Tuesday 24th October 2017
(7 years, 1 month ago)
Commons ChamberSmart Meters Act 2018 Read Hansard Text
18:48 - The House divided: - Ayes: 314 / Noes: 228 - Question accordingly agreed to.
This text is a record of ministerial contributions to a debate held as part of the Smart Meters Act 2018 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
I beg to move, That the Bill be now read a Second time.
The Bill, which passed its pre-legislative scrutiny in 2016, is narrow in scope and technical in nature, but it is an important Bill that supports the delivery of the smart metering implementation programme to modernise an outdated part of our energy infrastructure. Smart meters are the next generation of metering technology and are an important element of a smarter energy system. We set out in the recent smart systems and flexibility plan how smart meters will enable technologies such as demand-side response, whereby consumers can gain financially if they lower or shift their electricity use at peak times. The data provided by smart meters will also help improve investment decisions in Britain’s energy infrastructure. A smarter, more efficient energy system could drive up to £40 billion in energy cost savings for consumers by 2050. Smart meters will help with that by giving consumers greater control over how and when they use energy. By allowing homes and businesses to better manage their energy use, we open up the possibility of flexible energy tariffs. Taken together with secure smart appliances, consumers will thus be able to benefit from using energy at times when it is cheaper. Shifting demand to match supply may be cheaper than building generation capacity to meet future demand peaks.
This is just the start. New innovative and disruptive business models and systems will be enabled, and will help deliver a cleaner, cheaper and more secure energy future. The smart meter roll-out is, as the Select Committee found, a vital infrastructure upgrade which supports our ambition to make Britain a world leader in energy innovation. Indeed, this is the first step on that journey—exchanging analogue meters for a digital model—and it will in itself deliver savings.
Alberto Costa (South Leicestershire) (Con)
I congratulate the Government on this Bill. Does my right hon. Friend agree that it is imperative that, in addition to having advertising from Smart Energy GB on the roll-out of these meters, small energy firms that are contacted by consumers, as I have done with my own, promptly respond to them on this matter?
Greg Clark
I am grateful to my hon. Friend for that, and he is absolutely right in what he says. If we want to have a fully smart grid, the more people that avail themselves of that the better. When members of the public share his enthusiasm, it is very important that they should be given the chance to have a smart meter.
Sir Edward Davey (Kingston and Surbiton) (LD)
Will the Secretary of State explain why the roll-out of the second set of smart metering equipment technical specifications—SMETS 2—has been so delayed? I understand, probably better than most Members, the frustration he will feel about the delays to the smart meter programme. Is not the concern that suppliers are going to fit lots of SMETS 1 meters, which will be a barrier to competition and reduce the benefits of the smart meter programme to consumers?
Greg Clark
I am grateful to the right hon. Gentleman for raising that concern. He is absolutely right that in moving towards a fully smart system we want full interoperability, which is what SMETS 2 achieves. It has been tested and will be rolled out from July next year. The key point is that those who have a SMETS 1 smart meter will be able to access the software upgrades that will provide that interoperability. That is an important aspect of the roll-out and I am pleased to confirm it to him.
Sir Edward Davey
I am grateful for that clarification, because it may put some minds to rest if they know that the software upgrades will be available. There is a danger that many suppliers, be they one of the big six or others, see the roll-out of as many SMETS 1 meters as possible as a way to stop competition and lock in their consumers. That should really worry everyone in the House. Has the Secretary of State weighed up the benefits of ensuring we have more competition through the roll-out of SMETS 2 meters against the obvious downside of delaying the 2020 deadline?
Greg Clark
Yes, I have. Again, I am grateful to the right hon. Gentleman for asking that question. It is essential that the upgrade is available so that the smart meters that are installed under the SMETS 1 standard will be operable under the SMETS 2 standard. That has been a key part of the development and testing for exactly the reason he mentioned.
Smart metering upgrades the interactivity of the energy system in general. One big advantage of it is that if the system is fully interactive, less unneeded generating capacity needs to be invested in, with consequent savings to consumers. Even in the initial operation, it is estimated that by 2020 consumers can make net savings on their household bills to the tune of £300 million. In addition to the bill savings, smart metering will deliver benefits to the energy industry and to the economy more widely. It seems to me to be essential that if we want to plan a prosperous future, building on our strengths, this country should be the place in the world that can best integrate renewable energy and battery storage—not least in electric vehicles—with the consumer. Smart metering is an important element of that.
Mr Jim Cunningham (Coventry South) (Lab)
Has the Secretary of State considered people in the poorer sections of society who might have difficulty paying?
Greg Clark
Yes, and it is important that all consumer groups should be able to access the benefits, including lower bills. That has been an important requirement, and the Bill addresses it by extending the necessary powers to ensure that we have the regulatory ability to insist that the roll-out goes to all consumers and is not restricted to the more affluent.
Sir Edward Davey
I am grateful for the Secretary of State’s answer to the hon. Member for Coventry South (Mr Cunningham). Is he trying to ensure that suppliers roll out smart meters to prepayment customers as soon as possible? The benefit of smart meters to those on low incomes who use prepayment is that some of the extra costs associated with prepayment go.
Greg Clark
The right hon. Gentleman is right: we especially want to extend smart meters to those on prepayment meters and those who might struggle to afford their energy bills, because the benefits of the savings are disproportionately better for them.
Amanda Milling (Cannock Chase) (Con)
Does my right hon. Friend agree that one of the biggest issues with the energy market is apathy on the part of consumers? We must try to get consumers to engage so that they understand their energy use and bills and can switch. Smart meters are critical to engaging the public.
Greg Clark
My hon. Friend is absolutely right. At the moment, an imbalance in information characterises the energy market. The suppliers know pretty well the consumption patterns of their customers, but those same data are not available to the customers to help them see whether they could make considerable savings either with another supplier or in a different type of tariff that might, for example, reward the use of appliances at off-peak times. It is a very important change.
Mims Davies (Eastleigh) (Con)
I note that the Bill is just the start in terms of innovation. However, a local college, a training provider for placing these meters, has raised this issue with me. It said that some energy companies have outsourced the placement work and the training and that the installation is not happening because the training courses are not sufficient. Do the energy companies have a question to answer when it comes to really helping consumers?
Greg Clark
My hon. Friend raises an important point. I would be very pleased to take up the particular concerns of her college. The energy companies do have an obligation to roll out smart meters. If they subcontract the work, they do not escape their responsibilities. Again, the purpose of the Bill is to extend the current regulatory powers through to the end of the roll-out so that we can ensure that the higher standards apply.
Alan Brown (Kilmarnock and Loudoun) (SNP)
I thank the Secretary of State for giving way one more time. On projected savings, consumer benefits are estimated in the Government’s cost-benefit analysis to be £5.24 billion. How much of that is based on consumers having to switch? In the same cost-benefit analysis, supplier benefits are estimated to be £8.25 billion. How will those supplier benefits be passed onto the consumer?
Greg Clark
The hon. Gentleman raises an important point. There are multiple benefits. About a third of the savings come from the possible reductions in the use of energy. Just over 40% comes from the supplier’s cost savings, which is a result of not having to read meters—that gets done automatically. We expect those savings to be passed onto consumers as savings in their bill. In the 21st century, it seems absurd that we should have to rely on someone physically coming to inspect, literally, a spinning metal wheel. That is decades out of date. To have such work done automatically provides important savings. Therefore, there are benefits to consumers and to the whole economy.
Sir Greg Knight (East Yorkshire) (Con)
Will my right hon. Friend confirm that, if a customer does not want to have a smart meter, they will not be forced to have one installed?
Greg Clark
I can certainly confirm that. There is no obligation on the customer whatsoever.
The roll-out is well under way. Some 7.7 million smart meters were installed by June 2017. The current rate of installation is around 350,000 a month, but that is increasing as energy suppliers continue to ramp up their delivery. As the right hon. Member for Kingston and Surbiton (Sir Edward Davey) mentioned, it is right that we should move on to the second generation of smart meters, the so-called SMETS 2 meters. One advantage of doing so is that the next generation of meters are between 20% and 30% less costly than SMETS 1 meters, thereby providing another good reason to upgrade.
In recognition of the importance of this upgrade and the value that it will bring to consumers, we are committed to seeing all homes and small businesses being offered a smart meter—but they are not compelled to have one—by the end of 2020.
Alan Brown
To help achieve that 2020 target, the install rate needs to go up from 350,000 a month to 1.25 million a month. How will that happen?
Greg Clark
There is a significant increase of the scale that the hon. Gentleman describes. Part of the reason for ensuring that we have these powers is so that the energy companies do not regard this as optional, and have to meet their obligations.
The Government are overseeing the process and that has enabled us to take steps to protect consumers. We have put in place a licensed central data and communications provider, the Data Communications Company. The information will not be held exclusively by the supplier. It is therefore available, with the consumer’s consent, to competitors. Through the DCC, energy companies and other authorised parties are able to collect energy data remotely and securely.
Let me take the House through the specifics of the Bill. Clause 1 extends by five years the Government’s powers to direct the roll-out of smart meters. Since the first legislation was introduced, the powers have lasted for five years at a time, which seems to be the right approach, rather than having powers in perpetuity. Therefore, it is consistent with our practice to come back to the House in order to renew those powers for five years.
Alberto Costa
I am, once again, grateful for the Minister’s generosity in giving way. I understand why the Government require the powers to be extended by another five years, but does the Minister agree that it is imperative that all energy companies, including the smaller ones that I mentioned earlier, give consumers information in a timely manner? The message plastered across the underground and in various papers is that consumers should contact energy suppliers, but from my own experience, those suppliers are not responding in a timely manner. What can the Minister say to assure me that energy companies will respond to consumers now, rather than in two years’ time?
Greg Clark
My hon. Friend again makes an excellent point. Companies are under an obligation to offer households a smart meter by the end of 2020, and these powers allow the Government and the regulator to hold them to their licence conditions in so doing. If he gives me the details of the particular supplier to which he refers, I would be happy to take up that case.
The powers are due to expire on 1 November 2018, so the Bill extends them for five years. An extension of the powers is necessary in order to ensure the successful roll-out by the end of 2020, and to maximise the benefits accruing to consumers during and after the end of the roll-out.
Clauses 2 to 10 introduce a special administration regime to ensure continuity of the smart meter continuation service currently provided by the DCC. Special administration regimes are common—in fact, typical—in network companies. They are primarily designed to guard against the DCC going insolvent due, for example, to cash-flow problems if one or more of its energy supplier customers were unable to pay its charges.
The DCC licensee is deliberately designed to have limited financial assets of its own to avoid the cost of holding large capital reserves, so it relies on timely and full payments from energy suppliers to meet its own contracted obligations to its subcontractors, which provide the communications network. If, for some reason—we regard this as being very unlikely—one or more of its larger customers did not make payments, there are provisions in the smart energy code to allow it to make emergency charges on other suppliers. If these emergency charges also went unpaid for some reason, there would be a theoretical risk that it could go into administration and cease service, so the special administration regime allows the Secretary of State—or Ofgem, with the Secretary of State’s approval—to apply for an administration order to be made in relation to the smart meter communication licensee. Such an order would direct that, while it is in force, the affairs, business and property of the company are to be managed by an administrator appointed by the court.
The aim of the special administration regime is to ensure that the functions of the smart meter communications licensee, under its relevant licences, are performed efficiently and economically, pending the company being rescued or its business being transferred to another company. In the unlikely event of the DCC’s insolvency, fundamental services may be disrupted. Therefore, it is prudent to have safeguards in place, as with other network operators, such that its continued operation is protected. This special administration regime is standard practice in the energy sector, and these powers are based on similar regimes that have been introduced—for example, for networks and suppliers.
The Bill allows the Government to continue to progress with the important goal for the national economy of delivering an energy system across the country that is smarter and more flexible.
Sir Edward Davey
I am grateful to the Secretary of State for giving way, and I know that he is on his peroration. One big policy issue is the interrelationship between the smart meter roll-out, with the 2020 deadline, and the energy price cap he has proposed. How does he see those linking together? Does he see the price cap going once all smart meters have been deployed?
Greg Clark
The draft Bill the Select Committee is going to scrutinise means that there would be a temporary price cap while the current uncompetitive conditions in the market continue. As we have discussed, one of the major advantages of the smart meter programme is that it corrects the imbalance of information between consumers and suppliers, and that is something Ofgem will want to take into account in deciding when to lift that price cap. So the connection with smart meters is very important.
The Bill is an important step in making sure we have one of the smartest, most flexible energy systems in the world, enabling us to take advantage of new technologies while at the same time delivering benefits for households and small businesses. I commend the Bill to the House.
Dr Whitehead
I am very sorry—it’s Don Valley now, isn’t it?
My right hon. Friend talked about the continuing imbalance of benefit in the roll-out of smart meters, with the benefit appearing to be accruing to energy companies, as opposed to customers. For our part, we support the idea of introducing smart meters across the country to replace the dumb meter system that serves the customer very badly and has historically done so, and is certainly not fit for purpose for the requirements of the different ways of supplying, using and measuring power that are coming our way with the energy revolution that is upon us.
The gain not only to customers but to our energy systems as a whole of having collectively installed, sufficient smart meters across the country to bring in new ways of measuring and predicting use of associating smart meters with smarter grids, thereby saving enormous amounts of further future expenditure in grid strengthening and capacity additions—all to the benefit of a smarter, more resilient, more efficient energy system for the future—suggests that supporting smart meters is right thing to do.
But then we come to the process by which smart meters are rolled out, and there is much to raise an eyebrow about. First, there is the Government’s original choice of who should undertake the roll-out—the energy companies: a model not adopted by any other country managing a smart meter roll-out programme, as my right hon. Friend the Member for Don Valley (Caroline Flint) pointed out. Secondly, there is, as a number of hon. Members have mentioned, the high overall costs built into the roll-out—costs that will eventually land on consumers in the shape of bills on their doormats. Thirdly, there is the truly lamentable performance so far in getting the DCC—the communications company responsible for making smart meters communicate well and on an interoperable basis—up and running so that smart meters, once installed, really can communicate with other and with the system. That communications company has now only just gone live, at the very end of the window for doing so before serious repercussions arise. Fourthly, there was the decision, halfway through the roll-out, to transition from one type of smart meter to another—a process akin to trying to change the wheel of a car while it is driving along the road.
All these issues raise legitimate and far-reaching questions about whether the goal of having a critical mass of smart meters in place by the end of 2020 is likely to be achieved and whether, in the short time available to us, moves can be made to get us back to that goal. The recent reports in the 2016 impact assessment suggest that we are not doing very well on installation—that we are set for an almighty bunching of installations in late 2018 and 2019 that is very daunting, even if vans of installers are not starved of meters to put up because they have been told not to install the old ones and are awaiting supplies of the new ones to install. I welcome the consultation on methods of resolving the possible hiatus in supply during the changeover from SMETS 1 to SMETS 2 meters. However, I am minded—I think the Government will have some difficult decisions to make in this regard—of what we need to do by 2020 in populating the country with smart meters to the extent that we can really make these changes possible, for our collective good, given the sheer number of smart meters that have been installed across the country.
We need to judge the very modest changes to the smart meter roll-out regime in this Bill against that wider background of decisions and progress made in the roll-out itself, and of how far away we are from the goal of having a national smart meter presence that makes all the other energy innovations—and cheaper energy and gas—possible, and to decide whether we should take the opportunity to add further elements of “getting on with it” into the Bill as it progresses through Committee.
We will not oppose this Bill on Second Reading. However, I place the Minister and the Government on notice that in Committee we will closely scrutinise the roll-out provisions currently in place to look at ways in which we can make amends for some of the frankly sloppy decision making that has occurred in the progress of the roll-out, and stiffen the sinews of the programme so that it works as well as it can. It is perhaps no coincidence that the—
Greg Clark
Will the hon. Gentleman confirm that the programme motion is generous in providing time for consideration of the Bill?
Dr Whitehead
The last time I heard about the progress of the programme motion, there was no agreement on the number of days that could be set out for the Committee stage, so it may well be the case that that concern will be reflected tonight. However, I would emphasise that as far as the main purpose of the Bill—
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington)
Earlier this year when I decided I was going to switch my supplier, I found myself on my hands and knees with a torch and a duster, clearing cobwebs away. That is no way to go on. The purpose of this Bill is to give us all a way of changing supplier and put us in control of our destiny when it comes to our power.
I thank hon. Members from both sides of the House for their contributions, none of which I take lightly. I look forward to the Bill Committee, and I will be delighted when we have agreed with the Opposition the time needed to go through the Bill in great detail. I will not go into as much detail in this speech as I will do in the Committee, because I am delighted that everything has been agreed. I remind Members on both sides of the House that the Bill is not about money saving, modernisation for the sake of it or replacing old kit; it is the platform for a new smart and flexible energy system that gives control to all customers—vulnerable customers and others alike. That is absolutely necessary, which is why we are doing it.
Of all the points made by hon. Members on both sides of the House, I particularly want to clear up one first made by my hon. Friend the Member for Rugby (Mark Pawsey). The SMETS 1 and SMETS 2 meters have been much discussed, and I can confirm that a software programme is being developed that will allow full conversion between the two. That will be done remotely, so customers who have had the meters installed will not have to worry about people coming to their house and changing them again. That conversion programme will start within a year.
Richard Harrington
I am very sorry, but there is not time. The smart meter programme is the foundation of this whole system of freedom. It is one of the most significant engineering projects that has been undertaken in our country, and I am delighted to report that about 370,000 smart meters are being installed each month. I have met the suppliers, and they have all made arrangements to double or triple that in the next few months. I thank hon. Members on both sides of the House for their contributions today, and I look forward to the agreed scrutiny of this Bill. I commend it to the House.
Question put and agreed to.
Bill accordingly read a Second time.
Smart Meters Bill (Programme)
Motion made, and Question put forthwith (Standing Order No. 83A(7)),
That the following provisions shall apply to the Smart Meters Bill:
Committal
(1) The Bill shall be committed to a Public Bill Committee.
Proceedings in Public Bill Committee
(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 30 November.
(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.
