Research and analysis

RPC Opinion: Non-Domestic Smart Metering Policy Framework Post-2025

Published 7 September 2026

1. Non-Domestic Smart Metering Policy Framework Post-2025

Lead department	Department for Energy Security and Net Zero
Summary of proposal	The proposal is to drive non-domestic smart meter uptake by introducing new energy supplier licence conditions to include a universal smart meter implementation requirement, as well as a universal communication requirement and customer code.
Submission type	Options Assessment – 26th June
Legislation type	Secondary legislation
Implementation date	2026
RPC reference	RPC-DESNZ-25059-OA (1)
Date of issue	31 July 2025

2. RPC opinion

Rating[1]

RPC opinion

Fit for purpose

The OA outlines the problem under consideration with sufficient supporting evidence. The OA identifies a sufficient range of long-list options and justifies the selection of the short-list option. Whilst this diverges from Green Book guidance, this is appropriate due to the low impact of the options within this proposal (not meeting the de minimis threshold). The IA clearly explains the reasoning behind this and justifies why other long-list options are not viable for short-list appraisal. The OA provides a sufficient assessment for the preferred way forward from the short-list. The analysis would be improved if the Department were able to include some further sensitivity analysis and fully explain the research that was undertaken to inform the estimates.

3. RPC summary

Category	Quality[2]	RPC comments
Rationale	Green	The OA outlines and evidences the problem under consideration. The OA could relate the problem to the projected meter roll out and could considering the wider rationale for intervention. The OA’s argument for intervention is focused on market failures. The OA provides sufficient SMART objectives and theory of change diagram.
Identification of options (including SaMBA)	Green	The OA has considered a long-list of eight policy options but could benefit from using the Green Book’s Strategic Options Framework Filter (SOFF). The Department provides sufficient justification for the generation and selection of short-list options. However, this could be improved by applying the critical success factors (CSFs). The Department discusses non-regulatory policy alternatives and has provided a sufficient SaMBA.
Justification for preferred way forward	Green	The OA could benefit from providing further detail on which groups will receive the expected impacts. The OA could also detail the type of research that was undertaken to underpin the cost-benefit analysis and could apply a more thorough sensitivity analysis and explanation of key assumptions used. The Department could also provide further evidence to support key non-monetised benefits. The Department has provided sufficient justification for the selection of the preferred option.
Regulatory Scorecard	Satisfactory	The OA summarises the impacts of the proposal on business, household, total welfare and government priorities but could set out the direct and indirect classification of impacts in the OA, as well as the size and nature of the main businesses expected to be impacted by the regulations.
Monitoring and evaluation	Satisfactory	The OA outlines the data that will be used to evaluate the policy but could be strengthened by further outlining the indicators that will be obtained from these sources.

This opinion has had some material redacted from the version originally issued to the department for the reason(s) stated in the redaction.

4. Summary of proposal

Smart meters are being rolled out to smaller businesses and public sector sites and are a crucial component of achieving a clean and flexible power system by 2030. The approach to the rollout of smart meters in the domestic and non-domestic sectors has, to date, been treated largely the same (with energy suppliers set binding, separate domestic and non-domestic installation targets until 31st December 2025). As with the domestic rollout, non-domestic suppliers need regulatory certainty to continue rollout momentum and drive investment in workforce capacity from 2026 and the Government therefore needs to decide the appropriate policy framework for new non-domestic installations moving forward.

The proposed non-domestic policy package has been designed in response to energy suppliers increasingly making their non-domestic fixed term energy contracts conditional on the customer agreeing to have smart meters installed, known as ‘smart-contingent’ contracts. The proposed policy package has been designed to address the rollout of these contracts in order to both drive non-domestic smart meter uptake and protect consumers and would consist of new energy supplier licence conditions which specify:

• A universal implementation requirement. Energy suppliers must make all of their new fixed term non-domestic energy contracts conditional on the customer having, or agreeing to have, smart or advanced meters installed[3] from the same date (proposed: from 1st January 2027).
• A universal communication requirement. Ahead of the 1 January 2027 date, all suppliers must start to communicate from Q1 2026 these upcoming changes to customers (as soon as the licence condition modifications are made).
• A legally binding customer code which suppliers must adhere to from 1st January 2027 to protect customers from the risks of these smart-contingent contracts.

