UK: Smart Meters: Implementing The UK's Data Access And Privacy Framework

Last Updated: 28 February 2013
Article by Publications Field Fisher Waterhouse

A significant milestone was reached on 12th December 2012, when the UK Government published its decision on the regulatory framework that will underpin how valuable energy consumption data ("Consumption Data") generated and transmitted by smart energy meters may be accessed and managed.  David Lewis, Senior Associate at Field Fisher Waterhouse LLP, considers the data protection compliance implications of the new rules. 

Of the numerous studies and soundings conducted by the Department of Energy and Climate Change (DECC) in preparation for the rollout of over 50 million smart energy meters commencing in 2014, the consultation on Data Access and Privacy issued in Spring 2012 generated some of the most polemical press coverage. Some newspapers cited warnings of "cyber attacks by foreign hackers" and "a spy in every home", and there was much interest in the concerns highlighted in a report published in June by the European Data Protection Supervisor that the most granular real-time Consumption Data could reveal details such as the daily habits of household members or even tell burglars when a house was unoccupied.

The Government's response to this consultation sheds considerable light on the data protection compliance measures that must be put in place by energy companies, network operators and anyone else who plans to access Consumption Data such as 'switching' websites and energy services suppliers. These requirements will apply alongside (and in addition to) those already set out in the Data Protection Act 1998 ("DPA 1998"). The measures will be implemented via amendments to the licence conditions adhered to by energy suppliers (enforced by Ofgem) and a new Smart Energy Code ("the Code") overseen by a dedicated Smart Energy Code Panel. A central information hub controlled by a body known as the Data and Communications Company (DCC) will enable remote access to Consumption Data to companies that have agreed to be bound by the Code.

Background

The Energy Efficiency Directive (2012/27/EC) alongside other EU Directives (2009/72/EC and 2009/73/EC) set out the European framework for smart meters and require Member States to ensure that standardised intelligent meters are installed in the homes of 80% of domestic energy consumers in Europe by 2020. The UK has pursued an even more ambitious programme, aiming to reach almost all British households by 2019. The Government's vision is to give energy customers real-time data about their energy consumption in the hope that this will help them to control costs, in addition to other benefits, such as the environmental and broader economic side effects of the behavioural changes such information may encourage.  Screens known as In Home Displays or IHDs will make it easy for customers to view their own Consumption Data.

One of the key benefits is intended to be the elimination of estimated bills, since consumers will no longer need to provide multiple meter readings before their energy supplier can calculate their household's energy consumption with any accuracy. In the longer term, it is hoped that smart energy data will lead to fluctuating, real-time energy pricing, which would enable consumers to see how expensive it will be to use gas or electricity at any given time of day.

However, prompted perhaps by consumer groups and media interest in the privacy concerns posed by this new technology, the DECC has prioritised development of its policy in respect of the data protection aspects of smart meters and has clearly invested a considerable amount of effort in its Data Access and Privacy consultation and resultant regulatory proposals. The Government is also looking to energy suppliers to develop a Privacy Charter over the coming months, which is likely to be based on the commitments already published by the trade association Energy UK.

Key elements of the new framework

It is important to understand that the additional requirements imposed by the new framework only apply to Consumption Data – personal data that may be collected by smart meters that does not relate to energy consumption will simply be governed by the DPA 1998.

The framework applies differently to energy suppliers (such as British Gas and EDF Energy), network operators (companies that own and lease the infrastructure for delivering gas and electricity to premises) and "third parties". The latter category includes any interested party that may apply for access to Consumption Data via the DCC (such as the switching websites mentioned above), but may also include energy suppliers accessing data in a capacity other than as supplier of energy to the relevant premises.

A crucial aspect of the rules that applies to all parties is the requirement to obtain explicit, opt-in consent before using Consumption Data for any marketing purposes. Opt-in consent will also be required before any energy supplier or third party can remotely access the most detailed level of Consumption Data (data that relates to a period of less than one day). Whilst energy suppliers may access daily or monthly data without explicit consent provided they give a prescribed period of notice and offer an opt-out mechanism, third parties must obtain explicit consent before requesting data of any level of granularity from the DCC. As for network operators: they will be allowed to access Consumption Data for certain regulated purposes (such as planning and maintenance of network assets), provided that they have in place approved plans to aggregate or anonymise the data they collect. 

From a consumer protection perspective, perhaps the most important safeguards introduced by the Stage 1 draft of the Smart Energy Code published in November 2012 are the requirements on third parties requesting Consumption Data from the DCC to:

a. take measures to verify that the relevant household member has solicited the services connected with the third party's data request;

b. self certify that the necessary consent has been obtained; and

c. provide reminders to consumers about the Consumption Data being collected at appropriate, regular intervals.

As regards the mechanism to be used for verification mentioned in (a) above, the Government has reserved its position on the details of this pending further examination of the available security methods. It mentions the possibility of electronically exchanging "Customer Identification Numbers", but it remains to be seen what will become the standard process. 