Proceedings on Consideration and up to and including Third Reading
(4) Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.
(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.
(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.
Other proceedings
(7) Any other proceedings on the Bill may be programmed.—(Rebecca Harris.)
Tuesday 21st November 2017
(7 years ago)
Public Bill CommitteesSmart Meters Act 2018 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 21 November 2017 - (21 Nov 2017)
This text is a record of ministerial contributions to a debate held as part of the Smart Meters Act 2018 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
Dr Whitehead
Q
Bill Bullen: I just do not think that the programme is anywhere near the level of completion that it needs to be. The DCC was originally intended to be up and running in 2014, at which point 2020 was perhaps a realistic timeframe. We are now nearly at the end of 2017, and the DCC is clearly not up and running at anything like full capacity. It will just not be possible to deliver the remaining 40 million–plus meters in three years. It is logistically impossible.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington)
Q
Bill Bullen: Business is completely focused on the prepay market. We have nearly 600,000 prepay customers now, and more than 85% of those already have smart meters installed. The prepay market in total is something like 20% of the market—5 million households in the UK use prepay, and about 20% of those already have smart meters installed. There is a very simple reason for that: it completely transforms that product and service for those customers. It has huge value benefits for prepay households, which is why they have adopted the technology more quickly. Until the price cap came in, there were also significant price reductions because prepay smart meters allow people to cut their cost to serve ratio, and therefore they deliver a better price as well as a better product. It is a bit of a no-brainer, to be honest.
Audrey Gallacher: I echo that. We know from a lot of early research done on the Government’s smart meter programme that the customer service benefits go beyond improvements and engagement in reducing consumption. The sheer customer service benefits have been massive. Right now, people have to go outside the house to top up their meter, but with a smart meter they can do that in their home. As Bill says, that has proved massively popular.
The Chair
We now hear oral evidence from Ofgem and the Data Communications Company. We have until 10.40 am for this session. Could the witnesses please introduce yourselves for the record?
Rob Salter-Church: Good morning. My name is Rob Salter-Church. I am a partner in the consumers and competition division at Ofgem, and I have responsibility for our work on smart metering.
Angus Flett: Good morning. My name is Angus Flett. I am the CEO of DCC.
Richard Harrington
Q
Rob Salter-Church: I might first explain the role of Ofgem and the Government in the roll-out, because that sets out the context for answering that question. To be clear, the roll-out of smart metering is Government policy. The Government have powers, and one of the parts of the Bill we are considering today is to extend their power to put in place the licence arrangements around smart metering. Ofgem’s role is to oversee suppliers and DCC compliance with the policy framework that the Government have put in place.
We are hugely supportive of smart metering, and we think it has real potential to improve consumers’ outcomes. Through regular engagement with suppliers, we are overseeing their compliance with their licence obligations. We do that through regular bilateral engagements, gathering significant information from suppliers and working in partnership with Citizens Advice and the energy ombudsman to gather information about consumers’ experience of smart metering.
We use the data we gather to hold suppliers to account, challenge them and make sure they are doing what they are required to do in terms of installing smart metering—adhering to their roll-out plans and, perhaps more importantly, delivering a good-quality installation, providing energy-efficiency advice to consumers when they do that and making sure consumers are aware of how they can realise the benefits of smart metering.
We have a range of tools in our toolkit that we can use to secure supplier compliance. Ultimately, if we feel that a supplier is not doing what they need to do to stick to the rules and make the programme a success, we can take enforcement action against them—a process that enables us to levy a fine against that organisation if it is failing to meet what is required of them.
Steve McCabe
Q
Rob Salter-Church: There is a whole range of benefits that consumers—including vulnerable consumers and those on prepayment meters—can get. One of the key ways in which consumers can benefit from smart meters is through being in control and having access to real-time information about their energy usage and what it is costing them. Many people, including vulnerable people, are often worried about getting an unexpected bill—having a bill shock that they are unable to meet—and falling into debt. One of the great things about smart meters is that they give real-time information so people are in control and can manage their energy usage to prevent those kinds of issues from arising.
Another benefit that will accrue to all people, but may well have particular relevance for more vulnerable customers, is the end to estimated billing. They will know exactly what they are being billed and will be able to make sure they are not being over-billed by their supplier.
The last thing I will say is about prepayment meters. Smart metering has the potential to absolutely transform the realities of energy for prepayment customers. People will no longer have to go out in the rain to go down to the shop to put credit on their meter; they will be able to very simply and easily top up the meter when they need to. The functionality also enables suppliers to help customers manage their energy usage. For example, rather than running out of credit overnight, the smart meter technology allows the supplier to offer services to customers that enable them to have a small amount of energy to ensure that the heating and lights are still on in the morning. Those kind of quality of service benefits are huge, and they should accrue to customers through the point at which they get a meter installed.
Tuesday 21st November 2017
(7 years ago)
Public Bill CommitteesSmart Meters Act 2018 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 21 November 2017 - (21 Nov 2017)
This text is a record of ministerial contributions to a debate held as part of the Smart Meters Act 2018 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Chair
Thank you very much, gentlemen. You are very welcome. I believe that the Minister has indicated that he would like to ask the first questions.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington)
Q
Thank you for coming today, gentlemen, and helping us. As you probably know, the evidence you are giving today is the beginning of the Committee stage of the Bill. May I ask you both to comment on the interop—I cannot pronounce it—on how the Data Communications Company system will help the SMETS 1 meters to be operable throughout the whole system? We keep hearing about it and my shadow and I have discussed it at different times, but I would be very interested in your comments.
Derek Lickorish: I think that interoperability for SMETS 1 meters will come about in two ways. But first, what is interoperability? At the moment, SMETS 1 meters have their own mini data communications company. They have their own communications infrastructure, and it is generally all made by the manufacturer who supplies the meters. There are several of those systems out there. The initial interoperability can come about by making SMETS 1 meters interoperable through their communication systems. That is already available technically, but it requires the participation of the big six to make it happen.
You asked specifically about how the DCC deals with enrolment and adoption—those are the terms used. In the case of Secure Meters, it will take the output from its smart meter service operator system and plug it into the DCC. That, on the current timeline, is due to take place next October. That is based on a whole range of assumptions, and I think it is more likely to come about at some time during 2019, subject to all things here on in going very smoothly for the DCC. So there are two options to make interoperability work.
Richard Wiles: Likewise, at Trilliant, with our meters we offer integration into third-party systems that allow interoperability and for the devices to remain smart. We do that through one of our clients. We also offer a cloud-based smart meter systems operator—SMSO—solution ourselves, and we can provide that interoperability for people who take up our service. That enables them to put meters on the wall pretty quickly, using a similar platform to that of our larger suppliers from the big six energy companies.
We also provide that service through an aggregator that can do secure file transfers that allow even quicker adoptability and the ability to get meters on the wall, but we adhere to the same standards as the DCC for enrolment and adoption as to how we would build that development interface to communicate to our existing infrastructure and make sure that the service requests that come through the DCC path meet the criteria of the DCC, similarly to what happens with SMETS 2.
Derek Lickorish: So SMSO interoperability could be achieved now.
Dr Alan Whitehead (Southampton, Test) (Lab)
Q
Derek Lickorish: We are kidding ourselves if we think that we are about to have a mass roll-out of SMETS 2 meters any time soon. As we heard this morning from the gentleman responsible for DCC, there are 250 SMETS 2 meters connected to DCC, and they are electricity-only; that is 200 more than I thought were connected to DCC. If we were about to have a mass roll-out, we would have at least 200,000 fully interoperable SMETS 2 meters connected to DCC to facilitate end-to-end testing of that system. That is currently not the situation.
The July 2018 date is predicated on the fact that SMETS 2 meters are going to roll out very soon. For that to happen, those meters need to be declared interoperable. Interoperability is essential not only now but in the future. What does that mean for people who do not follow all this stuff at the molecular level? We decided at the outset of the smart meter programme that we would have many world firsts. There are about seven or eight first-in-the-world developments in this programme, one of which is that every meter must be interoperable with other meter manufacturers’ meters so that, should a meter fail, it can be replaced by another meter manufacturer’s meter without the in-home display being replaced. That is a key tenet of the programme.
A process known as smart meter design assurance is supposed to be up and running to prove that SMETS 2 meters are interoperable. That is not up and running, and it has some technical difficulties. Yesterday, a letter arrived to say that one SMETS 2 meter manufacturer has a problem with compatibility of the hub. That is not to say that that will not be solved, but that was only yesterday. Is it just that manufacturer’s SMETS 2 meter or is it all of them? In theory, it should be all of them, because they have all been made to precisely the same specification.
This programme is the first in the world for device-level interoperability, it is the first in the world to separate out the communications system and it is the first in the world to get all the people involved in the SMETS 2 roll-out designing to a 6,000-plus page specification. I hope you can see from that that I do not think we are going to be going very quickly very soon. Having said that, I do not think that the 2020 date should be changed. I believe that the industry should be galvanised into action to solve the problems and then there should be a reflection on what the 2020 date should be. We should not have a date that nobody believes is possible.
Richard Wiles: Trilliant’s view is that there needs to be some coexistence between SMETS 1 and SMETS 2 beyond 14 July next year. Our response to the consultation is that we are concerned that smaller suppliers, which may not have done any SMETS 2 installations to date, may be in a position where they are not first in the supply chain for meters, communications hubs or other parts of the end-to-end system testing. We believe there should be coexistence and that SMETS 1 should run with SMETS 2 until SMETS 2 deployment has been proven at scale and can take over the quantity of SMETS 1 meters that will be deployed.
From our supply chain, we are concerned that if we are forced to turn off our supply manufacturing chain and then we get the go-ahead to recommence production, we will then have to ramp up. For the products that we develop, we have specialist components to ensure that the security is maintained. We need to ensure that other key, core aspects of the supply chain are readily available so that, should the call come to bring SMETS 1 up again at a date beyond 14 July, we can serve and make a credible difference to the actual roll-out and then achieve the 2020 planned deadline.
The Chair
I think you have seen how the sessions are conducted here. Questions come randomly from the members of the Committee as they catch my eye, and may I ask you to speak as clearly as you can for the Hansard Reporters?
I think we will start with the Minister.
Richard Harrington
Q
I will continue from the evidence that I know you heard before, because you were sitting—quite rightly—behind those witnesses. How important do you feel it is that the energy suppliers make a swift and smooth transition to using SMETS 2 meters? I ask that because we have heard from people who have been suppliers of SMETS 1 meters and from others who have taken a broader view, so I would be very interested to hear your view, please.
Dhara Vyas: From the Citizens Advice point of view, we are quite keen to see that transition happen as soon and as rapidly as possible. As I am sure you are aware, SMETS 1 meters do not really provide the same sort of functionality as SMETS 2 meters, and a big part of that is the continuing benefits of SMETS 2 meters. You have heard about the interoperability and the ability to switch, but there is also the kind of loss of functionality in terms of the dynamic currency conversion-enabled services, or DCC-enabled services, that they have access to, and things like “last gasp, first breath”, whereby a network could see if somebody is off supply and act really quickly. SMETS 1 meters do not have that sort of capability built in. So things that really serve to protect consumers are built in to SMETS 2 in a way that they are not with SMETS 1.
Also, there is confusion as the roll-out progresses at a pace and as suppliers and SEGB are working to promote the roll-out and encourage consumers to take up the offer of a smart meter. With different meters going on the wall, consumers are already confused and will ask questions, such as, “My neighbour can do this, and they switched, and they kept their meter. How come I can’t?” So the increased confusion around having more SMETS 1 meters on the wall will cause a problem.
Sacha Deshmukh: I agree that the SMETS 2 roll-out is very important. The only extra contextual point that I would add is that people should remember just what a step forward SMETS 1 meters are from previous meters. So the feedback from consumers who have SMETS 1 meters—several million of them now—is overwhelmingly positive.
I remember a story that was told to me recently. A consumer who had previously been on a prepayment dumb meter had slipped and fallen—she was an elderly lady—and broken her hip, while going out to charge up her key late at night on a petrol forecourt that was wet, in the rain, in a month a little bit like this in weather like this. So a SMETS 1 meter and the capability it offers is a huge step forward for consumers, but I agree that SMETS 2 meters are also incredibly important, for the reasons that Dhara just outlined.
Richard Harrington
No. I will give everybody else a chance. Thank you very much.
Richard Harrington
I am happy to let Mr Morris go first. I know he has been waiting for a long time.
Richard Harrington
Q
Dr Sarah Darby: I am not sure we can yet say that there is a prototype smart grid. The beginnings of smart energy tend to be different in every country and smart metering in this country is different from smart metering anywhere else. In fact, more attention has been paid to the consumer engagement side of smart metering in this country than anywhere else. This is the only country where a fairly intensive effort is put into customer engagement at the time of roll-out of the smart meter, when everyone is offered an in-home display, and all the installers are trained in communication skills to explain what is going on, what can be done with the display, what the smart meter is about and how customers can use it as a tool, if they wish to. This country is a bit special in that way, and we are seeing, on average, modest positive effects.
In the US, where smart metering is widespread, the emphasis has been very much on using it to try to control peak demand, and as an instrument to introduce time-of-use pricing and whack up the prices at peak times to keep peak demand down. They have special problems there, particularly in the hotter states, with air-conditioning in the summertime and very high peak loads, which is an expensive problem for them to manage. The earliest roll-out of smart meters was mostly, in my understanding, to overcome serious problems with fraud.
Dr Richard Fitton: I agree with Sarah, the UK is very strong on smart meters. If you speak to anyone in Europe, a lot of them are envious of the technical standards of the smart meters that are being rolled out. As we have heard from all the sessions, it is a very complicated issue and it is not getting any less complicated, certainly for the consumer.
Our research group’s angle is everything from the consumer side of the meter. We are looking at how to diagnose problems with buildings using the data and systems that are available. We are also developing appliances that will work with smart meters. A big piece of the puzzle that is missing from some of the discussions is the fact that the consumer should be able to engage with the smart meters. As it stands now, they cannot engage with the smart meters. We can log on to the energy supplier’s portal and get a half-hourly reading. But a magic black box called the consumer access device is the gateway to the occupiers having access to their real-time data. This is not a box on the wall that tells them how much energy is costing. It is a consumer access device that streams real-time data to things such as smart appliances and smart heating systems for homes.
That is the whole aim, as far as I can see, of the smart and flexible grid that we constantly talk about. To attach one of these devices is exceptionally difficult and I have never had one successfully connected personally, nor have colleagues or associates. So a big piece of the puzzle is missing in using this data for something that is really smart, rather than just for billing. Billing is clearly important, but the use of the best-value data for the consumer appears to be the missing part of the puzzle. I think that would also push some buttons to help develop the interest in smart meters and get them into people’s homes.
Dr Whitehead
Q
Dr Richard Fitton: I think it is the same with any technology. The greater the penetration geographically across different types of people and property and heating systems, and the greater the spread the better. It is a very difficult question to answer. My thought has always been, when is the roll-out complete; when do we say it is complete? Is it at 90%, or 80%? It may be that 10% of people—I have just made that figure up—will not let you through the door. When is it complete; when do we rubber stamp it?
Dr Sarah Darby: Yes, I think there will always be a section of the population who do not stand to gain very much from having a smart meter; the demand is perhaps very low and there would not seem to them to be a great deal of point. Their impact on the system would also be very small, so I would say yes, we are probably talking in the region of 80%. You would have garnered pretty much all the benefit by then.
Thursday 23rd November 2017
(7 years ago)
Public Bill CommitteesSmart Meters Act 2018 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 23 November 2017 - (23 Nov 2017)
This text is a record of ministerial contributions to a debate held as part of the Smart Meters Act 2018 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington)
The hon. Gentleman is past the point of no return.
Grahame Morris
That is certainly not my intention, Minister. My point relates to the amendment, the justification for extending the date by an additional three years and whether the delivery vehicle is fit for purpose. Was my hon. Friend surprised, as I was, when the witnesses told us that only 250 units had gone live to date? Does that imply that the company is fit for purpose?
Dr Whitehead
Indeed. I hope the Minister will say something reassuring about that, and I am sure he is fully ready to do so.
The final important issue to do with the date is the number of appointments that energy suppliers are making—due to expressions of interest or otherwise—to put a smart meter up on a wall. We heard in evidence from Smart Energy GB about what it calls a pan-supplier customer funnel. That is a fancy way of saying that there is an enormous difference between people who say they would like a smart meter and people who actually get a smart meter at any stage of the installation proceedings. The number of installation appointments booked by energy companies looks very different from the position at the point of interest being expressed and people saying, “I would like a smart meter in my home. When are you coming to install it?” It is not a question of whether people want a smart meter, but whether they get the smart meter on the wall after they have said they want one. That appears to be a continuing problem in the roll-out.
Indeed, if hon. Members look at page 19 of the cost-benefit analysis from the end of 2016, they will see how considerations are changing with regard to the installation profile of smart meters up to the end of 2020. We may need another cost-benefit analysis in the not-too-distant future. As new cost-benefit analyses emerge, and as more information on the ground comes to light, the profile changes. I do not wish to repeat the theory of the four cups on the table from our evidence session, but hon. Members can see from a graph in the cost-benefit analysis the change between the profile of the roll-out and the profile in the cost-benefit analyses of 2014 and 2016: the mountain gets steeper and steeper as we come to the end of 2018 and the beginning of 2019.
It is suggested that a roll-out of some 15 million a year will be necessary in 2019 to get the programme on track in the way we all want and hope. A number of people think that that roll-out profile—a roll-out by the end of 2020—verges on the improbable. That is the fourth—and last, you will be pleased to hear, Mr Gapes—reason that I put forward for why 2023 has been decided on. The question is how that reflects on the roll-out, the communications, the offer and the ability of the whole system to work properly as far as future energy systems are concerned.
As the Minister is itching to tell us which one of the four is the actual reason—or perhaps it is all four or something else; I do not know—I will give him the opportunity to do that, but I hope that we can start the Bill with a very clear idea of what we are talking about as regards the 2023 date, because that will inform the rest of our discussions.