The OA has considered a long-list of eight options, reducing this to two shortlisted options:

• Do nothing option
• Option H - Regulatory- non-domestic smart-contingent contracts package

The OA presents an NPSV of between £161 million and £340 million, with an EANDCB between £3.4 million and £6.5 million. This consists of benefits faced by suppliers and non-domestic consumers, such as avoided meter readings, customer enquiries and non-domestic consumer energy savings, which outweigh costs such as asset costs and installation costs.  

5. Rationale

Problem under consideration

The OA outlines the problem under consideration, explaining that a limited consumer demand for non-domestic smart meters poses a challenge to achieving the Government’s Clean Power 2030 mission, particularly as the existing Targets Framework for smart meter installations ends in 2025. The Department evidences this problem, explaining that whilst 63% of smaller non-domestic sites have smart meters installed, non-domestic consumer attitudes research indicates a high rejection rate for smart meters (49% and 56% respectively) in two segments of consumers. Furthermore, a 2024 survey which found that the proportion of the non-smart non-domestic population that would reject a smart meter had increased relative to the increase in uptake.

Whilst this suggests a large proportion of non-smart consumers reject smart meters, the OA would benefit from further expanding on this problem, perhaps by relating the rejections to the projected roll out of non-domestic smart meters. For instance, whilst the OA states that 86-90% working electricity smart meter coverage is predicted to be needed to enable the Clean Power 2030 mission, it is not clear what proportion of this coverage is from non-domestic meters and the OA could detail the current Targets Framework installation targets and by how much these have not been met. The Department would also benefit from considering the wider rationale for intervention, detailing the original rationale behind installing non-domestic smart meters and the consequential effects from the problems identified. This would help to explain how the current roll out coverage will negatively affect the overall impact of a decarbonised power system. The OA could also benefit from further detailing the problems which may have caused this poor consumer reaction, and why these might have occurred recently. The OA could also use international comparisons to evidence the rationale for intervention, detail how smart meters have been implemented internationally.

The OA also outlines the problems relating to smart-contingent contracts, including their risks for breaches and inconsistent market implementation. Whilst the Department states that there has been growth in these contracts between 2022-2024, the OA would benefit from expanding the evidence base to support these problems under consideration.

Argument for intervention

The OA’s argument for intervention is focused on market failures, such as positive externalities, coordination failure and imperfect information. The Department’s description of these arguments is sufficient, although could be further improved by the inclusion of any supporting evidence, where relevant. The OA could also further expand on imperfect information failure argument, considering how this might also occur from smart-contingent contracts where there is customer and supplier enforcement confusion.

Objectives and theory of change

The Department sets out five objectives for the policy package. The OA would benefit from fully applying the SMART objectives framework when forming the objectives. The provided objectives are specific, achievable and time-limited but do not consider the measurability aspects of the SMART framework. Furthermore, one of the SMART objectives is ‘leveraging existing market mechanisms’. The OA could consider rephasing this objective as it is not clear how market mechanisms (in this case, smart-contingent mechanisms) are being leveraged, as the proposal is to regulate these mechanisms as to make them effectively non-market instruments. The OA provides a good theory of change diagram.

6. Identification of options (inc. SaMBA)

Identification of the ‘long-list’ of options and justification for the short-listed options

The OA has considered a long-list of eight policy options to drive non-domestic smart meter uptake and protect consumers [text redacted from the published opinion reflecting policy in confidence material removed from the version of the IA published by government]. The Department details these options in the OA, describing qualitatively what they would involve and their associated risks. However, the assessment could be improved by including detail on the process behind developing the long-list of options, such as how research and stakeholder engagement (with energy suppliers) has been used to form these policies. The long-list of options could benefit from using the Green Book’s Strategic Options Framework Filter (SOFF), which could help present the long-list in greater detail whilst retaining a clear and concise structure.

The Department uses the term ‘advanced’ and ‘smart’ meters interchangeably throughout the description of options but would benefit from discussing the difference between these definitions and using consistent terminology in the OA. Furthermore, the role and benefits of the DCC in relation to smart and advanced meters should be explained. The OA would also benefit from explaining SMETS1, SMETS2, the migration into DCC and any implications of the 4G upgrade so this background can easily be understood for a lay reader.

