
£16.00 • Altering this driver +/- 10% has an
£14.00
M impact of +/-£23.1M on the historical
business case
£12.00
£10.00
CONFIDENCE
£8.00
• Need a more robust approach by
£6.00 engaging an increased number of
A suppliers
£4.00
• Data should be revisited moving
£2.00 forward
£0.00
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Key Highlights: • This information has been provided by
• Costs, based on an RFI, are significantly higher before 2012 due to low volume rollout. Costs are Vodafone. moving forward more suppliers
expected to reduce when mass deployment begins should be engaged through a formal RFI
• In practice, costs will be charged on a monthly basis, however they have been costed on a yearly basis process to validate data
on this slide • Costs are heavily dependent on data load
requirements, which are currently estimated
Reference Documents at 250kb/month and are subjective to change
• Recent ‘data items’ work by ERA needs to be
Name Summary
considered to determine potential impact
DEFINITION
C5.2 Solution Type Specification The chosen communication solution to be used to transfer customer
consumption data to POWER & UTILITIES COMPANY A. This has a
direct impact on meter type specification

SENSITIVITY
analysis
• Directly impacts meter asset unit costs
therefore the impact of this driver has
been assessed as High
CONFIDENCE
• Solutions have been rigorously
Please Refer to Technical Architecture reference analysed against current
document (Slides 165 – 180) for more detail requirements
Key Highlights:
A • Government mandate is subject to
change and should be monitored
• The table summarises why GPRS has been chosen as the best communications option before final decision is agreed and
• POWER & UTILITIES COMPANY A will use GPRS as it has the ability to withstand demand and implemented
rollout requirements and covers 99% of the UK
• The output of project clever will determine impact of Smart Meters on communications traffic
• Future direction of communications technology is being considered to enable selected solution to be
• The overall solution might still be mandated
‘future proof’
by government which would significantly
Reference Documents influence POWER & UTILITIES COMPANY A
Name Summary
• The solution type is heavily dependent on
data load, type of data to be transmitted and
Technical Architecture - High Level High level architecture supporting a mass rollout of SM to residential and SME required regional coverage
Overview V0.12 markets
DEFINITION
C5.3 Data Load The amount of data that will be transferred on a monthly basis
between the Smart Meter unit and POWER & UTILITIES COMPANY
A

SENSITIVITY
• This driver has no sensitivity at +/-
10%. However, if data load
requirements were to increase
L 100%, there would be a significant
Electricity Supply change in cost
250kb /month
POWER & UTILITIES COMPANY A

CONFIDENCE
• Data calculations robust, and
verified with Vodafone early 2008
A
• Data should be refreshed to match
new requirements
Key Highlights:
• The current forecast is for 250 kb / month DRIVER ASSUMPTIONS AND RISKS
• This figure has been calculated, based on half hourly readings being sent back to supplier
everyday for one month • Estimated data load is dependent on government
mandated information transmission requirements
• Dependent on POWER & UTILITIES COMPANY
A’s customer value creation propositions as this
will decrease or increase the load accordingly
Reference Documents • Additional data load requirements for Gas, meter
management, security etc. should be considered
Name Summary
C6. Repair Costs
These costs are the costs relating to failed meters and interfaces. Assumptions around the repair costs are
estimated as these products are new, however they are based upon an educated viewpoint from
SERVICES.
Driver Equation
Total Repair
Costs
= A × ( B + C )
C6.1 Out of C6.2

C6.3 Meter
Warranty Vs Replacement
£40.0m In Warranty Costs per
Repairer
Salary
Failures Meter asset
Additional Factors
• The period in which the Smart
• The estimated percentage of C6.5 Meter manufacturer will replace
C6.4 Failure
installed Smart Meters that will Warranty a failed Smart Meter without any
Rate
fail before recertification Period cost to POWER & UTILITIES
COMPANY A
DEFINITION
C6.1 Out of Warranty vs. In
Estimated quantity of Smart Meter failures based on the estimated meter
Warranty Failures failure rate

Repair Costs SERVICES / SMDP PERSON
SENSITIVITY
Total Failure Volumes (2009 – 2020)
45,000
40,000
Total Failures per Year

35,000
L analysis
30,000
25,000 • In/Out of warranty failures have a
20,000 similar impact to failure rate
15,000
10,000
5,000 CONFIDENCE
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
• SMDP should liaise with meter
manufacturers as part of the
Total Out of Warranty Failures Total In Warranty Failures validation process for this data
Key Highlights: R • POWER & UTILITIES COMPANY
• It is estimated 40,000 Smart Meters will fail every year post 2020 A should specify a reasonable
target failure rate and see which
• The data has been calculated by multiplying total C1.1 Smart Meter Rollout Volumes by
suppliers can achieve this number
C6.4 per year Failure Rates. Warranty periods are then applied
and demonstrate it. This will be
• After 2020, it is expected no meters will be installed therefore no more meters will be in warranty after central to the selection process
2022
• The number of CDU failures has not been factored into the business case and needs to be considered
moving forward DRIVER ASSUMPTIONS AND RISKS
• 40,000 Smart Meter failures per year (post
mass deployment) will require a significantly
Reference Documents
sized workforce to manage. Current FTE
Name Summary estimates appear low as OOA repair costs do
not seem to have been included
DEFINITION
C6.2 Replacement Costs per Meter
The per unit asset cost of replacing a failed Smart Meter. This does not
asset include the installation/site visit cost.

SENSITIVITY
In Warranty Replacement Costs = £0 L
analysis
• In/Out of warranty failures has a similar
impact to failure rate
• The sensitivity of this driver has been
assessed to be Low
Please refer to CONFIDENCE

Out of
C1.2 Cost of Meters in Year of Inst
Warranty allation
• The approach is correct, however
this driver is dependent on the
A unit cost of a Smart Meter which
for further information has been flagged as red
Key Highlights:
• There are two different replacement costs depending on whether the meter to be replaced is in
warranty or out of warranty
• This driver is influenced by the type of

warranty agreement that is agreed with
Reference Documents
manufacturers and accepted unit cost of a
Name Summary Smart Meter
DEFINITION
C6.3 Meter Repairer Salary Meter Repairer Salary encompassed all costs related to daily activities of a
repairer, including vehicle and mobile phone costs

SENSITIVITY
• Please refer to C1.1 Meter Installer

M Salary
Please refer to CONFIDENCE
3.1 Meter Installer Salary

for more details A
• Information from SERVICES and
DC and quite confident
Key Highlights:
• The business case has assumed that repairer salary is the same as installer salary as repairs
will be carried out as full replacement of Smart Meters
• If method of repair changes from full
replacement to on site repair, proficiency of
FTE used may change which could result in a
Reference Documents change of salary
Name Summary
DEFINITION
C6.4 Failure Rate The estimated percentage of installed Smart Meters that will fail before
recertification. Failed meters are to be replaced with new meters (i.e. not
repaired)

SENSITIVITY
L impact of +/-£4.2M on the historical
business case
10% Failure Rate over life of meter

CONFIDENCE
• The information provided is an estimate

only. SMDP should liaise with meter
0.5% Failure Rate per year R manufacturers to validate data and refer
to Ofgem for regulatory standards (if
available)

• More sophisticated meters might have a
higher failure rate
Reference Documents • Agreed solutions to detect meter failures
Name Summary
must be accounted for within business case
moving forward
CFS Resi meeting output Overview of a meeting held between CFS and SMDP team to discuss quality
and appropriateness of CFS assumptions in the MTP workings.
• The failure rate has been revised upwards to 10%
over the life of meter from 2%
DEFINITION
C6.5 Warranty Period The period in which the Smart Meter manufacturer will replace a failed
Smart Meter installed on site without any cost to POWER & UTILITIES
COMPANY A

SENSITIVITY
L analysis
• Warranty period has a similar impact to
The assumed warranty period failure rate
for Smart Meters is three

years CONFIDENCE
• The data has been estimated by
SERVICES with no support
documents
A
• Moving forward, the warranty
period should be supplied by
manufacturer
Key Highlights:
• The warranty period above does not apply to CDUs DRIVER ASSUMPTIONS
• The warranty AND RISKS
period is dependent on meter
• It is assumed that the warranty for CDUs will be 1 year. manufacturer choice and procurement
contract terms
• No costing for CDU repairs and replacements have been factored into the business case • The warranty period should align better with
the relative life of the meter
Reference Documents • POWER & UTILITIES COMPANY A should
look to work with other retailers and Ofgem
Name Summary to encourage manufacturers to increase
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case warranty period
C7. Safety Visit Costs
Regulations require a safety visit to assess each electricity and gas meter once every 2 years. In the event
that the requirement is partially or fully eliminated these costs will be adjusted or removed from the business
case.
Driver Equation
Total Safety
Visit Costs = B × C
C7.1 Safety C7.2 Rate per

£75.8m Visit Volumes Visit
DEFINITION
C7.1 Safety Visit Volumes The number of expected safety visits required for the total Smart Meter
portfolio (i.e. Gas & Electric)

Safety Visit Costs Energy Field Services PERSON
SENSITIVITY
Volume of Safety Visits (2009 – 2028)
1.4
1.2 L impact of +/-£379K on the historical
business case
1.0
Millions
0.8
CONFIDENCE
0.6
0.4
• Analysis is robust as it follows Ofgem’s
0.2 G current position
0.0
09 010 011 012 013 014 015 016 017 018 019 020 021 022 023 024 025 026 027 028
20 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2
In Area Residential Out of Area In Area SME