Richard Harrington
The shadow Minister took my “itch” comment correctly. I was, as Mr Speaker would call it, mumbling from a sedentary position.
Mr Gapes, I understand fully your rulings on scope. There are points from hon. Members on both sides of the Committee, and particularly Opposition Members, that I would like to speak about, but the issues raised are not within the Bill. If they would like to meet me separately, either formally or informally over a cup of tea, I would be very happy to do that, because I am absolutely obsessed with smart meters, and that is my job; the hon. Member for Birmingham, Selly Oak, who spoke so eloquently, and I have met to discuss the subject. I took on this project quite recently, and I am determined to make a success of it, as are the officials. In my admittedly short and less than illustrious ministerial career, I have never come across people with such enthusiasm and energy for the project. We want to get it right, and I accept fully hon. Members’ statements that the amendments are not designed to wreck the Bill. The expression used is “probing”. We have heard very genuine comments and questions, and I will do my best to answer them.
I was going to make a longer speech. I thought that in the first bit of it, it would be better to put on record what the whole Bill and smart meter programme is about, but in the spirit of your ruling that Members’ contributions have been outside the scope of the Bill, Mr Gapes, I think I would be pushing it, but I would have liked to have done that; I would like to put that on record, anyway.
Richard Harrington
Well, I would like to make it very clear—this is absolutely within the scope of the Bill and the amendments—that the purpose of the Bill and clause 1 is not to give the Government more time because they or the companies are behind on targets. It really is not; it is to extend the existing powers of the Secretary of State to do quite a lot of things. I will not say this again unless I am asked, but it is not to give the Government more time. Hon. Members’ comments have often probed that point, so I thought I should make that absolutely clear, and then happily go through the measure.
I have seen in my business life quite a lot of targets. They are called hockey sticks. When we look at a business plan, or any plan, suddenly next year seems so fantastic compared with this year, and all of a sudden we wake up on 1 January and say, “Oh great, we’re going to do five times as much as we did in November.” I must say that when I first looked at this plan, that was my thought. It is my job to be cynical. Just as it is the Opposition’s job to be cynical with regard to me, it is my job to be cynical with regard to officials on the programme; that is what the system exists for.
Grahame Morris
Will the Minister clarify something? I am slightly confused. If the purpose of the measure is not to give the suppliers more time to meet their obligations, what is the justification?
Richard Harrington
I repeat that it is absolutely to extend the Secretary of State’s powers. I was going to mention the 2023 issue and the reason for that. In fact, I scribbled myself a note to answer the hon. Gentleman’s comments about it. So as not to repeat my own scrawl—in fact, I will repeat my scrawl later, because I cannot remember where I put the note.
On the 2023 issue, a lot of things in the powers are not about the targets. Richard Milhous Nixon, whose biography I have just been reading, said, “If you’ve got them by the balls, their hearts and minds will follow.” I do not know if that is unparliamentary; if it is, I apologise. We could easily say, “That’s it; we will leave those powers, because then they will do it”, but that is not what is happening. I am not a fan of Richard Milhous Nixon, for those who might think that, but it struck me that that often in life, that is why people do things.
A lot of things in the powers that are needed will be involved in winding up. I will cover them a little bit later. I do not think it would be possible for any organisation to suddenly give a date—31 December or November or whatever—when the powers run out and that is it. A lot of the things involved go beyond the target. The targets are made with the suppliers. It was asked what happens if suppliers do not do this. There are powers to fine; the regulator has powers to fine suppliers, from memory—if I am wrong by a bit, I will correct the record—10% of turnover if they do not comply with the agreed targets.
Steve McCabe
It is a very simple question. The Minister says the regulator has those powers, but is there any evidence that they have been exercised?
Richard Harrington
They have not needed to be yet, but they are there. The hon. Gentleman does not mention—no one has given any credit for this—the 7 million smart meters that have been installed. That is quite a lot of smart meters. I have seen the programme that has been put out, and having spoken to so many of the companies and organisations involved, I am satisfied that it is a realistic target. I had better make some progress; I will not be able to address his amendment properly unless I do.
For me, this is the most significant thing that has happened in electricity, but also in power supply to homes, since Edison or whoever it was—hon. Members will have to excuse me; it is a long time since I did it at school.
Richard Harrington
Let us get back to business straight away. I was tempted by the hon. Gentleman.
This is a precursor to a smart grid through which everyone—poorer people, richer people, businesses, houses—will be able to make real choices all the time. They might have computer programmes or apps to do it for them. Our children and grandchildren will not talk about SMETS 1 and SMETS 2, as the shadow Minister does in day-to-day conversation over breakfast. They will just look at what they are paying for their power every half hour or whatever, and they will know. That is why we are bringing forward the Bill.
We are committed to ensuring that every home and small business has been offered a smart meter by 2020; I believe that was in the Conservative party manifesto, so it must be true. That is our clear policy, and it is what we are going to do.
Stephen Kerr
Will the Minister say exactly what “offer” means in that context? There is an issue over whether “offer” equals mandate, but we have clearly said that there is not a mandate or a requirement for consumers to have a smart meter.
Richard Harrington
It is precisely that: it is not compulsory, it is an offer, which is deemed to be people being told by phone or in writing that they can have a smart meter, as indeed I have been and am arranging for. I am sure many hon. Members in this room will be doing the same.
The extension of the powers proposed in the Bill will enable us to drive progress to the 2020 deadline, act on evidence to remove any emerging barriers to the roll-out and then—this is the important thing for the 2023 extension—to respond to the findings of a post-roll-out review, to ensure that the benefits for consumers are fully realised over the long term. Industry and consumer groups have made it clear that they see a need for Government leadership on this, which we hope we are providing.
Dan Carden
I hope that the Minister will respond to one of the points that Derek Lickorish made the other day when he said,
“It is no good having a target that nobody believes in...we need a recognition now that says, ‘We will look at all the issues and have a unity of purpose about what the targets should be’.”––[Official Report, Smart Meters Bill Public Bill Committee, 21 November 2017; c. 37, Q69.]
What proactive undertakings is the Minister proceeding with to bring the suppliers together to make 2020 a realistic date in this context?
Richard Harrington
I can reassure the hon. Gentleman that we speak regularly to the suppliers. In fact, yesterday morning I met a group of them. I think Mr Lickorish was there, but certainly others who gave evidence, Mr Bullen and Mr Salter-Church from Ofgem, were there. BEIS has regular meetings. I would not put my name or that of the Department to this target if I thought it was unrealistic. Hon. Members have referred to Mr Lickorish’s evidence showing some cynicism about it. The cliché on these occasions is, “He would say that, wouldn’t he?” I am sure it is a genuinely held belief, but it is the Government’s intent to make sure this happens. I would be hauled, as they say in the press, before whatever Committee if the target is not met in 2020, or whatever the date might be—not 2023, because that would be on a different issue; that is not the target. But I might end up being accused of misleading the House, albeit not on purpose, and being told I was completely wrong and should pay the price. However, I am personally satisfied that the date is not as unrealistic as Mr Lickorish said.
The extension of powers has been mentioned, and I think I have stressed enough that is not because of failing to meet the target. The hon. Member for Liverpool, Walton said earlier that he was concerned that the cost to consumers from the smart meter roll-out could be unlimited. He was probably referring to poorer people in our constituencies, who currently do prepayment and might suddenly be hit with an unlimited charge by suppliers, justified or not. I want to make it clear to him and to everyone else that we are monitoring the costs all the time. The DCC, which is a natural monopoly, simply because it is the only company connecting smart meters, is subject to price control regulated by Ofgem, which has provisions for monopolies. The DCC is slap bang in the middle of that.
Grahame Morris
Is there not a danger that building in an overrun will inevitably lead to cost escalation? The estimates presented in evidence were an increase from £1.3 billion to £2.1 billion, and the overall programme is £12 billion, which I think Mr Lickorish told us was the equivalent of 10 200-bed hospitals.
Richard Harrington
Actually, concentrating the mind in the Nixonian way, the next couple of years will surely lead to reduced costs because of economies of scale, but we can discuss that another time. I will be happy to.
The shadow Minister said that small suppliers have a weaker obligation in relation to 2020. That is not quite true, although he did not intend to mislead us with the wording he used. It is exactly the same obligation. The only flexibility the small suppliers have been given is that they can deliver their programmes in line with their broader corporate strategy. We are allowing the smaller ones to be later in the programme because, unlike British Gas and others that have been mentioned, they have not got the bulk.
Richard Harrington
The hon. Gentleman will have to excuse me. I am being told to make progress.
Amendment 1 relates to the Secretary of State’s power to modify the relevant electricity licence conditions and industry codes, which relate to the detailed regulatory framework, covering the activities of energy suppliers and network operators, and the data and communications licensee. It would cause those powers to expire at the end of 2020, which, again, has nothing to do with the target. I do not think anyone would argue that they should just disappear. I oppose amendment 1 because it removes the Department’s ability to conduct an effective post-implementation review, which, as I said earlier, we will need to do. The aim is for that to happen in 2021. The extension of powers until 2023 allows us to complete that exercise and implement the recommendations.
I know that this is a probing amendment, as the hon. Member for Birmingham, Selly Oak said, but I do not think he took those things into consideration. He concentrated his comments on whether to extend the target, which I hope I have covered. In contrast, in the absence of the power we are asking for to modify the energy licence conditions and industry codes beyond 2020, we would have to bring the review forward. For it to be consulted on properly, and to provide the appropriate parliamentary process, it would be necessary to conclude the evidence gathering the year after next at the absolute latest, which as far as I can see would completely reduce the robustness of the assessment and exclude valuable evidence from the final stages of the roll-out. It would also prevent the consideration of longitudinal research exploring the impact of smart metering on consumer behaviour, which is what this is all about, and energy saving over the course of several years. If it were carried out before 2020, there would not be enough evidence. I believe smart meters will be absolutely revolutionary, and will change the way people use their energy bills. If hon. Members believe in smart metering—I am sure you have been persuaded, as the rest of us have, Mr Gapes, that this is a really good thing to do—and think it is not just a short-term thing, it is right that the Government can ensure that the regulatory framework is there and is fit for purpose for decades to come.
Amendments 2 and 4 would limit the period to which the Secretary of State can veto Ofgem’s proposal to give consent to the transfer of the whole or of any part of the communication licence. Again, if the amendments were passed, the Secretary of State could prevent the transfer only up to the end of 2020. DCC’s smart meter licences were awarded in 2013 for 12 years. The curtailment of that power would create an imbalance in the Government’s arrangements of the smart metering programme, undermining our leadership role within it.
I know it sounds like we want it both ways, but the Government’s role is absolutely central to this. We have to provide the leadership that we have been asked for. I do not want to risk having a situation in which a smart meter communication licence was transferred in a manner that conflicts with activities undertaken by the programme as part of its post-implementation review. It is necessary to extend the power to 1 November 2023 to retain coherence in the Government relating to the smart metering programme and to ensure that these activities are appropriately co-ordinated.
Amendments 3 and 5 would limit the Secretary of State’s ability to introduce new licensable activities in relation to the smart metering roll-out. The power we are talking about was used to set up the provision of the smart meter communications service, which led to the granting of the DCC’s licences. I want to make it clear that we have no specified or defined plans to use the power. Perhaps the hon. Member for Birmingham, Selly Oak will still argue that if the scenarios change, primary legislation will be needed to go through it again, and I understand that. However, I can see scenarios that could develop where we will need the ability to introduce new, licensable activities quickly, in order to overcome barriers and to ensure that the benefits are realised. Such situations can arrive relatively late in the roll-out or in the immediate post-implementation period.
Richard Harrington
I know we have four more days, but I would like to make progress on this particular point, although I will give an example that might be acceptable to the hon. Gentleman. As an example, it may be necessary to create new licensable activities to ensure that all premises can secure a home area network if that cannot currently be achieved. Technology develops, as do apps, different systems and inventions. It is for us to be able to act quickly so that there is flexibility for the consumer to take advantage of all those things.
Our current explanation is that we may know when solutions are appropriate and viable for these premises only towards the end of 2020 or even in early 2021. I must say, clearly, that we would use this power only after going through the normal policy development process, including consulting relevant stakeholders. I feel that I have done my best to make that point. It is for us to show leadership in this matter. The decisions taken up to now have driven this momentum, and whatever has been said on cynicism about the targets, the installation volumes are increasing dramatically and it is important that we can keep a robust regulatory framework that enables the delivery of the benefits.
It is vital that this work can continue and that the Secretary of State retains the powers available to him to direct the efficient delivery of the roll-out. I am sure that hon. Members will take these points into consideration, other than the target itself, which we have discussed. The last thing that hon. Members want is a cliff edge—they argue against cliff edges many times on the Floor of the Chamber—and the last thing that we want in this case is a cliff edge. I hope that the hon. Gentleman will find these arguments reassuring and that he will feel able to withdraw his amendment
Steve McCabe
I am conscious of the time, but I want to be dead straight: I did not find that particularly reassuring, if I am honest. If hon. Members look through Hansard, they will find that I raised a number of questions that have not really been answered at all. As I said at the outset, the amendment was intended as a probing amendment, so I do not intend to push it to a vote at this stage. I recognise that the Minister is very sincere in his approach to this matter, but will he reflect on some of the points that have been made during this part of the debate? Perhaps at a later stage in Committee or in the Bill’s progress, he will see whether he can be a bit more persuasive with the quality of the answers that he provides. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Ordered, That further consideration be now adjourned. —(Mike Freer.)
Thursday 23rd November 2017
(7 years ago)
Public Bill CommitteesSmart Meters Act 2018 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 23 November 2017 - (23 Nov 2017)
This text is a record of ministerial contributions to a debate held as part of the Smart Meters Act 2018 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington)
Like everyone else, I formally welcome you back to the Chair—you were here for the programme motion. I am sure that, if I stray from the scope of what is being discussed, you will be just as much a disciplinarian as Mr Gapes was this morning. I shall do my best to comply with his edicts and yours.
Richard Harrington
Well, I promised I would do my best; I did not say anything legally binding. No, of course I shall. You will tell me if I do not.
As with everything else we have discussed, I fully respect the Opposition’s intentions and the contribution from the shadow Minister, as ever. The hon. Member for Birmingham, Selly Oak confirmed again that the amendment is not intended to wreck the Bill, which I fully accept. However, I will point out, from the Government’s point of view, that a lot of myths are doing the rounds about the differences between SMETS 1 and SMETS 2. I felt it might be worthwhile for me to explain them.
First, the hon. Member for Birmingham, Selly Oak repeated some evidence given during oral evidence—the contention that 20% of 7 million smart meters are now dumb meters. I do not recognise that figure from the numbers I have been given or from my conversations with stakeholders and officials. The number we have is 4%, not 20%. I fully accept in principle that, because of a change of supplier, some meters become dumb, but I do not believe the problem is as comprehensive as the evidence given suggests.
Obviously, I will be very happy for that evidence to be given if its numbers could be verified. I felt I ought to make that point, because I think the SMETS 1 programme has been successful in its own right. There are 7 million of them, and the vast majority provide a lot of really helpful information to the residents concerned, and that is what they are for.
I will try to clarify the list, which I scrawled down while the shadow Minister was speaking, of the differences between a SMETS 1 with DCC interoperability—the software that will allow them to talk to each other—and the SMETS 2. It is quite important to know, because very few of us—including me, I might add—are experts on the technical side of things. In practical terms, which I think is the most important matter for our constituents and should therefore be reflected in the laws that we try to make, the differences between a SMETS 2 and a SMETS 1 with DCC software are not very great; there are some differences, but most of their functions are the same. A SMETS 2, rather than a converted SMETS 1, has some technical flexibilities, but they are all fundamentally better than a dumb meter. I have looked at both SMETS 1 and SMETS 2, and have examined them while asking this question, and there is not that much difference between a converted SMETS 1 and a SMETS 2. It is just the fact that technology moves on. The SMETS 2 is certainly better, but when the software comes into being it will be able to do most things. The hon. Member for Birmingham, Selly Oak said that what were smart meters would become dumb meters; that will certainly not be the case.
Grahame Morris (Easington) (Lab)
Will the Minister clarify that point on the SMETS 2 meters for my benefit and that of the Committee? The key issue that was raised originally with the witnesses was interoperability. Obviously, that problem is being solved by the SMETS 2 meters, so theoretically it is possible to solve the problem of interoperability. Will the SMETS 1 generation of smart meters require a different methodology to solve that problem in order to recalibrate them to give them that interoperability functionality—if that makes sense?
Richard Harrington
The hon. Gentleman makes a lot of sense, but not in a technical way. I cannot answer him in a technical way, other than to say that my understanding is that the software is remotely operated—in our day we might have called it via the lines—through the air to the meter, so it is not a question of people coming out to revisit them to make them nearly as good as SMETS 2s. The SIM card on the dumb ones is reactivated remotely.
One of the good points about SMETS 2s is that they allow energy suppliers to roll out smart meters to premises that just have gas customers. They allow distribution network operators to view maximum electricity demand for a premises in order to plan their network investments. There are a number of specialist types of smart meters, for example, polyphase meters for large electricity users, and smart meters that can be used to replace traditional Economy 7 and 10 teleswitches, which we may have come across in our constituencies, and they can only be SMETS 2. But when upgraded—if I may call it that—with the DCC software, SMETS 1s do most of the smart things that SMETS 2s do. It is just how things move on. We must accept the fact that the foundation stage of the programme was based on SMETS 1, which was infinitely better than the previous option of different companies manufacturing different types of meters for their own customers, perfectly properly, with the technology that there was. This system has replaced that anarchy—although it was legal anarchy—in terms of national organisation.
I accept the point about timing, but the foundation stage was always intended to be different from the main installation phase. We have to see this transition from SMETS 1 to SMETS 2, because it is the latest technology and we want as many people as possible to have it. I feel it is fair to say that the foundation stage has provided real benefits. We are seeing savings. Mr Bullen, in particular, spoke about his 600,000 prepayment customers with the key system, which is very old fashioned and difficult for elderly people and vulnerable people. Anyone can recognise objectively that that has been a very good thing; had we waited for SMETS 2 to be developed, those people would not have had the benefit of smart meters. It is fair to say, like with any new technology, that we want to see the industry move from SMETS 1 to SMETS 2 as soon as possible, for the reasons I have explained.
