Smart Meters Bill — House of Lords, 2018-03-13
Topic: Energy
Christopher Suenson-Taylor (Labour, Centre-left): My Lords, smart meters are a necessary and vital part of national infrastructure to provide secure energy supplies to consumers in a more efficient, cost-effective way. They will allow households to benefit from innovation in the energy market. The measures in the Bill extend the powers of the Secretary of State to amend regulations to roll out smart meters from 2018 to 2023. The Bill introduces a special administrative regime for the Data Communications Company—the DCC—as a precautionary measure to protect consumers in any event from insolvency in the critical DCC infrastructure. The Bill will enable half-hourly electricity readings via smart meters to be used in energy bills, necessary for rewarding consumers and allowing them to use energy in more cost-effective ways, ensuring a more efficient system The Minister is correct in saying that it is largely a technical Bill, limited in its scope to issues in the smart meter programme. I thank him and his Bill team for making so much time available to meet me and other Members of your Lordships’ House: it has been extremely helpful. On these Benches, the Bill remains relatively uncontroversial: Labour agrees with the measures in the Bill, agrees with the importance of smart meters and with the need to roll out their use as judiciously as possible. Nevertheless, there are a few buts and a few wider points to be made about the flaws in the smart meter rollout system, the inadequacy of the communications arrangements and the disruption caused between the introduction of SMETS 1 and SMETS 2 meters The first point of contention is: why has the programme taken so long? The powers granted to the Secretary of State to implement and direct the rollout of smart gas and electricity meters go back to the Energy Act 2008. They now need extending from 2018 to 2023. Why did the DCC go live only in November 2016? The Minister may contend that everything is on track, the industry is committed and energy suppliers remain legally obliged to complete the rollout by the end of 2020. He may point to the fact that the smart meter data access and privacy framework was introduced in December 2012, which determines the level of access that energy suppliers, networks and authorised third parties can have to energy consumption data and determines the purposes for which these can be used. The Government have committed to concluding a review of this framework by the end of this year While it is understood that the Secretary of State needs time beyond 2018 to implement any conclusions from this review, it is nevertheless likely to be understood that the initial end date slipping beyond 2020 to 2023 is the real reason behind this extension. This view is reinforced when we hear of delays brought about by issues concerning the setting up of the DCC and the hesitancy brought about by the muddle between SMETS 1 and SMETS 2 meters, when the Government had to withdraw their early rollout obligation to install 1,500 SMETS 2 meters, or 0.025% of total meter points, whichever was the lower, by 1 February 2017. I believe that only about 100 SMETS 2 meters have been installed to date. Perhaps the Minister can update us SMETS 1 meters do not offer the same consumer benefits as SMETS 2 meters, with significant loss of smart functionality on any change in energy supplier by consumers. It is hard to understand why the Minister’s department has taken insufficient account of the consumer perspective around the importance of interoperability of smart meters. In changing suppliers, the consumer is not thrilled to learn that the SMETS 1 meter goes back to being a conventional meter, especially having paid the cost of implementation With the provision in the Bill to bring in half-hourly settlement, Ofgem is considering options for access to consumers’ half-hourly data to develop the data access regime and will be consulting on this, supported by a privacy impact assessment. This brings an added challenge to the understanding of what the offer should be in order for the consumer to agree to accept a smart meter The extension of powers in the Bill—a further five years from 2018 to 2023—is an indication that the Government fear that they might not meet the deadline of the end of 2020 to complete the rollout. The figures support this conclusion. As of February 2018, only 8 million SMETS 1 smart meters have been installed at homes and businesses. The target is 53 million gas and electricity meters at 30 million domestic and small non-domestic properties, with only two years to go to the deadline. Which?, the consumer organisation, has calculated that suppliers would need to be fitting 250,000 meters a week, equivalent to 24 every minute, around the clock, every day. The Government must state whether the 2020 target is still realistic and whether offers being accepted will lead to fulfilment within the timeframe. What probability has the programme of meeting this objective? The next issue these delays give rise to concerns costs. Consumers are reminded that, even though most benefit accrues to the industry—of some £8 billion, rather than to consumers, who will benefit by some £6 billion—overall it must be said that there will be a net benefit of some £11 billion. Consumers are fearful that the potential cost impact of delay will wipe out the forecast net benefit. It is necessary that the National Audit Office updates its reports of 2011 and 2014 and reassesses the current economic case for the rollout of smart meters. Furthermore, it should look at whether the Government are on track to achieve their target to roll out smart meters by 2020 and are maximising the chances that smart meters will achieve their intended long-term benefits and advantages The main body of the Bill—nine out of 14 clauses—introduces the special administration regime for the DCC to ensure that the service continues should it get into funding or insolvency difficulties. Anxiety is rightly raised by Clause 7, which includes a provision that charges can be raised to make good any shortfall to meet the expenses of the DCC’s administration. It is not clear from the Bill or the Explanatory Notes why customers and users should foot this bill, especially when they have already borne the cost of the rollout in their energy bills. The DCC is a wholly-owned subsidiary of Capita plc which, it must be borne in mind, has recently issued a profit warning. Members of your Lordships’ House will recall that profit warnings were a precursor to the demise of Carillion. In Committee, we may wish to examine and test whether the safeguards in the Bill are adequate. The ownership of the DCC remains a concern Several concerns have also been raised about the smart metering implementation programme. I have already mentioned the smart meter problems between SMETS 1 and SMETS 2. Derek Lickorish, director of Secure Meters Limited, has said that as many as 20% of smart meters are operating in "dumb" mode because they have lost their smart functionality as customers have switched energy suppliers. Will the Minister confirm the steps being taken later this year to enable SMETS 1 meters to operate as SMETS 2 meters without a change of meter and an added cost? Does the Minister agree that this would remove the greatest barrier to the uptake of smart meters and greatly enhance the rollout programme There are further issues concerning the need to license meter asset providers—MAPs—and possible supply chain issues in the supply of meters. Issues also extend to the impact of half-hour billing options, which are the subject of three clauses in the Bill, allowing Ofgem to modify industry codes. The Government also need to have an answer to the transparency issues around the amount being raised for the rollout programme through customer bills, the monitoring of savings and the benefits being adequately transmitted to consumers. The Government need to be aware of unintended consequences of switching of demand around the clock and the waste issues around the disposal of obsolete meters In highlighting some of the issues around the smart meter rollout programme, we must not allow them to cloud the main objective that must be reached, which is that Britain’s energy efficiency and public interaction to achieve this will be enhanced through smart meters and the development of a flexible energy system supporting innovation in smart products and services. We support the Bill.