Capita's smart meter monopoly is owed £42m by industry

Deferred revenues up sharply at the Data Communications Company

Paris, France - July 16, 2016 : New smart electric meter Linky from ERDF (Electricity Network Distribution France). Photo by GERARD BOTTINO / Shutterstock.com Editorial use only
An EDRF smart meter from France. Pic: Shutterstock

The Capita-owned monopoly that runs Britain's smart meter infrastructure made an operating profit of £390,000 last year – but paid no tax and is owed £42m by the wider smart meter industry.

Smart DCC Ltd's regulatory accounts for the year ending March 31 were published earlier this week in its annual report.

The firm, also known as the Data Communications Company, is a wholly owned subsidiary of Capita and has a monopoly over the management of Britain's smart meter infrastructure, under its licence to operate from the Department for Business, Energy and Industrial Strategy (BEIS). It decides who will build and operate that infrastructure by awarding contracts, on behalf of the State, to suppliers, and then manages those contracts.

Although the DCC's corporation tax bill for last year was precisely nil, Capita was quick to insist that the parent company pays all its taxes and that BEIS is content with this setup. The DCC's annual report says: "We operate on a £nil profit model where our revenues are exactly equal to our costs. Our charges to Service Users are structured in such a way that we receive funds that are sufficient to cover our expected costs for the year, plus a contingent amount, known as the Prudent Estimate."

The nil-tax situation arose after the company applied unspecified finance costs of £390,000 to its operating profit for the fiscal year – which came in at precisely the same figure. Its revenues for the year to March 31 were £347m. Gross profit, before administrative expenses, was £42m. Deferred revenues, aka upfront payments from the smart meter industry, came in at £42.8m; a hefty increase over the previous year's deferred revenues of £14.9m.

The annual report also says that the DCC is making "good progress towards developing solutions to support the enrolment and adoption of SMETS1 meters" while noting that it is "currently in a programme phase of the SMETS2 solution delivery". SMETS1 is the original smart meter specification and relies on mobile phone networks to send information to (and receive it from) energy suppliers. SMETS2 is the newest specification, which will rely on a dedicated nationwide wireless network infrastructure and is currently under construction.

Although the intention is for the UK's smart meter fleet to be entirely SMETS2-compliant – SMETS1 was intended to be an interim spec – SMETS1 meters are still being made, sold and installed in consumers' homes. Some companies are even pitching for future work by basing their offer entirely on SMETS1 equipment.

The DCC was initially expected to deliver the smart meter network in late 2015 at a cost of £220m. After a series of missed deadlines, the south and central regions of the DCC network went live in early November 2016, with the northern region following towards the end of that month. The full rollout is estimated to have cost almost £900m.

Earlier this year one of the DCC's smart meter industry customers, EDMI, was caught trying to charge £7m to change a single component in its dual-band comms hub by The Register. That redesign was triggered after the DCC realised that a single-band comms hub, which is the home device that transmits smart meter data from consumers to the supplier's network, would not work in a substantial number of UK homes. ®


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