The witness from the supplier company, Secure Meters Ltd, was basically arguing very much for SMETS 1, presumably because that company is a big supplier of SMETS 1 meters. I do not mean that in any sarcastic or improper way; that is what the company does. It was said very clearly that at the moment 250 SMETS 2 meters have been connected. I hope that in the two days since then, it is a lot more than that, but it is a small number. [Interruption.] Well, at least 251, if I may say so to the shadow Minister. Anyway, they are being installed.
Richard Harrington
I will try to come on to that.
Secure Meters was saying that its kit can offer interoperability; why do we need the DCC? I state again that via the DCC network operators can access meters to provide a lot of system benefits. All suppliers are required to use DCC for SMETS 2 meters, which allows full interoperability for enrolled meters; we are not talking about just one company. Several hon. Members have mentioned fear about the DCC’s price control. DCC offers opportunities to enhance security arrangements. The main point is that the DCC systems have been future-proofed. This is not one company providing a system that, with the best intentions, works but is not part of a national system and is not future-proofed in the same way as we expect DCC to be.
In answer to the question that was asked, DCC has published an approved plan, which was agreed by BEIS, for this system to begin in late 2018, so that consumers can keep their smart services when they switch supplier. That will be done. There is, if I may say so, some cynicism—I mean that in a polite way—about whether it will work or work quickly. It has been suggested that it is untested and so on, but it is being done in phases, batch by batch. We heard evidence from the chief executive officer of DCC that this is a very serious operation. Some could say that it is a very expensive operation, but it is not a wing-and-a-prayer type of thing, as much as any software roll-out is not—I am perfectly prepared to accept that. From big Government projects all the way through, I accept that recent history is littered with disappointments in the efficiency of these roll-outs, but the DCC was very carefully appointed and has very carefully been tested. BEIS is monitoring very successfully, and we are happy with what we have produced. Subject to a cost and security assessment, we expect all SMETS 1 meters to be enrolled in DCC. As I have said, that will make them similar but not exactly the same as the SMETS 2 meters.
I say this in the spirit in which the amendment was meant—I say it in good faith; it is not some political point. I believe that the amendment could undermine delivery of this project, for example where changes to the regulatory framework are needed after the current expiry date of October 2018 to ensure that the process for enrolling the meters into DCC runs smoothly. Were the amendment to apply, such changes could not be made. That would risk delaying or even preventing the benefits of an interoperable service for energy consumers. I state again that I know that that is not the intention of the amendment. That would be irresponsible, and the hon. Member for Birmingham, Selly Oak is anything but irresponsible about this project; he cares for it as much as me or anyone in the Committee or, indeed, in the House generally.
In addition, the amendment would mean that any new consumer protections or other obligations on suppliers introduced after our powers’ current expiry date would not be applicable to SMETS 1 meters or consumers with those meters. Again, I am sure that the hon. Gentleman does not intend that. I know he wants to ensure that relevant consumer protections extend to consumers, whatever type of smart meter they happen to have.
I hope that my explanation reassures hon. Members that we recognise the benefits of moving to SMETS 2 as soon as possible and have established a clear end-date for SMETS 1. We are delivering a solution to resolve the interoperability issues that may be experienced when a consumer with a SMETS 1 meter switches energy supplier. We have thought about this issue, and I am very happy to discuss it with individual Members if they feel that I have missed something out. I hope that on that basis, the hon. Member for Birmingham, Selly Oak feels able to withdraw his amendment.
Dr Whitehead
Will the Minister say something briefly about the consultation that is under way on extending the period after which SMETS 1 meters cannot be installed? Will he perhaps inform us of the intention behind the consultation, and whether it has any bearing on our discussion today about the interface between SMETS 1 and SMETS 2?
Richard Harrington
I want to make the answer very precise, so I would prefer to write to the hon. Gentleman about the consultation, if that is acceptable, rather than give him a vague answer that does not have the precision he deserves.
Steve McCabe
As I said at the outset, the amendment’s purpose was to explore this problem and to help Members to get a better understanding of interoperability. A question mark hangs in the air about how successful the SMETS 2 roll-out will be and what the problems will be if we end up with a lot of SMETS 1 meters installed but no longer counted in the Government’s target or, as my hon. Friend the Member for Southampton, Test said, with a hiatus in which there are no meters available. The amendment’s purpose was to explore that point.
The Minister has done his best to explain where he stands. I am not sure that we have reached complete agreement on that, if I am truthful with him, but he has done his best and it would not serve any useful purpose to force the amendment to a Division. That would be a wrecking amendment, which is not my intention, and I am grateful for what he said. I ask him to continue to reflect on this issue, which will be central to the roll-out programme and needs to be considered. However, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Dr Whitehead
That is because the WEEE directive operated properly, but before it was implemented there were a number of small alps of electrical goods around the country. It will reflect badly on the smart meter roll-out if we end up with Dolomites of old meters as a memorial to it.
We must sort this problem out. Amendment 6 gives the Minister a golden legislative opportunity to do so; we may not get another, so he should be anxious to grasp this one with both hands. I hope he will.
Richard Harrington
I will try to deal separately with supply and disposal, just as the hon. Members who spoke to the amendments did. The Government are clear that we support free markets and the benefits of competition generally. However, we have also shown that we are quite prepared to regulate where necessary to protect consumers.
We have done a lot to regulate energy suppliers. Their licence conditions require them to use smart electricity and gas meters that meet the SMETS standard. All energy suppliers must install smart meters that conform to minimum common standards, including ensuring that they are, or can become, interoperable and can be used by competing energy suppliers.
The supply of the meters themselves is a competitive market. There are quite a few suppliers, and they compete with each other; some manufacture both SMETS 1 and 2 meters. The Government set the technical standards, but it is up to the market and the suppliers to compete for the best price. Competition from other energy suppliers would mean that if smart meters supplied were unreliable, incompatible or unduly costly, suppliers would risk losing customers. I do not mean risking losing consumer customers—the wholesale supplier of the product rather than the end user. There is strong competition. Energy suppliers and meter asset providers have plenty of choice.
Clive Lewis
I apologise. It seems to me that the Minister is ignoring the fact that many of these meters are being switched to being dumb meters. Therefore it seems that this system is not working and the market is failing. The Minister may say that the market is working, but it is not, because so many meters are being switched to dumb meters.
Richard Harrington
I actively disagree with the hon. Gentleman. I accept the problem—whether it is 4%, 20% or the numbers that have been talked about that do not work—but I do not view that as an aspect of market failure. In my submission, market failure would mean the charge being 400% or 500% of the cost of manufacture. I regard it as a failure, but a technical failure that we hope will be changed within months by the operability technical changes, as I explained. I understand what the hon. Gentleman means, but I do not regard it as market failure. My contention is that the regulation of the supply, or the ability to regulate, as the hon. Member for Birmingham, Selly Oak mentioned, would not have made a difference to the technical failure side of it.
Steve McCabe
I just want to clarify what the Minister said, in case I misheard him. I think he said it is not a market failure but a technical failure, which within months we hope to address. As I pointed out earlier, his Department’s position is that it is meant to be addressed by the end of this year. In fact, I asked him if he would produce the plan by the end of the Committee. Is the Minister now revising that timescale? Is that what he is telling us?
Richard Harrington
I used the expression “within months” as a figure of speech; I apologise for that.
Richard Harrington
It is a very fair point. I did not do it as a way of pulling back on what I said before, I promise. The point I want to make is that the Government do not believe it necessary to make provision to require MAPs, as asset providers, to be licensed because the competition is working and providing good value to energy consumers.
Away from the Committee, the hon. Gentleman and I had a discussion on meter disposal, and I have given it considerable thought. This is not an excuse, but the responsibility for disposal lies with the Secretary of State for Environment, Food and Rural Affairs. I have not discussed this issue with the Secretary of State, or in fact anything to do with general disposal issues, particularly not gas and electricity meters.
If the hon. Gentleman will bear with me, I suggest that we hold a roundtable with DEFRA and BEIS officials, himself and the shadow Minister, if he is prepared to come—I hope he will—so that we can discuss this. It is not something I can give a short answer to; it is much more complex than I first thought. Having made both those points, I would be delighted if the hon. Gentleman agreed to withdraw his amendment.
Tuesday 28th November 2017
(6 years, 12 months ago)
Public Bill CommitteesSmart Meters Act 2018 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 28 November 2017 - (28 Nov 2017)
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
This text is a record of ministerial contributions to a debate held as part of the Smart Meters Act 2018 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington)
Thank you, Mr Gapes. I wondered whether you were looking for someone else to stand. I thought that perhaps there had been a reshuffle without my being told, or something like that.
Richard Harrington
It is beyond most of our powers, but I am delighted still to be in position to try to resist the amendment—in a civilised way, I hope—and to reassure the hon. Member for Southampton, Test. As ever, I accept fully the nature and tone of his amendment, because he means exactly what he says. I take a similar approach in reading his amendment and trying my best to consider whether it is practical to agree with what he says or whether there is a way I can accept what he says so that he accepts what I am trying to say. I am conscious that hon. Members are itching to make a lot of progress on the Bill, but I will try to answer his points.
I think that the hon. Gentleman would accept, despite the fact that we are trying to do this in different ways, that the Government are trying to protect the interests of energy consumers in this whole programme. The only current licensable activity is the provision of a smart meter roll-out communication service, so the situation is comparatively simple. Like a lot of things in legislation, it is really more complicated than that, but that is what it boils down to. We have done this to ensure that we have a communications and data system that supports secure, reliable and interoperable services for smart meters. The Government would not remove this service without putting in place an alternative. We currently consider that doing so would not be in line with the Secretary of State’s principal objective, for which he or she must use their discretion.
Let me explain the concern from the Government’s point of view. In future, the whole smart meter system will expand and become, we hope, exponentially greater than it is now—not just because everyone will have one, but because it will be able to do so many other things that we all want. I am thinking of operations with apps. Perhaps water meters or other devices in people’s homes could be applied to it. The current licensable activity may then be redundant, because things will have developed beyond that. In such circumstances, it would not be appropriate, or indeed in line with better regulation principles, to leave in place a licensable activity that is not required in the future.
I hope that everyone accepts that the DCC has a fundamental role in driving the smart meter benefits. I do not currently consider that we would exercise the power to remove licensable activities, but I feel that it is necessary for the Secretary of State to keep that, given that principal objective. I hope that the hon. Gentleman will consider our concerns, just as I have tried to consider his, and agree to withdraw the amendment.
Dr Whitehead
I am not quite sure what that meant. I understand that at present, as the memorandum indicates, there is only one licensable activity that could be removed, and that is indeed the DCC service. The Minister rightly puts it to us that it is difficult to conceive of circumstances in which the Government would decide to remove that licensable activity, but that is not what legislation is about. Legislation is not about whether, on the balance of probability and taking all things into account, including the bona fides of the Government, something that one might legislate on should not be legislated on because it is unlikely to happen; legislation is supposed to ensure that, in all circumstances we can think of, those things that we do not want to happen should not happen.
Although I take on board what the Minister has said—I do not doubt for one moment his bona fides—I do not think that he has added anything to the debate this morning, other than to repeat what was in the Department’s memorandum.
Richard Harrington
The hon. Gentleman has been gracious in his comments about me personally, about the Secretary of State and, I hope, about most people who would do the job, but should there one day be an evil Secretary of State who, in the middle of the night, while plotting the destruction of society, realised that they could use this power, which in the scale of things is pretty tiny, how would they use it in so destructive a way that a future Parliament might think, “Oh, I wish we had been stronger in this Bill and that we had the power suggested by the then hon. Gentleman”? I hasten to add that I am not hoping that he will have gone to the great energy supplier in the sky, as we all will at some stage. The serious point is this: were that to happen, what is the bad way in which this power could be used?
Dr Whitehead
A future Secretary of State does not necessarily have to have quite the intents suggested by the Members making non-verbal interventions. I can easily envisage such circumstances. For example, bearing in mind that the present DCC is set up as the subsidiary of a private company—
Richard Harrington
I do not know whether to thank the hon. Gentleman for giving way or not.
The Chair
I think you are responding to the amendment. It makes it a bit more procedural. You are allowed to speak more than once, and we have not yet got to the summing-up speech from Dr Whitehead.
Richard Harrington
I was going to thank the hon. Gentleman for giving way, but I will not now. I am grateful that I am not abusing the system, which I was going to.
I think we have to agree to disagree on this point, because I believe that, given the restrictions in the Bill and everything else, it is a minor point. I accept that the hon. Gentleman is not doing it to bring down the Government or anything like that, because opposition is opposition. I respect him not just for his position but, much more than that, for the person he is. If he wishes to press the amendment to a vote, then I understand that I have not persuaded him. If he wishes me to ponder the matter further, or even to meet him and talk about it, I am perfectly prepared to do so. I think it is making a mountain out of a molehill.
He thinks changing the licensable activity is quite an important thing that needs to be brought before Parliament. Any decision to remove a licensable activity would still be subject to parliamentary scrutiny through the affirmative procedure, but it is ultimately a question of what discretion a Secretary of State should have in the consumer’s interest. We could politely agree to disagree on that, but if the hon. Gentleman would like to discuss this further and withdraw his amendment for that purpose, I would respect both things. At the moment, I disagree with him not because we are the Government and he is the Opposition but because I do not see the significance of the points he is making.
Dr Whitehead
This is not a cosmically important thing, and I agree with the Minister that it is unlikely to change the course of the roll-out, but I say gently that that is not necessarily what we are supposed to do in Committee. We are not supposed just to grade the importance of the things in the Bill and then decide to act on them according to their relative importance; we are supposed to examine the Bill line by line and, between us, suggest ways that it can be strengthened so that it is as good as we can make it when it returns on Report and Third Reading. That means that things may be added to the Bill that are not in themselves important but could be regarded, in the context of the work we are supposed to do in Committee, as a result of our discharging our responsibilities properly.
I am in a bit of a dilemma. I agree with the Minister that this is not a really important thing, but I cannot see for the life of me why it cannot be placed in the Bill so that at the end of its passage it is as good as we, between us, can make it and that it contains things that, although they may not be that important, add to its overall strength. I simply have not heard any reason why that cannot be done. I have heard reasons why the amendment is not that important. The Minister might suggest—and he might be right—that if we put it to a vote we would over-emphasise its importance. However, I am—“annoyed” is not quite the right word—a little concerned that something that can be seen as reasonably obvious, if not as significantly strengthening the Bill, regardless of our party positions or of the position we take on the Bill overall, is rejected in this way. For that reason, I seek to divide the Committee.
Question put, That the amendment be made.
The Chair
With this it will be convenient to discuss new clause 4—Conditions of extension of time for exercise of powers—
‘(1) Prior to making any directions during the extended time period provided for in section 1, the Secretary of State shall commission a review which shall consider—
(a) data access and privacy issues arising from the smart meter rollout,
(b) the benefits realised during the smart meter rollout and the scope for greater benefits to be realised,
(c) the effectiveness of the policy framework for future smart metering operations.
(2) The Secretary shall lay the report of the review in subsection (1) before each House of Parliament.’
This new clause requires the Secretary of State to carry out a review of matters relating to the current status of the smart meter rollout.
Richard Harrington
The new clause would make it a condition of primary powers being extended that the Secretary of State carry out a review of smart meter roll-out, and that the review cover the data access and privacy issues, the benefits realised during the roll-out and the scope for greater benefits to be realised, and the effectiveness of the policy framework for future smart metering operations. I will now turn to each area that it is suggested be covered in the review in turn.
In 2012, the Government established a data access and privacy framework to ensure consumers’ interests are protected. This framework applies to domestic consumers and micro-businesses. It seeks to strike a balance so that consumer privacy is protected while enabling the proportionate access to data necessary to deliver energy system-wide benefits. For example, the framework determines the level of access that energy suppliers, networks and authorised third parties can have to energy consumption data. It also establishes the purpose for which data can be collected and the choices that consumers have about that. The central principle is that consumers have control over who can access their detailed energy consumption information, except when it is required for regulated purposes, a good example of which is billing.
The framework was welcomed when it was established, and the Information Commissioner’s Office, which is the data protection regulator, commented that it felt the framework offered a good level of control and protection for consumers. We publicly committed to carrying out a review of the framework, and intend to do that in 2018. Subject to the extension of the relevant powers, we will then be able to act quickly if there is any evidence that the framework is not delivering against its objectives.
On the second area, the Government are focused on the delivery of benefits and have regularly updated the cost-benefit analysis for the smart metering programme to reflect the latest available evidence. We are also very keen to ensure that even greater benefits can be achieved than forecast. For example, that is why we published our clean growth strategy and made a commitment in it to undertake further research and to trial approaches to using the data from smart meters to provide tailored post-installation energy efficiency advice on heating—the largest part of domestic energy bills—so that consumers will be able to make further changes to reduce consumption while maintaining comfort levels. That will further increase benefits.
We are looking at innovations that build on the smart metering infrastructure more widely, for example through the use of consumer access devices, which will enable greater home automation. I think that that is critical for the future and know that hon. Members on both sides of the Committee will agree—the nirvana is everybody having an app on their phones, knowing exactly what is going on in their house or flat and being able to adjust accordingly their patterns of usage, not just of heating but when they want to put on a washing machine or any other device, to save electricity. In fact, that may be done automatically in the future through algorithms and things. I could not possibly understand how they work, but I know they will transform people’s lives. As we know, the whole smart meter system is to provide the building blocks for that to happen.
In terms of policy framework—the third area that was suggested for review—we have made a public commitment to undertake a post-implementation review of the smart metering programme, drawing on evidence from the roll-out itself and a period after its completion during which smart metering systems will have been operating in steady state. The review will evaluate the overall programme, the realisation of the benefits and the overall effectiveness of the policy and regulatory framework.