Key Highlights: DRIVER ASSUMPTIONS AND RISKS
• It has been assumed that one safety visit every two years will be mandatory for each customer
• Data is dependent on deployment strategy

Reference Documents (i.e. rollout volumes)
• Ofgem is yet to finalise a decision on whether
Name Summary
safety visits will be required
DEFINITION
C7.2 Rate per Visit Cost of conducting a safety visit on a Smart Meter (rate is for Gas &
Electric)

Safety Visit Costs Energy Field Services PERSON
SENSITIVITY
Safety Visit Costs per visit (2009 – 2020)
£4.00 L impact of +/-£379K on the historical
business case
£3.50
£3.00
£2.50 CONFIDENCE
• This data is based on current data
£2.00
retrievals which requires similar
£1.50
A activities to safety visits
£1.00 • Data should be revisited from
£0.50 September 08 figures
£0.00
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Out of Area Cost per visit In Area Cost per visit • Ofgem’s final safety visit requirements may
Key Highlights: defer from current assumption used within
• These costs have been estimated based on the assumption that safety visits need to be business case
carried out once every two years for each meter • Costs could be higher than estimated as
Ofgem may place stringent safety regulations
Reference Documents on staff undertaking visits
• Current cost assumptions assume a high
Name Summary
level of meter density, which will not be
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case attained until the later stages of mass
Cost Model Version 9.xls Cost Calculations to support Version 9 of the historical business case deployment
C8. Operational Deployment Costs
This cost category includes the potential costs of Smart Meter deployment that will dissipate after the first
full roll out of Smart Meters is completed.
Driver Equation
Total Operational
Deployment Costs = ( A × B )+ ( C × D )
C8.1 Number C8.2 Salary C8.3 Customer

C1.1 Smart
of Deployment of Each Services BAU
£75.0m Support Staff Support Staff Costs per
Meter Rollout
Required Meter Volumes
Type
+ E
C8.4 SMDP
Planning
Costs
DEFINITION
C8.1 Number of Deployment
The extra quantity of support staff required to sustain the expected increase
Support Staff Required in meter installers due to the mass deployment of Smart Meters

Operational Deployment Costs Customer Services (Steve Weeks) PERSON
SENSITIVITY
Quantity of Support Staff Required (FTE) (2009 – 2028)
140
Support Staff to Meter • Altering this driver +/- 10% has an
Installer Ratio L impact of +/-£2.5M on the historical
120 Managers 50 business case
FSM 20
100
Electronic Scheduler
40 CONFIDENCE
Staff FTE
80 (Electricity)
Manual Scheduler (Gas) 10
60
Clerical Support Staff 20
A September 2008 estimates
40
20
0 • The number of support staff required is
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
dependent on the Smart Meter deployment
Managers FSM Electronic Scheduler (Electricity) schedule and strategy
Manual Scheduler (Gas) Clerical Support Staff • Business case calculations to be reviewed to
Key Highlights: ensure no support staff are required after
• This data has been calculated by dividing Meter Installer FTE expectations by support staff to mass deployment has been completed
meter installer ratio (Smart Meter installation activity should
become a BAU process after mass
Reference Documents deployment)
Name Summary • The historical business case does not
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case consider potential field force effectiveness
improvements through automation tools and
CFS Resi meeting output Overview of a meeting held between SERVICES and SMDP team to discuss
quality and appropriateness of SERVICES assumptions in the MTP workings. business process re-engineering
DEFINITION
C8.2 Salary of Each Support Staff
Expected salaries for each staff classification required to support the mass
Type deployment of Smart Meters

Operational Deployment Costs Customer Services (Steve Weeks) PERSON
Individual Support Staff per annum costs (2009) SENSITIVITY

£70,000
£60,000 L impact of +/-£2.7M on the historical
business case
£50,000
£40,000
CONFIDENCE
£30,000
£20,000 • Salary costs have been taken from

£10,000
G POWER & UTILITIES COMPANY A’s
formal job family guidelines
£0
Manager (L5) Manager (L4) FSM Scheduler Clerical Support
(Training ) (Deployment) Staff
Key Highlights:
• In addition to the above costs, one-off recruitment costs of £200 per person have been included in the DRIVER ASSUMPTIONS AND RISKS
business case for recruitment of staff beyond the existing BAU recertification team of 122 FTE • There is a risk that salaries are higher than
• 2009 costs will be indexed for wage inflation for subsequent years estimated in the business case due to
increased market demand for staff during
the Ofgem mandated roll-out period
Reference Documents • The application of wage inflation should be
reviewed to ensure it accurately reflects
Name Summary expected salary growth for required staff
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case types
DEFINITION
C8.3 Customer Services BAU Increased cost of Business as Usual customer services activity in order to
Costs per Meter cater for above average workload due to Smart Metering implementation,
calculated on a per meter basis

Operational Deployment Costs Customer Services (XXXXX Weeks) PERSON
SENSITIVITY
BAU Costs per Meter 2009-2028
£16.00
£14.00 L impact of +/-£1.8M on the historical
business case
£12.00
£10.00 CONFIDENCE
£8.00
• This is an un-validated estimate
provided by SMDP
• More rigorous analysis is required
£6.00
R
as this is overly optimistic (please
£4.00 see risks below)
• Data should ultimately be tested
£2.00
with Customer Services
£0.00
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Key Highlights:
• Individual drivers of additional BAU workload
• Total BAU costs are calculated by multiplying above bar chart by total due to Smart Meters need to be articulated to
Smart Meter Rollout Volumes ensure costs and benefits have not been
duplicated
Reference Documents • From previous international experience in
Name Summary Sweden, BAU costs increased significantly,
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case especially in customer services
DEFINITION
C8.4 SMDP Planning Costs Costs of maintaining the Smart Metering deployment project (SMDP) team
to plan and oversee the roll-out of Smart Metering and the integration of
Smart capabilities across POWER & UTILITIES COMPANY A’s business

Operational Deployment Costs SMDP PMO PERSON
SMDP Planning Costs (2009 – 2018) SENSITIVITY

8.0
7.0
6.0 business case
Millions (£)
5.0
4.0 CONFIDENCE
3.0
• A rigorous approach has been used to
2.0 track budget to date, which can be used
1.0 A moving forward
• Costs must be realigned with new team
0.0 structure and project plan
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Key Highlights:
• Total Costs of £35m are expected, predominantly consisting of staff salary costs DRIVER ASSUMPTIONS AND RISKS
• The majority of the SMDP team will not be required once mass deployment gets underway
• SMDP planning costs currently cease in 2018
as it is assumed all activities will become
Reference Documents
‘business as usual’
Name Summary • There is a risk that some form of SMDP will
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case be required until the end of mass deployment
CFS Resi meeting output Overview of a meeting held between SERVICES and SMDP team to discuss
in 2020
quality and appropriateness of SERVICES assumptions in the MTP workings.
C9. Systems and Technical Architecture Costs
These costs relate to the Information Technology costs of building and supporting systems to enable the
delivery of Smart Metering. These costs fall into six broad categories.
Driver Equation
Total Systems and

Technical
Architecture Costs
A + B + C
=
C9.2 C9.3
C9.1
Middleware Technology
£110.6m Prepayment
Running Licensing
Infrastructure
Costs Costs
D + E + F
C9.6 Custom
C9.4 C9.5 Systems
Application
Hardware Integration Development &
Costs Costs Deployment
Definition
C9.1 Prepayment Infrastructure The cost associated with moving away from expensive prepayment
structure. This will require up-front costs to develop new payment system

Systems & Tech Architecture Costs SMDP PERSON
SENSITIVITY

L impact of +/-£110K on the
It has been assumed that

CONFIDENCE
£1,000,000 will be spent
• There is no supporting
in 2012 on prepayment documentation, this is an estimate
infrastructure R only
September 08 figures

• Provision is based on estimate without
supporting documentation
• A structured approach which outlines a high
level costed design, through RFI’s with
potential vendors, is required for Gate B
Reference Documents
• Ongoing infrastructure support costs have
Name Summary not been included within the historical
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case business case and need to be considered
moving forward
DEFINITION
C9.2 Middleware Running Costs Operational costs of maintaining the Smart Metering middleware software
as part of business as usual

SENSITIVITY
Middleware Running Costs (2009 – 2028)
2.5 • Altering this driver +/- 10% has an

2.0
business case
Millions (£)
1.5
1.0 CONFIDENCE
0.5 • Estimate based on current PROGRAM
programme. Moving forward, a more
0.0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 R rigorous approach is required
• The data was looked at over 12 months
ago and should be revisited
Staff License/Maintenance Internal Software Updates
Middleware Running Costs Total (£)
Staff 4.14 m
• Total Middleware Running Costs equal • Middleware providers need to be engaged
License/Maintenance 29.61 m
£34.1m to assess support requirements. A detailed
Internal Software Updates 0.4 m specification should be documented to
enable a more rigorous cost forecast
Reference Documents • It is assumed that middleware will handle all
meter types, tariff segments and CDU
Name Summary
requirements
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case • It is also assumed middleware will be able
Cost Model Version 9.xls Cost Calculations to support Version 9 of the historical business case to provide data warehousing capability
DEFINITION
C9.3 Technology Licensing Costs License costs for use of middleware software

SENSITIVITY
MDM License Costs (2009 – 2028)

7.0 L impact of +/-£4.9M on the historical
business case
Millions (£)
6.0
5.0
4.0
3.0 CONFIDENCE
2.0
1.0
0.0 • The 14% original license fee costs
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
R are subject to change as contract is
negotiated
Key Highlights: MDM License costs (per meter 50%) MDM License costs (upfront 50%)
• Total costs of 14.6m are expected