The OA provides sufficient justification for discarding options from the long-list, clearly assessing all long-list options against SMART objectives. The Department uses the SMART objectives to shed light on the options ability to achieve market wide rollout, leverage existing market mechanisms, protect smaller consumers and provide certainty and flexibility. This demonstrates that Option H (Regulatory- non-domestic smart-contingent contracts package) is viable to carry forward to the short-list for comparison with the do-nothing option. The OA also provides further qualitative justification for the generation and selection of this short-list option, explaining why the other long-list options are not viable for short-list appraisal. Whilst the OA’s short-list diverges from Green Book guidance (to have multiple options in the short-list), this is appropriate due to the low impact of each option within the proposal (not meeting the de minimis threshold) and the clear explanation on the other long-list options. The OA clearly explains the process behind this and justifies the selection of the short-list. [Text redacted from the published opinion reflecting policy in confidence material removed from the version of the IA published by government].

Furthermore, whilst the Department clearly explains the ratings, rather than using the SMART objectives to rank and discard the long-listed options, the OA should apply the critical success factors (CSFs) to the long-list to justify the generation of the short-list. The CSFs would help the Department to display a systematic process of how the longlisted options were discarded to produce a short-list. The use of CSFs could have provided a clearer argument for why certain options were discounted, [text redacted from the published opinion reflecting policy in confidence material removed from the version of the IA published by government]. Furthermore, SMART objectives are not an effective method for justifying the generation of the short-list, as it is best practise for all long-list options in an OA to meet SMART objectives.

Consideration of alternatives to regulation 

The Department discusses non-regulatory policy alternatives [text redacted from the published opinion reflecting policy in confidence material removed from the version of the IA published by government]. The OA explains why these are not suitable as these have already been trialled and have not provided enough incentives for energy suppliers in isolation of regulatory approaches.

SaMBA and medium-sized business (MSB) assessment 

The Department has provided a sufficient SaMBA, particularly for a proposal which is de minimis. The OA outlines why exemptions for SMBs are not appropriate, explaining that it is crucial that this obligation is applied to all non-domestic supplies in order to deliver its SMART objectives, as a consistent market wide transition removes first mover disadvantages. Equally, if the policy only applied to large suppliers, the policy could begin to impact switching choices (in that customers that do not want a smart meter due to hassle may choose to renew a fixed term contract with a small supplier instead without price implications), leading to market distortion and reducing the impact of the policy on customer demand for smart metering. Furthermore, exemptions are not appropriate as the policy is expected to bring benefits to businesses, with the OA presenting a positive business NPSV.

The OA also considers if there will be disproportionate impacts on SMBs, concluding that their costs will be broadly proportionate to the number of smart meters they instal and that a small proportion of the estimated costs will be faced by SMBs. The OA could benefit from expanding this assessment, providing any relevant evidence to support this argument. The OA would also benefit from considering any potential mitigations for SMBs, such as issuing guidance or training to smaller suppliers.

7. Justification for preferred way forward

Appraisal of the shortlisted options

The Department has identified and monetised the key impacts from the proposal, estimating an NPSV for the preferred option of between £161 million and £340 million. This largely consists of metering equipment and installation costs, as well as energy use reduction benefits for non-domestic consumers and carbon air quality benefits. As the majority of the benefits are received by non-domestic consumers, the OA would benefit from elaborating on the nature of these consumers who will be impacted, as it is not currently clear which groups will receive the large quantity of benefits estimated by the NPSV. This could include specifying the non-domestic consumers expected to be impacted by the regulations, including their sector, size and industry.

The Department also discusses a number of non-monetised impacts, such as the benefit from enhanced consumer protection [text redacted from the published opinion reflecting policy in confidence material removed from the version of the IA published by government]. The Department could provide further qualitative explanation of these impacts, alongside any rough estimates to indicate their potential scale.

The Department explains the methodology underpinning the monetised NPSV estimates for the preferred option, setting out the key data sources that have been utilised to calculate the costs and benefits. The overall approach of the analysis is based on the approach taken to the programme’s 2019 cost-benefit analysis and utilises data collected from energy suppliers as part of the quarterly official statistics report and data from a Carbon Trust Study. The analysis is also reliant on data collected from internal and external research commissioned by the programme. The OA could benefit from providing further detail on the type of research that was undertaken, including the stakeholders engaged and their representativeness. Furthermore, as the Department uses this data to obtain unit costs or benefits per meter (which are then applied to the number of expected meters under the policy option), the OA could provide further detail on how these unit costs have been derived from the sources and the assumptions which underpin them.