Dr Whitehead
There is not too much more to say on clause 1 stand part, inasmuch as we have undertaken a good examination of the clause. We have made a number of suggestions to strengthen it. Although we had a little fall-out just recently, in general the discussion has proceeded in such a way that we are satisfied that the points we have raised have either been taken into account, explained properly, or given rise to some undertakings about how matters might proceed not within the context of the clause, but perhaps administratively in backing up the clause. Therefore we would not want to oppose clause 1 stand part.
New clause 4 has been grouped with the clause 1 stand part debate. That is sort of the wrong way around, because the Minister has given his assurances about new clause 4 before I had the opportunity to say what I wished to have assurances about, but we will let that one pass and proceed as if it was the other way around. Just to explain to the Committee, new clause 4 is drafted very specifically, again, in the context of the memorandum in which the Department set out the Delegated Powers and Regulatory Reform Committee, where the Department states its justification for taking powers in clause 1. It says:
“We consider this extension was necessary so that the Government can remove any barriers to the roll-out of smart meters which emerged and ensure that benefits for consumers are maximised in the continuing operating of smart meters following completion of the roll-out”.
It then states:
“The Government has made public commitments to undertake reviews in the following areas of the smart meter roll-out…data access and privacy to ensure the regulatory framework remains fit for purpose in 2018…benefits realised during the roll-out to assess whether we can do anything to encourage greater benefits in 2019…overall effectiveness of the policy framework post-implementation for future smart metering operations in 2021”.
As hon. Members will observe, that is exactly what has been set out in subsection (1)(a), (b) and (c) of our new clause. The commitments to reviews that the Department has already undertaken in principle for the extended period of the roll-out are transferred to the Bill. The Minister has already mentioned this morning his commitment to undertake an annual review that, I assume, would incorporate these particular concerns and considerations.
Richard Harrington
That is a perfectly fair assumption —that is our intention.
Dr Whitehead
I thank the Minister for that clarification. A commitment to an annual report to be laid before both Houses goes a long way towards satisfying our concerns about whether these particular wider commitments should be placed in the Bill. I thank the Minister for his commitment and will not press new clause 4 to a vote.
Patricia Gibson (North Ayrshire and Arran) (SNP)
I want briefly to add my voice and that of my party on new clause 4. I know that the Minister will agree that we need continually to reassure consumers that their data are securely and robustly protected in the course of this roll-out. I know that he will agree how important it is to ensure that meters currently installed are always to the highest specification of function and data security.
The Minister will also be concerned—like, I am sure, everybody else in the room—about the evidence that was taken that the smart meter network is being installed before its requirements as an internet-connected energy system have been fully determined. We would expect—I know that the Minister will feel this—that the Minister would do everything in his power to ensure that consumers are best protected amid this roll-out.
I impress on the Minister and remind him of the concerns raised in March 2016 in the Financial Times that GCHQ had intervened in smart meter security, claiming that the agency had discovered glaring loopholes in meter design. As we move forward with these considerations, I want to impress those concerns on the Minister.
Richard Harrington
I thank the hon. Lady for her comments and am very pleased that GCHQ did that, because it shows how it was included in the process of getting to the security stage that we are at today.
Question put and agreed to.
Clause 1 accordingly ordered to stand part of the Bill.
Clause 2
Smart meter communication licensee administration orders
Question proposed, That the clause stand part of the Bill.
Dr Whitehead
We have talked about the extension period; the second part of the Bill is about administration orders. These might be made in the context of the DCC’s failure to operate either because it has gone bankrupt or because its supply of funds dries up or is diluted for any reason and it can no longer continue—it is entirely dependent on the resources it receives from suppliers to operate. A number of clauses in the Bill relate to setting up a procedure to enable the roll-out to continue by recovering the DCC’s procedures, if and when in administration, in such a way that the flow of the roll-out is not interrupted. At this stage of the legislation, therefore, we need to concentrate on whether the things put forward—what can and should be done by Government to make that change while at the same time continuing with the roll-out in the unlikely event of administration—are good enough to ensure the roll-out continues and we achieve the purpose of ensuring a smooth passage.
I want to make two brief points, to which the Minister may want to respond. The first is about provisions in the Bill relating to what are unlikely events that probably will not happen, but conceivably could. It might be prudent to legislate to ensure that we are in a position to do something in the unlikely event of that happening. We had a debate about that recently in this Committee. What we are doing in considering the second part of the legislation is roughly what we were doing in the first part to try and strengthen the Bill. We did not succeed in doing that, but we will not be churlish or childish about that. We will go along with the idea that this is an unlikely event, for which we have to make prudent legislation to ensure that catastrophe does not take place as far as the roll-out is concerned.
The second point is that we are legislating this morning for an event that could occur to an organisation that has been in operation for several years already without this legislation being on the statute book. One might ask, therefore, what was happening in the meantime. Were we operating over a period of time where there was no protection for the smart meter roll-out programme from the possible bankruptcy or administration of the organisation that was essential to the running of the whole operation? That seems to me to be a considerable omission on the Government’s part.
Dr Whitehead
My hon. Friend is right. That is the situation at the moment, and that is what the Bill, very late in the day, seeks to rectify. I am not saying that one should not take part in the rectification of that problem. Clearly it should be rectified, and we need legislation that protects us in those circumstances.
I wonder if, as a gateway into this part of the Bill, the Minister might share some thoughts with the Committee on why this has not happened before and why we have had these circumstances for several years. I appreciate that it was before the DCC went live, which was only relatively recently, but the DCC was set up and a lot of money was put into it. All the various arrangements went through, and it was by no means impossible for that problem to arise to date. I am pleased that we are taking this step, but slightly alarmed that we have not done it previously. Can the Minister shed any light on why that was the case? Did the Government simply forget? Was the legislation so difficult to undertake that it has not been drafted until now, or was it not thought necessary to have this protection prior to the DCC being in its present position? It would be useful to have some guidance on what thinking went on before the legislation appeared.
Richard Harrington
Before making a few brief comments, I will try to answer the two very reasonable questions raised by the hon. Members for Southampton, Test and for Birmingham, Selly Oak.
I will deal with the unlikely event point first. The Government have to try to gauge how unlikely an unlikely event is. I hope the hon. Member for Southampton, Test accepts that it is a question of judgment. We have to draw the line somewhere on the level of unlikeliness, and we drew it on the wrong side of what he thinks is unlikely.
Richard Harrington
Yes, that is very good. I wondered what the hon. Gentleman did his doctoral thesis on, and now I have discovered it.
It is a judgment call. I hope I made it clear in my previous comments that I do not think his amendment is unreasonable, mad or anything like that; it is just that we have to try to make a judgment, and it is on a different side of the line to his.
The question of why we have not done this before is, like many of the hon. Gentleman’s points, very valid. It is one of the first questions I asked officials when considering this. I have been given a note, which I have not read; I will answer from what I think, rather than what I have been told. I asked that very question. I understand that this was consulted on in 2011 by the Department. The official reason—genuinely—is that there is a lot of competition for parliamentary time, and this is the first opportunity we have had to deal with something that is reasonable, but at the highest level of unlikeliness on the unlikely-o-meter, if there were such a thing. There must be an unlikeliness app to gauge the level of unlikeliness.
I personally think this should have been done before. It was probably less important than it is now and going forward, simply because of the scale of use and the containability of unlikeliness. This was the first opportunity I had to introduce the clause on what to do in the event of these unlikely circumstances, and it is important. It is to stop other interested parties putting in administrators. There are always commercial administrators—for example, companies that have not been paid. There is a normal system to do this that still exists, but it does not have the level of control that the Department or Ofgem would have.
This is important. I could spend 10, 15 or 20 minutes of the Committee’s time going through the reasons why it is important, but those reasons will be debated later on in the Bill’s passage. I hope I have answered the points raised to the best of my ability.
Steve McCabe
I do not want to dwell on this, but I am genuinely curious. When the Minister says that the Department consulted on this and decided that there was no need for this sort of protection or safeguard because of parliamentary time, or whatever reason, who did they consult? Presumably not the customers, who would have been the first to say, “Hang on, we don’t like the sound of this.”
Richard Harrington
I thank the hon. Gentleman for that comment. Those consulted were stakeholders and so on. I would remind the hon. Gentleman and the shadow Minister that the DCC only went live in 2016. I accept that there would have been a point between 2016 and now that would have been ideal. It is not uncommon to have special administrative regimes in this kind of world—this is the first one for this particular administrator—and it seems obvious for Government or the regulator to have powers basically to override the normal administration system. Given the millions of smart meters around, and given in particular the system whereby they are all electronically talking to each other—which we all want—it would have been negligent for the Government to leave this for another four or five years. It is quite reasonable for this to be the first legislative slot since it went live.
Having said that, I accept that there has been no unreasonable comment in the points made by the hon. Gentleman. There is plenty to discuss in this Bill, and everyone would agree that a special administration regime guards against a risk that the licensee might go into normal insolvency proceedings, which is a standard process within the Companies Act 2006 and something that companies do. The reason that this is a level of unlikeliness that makes it really unlikely is that the income side is more or less guaranteed, as we heard in the evidence from the experts. It is prudent, given that these risks could be there, to have safeguards in place. That is what the clause does. These measures all have precedents in other special administration regimes for energy networks and suppliers. The clause is a sensible measure and I commend that this clause stand part of the Bill.
Question put and agreed to.
Clause 2 accordingly ordered to stand part of the Bill.
Clause 3
Objectives of a smart meter communication licensee administration
Steve McCabe
I beg to move amendment 8, in clause 3, page 2, line 34, after “efficiently”, insert “, transparently”.
This amendment would make it an objective of the smart meter communication licensee administration to operate in a way which would allow the general public to be aware of his functions.
It is probably quite fortunate that this debate follows the discussion that just took place, because the purpose of amendment 8 is to make it an objective of the smart meter communication licensee administration to operate in a way that would allow the general public to be aware of its functions.
We are talking about a situation that is clearly about accountability, albeit one that people think is unlikely. This is a situation in which a massive investment goes wrong and the Minister is forced to set up a special administration regime. In those circumstances, it makes sense for people to know what is going on. It is a matter of accountability for the public, who, as I have said a number of times, are paying for this programme through their bills. It is therefore right that if ever a situation arises in which a smart meter communication licensee administration is in place as a result of a failure of the DCC, that administration should operate in a way that is transparent, open and obvious to Members in all parts of the House and, most importantly, obvious and transparent to members of the public.
Dr Whitehead
My hon. Friend underlines the importance of putting the word “transparently” somewhere in clause 3. An event may happen that the public would properly be interested in; they may be concerned about what might happen to them as far as administrative processes are concerned or about the effect on their bills of an event that caused substantial additional money to be spent over and above what had already been set aside. We must emphasise that all the costs that have been set out for the smart meter roll-out—be that the cost of the smart meter, the cost of the advertising campaign or the cost of the DCC itself—will, one way or another, be recovered from customers’ bills.
With that in mind, putting in the Bill a requirement for processes to be fully transparent would serve the consumer positively. I support the addition of that single word—“transparently”—to the Bill. I cannot see any downsides to that. It would not in any way impede the process of administration. All the objectives and procedures in clause 3 to ensure that the DCC runs as effectively as possible and protects the roll-out are sound. Inserting the word “transparently” would add to that protection and do nothing to undermine it, so I hope that the Minister will seriously consider doing so.
Richard Harrington
I understand the purpose of the amendment well. On the surface, it seems to be a good thing. Transparency is good anyway, and I will argue that the provision would lead to transparency. It is reasonable to argue that this is an important matter and that we want everyone to know what is going on. We are all here because we are part of a democratic process; I do not think anyone could disagree with that principle.
However, I cannot agree with the hon. Members for Southampton, Test and for Birmingham, Selly Oak because of what the amendment would mean in practice for the administration. Thankfully, none of us have experience of this kind of public, as opposed to commercial, administration—I know that is not quite the technical word—and I accept that. By the way, there will be plenty of legal requirements on the administration, which I will come to in a minute. It is just totally unrealistic for an administrator, given those requirements and all the complexities that it will have to deal with, unlikely though it might be, to spend hours ensuring that the public—I think this is what the amendment would mean—are kept informed of all the administrator’s moves, given that administrators have to meet plenty of requirements. I ask the Committee to bear that in mind; I cannot accept what the hon. Gentlemen said. That is not because we are secretly against transparency or anything like that.
Clive Lewis
It is not so much that the administrator would need to keep the public informed of every step they were taking, but that if the public, MPs or parliamentarians or others were interested, they would have access to the information to ensure that lessons could be learned in the future, if they felt that that was a requirement. Rather than the administrator giving out the information, it would be for the public or others to access the information; they would be able to access it.
Richard Harrington
I thank the hon. Gentleman for that intervention. I can see that afterwards, but not in the course of an administration, when there are very complex duties for the administrator to learn, be instructed to learn, and so on. I find this proposal quite difficult in practice; I am quite concerned about the effects of it. I am not concerned about the purposes of it, which I think are very noble. Perhaps I will answer the hon. Gentleman’s question in my remarks in a way that is more satisfactory to him; I hope so, anyway. Perhaps it is a victory of hope over logic; I do not know, but we will see.
I confirm for the record that the object in clause 3 is to ensure that the DCC’s functions under its relevant licences are performed efficiently and economically, pending the rescue of the company or transfer of its business. However unlikely that might be, as we know its revenues are guaranteed, we are on the Government’s side, rather than the shadow Minister’s side, of the line on unlikeliness. The intention behind the clause is to ensure the continuity of the smart metering service while minimising the costs incurred. In providing for continuity of services, the benefits of smart meter services are maintained and the costs—financial costs, but also the huge inconvenience that would come from any interruption to smart meter services—are avoided. I do not mean an interruption to the supply of electricity; I am talking about the gauging of how much people are using and, I hope, in the future, more fancy tricks, to allow them to control their costs, supply and everything that we have mentioned before.
Under the Insolvency Act 1986, as modified by this Bill, there is already an obligation for the name of the smart meter communication administrator to be stated on the DCC website; it should also be stated that the affairs, business and property of the company are being managed by that administrator. There are clear provisions setting out the functions of a smart meter communication administrator, including its powers.
As with the energy network operator and energy supplier special administration regimes—the nearest comparable regimes—we would expect the smart meter communication licensee SAR rules to require the smart meter communication administrator to file various documents at Companies House. That would include, for example, a copy of the administrator’s proposals for achieving the objective of the smart meter communication licensee administration, which would contain information about the administration. The administrator has to submit regular progress reports. Once filed at Companies House, those documents would be available to the public and would keep them informed about the administration and its progress in the way that I hope the hon. Member for Norwich South meant in his question.
I hope that hon. Members will recognise that information would already be available to the public and other interested parties through the existing procedures to ensure transparency about the administration. I hope that they will consider the points that I have made, because they are important. This proposal implies that the administration process could be helped dramatically by the public’s having access to information and knowing what is going on all the way through. I think that it is very important that the public experience no interruption whatever and that the administration is carried out quickly and efficiently. We must not forget that the whole reason for the SAR is to reassure consumers and other stakeholders that their smart meter services and the benefits that arise will be protected, and not interrupted in any way.
I state again that the administrator would be under a duty to manage the company efficiently and economically. When companies such as KPMG, PwC and other big companies act as insolvency practitioners, they do so as part of a regulated profession. All normal insolvencies, and not just special administration regimes, are covered by that. I therefore ask the shadow Minister and the hon. Members for Birmingham, Selly Oak and for Warwick and Leamington to consider what I have said and to withdraw this very reasonable amendment. I fully commend the purpose behind the amendment, but I think we are already fulfilling that purpose in this provision and with the existing rules on administration.
Steve McCabe
It is a devastating blow to hear that the Minister cannot bring himself to accept the word “transparent”, but in the circumstances I do not think that we would gain very much by pressing this to a vote. I hope that the Minister will seriously reflect on what has been said, because the circumstances in which he would have to exercise this power would be a massive failure and, almost certainly, a massive loss to the public, and I do not think anyone would be comfortable thinking that there had been any attempt to hush that up or push it to one side. I hope that he will reflect very seriously on why it has been raised. I do not wish such a failure to occur at all, but I am very clear that if it did, I would be one of the first at the front of the queue saying, “What on earth went on here?” I do not think there would be any gain in pushing it, so I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Richard Harrington
As with the last amendment, I perfectly understand this amendment’s purpose: to require that any regulations that the Secretary of State lays down about prioritisation of DCC activities following administration
“would have to take into account the context of the full services offered by the DCC.”
I understand the purpose, but I will do my best in the next few minutes to argue that there would be no effect on the policy. The precise intention of the proposed regulations is to specify the activities carried out by the DCC to which the smart meter communication administrator must give priority, and how that should be done, taking account of the full range of activities that the DCC is carrying out under its licences at that time. That is exactly what we are trying to do; we are just trying to ensure that the functions of the DCC under its licences are performed efficiently and economically, as I said before.
The administrator may face a judgment on which DCC services to prioritise; it is quite normal for an administrator to do that. The most appropriate judgment will depend on the circumstances, but that may not be clear to the administrator on the day that they take over the administration, and there may be a trade-off, as there are in administrations, between prioritising different services.
The clause to which the amendment relates gives the Secretary of State the power to make the regulations specifying which activities carried out by the DCC under its licences must be prioritised by the administrator, and how that should be done. As the smart metering programme develops beyond the foundation stage—the stage we are fundamentally preoccupied with as the purpose of the roll-out—we expect the number of services provided by the licensee to increase. The licensee can, for example, offer bespoke services for suppliers and others, building on the smart metering programme. I know that is what we all want. As part of that, consumers may be able to choose to give third parties permission to access their data, allowing a much wider range of energy-related services to be developed: products, advice, switching suppliers, tariff choices and all that sort of thing.
Smart metering data may also be used, where the consumer so chooses, as part of taking that service—for example, in supporting home energy management services and even for non-energy-related services, such as smart washing machines that do the laundry at different times so it costs less. That is not directly to do with the supply of energy but with the consequences that matter to most people: “How much will it cost and how can I save money?” I suppose it could be used to identify faulty or inefficient appliances, or to support carers, through a service that allows family members to be updated about changes in routine. That sounds futuristic, but there are many interesting things that could come from the programme if we take the big picture for the future.