• Total Costs include 14% for Middleware Running Costs (14% of original license fee). This is a standard
procurement estimate DRIVER ASSUMPTIONS AND RISKS
• MDM is structured to have 50% of costs upfront in 2012 before mass deployment with the remainder to
be paid when meters are installed • It is assumed MDM will be able to provide
data warehousing capability
Reference Documents • The 50/50 payment structure has significant
Name Summary implications on cash flow
• System refresh costs need to be considered
DEFINITION
C9.4 Hardware Costs Hardware costs include servers and related fail-over systems which will be
housed in data centres

SENSITIVITY
Hardware Costs (2009 – 2028)
5.0
business case
4.0
Millions (£)
3.0
CONFIDENCE
• The data has been based on
information from basic vendor
2.0 indications and POWER &
UTILITIES COMPANY A’s previous
R experience with PROGRAM
1.0
• A more rigorous approach is required
for Gate B
0.0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
• Hardware Costs will occur periodically every five years as new technology replaces old
• It has been assumed Smart Metering will
Reference Documents require similar hardware costs to PROGRAM
Name Summary • No system hardware requirements for Smart
have been documented
DEFINITION
C9.5 Systems Integration Costs The costs needed to update POWER & UTILITIES COMPANY A’s IT
solutions to cater for Smart Meter mass deployment rollout

SENSITIVITY
Systems Integration Costs (2009 -2014)
14.0
L impact of +/-£4M on the historical
12.0 business case
Millions (£)
10.0
8.0 CONFIDENCE
6.0
• The data has been based on information
4.0
from basic vendor indications and POWER
2.0 R & UTILITIES COMPANY A’s previous
0.0 experience with PROGRAM
2009 2010 2011 2012 2013 2014
• A much more rigorous approach is required
Integration & development cost external BI&T effort integration and project management for Gate B

• Systems Integration Costs will occur before mass deployment
• A one year lockout will be enforced 2010 –
• Integration and development costs total £34m and B&IT integration combined with project
2011 due to contractual obligations with
management costs will total £3m Accenture related to PROGRAM. Smart
• The rollout of Smart Meters will not only affect 87 out of POWER & UTILITIES COMPANY A’s 186 Meter’s IT solution should be developed in
process but will add new processes as well 2011
• Majority of costs will be required to update
Reference Documents SAP including the need to uplift CRM from
Name Summary
Version 2007 to current Version 7
• Market testing and industry migration costs
also need to be considered moving forward
DEFINITION
C9.6 Custom Application
Costs incurred to develop several mediums by which a customer can access
Development & Deployment their energy usage; be it online or through their PC or TV

SENSITIVITY
Altering this driver +/- 10% has an

L impact of +/-£88K on the historical
business case
CONFIDENCE
£800,000 will be spent in 2012 • It is still undecided as to whether or
not this cost will be incurred
on customer application • Based on an estimate of other similar
R products that have been developed by
development and deployment POWER & UTILITIES COMPANY
A
• The data is outdated

• Dependent on Ofgem’s mandate for customer
interfaces
• An explicit strategy needs to be developed
detailing how custom applications will be used
Reference Documents
to deliver required customer interfaces
Name Summary • Costs appear to be low compared to previous
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case experience with application development
projects
C10. One-Off Costs
There are a number of one-off costs that are anticipated to be incurred during the initial stages of the Smart
Meter roll out
Driver Equation
Total Safety
Visit Costs = A + B + C + D + E
C10.3 Smart C10.5 Customer

C10.4 Industry
C10.1 Internal C10.2 Legal / Proposition
£21.1m Comms Procurement
Metering Change Development
Trials Support Costs Investment
DEFINITION
C10.1 Internal Communications Cost related to informing business units on Smart Metering and how it will
affect the organisation’s operating model

One-Off Costs SMDP PERSON
SENSITIVITY

business case
£200,000 will be spent in 2012

CONFIDENCE
and 2013 on internal • This data has been generated
between comparison with
communications PROGRAM. The information
R should be developed based on a
high level plan of communication
activities required to support
POWER & UTILITIES
Key Highlights: COMPANY A’s Smart Metering
strategy
• The overall total will most likely be used for several events to inform the business about all
aspects of Smart Metering
• High level figures are largely based on

Reference Documents previous experience with PROGRAM. The
SMDP is potentially more complex than
Name Summary
PROGRAM and may require significantly
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case more investment in Internal Communications
DEFINITION
C10.2 Legal / Procurement The assumed legal costs of contracting for the purchase of large volumes of
Smart Meters over the next ten years

SENSITIVITY
Systems Integration Costs (2009 -2018)
1.2
1.0 business case
Millions (£)
0.8
CONFIDENCE
0.6 • Data should be revisited from
October 2008 estimates
0.4 • These figures were entirely
R informed from PROGRAM with no
0.2 supporting documentation
• Additional investigation into timing
0.0 of cash flows is required
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Key Highlights:
• Legal costs equalling £1m are expect every three years in conjunction with mass deployment
until 2020
• It has been assumed that legal &
procurement costs for SMDP will be similar
Reference Documents to those budgeted for PROGRAM. However
Name Summary SMDP procurement volumes will be
significantly higher than PROGRAM
DEFINITION
C10.3 Smart Metering Trials The cost of conducting Smart Metering trials to test cost assumptions and
clarify understanding of customer behaviour in response to Smart Metering

One-Off Costs ICP PERSON
SENSITIVITY
Cost of Smart Metering Trials (2009 – 2015)
£600,000 • Altering this driver +/- 10% has an
impact of +/-£166K on the
£500,000 L historical business case
£400,000
£300,000 CONFIDENCE
£200,000 • Approach has been limited to current
R trial with no future trials defined
£100,000 • Data is from May 2009
£0
2009 2010 2011 2012 2013 2014 2015
Key Highlights:
• Trial costs relate to EDRP and DEMS and total £1.5m until 2015
• Costs and rebates are dependent on
• No other trials have been considered within these costs
government mandated trials
• Smart Meter installations that occur before mass roll-out commences in 2013 within the current roll-out • Trials that have been assumed in the roll-out
schedule have been defined as trial installations, however the cost of the trial has not been included schedule should be considered within this
within this driver (ie. The cost of the meter and installation have been included within the roll-out costs, driver
however additional project costs have not been considered)
• Comprehensive planning is required to define
what trials are required moving forward
Reference Documents
• Additional trials should be considered beyond
Name Summary 2015 to support market testing for the value
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case creation workstream and any potential shift in
Ofgem’s mandate
DEFINITION
C10.4 Industry Change Support The expected cost to be borne by POWER & UTILITIES COMPANY A to
Costs support the industry change programme for mass deployment of Smart
Meters

One-Off Costs ICP PERSON
SENSITIVITY
Industry Change Support Costs (2009 – 2015)
L impact of +/-£1.6M on the
4.0 historical business case
Millions (£)
3.0
CONFIDENCE
2.0
• Completely dependent on
Government making a decision on
A final ICP charges although
1.0 approach is correct
0.0
2009 2010 2011 2012 2013 2014 2015
Key Highlights: • Allowances are dependent on government
mandated trials and additional planning is
• Total costs associated with industry change equal £15.2m from 2009 – 2015
required to define what trials are required
• No Smart related Industry change support costs have been forecast beyond 2015 moving forward
• Based upon ERA estimates, all six main
Reference Documents suppliers will be required to contribute to
industry change. These estimates should
Name Summary
be reviewed as they could potentially be too
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case low
DEFINITION
C10.5 Customer Proposition
Cost allocated to allow for the development of initial propositions
Development Investment associated with Smart Meters

SENSITIVITY

business case
CONFIDENCE
£1m will be spent on • The figures are arbitrary; no formal
Customer Proposition R
process to estimate data
Development in 2012 October 2008 estimates

• It has been assumed £1m will be sufficient
for Smart Meter customer proposition
development that is necessary before the
commencement of mass deployment
• £1m appears to be quite low in terms of
Reference Documents POWER & UTILITIES COMPANY A’s
Name Summary
proposition development needs. Moving
forward, ongoing development costs and
Assumptions Version 9.xls Assumption calculations to support version 9 of the historical business case promotional campaign to support National
Cost Model Version 9.xls Cost Calculations to support Version 9 of the historical business case Launch need to be considered
C11. Contingency Costs
Included in the business case is an amount for contingency on the gross costs of roll out
Consideration has been given to the level of confidence that may be applied to each category of cost and
the potential unfavourable variance from the current set of assumptions that might be experienced.
Driver Equation
Total
Contingency = A
Costs
C11.1
£126.4m Contingency
Calculations
DEFINITION
C11.1 Contingency Calculations Additional contingency allowances allocated to major cost categories due to
uncertainty in underlying business case data

Contingency Costs SMDP PERSON
SENSITIVITY
Contingency Costs per Category (2009 – 2028) Yearly Contingency Allowances (%)
18.0
By moving contingency allowances +/-
16.0
Sys tems
Staff 5%
10%
M 10%, there will be an impact of £12.6m
14.0 Communic ations 5%
Ins tallation 15%

Millions (£)
12.0
10.0
Meters & Interfac es 5%
CONFIDENCE
8.0
• A more rigorous review of
6.0 confidence is required
R •
4.0 Current allowances have not been
actively tested
2.0
0.0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Meter & Interface Installation Communications Opex & Deployment Systems