The cost-benefit analysis compares the preferred policy option against two potential counterfactual scenarios; counterfactual scenario 1 where non-domestic smart meter rollout continues only under the NRO once the existing Targets Framework expires (calculated using data provided by energy suppliers on the number of meters that are replaced at the end of their asset life) and counterfactual scenario 2 where additionally some (50%) of non-domestic suppliers implement smart-contingent contracts voluntarily. Roll out under counterfactual scenario 2 and the policy scenario are modelled using Ofgem survey data on meters reaching end of life and assumptions on the proportion which will be replaced by a smart meter. The Department could provide further clarity on these calculations as it is not clear how this results in the final estimated non-domestic smart coverage of 81% and 88% respectively. Furthermore, the OA could provide further justification for the assumption that 50% of suppliers will enforce smart-contingent contracts in scenario 2, as this appears to be an arbitrary percentage assumption.

The OA considers the risks associated with the preferred option, modelling a range to account for uncertainty in how widespread smart contingent contracts are implemented by suppliers in the absence of any government intervention. The Department also adjusts for uncertainty by applying an optimism bias to the installation and asset costs. However, the OA could be improved by applying a more thorough sensitivity analysis to the preferred option, testing the impact of key uncertain assumptions, such as the reduction in energy consumption and time saved from smart meters.

Selection of the preferred option

The OA explains that implementing the regulatory non-domestic smart-contingent contracts package is the overarching preferred option. The OA outlines some key reasons for selecting this as the preferred option compared to the ‘do-nothing’ option. This option will allow significant and market-wide impact on non-domestic smart meter uptake by converting non-domestic customers to smart meters over time at the point of contract renewal, supporting the Clean Power Mission. By making this a universal requirement and given that businesses are by motivated by price and to comply with their contracts, this option is anticipated to significantly drive consumer demand for smart meters compared to the counterfactual of “do nothing”. Whilst the smart coverage between the preferred option and the counterfactual is not significantly different (at 81% and 88% respectively), the risks to consumers from the counterfactual from the lack of binding obligations and potential unfair enforcement is significant to drive the selection of the preferred option. The OA thoroughly explains these risks, but could benefit from providing any supporting qualitative evidence to indicate their potential scale. Considering proportionality, and the low estimated impact of the regulations, the OA has provided sufficient qualitative justification for the preferred way forward.

8. Regulatory Scorecard

8.1 Part A

Impacts on total welfare

The Department indicates that it expects the preferred option to have an overall positive impact on total welfare due to the reduced non-domestic consumer energy consumption with resulting carbon and air quality benefits and energy supplier benefits. These impacts are expected to outweigh the smart meter installation costs, resulting in a positive NPSV of between £161 million and £340 million. There are also a number of non-monetised impacts from the preferred option, which are expected overall to be positive. These impacts include enhanced consumer protection from smart-contingent contracts and reduced supplier engagement costs. The OA could benefit from providing any indicative or qualitative evidence to support the consumer protection impact, particularly as this benefit drives the selection of the preferred way forward.

The OA could be improved by considering the potential risks from implementation of the preferred option. For instance, the OA could consider the unintended consequences of a rise of longer term (such as 5 year) supply contracts being signed just ahead of the 2027 target, to delay the need to install smart meters.  This would seem a rational response to this obligation which could tie customers into uneconomic long-term contracts if they are really opposed to having a smart meter. This would reduce the preferred option’s impact on total welfare.

Impacts on business

The Department indicates they expect the preferred option to have an overall positive impact on business. Whilst the OA estimates an EANDCB between £3.4 million and £6.5 million, several benefits (and costs) faced by business are classified as indirect (such as non-domestic consumer energy savings) and not included in this calculation. Therefore, the business NPSV (which includes these indirect impacts) indicates an overall positive result, estimated to be between £57 million and £120 million. This consists of benefits faced by suppliers and non-domestic consumers, such as avoided meter readings, customer enquiries and non-domestic consumer energy savings, which outweigh costs such as asset costs and installation costs. The OA could benefit from estimating and presenting familiarisation costs for businesses, even if these are early estimates. The Department could also benefit from setting out the direct and indirect classification of impacts in the OA, as this drives the different estimated metrics.