It might be in the interests of consumers and the wider energy market for the administrator, if that day comes—I do not think it will—to prioritise core services. If we keep smart metering working, the other stuff is all very nice, but for a time it could not be a priority, in order to keep the core system going. I believe it must be the role of Government to guide the administrator in that respect, because of the speed that must be taken into consideration within an administration. The precise aim of the regulations is to provide future flexibility to ensure the full range of activities carried out by the DCC at that point can be taken into account. That prioritisation will support the continuation of services in the overall interests of the public.
I believe the Bill delivers the noble aims of the hon. Gentleman’s amendment. I hope he will consider what I have said and the explanations I have given, and will agree to withdraw the amendment.
Dr Whitehead
In the context of the fact that what is set out in Hansard has some legal bearing, the Minister has this morning set out in terms fairly similar to the amendment the scope of clause 3 and the Government’s intention in regulations made under subsection (6). I do not want to press the amendment. I think it is agreed that we aim to ensure that the DCC’s circumstances prior to administration should be repeated as closely as possible post-administration for the general good of the roll-out. That is what I understood the Minister to say, and I hope he will confirm that.
Richard Harrington
I confirm that what the hon. Gentleman just said is precisely the case. I tried to be as clear as possible, and I am glad that he, like me, respects that things in Hansard are meant to be as they are said. I can clear that one up.
Dr Whitehead
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Richard Harrington
Thank you, Mr Gapes. I am sure Opposition and Government alike will take your warning on a Division. I hope it is not necessary because I hope to explain in the time allowed, as I have done with other amendments—some successfully and some less than successfully.
I can see clearly that this amendment would mean that in the unlikely event of insolvency—we all agree it is unlikely—any regulations that we will need to bring forward about the administrator’s priorities, which we have discussed before, would need to be approved by a resolution of both Houses. I can see the principle behind that, and it is a noble one, but I would argue that because of the speed required and the technical nature of these regulations, it is appropriate to use the negative procedure, which the hon. Member for Southampton, Test does not like.
I made points in the debates on the previous amendments about the choices that the administrator has to make and the speed with which they have to make them. It is considered reasonable—and I know the hon. Gentleman would agree—that the Government should guide the administrator in respect of this. That is why we are asking for these powers, so that the Secretary of State can make regulations specifying which activities carried out by DCC must be prioritised by the administrator and how this should be done. The question boils down to the nature of these provisions, which I argue are technical and therefore suitable for this kind of procedure.
The DCC has core services that provide energy suppliers and others with around 110 service requests. Again, I would ask both Mr Gapes and the Committee to consider the practicality of the affirmative system. This covers a range of areas, for example the provision of pre-payment services, the management of security credentials, changes of supplier events, the technical configuration of devices, access to network—I could go on, there are 110 of them. It would be necessary to review these services and prioritise them against new services, which I have mentioned before and which may be offered.
I argue that the regulations made under clause 2 would be largely administrative and technical in nature, focused on the specifics of implementation and acting to narrow rather than add to policy scope, entirely to protect consumers’ interests. We need to act promptly to achieve this, so that the administrator has appropriate direction. I believe that the procedure proposed will provide Parliament with sufficient oversight for supporting this ambition. I hope, not just because of time constraints but because I think it is the right thing, that the hon. Gentleman will understand our concerns and agree to withdraw his amendment.
Patricia Gibson
I want to speak to this amendment in relation to parliamentary scrutiny. In my party, we would welcome any enhancement of parliamentary scrutiny, but I need to draw the Minister’s attention to a number of concerns, and I am worried about time.
I am speaking about the need for enhanced scrutiny because I do not believe that the amendments allow for sufficient scrutiny, for reasons I will go on to discuss. Energy UK and Ofcom both state that aggressive selling is wrong. I am sure we would all concur with that, but that is little comfort until aggressive selling is properly addressed. That is going on and that is why more and enhanced scrutiny is so important.
It is my understanding that Ofgem has the power to fine energy companies up to 10% of their annual turnover if they fail to meet their licence conditions.
Richard Harrington
I am happy to talk to the hon. Lady about her consumer concerns, but I agree with your ruling, Mr Gapes, that what she has said is not relevant to this amendment, which is about technical considerations, and parliamentary scrutiny of those, in the event of the demise of the DCC and a special administration regime being put in. The point is not relevant to the amendment, but it is a valid concern. I am happy to discuss it with her informally, if not formally now.
Dr Whitehead
The Minister has alluded to a particular point about regulations under this clause, which relates to the speed that would be necessary to act under the circumstances of administration. That is a defence of the idea that there should be a negative resolution; presumably, the fact that Parliament at that time did not want to proceed to an annulment would allow things to be done speedily. I understand that, so on that narrow point we will not press the amendment to a vote this afternoon.
I draw the Minister’s attention to our next debate about a similar set of circumstances that concern a negative resolution, and to which that defence cannot be mounted. I hope that he will take his own words from this morning into account when we return this afternoon to debate the relevant clause. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Ordered, That further consideration be now adjourned. —(Mike Freer.)
Tuesday 28th November 2017
(6 years, 12 months ago)
Public Bill CommitteesSmart Meters Act 2018 Read Hansard Text Amendment Paper: Public Bill Committee Amendments as at 28 November 2017 - (28 Nov 2017)
The Committee divided: - Ayes: 8 / Noes: 9 - Question accordingly negatived.
This text is a record of ministerial contributions to a debate held as part of the Smart Meters Act 2018 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
Dr Alan Whitehead (Southampton, Test) (Lab)
I beg to move amendment 16, in clause 4, page 4, line 9, at end insert—
“(ba) in paragraph 33(3), for “negative” substitute “affirmative”
This amendment would apply the affirmative procedure to the use of provisions of Schedule 20 of the Energy Act 2004 under this Act.
The amendment, which I alluded to this morning, relates to a further clause in the Bill to allow regulations to be made by the negative procedure, not the affirmative procedure that I think hon. Members would prefer in most circumstances. Clause 4(1) deals with the possibility that, as smart metering develops, the licence holder of the Data Communications Company could be a non-GB company. The clause sets out what would be the conditions of administration of the future DCC in the event that the company that was the ultimate owner was not a UK company; separate arrangements might have to be made for it. In the memorandum from the Department for Business, Energy and Industrial Strategy to the Delegated Powers and Regulatory Reform Committee, which I have mentioned previously, the procedure that is set out in the clause is described thus:
“We consider that the negative resolution procedure is justified for providing for what would be detailed modifications narrowly focused on particular provisions of insolvency legislation and their specific application to a non-GB company. Affirmative resolution procedure or new primary legislation is not considered to be appropriate given the nature of the changes.”
No particular reason is given for the fact that affirmative legislation is not considered to be appropriate. A further consideration that is new in this clause—it was not the case with the previous clause that we discussed in relation to affirmative resolution procedures—is that, as the memorandum states at the beginning of the paragraph, legislation on what would happen if the owner was a non-GB company would be undertaken using a Henry VIII power. We have not yet discussed Henry VIII powers in this Committee, although we discussed them in a previous Committee in which the Minister and I were involved. On that occasion it was generally concluded that the use of Henry VIII powers in legislation was a bad idea. As I am sure hon. Members will know, Henry VIII powers essentially allow primary legislation that is on the statute books to be amended by secondary means. As a general principle in this House, one would have thought that enabling the Government to do that—depending on what bounds have been placed on the procedure—is potentially a worrying development. Without recourse to the Floor of the House and a full debate on the legislation, a Government can, if that legislation contains Henry VIII clauses, use secondary legislation to alter what Parliament had previously discussed during the full process of Second Reading, Committee, Report and so on, through both Houses of Parliament. The Government can amend that legislation through a regulation that substitutes for a piece of the primary legislation that was discussed previously by the House. That seems a bad principle of legislation, and if it is to be used, it should be used extremely sparingly and only in emergency circumstances.
This Bill is generally quite benign and innocuous, but surprisingly it contains a Henry VIII power to amend the Insolvency Act 1986 and the Energy Act 2004 and its schedule by secondary legislation. In this instance, the proposal to allow that is not only suggested in terms of providing detailed modifications on particular aspects of the insolvency rate legislation by secondary legislation, but it enables a Henry VIII power to be put through Parliament on the basis of a negative resolution which, as I said this morning, would give Parliament very little scrutiny of the whole process.
This morning we discussed the difficult conditions that might apply if the DCC became insolvent, and the need for speed and urgency might conceivably justify passing such a measure through the House by negative resolution. We cannot, however, really apply those arguments to this clause because this is not something that will need to be done as a matter of urgency. As the memorandum states:
“The earliest the licence is expected to be re-tendered and could potentially be transferred to a non-GB company would be 23 September 2025.”
What we are considering is not exactly an urgent process, and neither is it in parallel with the ideas put forward when we discussed the previous clause. This is a Henry VIII power that proposes to amend primary legislation by means of a negative procedure where no urgency is envisaged—it is as simple as that. In those circumstances, it seems to me, and even given the Minister’s own words, that there can be little justification for taking through these legislative procedures with a negative resolution. That is why the amendment substitutes the word “affirmative” for “negative”. Bad though we think Henry VIII powers are generally, if there is to be such a power, it should at least be passed by affirmative, rather than negative procedure, and I hope that the Committee will accept the amendment.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington)
I thank the hon. Gentleman for his comments. Henrys were discussed in the Committee that considered the Nuclear Safeguards Bill, including under the illustrious chairmanship of the then Mr McCabe, whom we must now refer to as the hon. Member for Birmingham, Selly Oak. It was interesting to hear contributions from the hon. Gentleman not just about Henry VIII, but about Henry VII, the French king, I seem to recall, who I looked up on Wikipedia that very evening.
Dr Whitehead
I need to put a correction on the record in that case, Mrs Gillan, because I did mention Henry IX, the French king. It was, in fact, Henry IX of Bavaria. I was mistaken at that point, but there was indeed a Henry IX and he lived in Bavaria.
Richard Harrington
I must formally apologise and hope that the Hansard writers are able to expunge the fact that I got the wrong Henry in the wrong country at the wrong time. In no way was it meant as any form of insinuation, implication or anything improper about the historical knowledge, or indeed, any knowledge, that the hon. Gentleman has. I must apologise for any offence caused. If this were outside in the world where one gets sued, I would have to make a donation to the charity of his choice, but I do not think the difference in Henrys is quite the point he was making.
It is a true and interesting point, which is relevant to so much legislation in this place—many things far more politically contentious than what we are discussing here today. Where it is appropriate for Government to have powers that are delegated is a big issue. I know that in the European Union (Withdrawal) Bill that is going through at the moment this has become quite a big cause célèbre, and it is one with which I have a lot of sympathy. I will try before you rule me completely out of order, Mrs Gillan, to talk about the specifics of this particular Bill, which, by powers of the Henrys, is quite limited in the powers it asks for.
The powers we need are of two types: first, as the hon. Gentleman gracefully and properly conceded, in some cases there is the need for urgency; a Secretary of State of whichever political complexion may need to be able to act quickly. Secondly, there is the question of the general type of statutory instruments, which are dealt with in the affirmative or negative way.
Stephen Kerr (Stirling) (Con)
Is there any precedent for using negative resolutions in relation to non-UK companies that have been awarded licences in any facet of our economy?
Richard Harrington
I cannot tell him about companies generally, but I know within energy, which is my field, that there are precedents within the Energy Act 2004. My hon. Friend the Member for Finchley and Golders Green next to me has told me the actual point—in fact he has not, he has told me exactly what I have just said. I was trying to be clever and remember the clauses, but I know it was the Energy Act 2011, which set up other special administrative regimes. This is a common system for SARs. There is ample precedent for that and it would seem very strange, for no particular reason, to give this special administrative regime a different rule to others. I hope that the hon. Gentleman will take that point into consideration.
The SAR has largely been formulated with GB-registered companies in mind, since a GB company is the current Smart Meter Communications Licence holder; that is true. However, there is a possibility that at some point in the future the licence holder could be a non-British company. He is right to say that the earliest the licence is expected to be re-tendered is September 2025. I know that delegated legislation moves slowly, but I accept his point that this is not a speed matter. I could not even try to argue in front of him or yourself, Mrs Gillan, that this was the case.
Although a number of adaptations to the special administration regime catering for non-GB companies have already been made by the Energy Act 2004 applied by this Bill, we may find that further modifications are needed to account for a non-British company becoming active in the provision of smart meter communications services.
Dr Whitehead
The Minister tried quite hard, but did not actually say anything new, other than what is already on the delegated legislation memorandum that I myself read out to the Committee. That was essentially the Minister’s defence of the procedure he is seeking to introduce.
I might have anticipated some other, particular reason—in addition to it not being urgent—for putting this forward as a negative resolution. There apparently is not one, other than that it is fairly narrowly drawn and relates to the Insolvency Act 1986, but nevertheless it amends the Insolvency Act 1986 by secondary legislation and negative procedure. That is the point that I was making: it is not the narrowness of it but the procedure by which the legislation is amended. This is an important principle for legislation in general, and I am therefore afraid that I do not think we can withdraw the amendment this afternoon. We would like to see this an affirmative procedure. In the absence of any good ideas that might arise in the next few minutes—a bit like the EU negotiations on the border—we may have to divide the Committee on this.
Richard Harrington
I hope the hon. Gentleman knows that I do try to accommodate wherever I can. To disagree with the argument I have put forward—which is “the other ones are like that”—would be basically to say that the other ones are wrong. I cannot see any rationale—perhaps the hon. Gentleman will enlighten me—why one should be different from the other energy one. To me that is the important point; to him, I do not think that it is.
I would ask him to reconsider. If it is really important to him, rather than put it to a vote—which he is welcome to—he could sit down and discuss it with me before Report, when he would still have the option to do what he wanted. I am very happy to do that, but it seems to me to be an administrative matter and, to him, it does seem to be a point of principle. It if is a point of principle, I cannot really accommodate him because I have to show the precedents, but there may be other things we could explore. If that were a suitable option, I would be very happy to do it.
Dr Whitehead
I am afraid that we must press the point.
The fact that there is some bad legislation on the statute book does not mean there should automatically be more. I am afraid that that does not take us much further forward.
Question put, That the amendment be made.
Richard Harrington
I have discussed the clause extensively and will not repeat my points other than to say that the powers are absolutely necessary. Hundreds of pages of things, such as quorums of meetings, have to be dealt with in this way. We propose to extend the application of the existing power, for which there is plenty of precedent, in relation to the energy supply company special administration regime.
Dr Whitehead
There is a new clause that refers effectively to what we are considering here, but I am happy for it to be discussed separately, even though it has a substantial bearing on whether a non-GB company might be a successor to the DCC. As far as this stand part debate is concerned, I have no further comments other than that I will save my fire for later when we discuss the new clause.
Question put and agreed to.
Clause 4 accordingly ordered to stand part of the Bill.
Clause 5 ordered to stand part of the Bill.
Clause 6
Modifications of particular or standard conditions
The Chair
Just to reassure you, Mr McCabe, you will have the opportunity to visit this point briefly when we discuss new clause 11. I think you will find that a good place for it.
Richard Harrington
Many of the points made by the hon. Member for Birmingham, Selly Oak had to do with the general costs passed on to customers in the electricity market, a small part of which involve the smart meters that we are discussing. The justification for smart meters, as far as I am concerned, is ultimately to give customers a control over their electricity bills that they do not have now. Now they have one choice, which is to move. It is a good choice, and one that I have exercised myself, but compared with what they will get out of smart meters, it is crude.
I am not making light of the costs charged—this amendment is not about the general costs—but I hope that they will be small fry compared with the huge savings that they will create over the years, although the costs of installation have unquestionably gone up; I will not pretend that they have not.
I will try to deal with the amendment generally. I made a note of the hon. Gentleman’s questions while he was speaking, as you would expect me to do, Mrs Gillan. He asked about the fines that can be levied. I point out that the fines are levied by Ofgem rather than by the Department via the Secretary of State. By the way, I was most impressed and surprised to hear the hon. Gentleman quote Centrica and its complaints as an example to all of us. Apparently, it did not want to bear the costs of smart meters or charge its customers for them; it wanted to pass them on to the general taxpayer.
Grahame Morris (Easington) (Lab)
The Minister’s defence is that lots of the powers rest with the regulator, Ofgem. However, the explanatory notes say that the Energy Act 2008 and later Acts have given the Secretary of State powers to veto any proposals by Ofgem to consent to a number of things, including the transfer of the DCC licence, which we discussed earlier. He already has extensive reserved powers.
Richard Harrington
To continue with the comments of the hon. Member for Birmingham, Selly Oak: if British Gas was fined 10% of its turnover, in theory that would be passed on to its consumers. In practice, of course, that would make it so uncompetitive that all its consumers would move somewhere else. The purpose of these measures is not the fines; it is all the things that happen before the fines to make suppliers comply.
Technically, the hon. Gentleman’s point is correct: in theory, all costs go on to consumers, just as in general Government finances all Government expenditure goes on to the taxpayer. I do not think the point is that relevant, but I cannot disagree with what he said other than to say that the fines are not a tool for compliance; they are the ultimate response.
It is true that Ofgem administers the programme and the legal requirements are on it to take all reasonable steps to ensure that households and small businesses have smart meters. The fine is for Ofgem to decide. I remind the hon. Gentleman, before I move to the substance of the amendment, that we have to consider the net benefits as well as the costs. Every single consumer who has a smart meter is making savings on their bill from day one, so experience shows. The real prizes are for the future: the information the meter gives and the change in behavioural habits that happens surely make this worthwhile.
It is not appropriate or feasible to change the policy to move the cost on to the general taxpayer, but it is for us to monitor the situation carefully. With volume, the cost will go down. Compared with many other costs in the generation and supply of gas and electricity, the smart meter bill is quite small given the price of the physical SMETS 2 meter, which, as we have discussed in previous sessions of the Committee, is lower than the SMETS 1 meter’s, and given the cost of the installation and administration that goes with it, which is the same for SMETS 1 and SMETS 2.