Key Highlights:
• Total contingency costs 2009 – 2020 equal £126.4m
Reference Documents • Contingency costs have been applied

depending on SMDP confidence of data.
Name Summary
B1. Data Retrieval
Data retrieval (DR) is the activity of obtaining meter readings from Customer Properties and there is a
regulated requirement to obtain at least one meter reading per year. With the introduction of Smart Meters,
automated remote read functionality will be introduced, reducing costs associated with collecting this data
and eliminating the risk of missing a read.
Driver Equation
Total Data
Retrieval = ( A × B ) + ( C × D )
Savings
B1.2 Number B1.3 B1.4 Percentage

B1.1 Data
of Data Contracted Out of Out of Area
£331.9m Retriever
Retrieval Staff of Area Read reads to be
Annual Salary Cost per Meter saved
Saved
× E
B1.5
Percentage of
Smart Meters
Deployed
DEFINITION
B1.1 Data Retriever Annual Salary Annual salary expense to employ one Data Read FTE to undertake
manual/physical reads of dumb meters for In Area residential and
SME customers

Data Retrieval SERVICES (PERSON) PERSON (PERSON*)
SENSITIVITY
Data Reader Salary (2009 – 2028)
£60,000
£50,000 M impact of +/-£15.0M on the
£40,000
£30,000
CONFIDENCE
£20,000
£10,000
• Data reader salary costs should be
£0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 A updated for current year actual
salary costs
Key Highlights:
• Annual salary costs for data retrieval FTEs has been estimated using actual SERVICES DR
salary and expense costs per FTE for 2008 and have been indexed for wage inflation for each
subsequent year
• Assumes greater than 90% increase in data reader salaries over the next 20 years due to DRIVER ASSUMPTIONS AND RISKS
wage inflation
• Data Reader ‘salary’ cost includes cost of wages, pension, tools, van and mobile phones for
each FTE • Data Reader ‘salary’ cost includes cost of
wages, pension, tools, van and mobile
Reference Documents phones for each FTE
Name Summary
DEFINITION
B1.2 Number of Data Retrieval Staff Reduction in Data Read FTEs who currently conduct manual reads of dumb
Saved meters for In Area customers. Total number of staff required decreases over
the Smart Meter roll-out period

Data Read & Scheduler FTE savings (2009 – 2028)

SENSITIVITY
300
M impact of +/-£15.0M on the
250
200
CONFIDENCE
Staff FTE
150 • FTE numbers should be refreshed to

ensure they are in line with 2010
100 actual staff numbers
A • The assumption of retaining 5% of
50 FTEs for ad-hoc requests should be
reviewed to ensure it is inline with
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Ofgem’s mandate
Key Highlights DRIVER ASSUMPTIONS AND RISKS

• Initial number of data read and scheduler FTEs is 277 in 2013 (when FTE savings begin) and reduces in
line with the In Area Smart Meter roll-out schedule • The reduction in FTEs is heavily dependent on
• It has been assumed that 5% of the 2011 FTE (ie. 277 FTE) will be retained to address ad-hoc read the Smart Meter roll-out schedule. Any change
related requests. This results in 13 Data read staff and 1 scheduler staff retained in the roll-out schedule can significantly impact
this driver
Reference Documents • Further analysis is needed to determine
Name Summary document what the activities of the retained 5%
of FTE will be
Benefits Model Version 9.xls Benefits calculations to support version 9 of the historical business case
Copy of DR FTE for 2009 MTP.xls MTP Data retrieval benefit impact (2009-2014)
DEFINITION
B1.3 Contracted Out of Area Read Cost
Per meter cost of outsourced manual/physical reads of dumb meters for out
per Meter of area residential and SME customers

SENSITIVITY
Cost of OOA Data Reads (2009 – 2028)
£6 • Altering this driver +/- 10% has an
£5
£4
£3 CONFIDENCE
£2 • Numbers should be refreshed to
ensure they are in line with 2010 costs
£1
A • The impact of access rates should be
£0 assessed
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
• Data read costs should be revised for
reduced dumb meter density
Key Highlights:
• Cost of OOA data reads reduces significantly in 2011 and 2012 due to the number of contracted meter
reads reducing from 4 in 2010, to 3 in 2011, to 2 in 2012. It has been assumed that 2 meter reads will be DRIVER ASSUMPTIONS AND RISKS
required for dumb meters from 2012 onwards • There is a risk that data read costs will increase
• Costs of meter reads from 2009 to 2012 have been based on current contracts with OOA data read due to decreasing dumb meter density. This
providers. Costs from 2012 onwards have been index for inflation based on the 2012 cost could also result in an additional cost to the
• The 70% access rate does not seem to have be en applied within the historical business case SMDP business case
• The 70% access rate has been factored into the
Reference Documents OOA read costs provided by SERVICES.
Clarification is need on whether POWER &
Name Summary UTILITIES COMPANY A is contractually
03 OOA Forecast - May 08 (MTP obliged to pay for contracted reads received, or
contracted OOA DR costs
Version) V1 5PERSON.xls reads attempted
DEFINITION
B1.4 Percentage of Out of Area Proportion of contracted OOA reads to be saved, with the remainder still to
Reads to be Saved be carried out after full deployment is completed due to ad-hoc requests
from customers and potential Ofgem requirements

SENSITIVITY
It has been assumed that 95% of CONFIDENCE

contracted reads will be saved, with 5% • The assumption of retaining 5% of
contracted reads for ad-hoc requests
retained to handle ad-hoc requests for A should be reviewed to ensure it is
OOA reads for meters inline with Ofgem’s mandated
requirements

• It has been assumed that 5% of OOA meters
will require Ad-hoc reads
• Further analysis should be conducted to
determine if ad-hoc visits beyond the Ofgem
safety visit requirement and repair visits will
Reference Documents actually be needed
Name Summary • The cost of safety visits have been included
03 OOA Forecast - May 08 (MTP
within Cost area C7. Safety Visit Costs
contracted OOA DR costs
Version) V1 5PERSON.xls
DEFINITION
B1.5 Percentage of Smart Meters
Volume of Smart Meters deployed as a percentage of entire meter portfolio
deployed (i.e. both Dumb & Smart)

Data Retrieval SMDP PMO (PERSON*)
SENSITIVITY
Distribution of Smart & Dumb meters across portfolio 2009 - 2028 • This driver has been qualitatively
100% assessed as the historical business case
90% model doesn’t support quantitative
analysis
80% H
• As the deployment schedule
70%
influences all costs & benefits, the
60%
sensitivity of this driver has been
50% assessed to be High
40%
CONFIDENCE
30%
• Dependant on
20% C1.1 Smart Meter rollout volumes
10%
R therefore confidence has been tagged
0% as red
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Dumb Meters Smart Meters
Key Highlights: • Additional investigation is required into the
• The distribution of Smart vs Dumb meters will shift significantly from 2014 to 2020 in line with the remaining 1,403 of Dumb meters estimated to
Smart Meter roll-out schedule remain within the portfolio
• Current figures show 1,400 dumb meters (not visible on the graph above) remaining within the portfolio • The proportion of Smart Meters deployed is entirely
after mass deployment has been completed in 2020 dependant on the Smart Meter roll-out schedule and
SMDP deployment strategy
• Scenario modelling is required to model impact of
Reference Documents 100% of Smart meters not being deployed by 2020
Name Summary (this incl. modelling of EU requirement of 80% of
meters to be Smart by 2020).
B2. MAP, MAM & MOP
Smart Meters will be deployed and owned by the UK supply businesses, with an infrastructure in place to
manage the movement of customers between suppliers. The traditional MAP, MAM and MOP costs will no longer
be charged and will instead be replaced with the cost of deploying Smart Meters. Therefore the benefits
recognised under this section are the savings in MAP, MAM and MOP charges.
Driver Equation
Total MAP, MAM
and MOP
Savings
= ( ( A × B ) + ( C × D )
B2.1 Annual C3.2 In Area B2.2 Annual

MAP / MAM Vs Out of Salary of B2.3 MOP
£883.1m Costs per Area Meter each MOP FTE Saving
Meter Volumes FTE
+( E × D × F )) × G
B2.4 % of Out C3.2 In Area B1.5

B2.5 Cost of
of Area MOP Vs Out of Percentage of
OOA MOP
visits per Area Meter Smart Meters
visit per Meter
annum Volumes deployed
DEFINITION
B2.1 Annual MAP / MAM Costs per The per annum cost charged per meter by MAPs and MAMs to provide
Meter dumb meter assets (as well as installation in regards to MAM) to POWER
& UTILITIES COMPANY A

MAP, MAM & MOP SERVICES (PERSON) PERSON (PERSON*)
SENSITIVITY
2009 MAP & MAM Unit Costs
£35.00
£25.00 H impact of +/-£84.1M on the
£20.00
£15.00
£10.00
CONFIDENCE
£5.00
£0.00
In-Area Electricity (MAP) Out of Area Electricity (MAP) Gas (MAM) • MAP & MAM unit costs have been
provided by SERVICES and are taken
A directly from current provider
Credit Prepayment
contracts
Key Highlights:
• In-Area Electricity meters are provided by POWER & UTILITIES COMPANY A’s Networks group
• All Gas meters (both In and Out of Area) are provided by National Grid and are significantly more
• Based on an initial review of contracts, no
expensive than Electricity meters due to the additional complexity of Gas meters. In addition, MAM
penalty clauses exist for the termination of MAP
costs include gas meter maintenance and recertification meter and labour costs. MAP costs only include
& MAM services with providers. However, due
recertification meter costs
to the size of contracts being terminated,
• 2009 costs will be indexed for wage inflation for subsequent years provision may need to be made for
compensation to MAP & MAM providers either
Reference Documents directly, or through ICP charges. Further
Name Summary
investigation is needed, and if required, an
additional cost element should be added to the
OOA Elec MAP Costs (MTP Version) business case
Out of area electric MAP costs
110908.xls
DEFINITION
B2.2 Annual Salary of each MOP FTE Annual salary of MOP FTEs employed to replace or repair faulty
Teleswitches or Prepayment cards

