Every week, members of the UK electricity sector receive an email called ‘The Clock’. The name is designed to remind its users of the urgency of its subject matter. Given a market transformation that should take some longstanding costs out of electricity supply, help manage grid fluctuations, and allow new and existing electricity suppliers to offer tariffs that could help consumers save money and bring in a more flexible and responsive energy system.

The programme will provide market-wide half-hourly settlement (MHHS) for financial transactions and represents a complete re-build of the electricity system back office, from data transfer to customer billing. The change is fundamental and is on a strict schedule as The Clock reminds participants that they will see domestic customers transferred over the next 18 months.

Responsibility for keeping the MHHS on schedule lies with settlements company Elexon, as implementation manager (Elexon has also become the market facilitator for domestic flexibility). Chief Executive Peter Stanley says it is more than an IT project: ‘This is a wholesale operating model change for the industry.’

Filling the gap
The back-office rebuild is needed because although most domestic customers pay the same price for every unit of electricity they use, that does not reflect the reality of the electricity market.

More customers are becoming used to the idea that the cost of generating their electricity varies during the day – and increasingly, depending on the weather. At times of low demand, like the small hours of the night, suppliers can buy the cheapest electricity generation to meet consumer needs. At peak times, like a winter evening, that is not sufficient and more expensive power plants start up to meet demand. This wholesale power market is traded in half hour periods, and the price can change dramatically throughout the day.

Customers are also becoming used to the idea that there may be times when power is free or heavily discounted, such as ‘free power weekends’, or overnight (when many electric vehicle owners charge on the cheap rate). Smart meters, which record usage on a half hourly basis, enable these flexible tariffs.

Half hourly generation and half hourly smart meter reads should be directly connected. But the history of the industry means there is a grey area in between.

The wholesale market was settled on a ‘half hourly basis’ when electricity competition started more than 20 years ago. Domestic meters were read by a meter reader once a year at best. Therefore, instead of using real data about whether customers use power at peak or low times, customers were assigned to one of a small number of ‘profile classes’, also used for interim billing purposes. In a process managed by Elexon, suppliers make payments to generators on an estimated basis. Eventually, after about18 months, with several re-estimations and the addition of smart meter reads, the industry bills will be more accurate and finally settled.

Nevertheless, this process is full of uncertainty and therefore implies extra costs. For example, suppliers carry out modelling to predict how much power their customers will use and at what time (and price). But without data, even the most successful model cannot be exact. That requires margin for error. For a supplier, being ‘out of balance’ in any half hour – buying above or below customer demand – is expensive, so electricity unit prices also include a ‘risk premium’.

Using real half-hourly data removes that uncertainty. Industry parties who understand their real position – whether that is trading wholesale energy or meeting individual consumer demand – can operate with less margin. That will also extend to consumers without smart meters, Stanley points out, because more data will improve modelling across the market gaps.

Meanwhile, the slow settlement process means the final cost is uncertain for many months, with on-costs such as collateral. After MHHS, the settlement process should be reduced to around four months, and settlement calculations will be more accurate, giving stability and more confidence to cash flows.

Removing these ‘uncertainty’ costs, the biggest potential prize from MHHS will be a more flexible and responsive power market. The aim is to give consumers tariffs tailored to their lifestyle, and at the same time helping lower electricity system costs by calling on customers who can be flexible on when they use power. This offers new ways of managing the system. Instead of paying high-priced power stations to start up for short periods to cover peak loads, for example, when it is cheaper (and cleaner) to pay consumers to choose to reduce demand.

This already happens for some groups, such as EV users who can access cheap power overnight, or users taking advantage of ‘free Sundays’. MHHS will extend to all 30 million UK households, providing powerful management options, especially, as Stanley points out, alongside other energy industry data that is also made available.