I return to the specifics of the amendment. The Bill allows us to reclaim the administration costs that effectively come from the end user via the companies—that is true. It allows the Secretary of State to make such modifications to the licence conditions, where he considers it appropriate to do so, in connection with the special administration regime. The key point is that the clause requires the Secretary of State to consult affected licensees and such other persons as he considers appropriate prior to making modifications to licences. The licence modifications envisaged under this power have been drafted and a version has already been made available along with the explanatory notes to the Delegated Powers and Regulatory Reform Committee and to the public via the parliament.uk website.
The licence conditions try to allow the administration costs to be recouped from the industry insofar as there is a shortfall in the property available for meeting the costs. I accept that, in any business, recouping something from the industry involves recouping it from the customer in the end, which is the point I conceded to the hon. Member for Birmingham, Selly Oak. In the crudest sense, that is true of purchasing anything: the cost of the manufacturer, importer or distributor in any form of good or service is met in the end price. That is bad unless consumers have the choice and the ability to easily switch to a supplier that does not have that incumbence, as is the case here.
I have always envisaged that when we formally consult on those modifications in due course, the consultation will be published. If it is helpful to the hon. Member for Birmingham, Selly Oak, I am happy to provide him and everyone else with an undertaking that the consultation will be publicly available and addressed to the public, as well as to the other consultees involved. On the basis of that undertaking, I hope the hon. Gentleman will withdraw the amendment.
Steve McCabe
The Minister made a very helpful offer at the end. He says that every single consumer is making a saving, but I repeat that that is not true if the smart meter is in dumb mode. People are not making a saving in those circumstances.
Dr Whitehead
My hon. Friend the Member for Birmingham, Selly Oak made a very good case for this amendment, to which I want to add only the question of what is happening throughout the roll-out process. My point relates to the cost of the process and the cost-benefit analysis. There will be a better opportunity in discussing a later clause to go into that in greater depth. For the purposes of this particular amendment, the act of funding an administration without knowing the amount involved, which will inevitably go on to customers’ bills, could result in a further deterioration of the cost-benefit arrangements in the context of the process as a whole.
We see already a number of areas in the August 2016 cost-benefit analysis. Page 15 of that analysis sets out how a whole series of areas reduced their net present value by substantial amounts, sliding away from the previously positive cost-benefit finding, with an overall reduction in net present value of some £500 million.
We may well be in for further considerations as more cost-benefit issues arise, and as the programme unfolds we could be in the position of considering the statements made about the benefits to the public of smart meters overall. Let us not forget that the initial cost-benefit analyses looked very rosy compared with the programme’s predicted cost. One could argue that although there may be higher consumer bills to cover the programme’s implementation, the benefits to the customer, consumers and the country as a whole would be considerable.
I will quote from an academic paper entitled “Vulnerability and resistance in the United Kingdom smart meter transition”: the authors describe the expected combined total cost of the programme as being “at least £11 billion”, or more than £200 per household. It adds:
“Even the marketing campaign inspires awe, with £100 million committed over a five-year duration of the program, convincing Barnett”—
an academic authority—
“to estimate that it is the biggest advertising campaign in the world in the ‘next five years.’”
All these costs will go on customers’ bills, one way or another, and will be subject to that cost-benefit analysis as it comes through. In the event that administration is required of the DCC, it seems essential for us to know the impact of that administration on total bills to the public, and the impact on the net benefit. There might be circumstances in which the DCC goes into administration, is rescued in the manner suggested in the Bill, is put forward on a different basis and ends up being a net cost benefit to the public. But, apparently, we do not know the likely cost in such circumstances or what the benefit might be, and we do not have any mechanism for appraising that against what else is in the cost-benefit analysis.
The purpose of the amendment, admirably crafted by my hon. Friend the Member for Birmingham, Selly Oak, is to do just that. It would not stop the Minister from doing anything in particular; it is simply saying, “Have a good mind to that overall cost-benefit situation. Make sure you are clear about the costs and benefits of that process. Make sure that that gets reported and sees the light of day as far as the public are concerned.” That seems to me to be a sensible coda to put in the process that does not in any way put a brake on it. I think the whole Committee could support the amendment.
Richard Harrington
I thank the hon. Members for Southampton, Test and for Birmingham, Selly Oak for their contributions. Clause 6 grants the Secretary of State the power to make modifications to licensing conditions when he or she considers it appropriate to do so in connection with the special administration regime for the smart meter communication licensee.
The licence modifications envisaged under the power are already drafted and publicly available. They allow the costs of administration—however unlikely we agree such an event to be—to be recouped from the industry where there is a shortfall in the assets it gets back to meet the costs. As the hon. Members for Southampton, Test and for Birmingham, Selly Oak have said, it is hard—indeed, almost impossible—to estimate the cost of administration up front, and I fully accept their point that there cannot be a blind process or an open cheque; a firm of accountants should not be able to do what they want, when they want, and then charge for it.
One reads about insolvency operations in the press and sometimes one gets the impression that the costs of the administration are more than the insolvency achieves. However, I think that is very unlikely in this case, simply because of the guaranteed revenue stream and all the things we have been through before. The point made in moving the amendment is right: we should try to understand what the costs would be.
It has been estimated that the DCC has cost billions, and that is basically everything aggregated over the period. To put the issue in perspective, it projects its annual costs to be £67 million in 2019-20. Obviously, a significant part of the administration costs would pay the ongoing costs while the business is kept going to get more revenue and find a buyer. Those are already planned for; they are not new costs. In layman’s terms, new costs would be the fees for accountants and lawyers to deal with the actual physical administration itself. Those new costs are not to do with the actual running of the business, and I believe them to be limited. On the issue of scale, I cannot see the administration costs being disproportionate to the annual costs or the huge amount of set-ups.
The key point of the amendment is that the hon. Member for Birmingham, Selly Oak and the shadow Minister feel that we should try to estimate the costs and that a lot more knowledge is needed and should be made available to the public. When the Government come to formally consult on the modifications, which they will in due course, the consultation document will provide an assessment of the potential scale of the cost that might need to be recouped from the industry. That can only be an estimate, because no one knows the exact figures, but there must be comparables. I suspect that the accountancy firms and other relevant parties, such as a regulator, will put in their estimates. I am very happy to provide that assessment in the consultation document. The responses that come in should be very helpful.
On the scale of cost, the assessment will need to take a variety of factors into account. Part of that is the running costs of the licensee and an estimate of the special administration cost. We will take advice from relevant parties—including the independent regulator, Ofgem—when providing the estimate of the potential cost. I undertake that the consultation on the licence modifications will be published and that we will invite comments from energy consumers as well as other representative bodies. One of the questions that we will expressly ask is whether the consultees agree with the assessment that we are laying out in the consultation. I undertake that, prior to the licence modifications being made, I am happy to make available to both Houses of Parliament the Government’s response to the consultation, which will report on the conclusions on the estimated potential scale of costs.
Having considered those points, I hope that the hon. Member for Birmingham, Selly Oak will withdraw the amendment.
Dr Whitehead
We are overrun with Henrys again this afternoon: there are more Henrys in clause 8. I have not tabled an amendment because the question of amendments to Henry VIII clauses has been tested, but the Committee should be aware that clauses 8 and 9 are substantial Henry VIII clauses. Both seek to make regulations by negative procedure. The clause to which I drew attention earlier is therefore not an accident; it is part of a theme that runs right through this Bill and that theme ought to be looked at.
We could have a debate about the justification for the procedure in clauses 8 and 9. Frankly, I think they have been written to make the Government’s life easier. That is not a sufficient reason to justify the enactment of legislation. I hope that I can recruit the Minister on future occasions for what I might call a crusade—
Dr Whitehead
Different Henrys. I hope to recruit the Minister to drive such arrangements as far as possible out of our legislative procedure. I appreciate that there are circumstances in which they are necessary, but they do not apply to clauses 8 and 9. I want to register my concern about what is in the Bill, but I will not take the matter further at this stage.
Richard Harrington
I have carefully noted the shadow Minister’s comments. I would call this a minor piece of Henrying—not a Henrietta but a Henryette. I think we disagree on the scale. The powers are very limited and very necessary. I accept the good spirit in which the shadow Minister made his comments, but the powers are necessary for the reasons I have already given. We disagree, but I thank him for his good grace and his acceptance that I have made the arguments before, albeit unsuccessfully as far as he is concerned.
Question put and agreed to.
Clause 8 accordingly ordered to stand part of the Bill.
Clauses 9 and 10 ordered to stand part of the Bill.
Clause 11
Short title, commencement and extent
Richard Harrington
I beg to move amendment 17, in clause 11, page 9, line 19, at end insert—
“(2A) Sections (Modification of electricity codes etc: settlement using smart meter information) to (Date from which modifications of electricity licence conditions may have effect) come into force on such day as the Secretary of State may by regulations appoint.
(2B) Regulations under subsection (2A) are to be made by statutory instrument.”
This amendment gives the Secretary of State power to bring NC8 to NC10 into force by regulations.
The Chair
With this it will be convenient to discuss the following:
Government new clause 8—Modification of electricity codes etc: settlement using smart meter information.
Government new clause 9—Modification under section (Modification of electricity codes etc: settlement using smart meter information).
Government new clause 10—Date from which modifications of electricity licence conditions may have effect.
Government amendments 18 and 19.
Richard Harrington
I find myself in the rare position, in any Committee, of moving an amendment. I usually spend my time responding to amendments, but I shall do my best because these amendments and new clauses are important. They refer to half-hourly settlement.
Before I set out the detail of each new clause, I will, if I may, set out the broader context in which the proposals apply. Smart meters, as we have explained throughout the Committee stage, are a critical foundation for the development of a smart energy system, and provision of the relevant functionality is a core part of our programme. I explained on Second Reading, and have done so again since, my and the Government’s vision, which I think is commonly held: in time to come, when we consider history, the current roll-out of smart meters will be seen as a small part of that programme, providing individuals in their homes and small businesses with more flexibility and information. Everyone will accept that, in the modern age, the old-fashioned system of meters, which were predominantly read by estimation, with the gas or electricity man—they were men in those days—coming occasionally with their brown overalls and torch to do a reading, is totally unacceptable. Most people I speak to still have that system at home, despite the fact that everything else they have—their televisions and computers and so on—is of a completely different era.
Half-hourly billing will provide the platform for that kind of flexibility. I would not argue that people will suddenly wake up and think, “I’m going to change my electricity and gas all the time by pressing a button”, but I do foresee situations in which people will have that kind of flexibility, through their phones, and where they will subscribe to sophisticated services continually whizzing around the whole of the UK and beyond to find the cheapest point of any particular time of supply. That will allow people to choose when their appliances are switched on or off, when they are used, and whether they are necessary.
Under previous clauses we have talked a lot about the costs of smart meters and the administration—the DCC—which is basically the big software interface, but let us not forget that the idea is to reduce system costs by what I hope will be tens of billions of pounds by 2050. The Government’s smart systems and flexibility plan, published in July 2017, set out a number of actions that will build on the smart meter roll-out and deliver a smarter energy system for consumers. That includes the half-hourly settlement, which will help deliver benefits to both consumers and the energy system, by providing commercial incentives on the suppliers to develop and offer time-of-use tariffs, which they have not really had to face before.
As I have explained, such tariffs enable customers to choose, when energy is cheaper, to reduce their bills and the costs of the future energy system. That will help make the energy system more resilient, because as we move towards an increasingly low-carbon generation mix, people will want to make more of those kinds of choices. Smaller suppliers—I should not mention my supplier by name, but I am sure many of them do this—already enable people to tick a box electronically in order to choose to receive energy from a particular renewable source. That is a tiny part of the total array of options available to people, as is half-hourly billing.
Ofgem has already delivered changes to provide more cost-effective settlement arrangements for suppliers that want to offer those tariffs, but that is only the first step. We believe that moving to market-wide half-hourly settlements will help deliver the full benefits of the smart meter roll-out. A market-wide approach will also ensure that any necessary consumer protection can be implemented effectively.
Steve McCabe
This is a genuine inquiry born out of curiosity. The Minister is making a perfectly reasonable case. Why has the amendment been tabled at this stage, and why on earth did we not hear anything about the issue on Second Reading? The Minister is making a very good case—I am not disputing that—but it sounds like an afterthought. Could he explain how we have got into this position?
The Chair
Before the Minister responds to the intervention, I have had a request from members of the Committee to allow the gentlemen to remove their jackets if they so wish, and I am minded to allow that. If you wish to remove your jackets, please feel free to do so.
Richard Harrington
Although it is in your power to decide on the jacket rule, Mrs Gillan, I personally think that people should keep their jackets on. That is probably why I will never be Chairman of a Committee.
The Chair
I am sure you would not want to make any Member who wishes to remove their jacket uncomfortable.
Richard Harrington
Certainly, the next time I appear before Mr McCabe in his capacity as Chairman, I hope that he will not be as liberal as you on the dress codes.
Richard Harrington
The hon. Gentleman asked a valid and important question, and I thank him for his preliminary support. He asked why this Government amendment was not included in the first place. I take full responsibility for that. The original intention was that it should be a separate piece of legislation, but I took my chance with this Bill. As those who were involved on Second Reading will know—I think that most members of the Committee were present—it came very quickly. I took my chance in that slot and I thank everybody for voting in support of Second Reading, which is why we are here today, and I also took my chance to table this amendment.
The issue went through pre-legislative scrutiny in 2016, I think—the exact date is in my notes—and I hope that it is non-contentious. I hope that the hon. Gentleman will accept that the clumsiness of its being a Government amendment—I think that is what he was referring to—is not because of any tricks or because we are trying to hide anything. I took my chance. It seemed like the right thing to do and it seemed non-contentious. Given what is going on in both Houses of Parliament at the moment—there is a lot of legislation to do with Brexit—I thought, rather than hope to get another slot, it would be better to take my chances.
I apologise that the process has not been as seamless as it should have been, but the hon. Gentleman asked me a straight question and I have tried my best to give him a straight answer. I will probably be told off by quite a lot of people for putting it like that, but that is exactly how it is. I hope that hon. Members on both sides of the Committee will accept that explanation in good faith, because this is a really good thing to do.
Mark Pawsey (Rugby) (Con)
The Minister has given some accounts of why these clauses are being introduced at this stage. Has he consulted the energy companies, Ofgem and the other bodies that are referred to, to ensure that they are aware of the amendments to this Bill?
Richard Harrington
Yes, I can confirm to my hon. Friend that there has been widespread consultation. The amendments are very well spoken about in the industry and they will not come as a surprise at all. In fact, the general reaction is that the industry is very pleased that we have managed to introduce them with an act of pure opportunism of getting them through parliamentary scrutiny—assuming that we do—not as a standalone piece of legislation but as an important amendment.
Dr Whitehead
I am in some difficulty here, inasmuch as what the Minister said about the content of the Government amendments is sound and clear. Indeed, they make an addition to the Bill and take us forward on getting ready for some of the benefits of smart meters, such as half-hourly settlements. However, as he indicated, this is effectively a separate Bill that has been lowered into the Smart Meters Bill and attached to it as Government amendments. He quite candidly stated that he took his chance—fair enough—to put it in the Bill, but it creates problems, some of which are at the very least technical, and some of which are possibly of a far wider nature.
As my hon. Friend the Member for Birmingham, Selly Oak pointed out, none of this was mentioned on Second Reading. We went into Second Reading on the basis of the long title of the Bill, which was very restrictive. Indeed, I counselled a number of my colleagues who wanted to table wider amendments to the Bill that the long title prevented that. I said that it is a closely drawn long title, and we are required to stick to what it says. We have done that in this Committee. We have had a good debate about a number of issues within the terms of the long title, but there is a range of issues that hon. Members would very much have liked to discuss, and for perfectly proper reasons relating to the long title it has not been possible to discuss them in this Committee.
Once we got through Second Reading, we found that a procedure had been used that I am not aware has been used regularly—if at all in recent years—for a piece of legislation: changing the long title of a Bill during its passage. That is a very rare procedure in this House. I refer to the authority of Wikipedia—I say that for what it is worth. The Wikipedia people say:
“In the United Kingdom, the long title is important since, under the procedures of Parliament, a Bill cannot be amended to go outside the scope of its long title. For that reason, modern long titles tend to be rather vague”.
This one was not vague, but amendments have clearly been introduced that are outside the scope of the long title.
There are some precedents, albeit not from this Parliament but from associated Parliaments whose precedents nevertheless have some relevance to this Parliament through the processes of the Privy Council. In Australia, a Department wished to amend a Bill whose title was “A Bill to amend the XX Act, and for related purposes”. My note, which is a drafting direction from Parliamentary Counsel, states that:
“The proposed amendments were not related to the subject matter of the Bill, but would have amended an Act administered by the relevant Minister. The Deputy Clerk advised that if proposed amendments fall a long way outside the subject matter of the Bill, it could be considered a misuse of the House’s powers for a motion to be moved to suspend the standing orders. Accordingly, the amendments were not able to be included in the Bill.”
A version of suspending the Standing Orders has been undertaken in this House. Amendments 18 and 19 actually add some new words to the long title of the Bill, so apparently, by magic, things that were outside the scope of the Bill are now inside the scope of the Bill.
Dr Whitehead
I must confess that I am a little bit confused by that ruling. I take your point, Mrs Gillan, but my understanding is that we did have a long title of the Bill and that was the long title that we have been speaking to until this moment, and that was the long title that we spoke to on Second Reading. That was the basis on which all amendments to date, except these amendments, have been drafted into the Bill. So it does create a different series of circumstances, and one that I believe merits at least some kind of review for the future. Although I take your concerns very strongly on board, Mrs Gillan, I think it would be remiss of me not to express those points on the position we find ourselves in as far as the Bill is concerned. [Interruption.] I can see that I am not necessarily gaining the full acclaim of all members of the Committee in pursuing this particular point, but it is important procedurally to put it on the record. I hope we can have some further thoughts on that at a future date.