SENSITIVITY

It has been assumed that the average
annual salary of MOP staff is the same CONFIDENCE
as that of POWER & UTILITIES
COMPANY A recertification staff. Please • MOP salary costs used should be
refer to R updated for current year actual
salary costs
B3.2 Average Recertification FTE Salary
for further information
• It has bee assumed that this is the same as

Average Recertification FTE Salary
Reference Documents
Name Summary
DEFINITION
B2.3 MOP FTE Saving Number of MOP FTEs that can be saved through the implementation of
Smart. Current MOP activities include replacement / maintenance of
Teleswitches and Prepayment metering infrastructure

SENSITIVITY
SERVICES have estimated that the MOP CONFIDENCE

team can be reduced by 18 FTE after the • FTE savings estimate has been
full deployment of Smart Metering provided / validated by SERVICES
A • Breakdown of how MOP team
workload will reduce due to Smart
should be documented to support
estimates provided

• Savings in FTE count will be realised in line with Smart Meter deployment schedule (i.e. proportion of
• The reduction in FTEs is heavily dependent on
savings will match proportion of Smart Meters deployed across meter portfolio)
the Smart Meter roll-out schedule. Any change
• FTE saving estimates have been provided by SERVICES in the roll-out schedule can significantly impact
this driver
• Changes in the specifications of Smart Meters
deployed (either due to Ofgem or to enable
Reference Documents delivery of new propositions) may significantly
impact the workload of the MOP team, and will
Name Summary
require estimates to be revised
DEFINITION
B2.4 Percentage of OOA MOP visits Percentage of ad hoc Out of Area meters visited per annum to replace or
per annum saved repair faulty Teleswitches or Prepayment cards that can be saved with the
deployment of Smart

SENSITIVITY
The percentage of OOA
meters necessitating an ad CONFIDENCE
hoc visit is estimated at 5% • This is an estimate provided by the

2009 – 2028 R SMDP team and is yet to be validated
against historic data and SERVICES
stakeholders and financial statements

• From 2009 – 2028, a total of 2.41m meters will need to be visited on an ad hoc basis
• It has been assumed that 5% of OOA MOP
visits can be saved. This saving needs to be
validated with SERVICES
• It is unclear how 5% of visits will be saved.
Further clarification is needed
• Further investigation is needed to see if MOP
Reference Documents visits can be linked to other, value add activities
Name Summary
(e.g. Provide additional propositions to
customers)
DEFINITION
B2.5 Cost of OOA MOP visit per
Per meter cost of outsourced ad-hoc dumb meter MOP visits for out of area
Meter residential and SME customers (Electricity meters only)

SENSITIVITY
Cost of OOA MOP visit per meter 2009 - 2028
£20 • Altering this driver +/- 10% has an
£18 L impact of +/-£2.2M on the
£16 historical business case
£14
£12
£10 CONFIDENCE
£8
£6 • OOA MOP costs should be provided
£4 by SERVICES and be based on
£2 current contracts with MOP providers
£0 R
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 • MOP costs should be revised for
reduced dumb meter density
Key Highlights:
• Per unit cost of OOA MOP visits has been estimated to be £10 and has been indexed for inflation
• Estimate provided by SMDP and has not been validated with SERVICES DRIVER ASSUMPTIONS AND RISKS
• Costs shown are only for Electricity meters. Gas meter MOP costs are included within the MAM meter
charge
• There is a risk that MOP costs will increase due
to decreasing dumb meter density
• The business case has assumed that there will be
Reference Documents
no OOA MOP visits for Smart Meters. This
Name Summary assumption needs to be reviewed with new cost
Benefits Model Version 9.xls Benefits calculations to support version 9 of the historical business case elements added to the business case if required
B3. Meter Recertification
During the roll-out of Smart Meters, dumb meter recertification will cease; instead a Smart Meter installation will
take place. As a result recertification costs will be eliminated providing a benefit for the Smart Meter business
case, the costs of rolling out Smart Meters are accounted for under the Cost Model. Please note, only Electricity
recertification savings are shown here. Gas recertification savings are included within MAM cost savings.
Driver Equation
Total Meter
Recertification
Savings
= (( A × B ) + ( C × D × E )
B3.4 B3.5 Cost of

B3.1 B3.2 Average B3.3 Volume
Percentage of Out of Area
£277.4m Recertification Recertification of Electricity Dumb meter Recertification
FTE Savings FTE Salary Meters (OOA) Recertifications per meter
+ ( F × G × H )) × I
B3.4 B1.5
B3.3 Volume
Percentage of B3.6 Fixing Percentage of
of Electricity
Dumb meter Kit Unit Cost Smart Meters
Meters (Total) Recertifications deployed
DEFINITION
B3.1 Recertification FTE Savings Number of dumb meter recertification FTEs that can be saved due to the
replacement of Dumb meters

Meter Recertification SERVICES (Trevor Allen) PERSON (PERSON*)
SENSITIVITY
Recertification FTE savings (2009 – 2028)
• This driver has been qualitatively assessed
140
as the historical business case model
120 doesn’t support quantitative analysis
M • As this driver has a similar effect on the
100 meter recertification benefit as recert
salaries, the sensitivity has been
80
Staff FTE
assessed to be Medium
60
CONFIDENCE
40
• The timing of these savings should be
20 reviewed as it has not yet been determined
how recertifications will be saved
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
R • FTE numbers should be refreshed to ensure
they are in line with 2010 staff numbers
Key Highlights:
• It has been estimated that 100% of the Recertification team FTE can be saved through the DRIVER ASSUMPTIONS AND RISKS
implementation of Smart Meters
• It has been assumed that all savings can be realised on the commencement of mass deployment of Smart • The reduction in FTEs is heavily dependent on the
Meters as any Dumb meter requiring recertification will be immediately replaced with a Smart Meter Smart Meter roll-out schedule. Any change in the roll-
out schedule can significantly impact this driver
• It is assumed that Smart Meters will not be recertified.
Reference Documents Further investigation should be done to confirm no
recertification FTEs need to be retained to manage a
Name Summary Smart Meter recertification programme
DEFINITION
B3.2 Average Recertification FTE
Annual salary expense to employ one Recertification FTE to undertake
Salary recertification of dumb meters for In Area residential and SME customers

Meter Recertification SERVICES (PERSON) PERSON (PERSON*)
SENSITIVITY
Recertification FTE Salary (2009 – 2028)
£90,000 • Altering this driver +/- 10% has an
£80,000 M impact of +/-£11.0M on the
£70,000
£60,000
CONFIDENCE
£50,000
£40,000
• Recertification Salary costs should
be refreshed to ensure they are in line
£30,000
A with 2010 salary costs and validated
£20,000
with SERVICES
£10,000
£0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
• Estimate provided by SMDP and has been based on Installer FTE salary costs for 2009. Costs have been
indexed for each subsequent yea
• Assumes greater than 90% increase in data reader salaries over the next 20 years
• A significant proportion of the benefit provided by
this driver are due to wage inflation
Reference Documents
Name Summary
DEFINITION
B3.3 Volume of Electricity Meters The overall volume of electricity meters (both Dumb and Smart) within
POWER & UTILITIES COMPANY A’s meter portfolio

Meter Recertification Planning Team PMO (PERSON*)
SENSITIVITY
Volume of Electricity Meters (2009 – 2028)
6,000,000
5,000,000
analysis
H • As the underlying volume of
4,000,000
meters drives the majority of costs
3,000,000
& benefits, the impact of this driver
has been assessed to be High
2,000,000
1,000,000 CONFIDENCE
• Meter volume analysis has focused on
0 the Customer Services medium term to
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
date until 2014
A • More robust information is needed to
In Area Out of Area
Key Highlights: determine how mass deployment will
affect customer numbers
• The volume of electricity meters has been estimated using the Customer Services Medium Term Plan
(MTP), and reflects no growth in electricity meters beyond 2014

Reference Documents • Increase in electricity meters over the medium
Name Summary
term appear to be overly aggressive. This should
be reviewed with Customer Services
DEFINITION
B3.4 Percentage of Dumb Meter
Recertifications Percentage of Out of Area Dumb meter recertifications per annum

SENSITIVITY
The percentage of OOA CONFIDENCE

meters requiring
recertification per annum is • Preferably, an actual recertification
estimated at 5% R schedule should be used to ensure
alignment with the Smart Meter roll-
out schedule
Key Highlights:
• The estimate of 5% has been provided by SMDP and has not been validated with SERVICES DRIVER ASSUMPTIONS AND RISKS
• This driver was estimated based on the assumption all meters will be recertificied over a 20 year period
• The historical business case has assumed that

there will be no OOA recertifications for Smart
Meters. This assumption needs to be reviewed
Reference Documents with new cost elements added to the business
case if required.
Name Summary
DEFINITION
B3.5 Cost of Out of Area
Per meter cost of Dumb meter recertification for out of area residential and
Recertification per meter SME customers (Electricity meters only)