The OA could also benefit from setting out the main businesses expected to be impacted by the regulations, detailing the sector, size and industry of the non-domestic consumers who will receive smart meters. In particular, the OA could benefit from defining the smaller business and public sector customers as it appears that there may be a huge range of size of these businesses, including sole traders which may be almost identical to domestic consumers in their energy usage.

In addition, as the OA states that costs may be passed through to businesses in the form of higher bills, the Department could expand on this impact, considering the potential scale of this impact and how this may impact non-domestic consumers.

Impacts on households, individuals or consumers

This policy package applies to the non-domestic sector and is therefore not expected to have any impact on households.

Distributional impacts

The OA states that the policy is not expected to have any distributional impacts but could further consider any distributional impacts on businesses. For instance, the OA could detail any potential positive distributional impacts from the policy on small energy suppliers. Similarly, the OA could consider whether the smart roll-out coverage will disproportionately impact non-domestic consumers of a particular industry or sector.

8.2 Part B

The Department considers the impact of the proposal on wider government priorities. However, this assessment is brief, and the OA could benefit from further expanding on the potential business environment and natural capital and decarbonisation impacts. For instance, the OA could consider how the proposal will support business environment by alleviating the current uncertainty faced by suppliers. By introducing a universal implementation requirement, the proposal will increase supplier confidence, removing the ‘first mover’ disadvantage and reassuring suppliers they will not lose customers. The OA could be improved by providing any relevant evidence to illustrate the scale of this impact for business, perhaps by utilising any relevant results from industry engagement.

The Department could detail how the expected energy supplier benefits from the policy (such as avoiding meter readings and inspection visits) may improve competition and innovation of suppliers. Furthermore, the Department could consider how reducing internal costs will affect the demand and supply mechanisms in a competitive market equilibrium and impact the long-term price and quality of energy.

The OA states that the proposal is expected to support natural capital and decarbonisation, as the policy will help to facilitate the UK’s progress to achieving its Net Zero Target and Clean Power 2030 target. The Department references carbon reduction and clean air benefits included in the cost-benefit analysis of the OA which support this impact, but could benefit from including any relevant evidence to support this impact, as well as a summary of the quantified impacts.

9. Monitoring and evaluation

The OA confirms that a post-implementation review will take place in 2035, 5 years after the conclusion of the rollout obligations. As PIRs are typically conducted 5 years after implementation of the policy (rather than the objectives within the policy), the Department could provide further justification for this delayed review date, particularly as this might be too late for the review.

The Department explains that it will monitor roll-out progress and outlines the data sources which will be used to underpin this monitoring, including ElectraLink, DCC and survey data from SEGB’s bi-annual non-domestic outlook survey. The OA could benefit from including further detail on the nature of these qualitative and quantitative data and how they will be gathered. This could include identifying the key research questions that will be used in the surveys, as well as when they will be rolled out. Furthermore, whilst the Department states that these sources will collect information on installation progress and benefits realisation, the OA could expand on these metrics, giving examples of particular indicators that will be obtained. The OA could then relate these directly to the theory of change diagram and SMART objectives. The Department states that programme has procured an interim programme evaluation of the smart meter rollout, including a programme of survey and qualitative research for non-domestic consumers, as well as research with smart meter installers and suppliers. The OA could provide further information on this evaluation, such as whether it will be process or impact evaluation and the research questions asked.

The OA could also discuss any possible unintended consequences from the policy and provide more detail on how the evaluation plan will attempt to assess these impacts. The OA could also consider any external factors that will have an impact on the success of the intervention.

Regulatory Policy Committee

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[1] The RPC opinion rating is based only on the robustness of the rationale, options identification (including SaMBA) and justification for preferred way forward, as set out in the Better Regulation Framework guidance. RPC ratings are fit for purpose or not fit for purpose.

[2] The RPC quality ratings are used to indicate the quality and robustness of the evidence used to support different analytical areas. The definitions of the RPC quality ratings can be accessed here.

[3] Within premises in scope of the smart meter rollout. We will consult on interactions with Industrial & Commercial sites-see section 4.