‘Consumer-led flex is going to be critical,’ says Stanley. Time-shifting demand will help avoid peak price periods, but flexibility will also have other benefits like avoiding overload on the local grid. Moreover, he adds: ‘You get access through the consents framework to a really holistic picture of what is happening across all [meters]’, both in business and consumer sectors, as well as giving access to information about on-site (‘behind the meter’) assets like batteries (including EVs). That will allow third parties to package response from businesses and consumers, who will gain financial benefits from participating in these flexibility services.

‘[MHHS] is a wholesale operating model change for the industry.’ – Peter Stanley, Chief Executive, Elexon

What a smart approach involves
The customer experience of the smart meter rollout remains patchy and incomplete, with some customers’ smart meters still in dumb mode.

Under the Smart Energy Code (SEC) all licensed users have to be a party to it, and other companies who use smart meter data can join voluntarily.

Angela Love is Chair of SECCo and its Change Panel. She says the lag in installing smart meters does represent a risk, and is concerned about consumer buy-in rather than technology. She explains: ‘Having site-specific costs levied on companies regarding how customers are using their energy is key to unlocking time of use tariffs… You will realise benefits on the electricity network, reducing losses and making it more efficient.’ However, she continues: ‘If we don’t get confidence from customers and make sure that meters are operating as intended when they are installed, there is a reputational risk and a confidence risk.’

Love describes the new smart meter and data transfer arrangements as the future for the industry. However, ‘suppliers and distribution companies are having to deal with legacy technology, so there is an increased cost for customers’, which affects the MHHS business case.

Elexon’s Stanley says that even with current roll-out levels (which are at nearly 70%, albeit not all operating in smart mode) there is a general benefit from hugely increased data available to suppliers, which will allow them to shape the way they buy energy more accurately. Looking at the programme as a whole, he is confident of the industry’s ability to deliver because ‘it’s industry-led and that was a really conscious decision right from the very beginning’. It is also design-led and ‘everyone has the ability to contribute to the design and understand the implications’.

The MHHS model and processes are currently being tested by eight ‘cohorts’ of industry from the different types of organisation. Functional testing has been under way since 2024. The half-hourly model was finalised for the start of migration in September 2025 and the first cohorts to be pre-qualified will begin to migrate over the coming weeks. ‘By October 2026 all suppliers will be qualified to migrate and we will have migrated 80% of the total [meter points],’ he says.

Suppliers who fall short of the timetable will face sanctions, such as not being able to take on new customers.

Consumer benefits
If all goes well the back-office change will be invisible for consumers. But when it is complete, there will be new opportunities and consumers will have to understand new options and choose the best for them. Love suggests that messaging around smart meters has been ‘trying to persuade people to take the [smart] meters, rather than talking about the benefits and how they realise them’, so she is pleased to see that Smart Energy GB adverts have begun talking about flexibility benefits.

Some consumers will have barriers to gaining those benefits. In a recent update on plans for smart energy, the government said it ‘wants to create opportunities across all consumer groups, so it will investigate participation barriers for low-income and vulnerable consumers’. It also said it would explore whether consumers could be offered personalised advice, including recommendations about how to reduce bills, using their site-specific data.

Matthew Cole is Chief Executive of Fuel Bank Foundation, a charity that provides advice for people in a crisis over their energy bills. He sees the potential in suiting tariffs to consumer groups and says there are lessons to learn from the smart meter rollout and other industry changes. He says suppliers typically start to introduce new ideas via ‘early adopters’ who can take a risk. This means customer groups for whom a small change could make a big difference tend to drop down the agenda.

Although MHHS is an industry-led programme, Cole wants suppliers to think early on about groups who could benefit (such as shift workers who are not home at peak times), and not delay offers through an excess of caution.

However, that means the consumer protection framework also has to continue to be fit-for-purpose. Indeed, the energy industry could have very different customer relationships in coming years.

• Further reading: ‘Hot energy policy debate considers the role of citizen engagement in achieving net zero’. The Energy Institute’s first Energy Policy Debate of 2024 saw four leading industry and academic speakers discuss the topic: 'The energy sector can't reach net zero without citizen engagement'. Read this edited version of the two-hour, standing-room-only event, beginning with opening remarks and then moving on to questions and answers.
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