SENSITIVITY
Cost of OOA Recertifications per meter (2009 – 2028)
£80
£70 M impact of +/-£12.2M on the
£60
£50
CONFIDENCE
£40
£30
£20
• Recertification costs reflect current
£10 G SERVICES P&L costs
£0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Key Highlights:
• Per unit cost of OOA Recertification visits has been estimated to be £45.58 and has been indexed for
inflation from 2014 onwards, using 2009 as the base cost. Costs from 2009 to 2014 are based on
SERVICES medium term plan numbers DRIVER ASSUMPTIONS AND RISKS
• Estimate provided and validated by SERVICES • There is a risk that recertification costs will
• Costs shown are only for Electricity meters. Gas meter recertification costs are included within the increase due to decreasing dumb meter density
MAM meter charge across the UK
• The historical business case has assumed that
there will be no OOA recertification for Smart
Reference Documents Meters. This assumption needs to be reviewed
Name Summary with new cost elements added to the business case
if required
DEFINITION
B3.6 Fixing Kit Unit Cost The cost of a fixing kit required to fit an Electricity Dumb meter unit safely
and securely at either SME or Residential client site

SENSITIVITY
Electricity Fixing Kit £10 CONFIDENCE
• Data has been validated with

G SERVICES and reflects actual
SERVICES P&L costs
Key Highlights:
• Cost of Electricity Dumb meter fitting kits has been provided by SERVICES
• The price of fixing kits includes bracket, sundries and regulator (breakdown of costs have not been
provided within the historical business case) DRIVER ASSUMPTIONS AND RISKS
• The cost of Gas Dumb meter fixing kits is included within MAM costs
• It has been assumed the cost of fixing kits will

remain constant over the period of the business
case (i.e. costs have not been indexed for
inflation)
Reference Documents
Name Summary
B4. Debt Management
Debt Management for SERVICES mainly involves the process of prepayment debt follow-up, loading debt
onto a meter and pre disconnection visits and warrant visits for actual disconnections etc. Smart Meters will
include the functionality to remotely add debt to a meter and set a repayment plan as well as remotely
disconnect and reconnect thereby eliminating this cost.
Driver Equation
Total Debt
Management
Savings
= A × B × C
B4.2 Average B1.5

B4.1 Debt
Debt Percentage of
£7.1m Management
Management Smart Meters
FTE Saving
FTE Salary Deployed
DEFINITION
B4.1 Debt Management FTE Saving Reduction in Debt Management FTEs due to the deployment of Smart
Meters across the meter portfolio

Debt Management SERVICES (Alf Reeve) PERSON (PERSON*)
Debt Management FTE savings (2009 – 2028)

SENSITIVITY
14 • Altering this driver +/- 10% has an
12 L impact of -£731k/ +£691K on the
10
Staff FTE
8
CONFIDENCE
6
4
• FTE numbers should be refreshed to
2 ensure they are in line with current
A staff numbers (including any changes
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
in PROGRAM benefits)
Key Highlights:
• It has been estimated that a total of 13 FTE will be saved due to full implementation of Smart. This is
equivalent to a 35% reduction in staff after the 43 FTE reduction due to PROGRAM has been accounted
for
• Initial number of front office FTE is 57 and back office FTE is 23 in 2009 and reduces in line with the
Smart Meter roll-out schedule
• The historical business case slightly understates savings due to a calculation error (FTE savings have • The reduction in FTEs is heavily dependent on
been incorrectly delayed by 2 years) the Smart Meter roll-out schedule. Any change
in the roll-out schedule can significantly impact
this driver
Reference Documents
Name Summary
DEFINITION
B4.2 Average Debt Management FTE
Annual salary expense to employ one Debt Management FTE broken down
Salary by front or back office salaries

Debt Management SERVICES (PERSON) PERSON (PERSON*)
SENSITIVITY
Debt Management Salary (2009 – 2028)
£80,000
£70,000 L impact of -£731k/ +£691K on the
£60,000
£50,000
£40,000
£30,000
CONFIDENCE
£20,000
£10,000
• Debt Management salary costs
£0
should be updated for current year
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 A actual salary costs
Back office Front office • Application of wage inflation rates
Key Highlights: should be reviewed
• Annual salary costs for debt management FTEs has been estimated based on Customer Services salary
and expense costs per FTE for 2008 and have been indexed for wage inflation for each subsequent year
• Front office wages include a £5000 non-salary (car) expense
• Activities conducted by Debt Management staff include prepayment debt follow-up, loading debt onto a
meter and pre disconnection visits and warrant visits for actual disconnections • For front office staff, wages have been indexed in
line with wage inflation expectations, however
car expense has not been indexed. Consistent
inflation should be applied
Reference Documents
Name Summary
B5. Improved Customer Services
This relates to the costs saved for activities surrounding Loss disputed reads, Prepayments (i.e. call
handling, key replacement, payment infrastructure costs and the internal prepayment infrastructure team
PPMIP team) and Intelligent Voice Recognition. The introduction of Smart Meters will affect all aspects of
the above, either in volume or process.
Paypoint/Pocl
Loss Disputed Reads
Infrastructure Savings
Customer Services PPMIP Team Savings
Prepayment Key Intelligent Voice

Savings Recognition Savings
Debt Visit Savings

Loss Disputed Reads

A Loss Disputed Read occurs when a closing account reading/estimate is disputed when a customer
changes supplier. A dispute is raised when an estimate is used to close the account and then the customer
provides an actual read which is outside an agreed tolerance. The Smart Meter’s remote reading
functionality will reduce the amount of work currently completed by this team, as accurate reads can be
requested from the meter on the CoS date.
Driver Equation
Total Loss
Disputed Reads = A × B × C
Savings
B5.1 Average B5.2 Loss B1.5

Customer Disputed Percentage of
£90.3m Services FTE Read FTE Smart Meters
Salary Saving Deployed
DEFINITION
B5.1 Average Customer Services FTE
Salary Annual salary expense to employ one Customer Services FTE

Improved Customer Services Customer Services PERSON (PERSON*)
SENSITIVITY
Customer Services FTE Salary (2009 – 2028)
£60,000
£50,000
£40,000 CONFIDENCE
£30,000 • Customer Services FTE salary
costs should be updated for
£20,000
A current year actual salary costs
£10,000
• Application of wage inflation rates
should be reviewed
£0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028

• Annual salary costs for Customer Services FTE include salary and an indirect cost component (for
workstation, training, recruitment, etc.). In 2009 these components are £24,000 and £3,000 respectively
• This driver has been used to support a number of
different FTE reduction benefits within the
Customer Services team. Additional investigation
should be done to ensure this average salary
accurately reflects the average salary of each
Reference Documents team impacted
Name Summary
DEFINITION
B5.2 Loss Disputed Read FTE Saving Reduction in Loss Disputed Read (LDR) FTEs due to the deployment of
Smart Meters across the meter portfolio

SENSITIVITY
LDR FTE savings (2009 – 2028)
200 • Altering this driver +/- 10% has an
180 L impact of +/-£9.0M on the
160 historical business case
140
Staff FTE
120
100 CONFIDENCE
80
60
40
20
• FTE numbers should be refreshed to
0 A ensure they are in line with current
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 staff numbers
Key Highlights:
• LDR staff manage disputed reads that occur when a closing account reading/estimate is disputed when a
customer changes supplier
• It has been estimated that all LDR FTE will no longer be required once Smart has been deployed across
the entire meter portfolio, resulting in a 100% FTE savings
• LDR Savings were calculated by first calculating the number of FTE within the Customer Services team
required to handle the LDR workload, then reducing the FTE in line with the Smart Meter deployment • The reduction in FTEs is heavily dependent on
schedule the Smart Meter roll-out schedule. Any change
Reference Documents this driver
Name Summary
Customer Services
Customer Service activities include handling inbound telephony traffic regarding lost / faulty keys, arranging
appointments to change meter or errors on the meter. Currently there is a significant additional customer
services workload attached to prepayment customers when compared to credit customers. Given the
anticipated specification of Smart Meters which will eliminate much of this work, it is assumed that
prepayment customers in the future will be no more resource hungry than current credit customers, hence
the reported staff saving. Cost savings include stationery savings related to posting new keys etc and other
consumables.
Driver Equation
Total Customer
Services Savings = ( A × B + C ) × D
B5.1 Average B5.3 B1.5

B5.4 Saving in
Customer Prepayment Percentage of
£88.1m Services FTE Queries FTE
Prepayment
Smart Meters
Queries Costs
Salary Saving Deployed
DEFINITION
B5.3 Prepayment Queries FTE Saving Reduction in Prepayment Query FTEs due to the deployment of Smart
Meters across the meter portfolio

SENSITIVITY
Prepayment Queries FTE savings (2009 – 2028)
180
160
140
Staff FTE
120
100 CONFIDENCE
80
60
20 A ensure they are in line with current
0
staff numbers
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Key Highlights:
• It has been estimated that 65% of Prepayment query staff can be saved through the implementation of
Smart Metering. This results in a total saving of 157 FTE from a current team of 244 FTE DRIVER ASSUMPTIONS AND RISKS
• Savings will increase in line with the Smart Meter roll-out schedule
• Prepayment query FTE activities include handling inbound telephony traffic regarding lost / faulty keys,
arranging appointments to change meter or errors on the meter
this driver
Reference Documents
Name Summary
DEFINITION
B5.4 Saving in Prepayment Queries
Reduction in Prepayment Queries overhead costs (non-FTE related) that
Costs can be achieved through the implementation of Smart