Third parties (and energy suppliers to the extent that they are obliged to comply with the basic consent requirements of the Code on top of their licence conditions) will be required to maintain detailed records to evidence compliance with the Code and the Smart Energy Code Panel is empowered to order independent audits as a further assurance measure. Details of the specific sanctions that the Panel may impose for failure to comply with the Code have not been finalised, but will certainly include possible suspension of data access rights or expulsion from the Code (and therefore the ability to send requests to the DCC). The Energy Efficiency Directive requires penalties for non-compliance to be imposed, but no financial penalties have been tabled at this stage and it may be that the Government plans to rely on the existing enforcement role of Ofgem and the powers of the Information Commissioner's Office (ICO) to issue fines of up to Ł500,000.

Privacy Impact Assessments (PIAs)

The Government has emphasised its openness to adopting best practice approaches to data protection used or supported by other countries. One of these is embedding Privacy by Design principles in the development process through the early consideration of privacy issues, as recommended by the European Commission, the EDPS and the governments of other territories undertaking smart meters projects, such as Australia. 

The UK Government has therefore developed its own Privacy Impact Assessment to assess and anticipate the potential privacy risks of the smart metering programme as a whole. The Government has said that its PIA should be viewed as an "umbrella document" and that it expects every data controller wishing to access Consumption Data to carry out its own PIA in advance of the anticipated commencement of the new framework this summer. This includes energy suppliers, network operators and third parties in equal measure. 

Although some countries plan to make PIAs a statutory requirement, it is understood that the UK will treat this as a "best practice" recommendation. Nonetheless, it is likely that enforcement action by the ICO or other authorities would be greater were a breach to occur in relation to a data controller that did not carry out a PIA before processing Consumption Data. Business-specific PIAs are also highly recommended by the ICO for high-risk projects such as those involving Consumption Data. In addition to identifying risks to customers and potential company liabilities, PIAs are lauded as the best way to protect brand reputation, shape communication strategies and avoid expensive "bolt-on" solutions.

The European Commission is developing a template PIA for organisations to use when assessing their own privacy risks in respect of smart meter data. Whilst the focus of each organisation's PIA will differ, some of the potential privacy impact categories assessed in the Government's PIA that are likely to feature in those of individual data controllers include the following (which generally reflect the data protection principles of the DPA 1998):

  • consumer transparency / awareness that data collection and usage is occurring;

  • using data lawfully and within the scope of the purpose for which it was collected;

  • ensuring data is up-to-date and accurate;

  • length of data retention;

  • security of end-to-end smart metering systems to prevent unauthorised access or destruction; and

  • management of the most granular (e.g. half-hourly) Consumption Data.

Collecting data directly from consumers

Whilst it is likely that most data controllers will collect Consumption Data via remote access to the DCC, consumers themselves will also be able to access their own household's Consumption Data and share this with third parties. Indeed, this "self-service" access is a central purpose of the smart meters programme, in line with the UK Government's broader midata initiative to encourage businesses to empower consumers with information about their own use of services.

In legal terms, where the consumer shares data in this way, they will usually have given their explicit consent and the DPA 1998 will apply as usual to this transfer - no additional rules will come into play. Nonetheless, the Government has acknowledged a concern that consumers will be sold some devices that work in conjunction with smart meters to collect more granular data and show, for example, exactly what appliances are being used in the home and how. It is understood that the government is therefore encouraging device manufacturers to implement best practice measures (which would presumably include giving consumers clear information about the potential for misuse of this detailed data).

Conclusion

Research carried out as part of the Government's Data Access and Privacy consultation showed that the overwhelming concern of consumers surveyed was that smart meter data would lead to an increase in direct marketing communications. Many participants did not identify the potential for misuse of Consumption Data until it was explained to them. The less obvious nature of the potential for privacy intrusion of this new data underlines the fact that consent is not a panacea in the case of smart meters (despite the considerable focus on this in the consultation responses). Clear and comprehensive information is key, and the new Code will sit beside existing legislation governing communications with consumers (such as the Consumer Protection from Unfair Trading Regulations 2008). As part of their preparations for compliance, companies planning to access Consumption Data should therefore build clear messaging into all their customer-facing procedures, including those in respect of all in-person, online and call centre interaction.

Clearly, there remain several areas of the framework that need to be ironed out. For example, how the overlapping roles of Ofgem, the Energy Ombudsman and the ICO will fit together, exactly how breach notification procedures will work and what approach will be taken to enforcement. The British Parliament's Public Accounts Committee has also raised concerns that there are no transparent mechanisms for passing on any cost savings to energy customers. However, one thing is clear: those organisations that plan to access smart meter data will be expected to digest the details of the new framework now and be fully prepared – including by completing Privacy Impact Assessments – in time for June 2013, when the regulatory framework is expected to come into force.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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