SENSITIVITY
Prepayment Queries Cost saving (2009 – 2028)
£300,000 impact of -£315k/ +£275K on the
L
£250,000
£200,000
CONFIDENCE
£150,000
• Expense figures should be refreshed
£100,000 to ensure they are in line with 2009
Customer Services P&L
£50,000 A
• A breakdown of which activities will
£0 no longer need to be performed for
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Prepayment queries needs to be
documented to support this driver
Key Highlights:
• It has been estimated that 100% of total Prepayment Queries non-FTE related costs will be saved
through the implementation of Smart Metering
• Savings will be realised in line with the Smart Meter roll-out schedule
• Reduction in costs has been provided and validated by Customer Services
• Prepayment query FTE activities include handling inbound telephony traffic regarding lost / faulty keys, • The reduction in expenses is heavily dependent
arranging appointments to change meter or errors on the meter on the Smart Meter roll-out schedule. Any change
Reference Documents
this driver
Name Summary
Prepayment Key Savings

When a customer loses a key or one is faulty, they are generally replaced by sending out a new one. The
cost per key below is for the key itself with any postage & packing included in the costs above. When
Smart Meters are installed, keys will be replaced by smart cards which are more cost effective and reliable
but may still need replacing.
Driver Equation
Total Prepayment
Key Savings = A × B × D
B5.5 Volume of B1.5

B5.6 Cost per
Prepayment Key Percentage of
£15.2m Replacements Prepayment
Smart Meters
per annum Card
Deployed
DEFINITION
B5.5 Volume of Prepayment Key
The number of prepayment keys to be replaced per year under a 100%
Replacements per annum Dumb meter portfolio compared to a 100% Smart Meter portfolio

MAP, MAM and MOP Customer Services PERSON (PERSON*)
SENSITIVITY
# of Dumb Meter Prepayment Key L impact of +/-£1.4M on the
300,000 historical business case
Replacements per annum
CONFIDENCE
• The number of Dumb meter
prepayment key replacements needs
# of Smart Meter Prepayment Key to be validated with Customer
150,000 A Services
Replacements per annum • The expected number of Smart Meter
Prepayment key replacements needs
to be discussed with key
Key Highlights: manufacturers
• Prepayment key replacements occur when a customer’s key is either lost or faulty
• Smart Meter prepayments keys have been estimated to require 50% less replacements due to Smart keys
being more durable (as they are made of plastic)
• An assumption has been made that there will be
• It has been assumed that there will be no variation in annual replacements numbers over the life of the
50% less prepayment key replacements for Smart
business case (other than due to the change arising from the deployment of Smart) Meters. There is a risk that the new keys will be
more sophisticated, potentially resulting in
additional faults
Reference Documents • The number of customer key losses and
Name Summary replacements due to damage could be reduced by
charging for key replacements
DEFINITION
B5.6 Cost per Prepayment Card Cost of prepayment keys to be replaced per year under a 100% Dumb meter
portfolio compared to a 100% Smart Meter portfolio

SENSITIVITY
Cost of Dumb Meter Prepayment historical business case
£3.00
Key Replacements per card CONFIDENCE
• Costs should be refreshed from more

Cost of Smart Meter Prepayment A
£0.50 recent Smart Meter manufacturer
Key Replacements per card RFIs
Key Highlights:
• Key costs have been estimated based on Smart manufacturer RFI responses and current Dumb meter
Prepayment Key cards
• Costs shown are for 2009 year. Costs has been indexed for inflation for each subsequent year • The historical business case does not specify if
the initial cost of prepayment cards has been
included within the cost of a new Smart
Reference Documents Prepayment meter. This should be assessed and
added to the business case if required
Name Summary
Debt Visit Savings

This includes the activities of pre-disconnection visits (to check status of property and to resolve issue
before warrant) and serving warrants for disconnection or adding debt to meters. Once Smart Meters are
rolled out, adding debt and disconnections / reconnections can be handled remotely although a portion of
site visits will still be necessary.
Driver Equation
Total Debt Visit
Savings = A × B
B1.5
B5.7 Saving
Percentage of
£15.2m in OOA Debt
Smart Meters
Visit Costs
Deployed
DEFINITION
B5.7 Saving in OOA Debt Visit Costs Reduction in OOA Debt visit costs as key activities of adding debt to
prepayment meters and disconnection / reconnections can be done remotely
using Smart Meters

SENSITIVITY
OOA Debt Visit Expense Saving (2009 – 2028)
£4,000,000 • Altering this driver +/- 10% has an
£3,500,000 L impact of +/-£3.8M on the
£3,000,000 historical business case
£2,500,000
£2,000,000
CONFIDENCE
£1,500,000
£1,000,000 • Expense figures should be refreshed to
£500,000 ensure they are in line with the 2009
Customer Services P&L
£0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
A
• A breakdown of which activities will no
Key Highlights: longer need to be performed for OOA
Debt Visits needs to be documented to
• It has been estimated that 50% of OOA Debt visit expenses will be saved through the implementation of
support this driver
Smart Metering
• Debt Visit costs have been indexed for inflation (with costs rising from total costs rising from £4.1M in DRIVER ASSUMPTIONS AND RISKS
2009 to £6.7m in 2028
• Reduction in OOA Debt visits has been provided and validated by SERVICES
• Current activities including pre-disconnection visits (to check status of property and to resolve issue • The reduction in expenses is heavily dependent
before warrant) and serving warrants for disconnection or adding debt to meters on the Smart Meter roll-out schedule. Any
change in the roll-out schedule can significantly
Reference Documents
impact this driver
Name Summary
Paypoint/Pocl Infrastructure Savings

Currently POWER & UTILITIES COMPANY A have contracted with Paypoint to provide prepayment key charges and payments. When Smart Meters
are installed, the customer will be able to pay using different methods (similar to those of a mobile phone top-up). While this means a lower cost for
Paypoint services (a saving benefit), a payment broker would need to be set up to manage the additional payment types. This is an added cost which is
deducted from the Paypoint savings benefit. The costs attached to the initial set up of a payment broker system are included in the Cost Model.
Driver Equation
Total Paypoint/Pocl
Infrastructure Savings = ( A × B × C ) +
B5.8 Annual B5.9 % of B1.5

Customers to
cost of Percentage of
£86.5m use new
Paypoint/Pocl
system
Prepayment
System
× Smart Meters
Deployed
( D × E × F × G )
B5.11 Cost per B5.12 Number of B1.5

B5.10 Volume
Smart Meter Transactions per Percentage of
of Prepayment Prepayment Smart Meter per
Meters Smart Meters
Transaction year
Deployed
DEFINITION
B5.8 Annual cost of Paypoint/Pocl
system Annual cost of current Paypoint/Pocl prepayment system

SENSITIVITY
Paypoint/Pocl Annual Costs (2009 – 2028)
£18,000,000
£16,000,000
£14,000,000
£12,000,000 CONFIDENCE
£10,000,000
£8,000,000 • Paypoint/Pocl annual costs should be

updated to reflect current year
£6,000,000 A operating costs (ie. validated against
£4,000,000 CS P&L)
£2,000,000
£0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Key Highlights:
• Annual costs reflect current costs incurred by Customer Services to maintain the Paypoint/Pocl
prepayment systema and have been validated against the Customer Services P&L • It has been assumed that costs can be saved in
• Costs shown have been indexed for inflation over the life of the business case line with Smart Meter Prepayment adoption.
Further analysis is required to ensure Paypoint /
Pocl costs are not fixed (ie. That 100% of costs
will need to be incurred though only 50% of
Reference Documents users will use historic system
Name Summary
DEFINITION
B5.9 Percentage of Customers to use The proportion of customers expected to use either the existing
new Prepayment System Paypoint/Pocl prepayment system compared to the % expected to use the
new system implemented under Smart

SENSITIVITY
% of customers to remain with L impact of +/-£937K on the
50% historical business case
current Paypoint/Pocl system
CONFIDENCE
• Further analysis is needed to

% of customers to move to new determine what is the preferred split
50% of payment system usage (including
payment system R analysis of costs – eg. Loss of
customers, versus benefits – reduced
operational costs. The business case
Key Highlights: should then be updated to reflect this.
• Currently, prepayment customers use the Paypoint/Pocl system to top up their prepayment cards. Under
Smart, a new (more cost-effective) payment system will be made available
• It has been assumed that only 50% of customers will move to the new system due to a large segment of DRIVER ASSUMPTIONS AND RISKS
existing customers preferring the interaction of using the current system
• This current estimate has been provided by SMDP and has not been validated with Customer Services • The assumption that 50% of users will remain on
the current Paypoint/Pocl system should be
reviewed. Customers should be encouraged
(potentially through cost incentives or other
Reference Documents benefits) to move to the new system to reduce
Name Summary costs to POWER & UTILITIES COMPANY A
DEFINITION
B5.10 Volume of Prepayment Meters Volume of Prepayment meters installed across POWER & UTILITIES
COMPANY A’s metering portfolio

Improved Customer Services Planning Team PMO (PERSON*)
SENSITIVITY
Volume of Prepayment Meters (2009 – 2028)
1,200,000
1,000,000
800,000
CONFIDENCE
600,000 • Volume estimates are based on current
Customer Services MTP projections
400,000 which is the correct approach
A
• However, these projects should be
200,000 reviewed with CS and the business case
updated for any changes
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Smart Meters Dumb Meters

Key Highlights:
• Volume of prepayment meters has been estimated based on current MTP meter volumes and current
growth projections
• The proportion of Dumb to Smart Meters is based on the current Smart Meter roll-out schedule • Growth projections for Prepayment meters are not
inline with assumed growth expectations for
overall customer numbers
Reference Documents
Name Summary
DEFINITION
B5.11 Cost per Smart Meter
Cost of each prepayment transaction for the top up of a Smart Prepayment
Prepayment Transaction meter

SENSITIVITY
CONFIDENCE
The cost per Smart Meter • Costs should be refreshed from more
prepayment transaction has recent RFI responses
A • A detailed breakdown of functionality
been estimated to be £0.02 of the new system should be provided
to ensure all prepayment requirements
are fulfilled
Key Highlights:
• Transaction costs have been estimated based on RFI responses
• Cost shown is for 2009 year. Cost has been indexed for inflation for each subsequent year
• N/A
Reference Documents
Name Summary
DEFINITION
B5.12 Number of Transactions per
Average number of prepayment transactions to expected per Smart Meter
Smart Meter per year per year

SENSITIVITY
L impact of +/-£937K on the
It has been estimated that
there will be 50 prepayment CONFIDENCE
transactions per meter per
year • The number of transactions should
reflect historical averages and account
R for expected changes in Prepayment
customer behaviour using Smart
Meters
Key Highlights:
• Number of transactions per meter has been based on SMDP estimates and should be validated against
historical per meter transaction averages and expected customer behaviour under Smart
• The number of transactions per meter per year has been assumed to remain constant over the life of the
business case
• The number of transactions per meter may
reduce over time as customers become familiar
with new Smart prepayment technology and are
Reference Documents better able to forecast energy usage
Name Summary
PPMIP Team Savings

PPMIP is the team based in CITY that supports the usage of prepayment meters, as Smart Meters are
rolled out and payment methods change i.e. pay as you go & DD, so parts of their work will be eliminated
and the volume of existing work will be reduced as the company moves onto an internal infrastructure e.g.
sending replacement and new keys out, redirecting payments.
Driver Equation
Total PPMIP
Team Savings = ( A × B + C ) × D
B5.1 Average B5.14 Saving B1.5

Customer B5.13 PPMIP in PPMIP Percentage of
£10.0m Services FTE FTE Saving Expense Smart Meters
Salary Budget Deployed
DEFINITION
B5.13 PPMIP FTE Saving Reduction in number of Prepayment Infrastructure Provider Team (PPMIP)
FTEs required to support Prepayment Dumb meters

SENSITIVITY
PPMIP FTE savings (2009 – 2028)
16
L impact of -£834k/ +£793K on the
14 historical business case
12
CONFIDENCE
Staff FTE
10

ensure they are in line with current
6 staff numbers
A
4 • Activities currently performed by
PPMIP should be documented to
2 support this driver
0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Key Highlights
• It has been estimated that 100% of the 15 FTE PPMIP team will reduced due to the implementation of
Smart Meters. Savings will be realised in line with the roll-out schedule for Prepayment Smart Meters in the roll-out schedule can significantly impact
this driver
• Further investigation is needed to determine if
additional benefits can be achieved by bringing
Reference Documents forward the implementation of all Prepayment
Name Summary meters within the roll-out schedule
DEFINITION
B5.14 Saving in PPMIP Expense
Reduction in PPMIP overhead costs (non-FTE related) that can be achieved
Budget through the implementation of Smart

SENSITIVITY
PPMIP Expense Budget savings (2009 – 2028)
£180,000
£160,000
£140,000
£120,000 CONFIDENCE
£100,000 • Expense figures should be refreshed
£80,000 to ensure they are in line with the
2009 Customer Services P&L
£60,000 A
• A breakdown of which activities will
£40,000 no longer need to be performed by
£20,000 PPMIP needs to be documented to
support this driver
£0
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Key Highlights:
• It has been estimated that 100% of total PPMIP non-FTE related costs will be saved through the
implementation of Smart Metering
• The reduction in expenses is heavily dependent
• Reduction in costs has been provided and validated by SERVICES on the Smart Meter roll-out schedule. Any change
Reference Documents this driver
Name Summary
Intelligent Voice Recognition Savings

This relates to the activity of customers attempting to leave meter readings using the automated system. If
a customer ‘drops out’ of the IVR process either through technical difficulty or human error, they will be
transferred to a customer service agent. Smart Meters remote reading functionality will eradicate the need
for customer own reads, meaning less calls into the contact centre therefore saving customer service FTE
and telephony charges to POWER & UTILITIES COMPANY A.
Driver Equation
Total Intelligent
Voice Recognition
Savings
= ( A × B + C ) × D
B5.1 Average
B5.16 Saving B1.5 % of
Customer B5.15 IVR
£871k Services FTE FTE Saving
in IVR Expense Smart Meters
Salary
Budget Deployed
DEFINITION
B5.15 IVR FTE Saving Reduction in Intelligent Voice Recognition (IVR) support FTEs due to the
deployment of Smart Meters across the meter portfolio

SENSITIVITY
IVR FTE savings (2009 – 2028)
0.16
0.14 business case
0.12
Staff FTE
0.10
CONFIDENCE
0.08
0.06
0.04 • FTE numbers should be refreshed to

A ensure they are in line with current staff
0.02
numbers
0.00
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Key Highlights:
• IVR staff provide support to customers attempting to leave meter readings who ‘drop out’ of the IVR
process, either through technical difficulty or human error
• It has been estimated that all IVR FTE will no longer be required once Smart has been deployed across
the entire meter portfolio, resulting in a 100% FTE savings
• IVR FTE Savings were calculated by first calculating the number of FTE within the Customer Services • The reduction in FTEs is heavily dependent on
team required to handle the IVR workload, then reducing the FTE in line with the Smart Meter the Smart Meter roll-out schedule. Any change in
deployment schedule the roll-out schedule can significantly impact this
driver
Reference Documents
Name Summary
DEFINITION
B5.16 Saving in IVR Expense Budget Reduction in IVR overhead costs (non-FTE related) that can be achieved
through the implementation of Smart

SENSITIVITY
IVR Expense Budget savings (2009 – 2028)
£90,000
£80,000
£70,000
£60,000
£50,000 CONFIDENCE
£40,000
£30,000
£20,000 • Expense figures should be refreshed
A
£10,000 to ensure they are in line with the
£0 2009 Customer Services P&L
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028
Key Highlights:
• The IVR budget (non-FTE related) covers the expense incurred in maintaining the IVR system to accept
customer Opening Meter Reads and Billing Reads
• It has been estimated that 100% of total IVR non-FTE related costs will be saved through the
implementation of Smart Metering
• The reduction in expenses is heavily dependent
• Reduction in costs has been provided and validated by Customer Services
on the Smart Meter roll-out schedule. Any
change in the roll-out schedule can significantly
Reference Documents impact this driver
Name Summary
B6. Other Benefit Areas
(Not costed within the historical business case)
The following benefits have been mentioned within the historical business case 1 but have not been
analysed or costed. The next phase of the SMDP will need to review each of the areas below in detail to
understand whether there is a direct benefit arising from Smart, and how it can be achieved. The categories
below are mentioned briefly (please refer to the ‘Benefits Model Calculations version 9’ word document).
1. Customer Propositions
2. Energy Services
3. Energy Branch
4. Network Branch
The following benefits have also been previously considered, but have not been mentioned within the
historical business case1
5. Avoidance of costs associated with Tariff change visits

6. Avoidance of costs associated with Radio Teleswitches for economy tariffs
7. Reduced cost from better efficiency through data quality improvements
8. Avoidance of exceptions between POWER & UTILITIES COMPANY A and Industry systems
and any resulting investigations
9. Reduced cost from lower Customer Services workloads due to reduced processing for
events, CoTs, etc.
1. The historical Business Case refers to version 9 of the Smart Metering business case as at the start of October 2009

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POWER & UTILITIES COMPANY

Version Date Author Comment

These drivers include:

They key gaps include:

Please click on a section to see further details

1. Factbook Approach 2. Factbook Update Process

3. Smart Metering Factbook

Drivers Supporting Data

Cost & Benefit

Definition Definition of the driver

Supporting data High level data supporting the driver

Confidence A qualitative assessment of the driver’s supporting data

Reference documents Documents providing further detailed information

Confidence RED: The data generation approach needs to be reviewed to ensure

£1.68 Bn(2) £1.82 Bn(2)

Benefit / Cost Area Supported Business Owners Data Approver

Cumulative number of Smart Meters

Areas Supported Business Owners Data Approver

Areas Supported Business Owners Data Approver

• Altering this driver +/- 10% has an

Areas Supported Business Owners Data Approver

Areas Supported Business Owners Data Approver

Areas Supported Business Owners Data Approver

Areas Supported Business Owners Data Approver

Areas Supported Business Owners Data Approver

Reference Documents • N/A

C3.2 In Area C3.3 In Area

• The estimated time required to install a Smart

Areas Supported Business Owners Data Approver

Areas Supported Business Owners Data Approver

4.0 similar, the impact of this driver has been

Areas Supported Business Owners Data Approver

Areas Supported Business Owners Data Approver

DRIVER ASSUMPTIONS AND RISKS

Areas Supported Business Owners Data Approver

• These costs are based on

DRIVER ASSUMPTIONS AND RISKS

• Actual rates will be lower due to economies

• The chosen communication solution • The amount of data that will be

Areas Supported Business Owners Data Approver

Areas Supported Business Owners Data Approver

Areas Supported Business Owners Data Approver

POWER & UTILITIES COMPANY A

C6.1 Out of C6.2

Areas Supported Business Owners Data Approver

model doesn’t support quantitative

Areas Supported Business Owners Data Approver

Please refer to CONFIDENCE

• This driver is influenced by the type of

Areas Supported Business Owners Data Approver

• Please refer to C1.1 Meter Installer

Please refer to CONFIDENCE

3.1 Meter Installer Salary

Areas Supported Business Owners Data Approver

10% Failure Rate over life of meter

• The information provided is an estimate

DRIVER ASSUMPTIONS AND RISKS