I turn to the substance of the amendments. What they do is a good idea and, had the Minister been able to bring the amendments on board by slightly different means, we would have had no concerns at all about what they say, what they add to the Bill, and why they are important in taking us to the next stage in terms of some of the benefits that smart meters may bring in the future. We would be happy to give those amendments, therefore, our wholehearted support. We are not going to press any of the amendments to a vote this afternoon, but I am pleased that our concerns are now on the record, as my hon. Friend the Member for Birmingham, Selly Oak suggested. It may well be the case that we have not heard the last of the matter.
Richard Harrington
I thank the shadow Minister for his comments. I am quite a simple person. When I was looking at this bit of the legislation, I asked a very simple question of the experts in the Department—the parliamentary advisers and lawyers: is it acceptable, is it within the rules and within the scope of the Bill, to include the half-hourly settlement? The answer was, “It is the decision—many things are—of the House authorities and the Chair, but it seems to us that it is very much within scope.”
I would like to make it clear that the scope of the Bill has not changed with this Government amendment. It remains about smart metering and data from smart meters. As Mrs Gillan has confirmed, the House authorities have said that. As such, the amendments in scope would have been in scope then. Half-hourly settlements are not possible without smart metering.
I promise I am not making light of the comments of the hon. Member for Southampton, Test. He means to get them on the record and he has explained that very reasonably. I thank him for his general support for the amendments, but at the same time I hope that he gives me the credit that this was not some charlatan move to slip something round the corner that was marginal in nature.
Dr Whitehead
Forgive me, but the Minister cannot proceed in this manner. The long title makes it evident to all those sitting here. It is to
“Extend the period for the Secretary of State to exercise powers relating to smart metering and to provide for a special administration regime for a smart meter communication licensee.”
It clearly and narrowly states two things. It does not even say “for related purposes.” It refers to extending the period for smart meter licensing arrangements, and to a special administration regime. That is it. As the Minister himself acknowledges, it has been necessary to move two amendments to change the scope of the Bill, essentially in order to omit those elements. So that is the basis on which we should discuss this, whatever the rights and wrongs of the amendments otherwise are.
Richard Harrington
I fully accept the hon. Gentleman’s right to discuss the matter, and I did not suggest for a moment that he was doing wrong in bringing this forward, or placing it on the record—far from it. I am just saying that, from my point of view, this was acting upon advice, that it was perfectly proper to get something that I felt was very important. I believe that it has the support of—I hope—most Members in the House generally, because we all think that it is a very good thing. I am sorry that the hon. Gentleman feels as he does, but I thank him for accepting that it was done for the right reason. I believe, as he does, that parliamentary procedure is important.
These rules have evolved over centuries for reasons, and—quite rightly—neither I nor anyone else on behalf of the Government can get things in round the side, or bring in things that should never be. When we decided to introduce the amendment, I did have a meeting with the hon. Gentleman to explain it to him, I suppose in an official capacity but obviously not within a Bill Committee capacity, and he did explain his support generally for it. His points have been noted on the record. I hope that my response—which I do not think he found satisfactory—is also on the record.
The amendments support the move to a smarter, more flexible energy system. Half-hourly settlement billed directly on a smart metering platform is a central aspect of the smart systems and flexibility plan that was published in July. The proposals will allow Ofgem to take forward the reforms in a more streamlined way, and I thank the shadow Minister for his support for the substance of the amendments.
Amendment 17 agreed to.
Clause 11, as amended, ordered to stand part of the Bill.
New Clause 8
MODIFICATION OF ELECTRICITY CODES ETC: SETTLEMENT USING SMART METER INFORMATION
“‘(1) The Gas and Electricity Markets Authority (“the Authority”) may—
(a) modify a document maintained in accordance with an electricity licence, and
(b) modify an agreement that gives effect to such a document,
if the condition in subsection (2) is satisfied.
(2) The condition is that the Authority considers the modification necessary or desirable for the purposes of enabling or requiring half-hourly electricity imbalances to be calculated using information about customers’ actual consumption of electricity on a half-hourly basis.
(3) The power to make modifications under this section includes—
(a) power to make provision about the determination of amounts payable in connection with half-hourly electricity imbalances;
(b) power to remove or replace all of the provisions of a document or agreement;
(c) power to make different provision for different purposes;
(d) power to make incidental, supplementary, consequential or transitional modifications.
(4) A modification may not be made under this section after the end of the period of 5 years beginning with the day on which this section comes into force.
(5) In this section—
“balancing arrangements” means arrangements made by the transmission system operator for the purposes of balancing the national transmission system for Great Britain;
“electricity licence” means a licence under section 6(1) of the Electricity Act 1989;
“half-hourly electricity imbalance” means the difference between the amount of electricity consumed by an electricity supplier’s customers during a half-hour period and the amount of electricity purchased by the electricity supplier for delivery during that period, after taking into account any adjustments in connection with the supplier’s participation in balancing arrangements;
“supply”, in relation to electricity, has the same meaning as in Part 1 of the Electricity Act 1989 (see section 4(4) of that Act);
“transmission system” has the same meaning as in Part 1 of the Electricity Act 1989 (see section 4(4) of that Act);
“transmission system operator” means the person operating the national transmission system for Great Britain.”—(Richard Harrington.)
This new clause gives Ofgem power to modify documents maintained in accordance with an electricity licence, or agreements giving effect to such documents, so as to enable half-hourly electricity imbalances to be calculated using information obtained from smart meters.
Brought up, read the First and Second time, and added to the Bill.
New Clause 9
Modification under section(Modification of electricity codes etc: settlement using smart meter information)
“(1) Before making a modification under section(Modification of electricity codes etc: settlement using smart meter information), the Gas and Electricity Markets Authority (“the Authority”) must—
(a) publish a notice about the proposed modification,
(b) send a copy of the notice to the persons listed in subsection (2), and
(c) consider any representations made within the period specified in the notice about the proposed modification or the date from which it would take effect.
(2) The persons mentioned in subsection (1)(b) are—
(a) each relevant licence holder,
(b) the Secretary of State,
(c) Citizens Advice,
(d) Citizens Advice Scotland, and
(e) such other persons as the Authority considers appropriate.
(3) The period specified under subsection (1)(c) must be a period of not less than 28 days beginning with the day on which the notice is published.
(4) A notice under subsection (1) must—
(a) state that the Authority proposes to make a modification,
(b) set out the proposed modification and its effect,
(c) specify the date from which the Authority proposes that the modification will have effect, and
(d) state the reasons why the Authority proposes to make the modification.
(5) If, after complying with subsections (1) to (4) in relation to a modification, the Authority decides to make a modification, it must publish a notice about the decision.
(6) A notice under subsection (5) must—
(a) state that the Authority has decided to make the modification,
(b) set out the modification and its effect,
(c) specify the date from which the modification has effect,
(d) state how the Authority has taken account of any representations made in the period specified in the notice under subsection (1), and
(e) state the reason for any differences between the modification set out in the notice and the proposed modification.
(7) A notice under this section about a modification or decision must be published in such manner as the Authority considers appropriate for bringing it to the attention of those likely to be affected by the making of the modification or decision.
(8) Sections 3A to 3D of the Electricity Act 1989 (principal objective and general duties) apply in relation to the functions of the Authority under section (Modification of electricity codes etc: settlement using smart meter information) and this section with respect to modifications of documents maintained in accordance with electricity licences, and agreements giving effect to such documents, as they apply in relation to functions of the Authority under Part 1 of that Act.
(9) For the purposes of subsections (1) to (10) of section 5A of the Utilities Act 2000 (duty of Authority to carry out impact assessment), a function exercisable by the Authority under section (Modification of electricity codes etc: settlement using smart meter information) is to be treated as if it were a function exercisable by it under or by virtue of Part 1 of the Electricity Act 1989.
(10) The reference in subsection (8) to the functions of the Authority under section(Modification of electricity codes etc: settlement using smart meter information) includes a reference to the Authority’s functions under subsections (1) to (10) of section 5A of the Utilities Act 2000 as applied by subsection (9).
(11) In this section—
“electricity licence” has the meaning given in section (Modification of electricity codes etc: settlement using smart meter information);
“relevant licence holder” means, in relation to the modification of a document maintained under an electricity licence or an agreement that gives effect to such a document, the holder of a licence under which the document is maintained.”—(Richard Harrington.)
This new clause sets out the procedural requirements that apply to the exercise of the power under NC8.
Brought up, read the First and Second time, and added to the Bill.
New Clause 10
Date from which modifications of electricity licence conditions may have effect
“(1) The Electricity Act 1989 is amended in accordance with this section.
(2) In section 11A(9) (modifications of electricity licence conditions not to have effect less than 56 days from publication of decision to modify), at the end insert “, except as provided in section 11AA”.
(3) After that section insert—
“11AA Modification of conditions under section 11A: early effective date
(1) The date specified by virtue of section 11A(8) in relation to a modification under that section may be less than 56 days from the publication of the decision to proceed with the making of the modification if—
(a) the Authority considers it necessary or expedient for the modification to have effect before the 56 days expire,
(b) the purpose condition is satisfied,
(c) the consultation condition is satisfied, and
(d) the time limit condition is satisfied.
(2) The purpose condition is that the Authority considers the modification necessary or desirable for purposes described in section (Modification of electricity codes etc: settlement using smart meter information)(2) of the Smart Meters Act 2017 (enabling or requiring half-hourly electricity imbalances to be calculated using information about customers’ actual consumption of electricity on a half-hourly basis).
(3) The consultation condition is that the notice under section 11A(2) relating to the modification—
(a) stated the date from which the Authority proposed that the modification should have effect,
(b) stated the Authority’s reasons for proposing that the modification should have effect from a date less than 56 days from the publication of the decision to modify, and
(c) explained why, in the Authority’s view, that would not have a material adverse effect on any licence holder.
(4) The time limit condition is that the specified date mentioned in subsection (1) falls within the period of 5 years beginning on the day on which section (Modification of electricity codes etc: settlement using smart meter information) of the Smart Meters Act 2017 comes into force.”
(4) In paragraph 2 of Schedule 5A (procedure for appeals under section 11C: suspension of decision), after sub-paragraph (1) insert—
‘(1A) In the case of an appeal against a decision of the Authority which already has effect by virtue of section 11AA, the CMA may direct that the modification that is the subject of the decision—
(a) ceases to have effect entirely or to such extent as may be specified in the direction, and
(b) does not have effect, or does not have effect to the specified extent, pending the determination of the appeal.’”—(Richard Harrington.)
This new clause allows licence modifications under NC8 to become effective before 56 days have elapsed.
Brought up, read the First and Second time, and added to the Bill.
New Clause 1
Review of smart meter rollout targets
“(1) Within 3 months of this Act coming in to force, the Secretary of State must prepare and publish a report on the progress of the smart meter rollout and lay a copy of the report before Parliament.
(2) The report under subsection (1) shall consider—
(a) progress towards the 2020 completion target;
(b) smart meter installation cost;
(c) the number of meters operating in dummy mode;
(d) the overall cost to date of the DCC;
(e) the projected cost of the DCC; and
(f) such other matters as the Secretary of State considers appropriate.” —(Steve McCabe.)
This new clause would require the Secretary of State to publish details about the cost and progress of the smart meter roll out, with reference to the 2020 deadline.
Brought up, and read the First time.
Matt Western (Warwick and Leamington) (Lab)
Clearly, the scheme is an incredibly ambitious one; the scale of it as a consumer programme is virtually unprecedented. That is why the hon. Member for North Ayrshire and Arran, my hon. Friend the Member for Birmingham, Selly Oak, and others have said that we have to ensure that what we do is in the public eye, the public interest and the consumer interest.
The intention behind the reporting is clearly a good one, not just for us in terms of monitoring but also for raising the visibility and the importance of the programme. A public relations exercise almost needs to be done because there seems to be so much confusion out there, particularly among consumers. The points made by my hon. Friend the Member for Birmingham, Selly Oak in terms of those metrics are critical, but it is also critical that we begin to understand the sort of behavioural change among consumers, in terms of that cost-benefit analysis for the whole programme and for individual households.
I do not want to spin the wheels and repeat what has been said. The only thing that I would urge is a little more ambition in the reporting. The annual report is not bad—it is a good idea—but like most businesses, which give quarterly updates, given those really important metrics and given that the ambition was set for 2020, arguably there are not many annual reports left between now and then. Perhaps a quarterly summary report would be valuable to see the progress that has been made and, critically, how the scheme has been adopted or accepted and how it is working with the consumer.
Richard Harrington
I thank hon. Members for their contributions, particularly the shadow Minister—or should I now call him my protection officer? I have never had one of those before and thought that I was not likely to, but I am very pleased that he has taken it upon himself to appoint himself to that position, which I warmly endorse, I thank him for that.
The new clauses give me the chance to set out the Government’s commitments for reporting on the smart meter roll-out, which is very important and something that I have given a lot of thought to. Before I do, I want to mention a couple of points that the hon. Member for North Ayrshire and Arran made, because they are quite different. She said that consumers were being misled by their energy companies and bullied into getting a smart meter—which is really what she was saying. I reiterate that it is not compulsory for anyone to have a smart meter installed. Consumers have a right to decline them.
Patricia Gibson
The Minister knows, as do I and everyone in this room, that smart meters are not compulsory, but my concern is that consumers are not always told that.
Richard Harrington
They should be, and I will do everything to make sure that they are. Suppliers have to treat their customers fairly, and that means being transparent and accurate in their communications. Ofgem has been in touch with energy suppliers to remind them of their obligations. It has written to all suppliers about deemed appointments—one of the points she made—to make clear that they have to consider whether deemed appointments are appropriate. Ofgem have marked their card on that because they have to take into account the consumers’ circumstances, for example ability to communicate, whether they may have not got the letter, and more. While I know that the hon. Lady is speaking entirely in good faith and that there have been examples of that, Ofgem is on it, and I shall monitor it carefully, as well as the other points she raised.
There is a conflict between us all wanting smart meters to be installed, because we think it is of long-term benefit to everyone, and protecting people’s right not to have one if they do not want one, for whatever reason, and to be informed of that right. We are putting pressure on the energy companies to install more, in keeping with the targets; the hon. Lady is right about that. However, we do not want any of the mis-selling cases that were well publicised some years ago, of people knocking on doors and getting householders to change supplier on false pretences. While the intentions are much more noble in this case, and however much we might think it is a good thing to have smart meters, we certainly do not want any form of pressure or inappropriate behaviour to mislead people. I tell everyone that it is brilliant to have a smart meter, and hopefully most of us will, but it is not for everybody. People should not feel under any pressure, and they should only want to have one for the best reasons.
I can be accused of many things, but lack of enthusiasm is not one of them. This is a really important element of the modernisation of the country’s energy infrastructure. Supplier switching is good, and I have done it myself, but it is not the answer. It is a right and a good thing to do, but the answer lies in what the smart meters will produce. I keep coming back to that in my head. I will not go through the reasons for it again, because hon. Members have been patient all day and on other days.
I understand and welcome the appetite for information on progress. It is right for us, as parliamentarians, to want that, and it is right for the Government and the Department to want to give that. It is right that customers generally should know, from the general public to what one paper calls the chattering classes—in other words, people who write on it, comment on it and study it. The more knowledge they have, the more it is part of the smart meter revolution, and the more people who have smart meters do not think they are alone and do not listen to the stories I have been sent by constituents—scare stories from the United States, conspiracy theories that MI5 is listening through smart meters and that sort of thing.
Richard Harrington
I have my own protection officer, so I am not bothered about that kind of thing, but other people are.
The new clauses would require the Government to publish information on programme costs and benefits, as well as details of installation activity and whether meters are operating in smart mode. I would like to address those in turn, to the satisfaction of all hon. Members, and particularly the hon. Member for Birmingham, Selly Oak and the shadow Minister—I always refer to him by his official title, but he is the hon. Member for Southampton, Test.
The programme costs and benefits are dealt with in new clauses 1 and 11. The Government published their initial assessment in 2008. Since then, the Government have updated and published their cost-benefit analysis a number of times, including in 2014 and 2016. Those publications included quite detailed breakdowns of the costs and benefits of the programme, including the DCC cost, which has been discussed before, and the installation of smart meters.
While there have been changes in the estimated costs and benefits over the years as our evidence base has developed, the business case for smart meters has remained good value for money. The benefit-to-cost ratio has remained stable since 2011, at around £1.50 of benefit for every £1 invested. Our latest cost-benefit analysis, published in November 2016, outlines net benefits of the smart meter roll-out of £5.7 billion. It is easy to talk in billions, but that is quite a lot of money, whichever way we look at it.
Our approach on the smart metering programme has been to update the cost-benefit analysis when substantive new evidence on costs and benefits for the programme comes to light through our monitoring and tracking. For example, the most recent update in November 2016 replaced estimates in a number of areas, including meter asset costs and financing and installation costs, with actuals based on information obtained from industry. It is right that estimates are replaced with actuals as soon as we have the information for it.
The hon. Member for Birmingham, Selly Oak asked why costs increased between the 2014 and 2016 assessments. The difference was about 0.5%, which is £500 million. Again, lots of zeroes; not a number to make light of. The increase is roughly equivalent to changes in the cost of fossil fuels, which impacts the value of the energy savings in our assessment. That was really his point; he asked that question before and I found out the answer for him. It is a reasonable question to ask.
It is important to know that it is not common practice for Government policies and programmes to update their cost-benefit analysis regularly in this way, and certainly not beyond the assessment made to inform the panel’s policy decision. With smart meters, we have done so in order to provide the additional public information and transparency. This is such a major upgrade of our energy infrastructure and will be transformational for people when the programme evolves further.
We have no immediate plans to publish an upgraded cost-benefit analysis, but we are regularly monitoring costs and benefits and would certainly update our analysis if there were new or substantive evidence or changes in policy design. I would like to make it clear that if there were substantive changes in the evidence, of course we would. I hope we have a track record that demonstrates that, if and when such evidence emerges, we will update our assessment. We would be negligent if we did not, and I am sure we would be held to account. In addition, the Data Communications Company regularly publishes budgets and cost projections on its website.
In relation to the installation activity mentioned in new clauses 1 and 7, the Government regularly publish statistics on the progress of the smart metering roll-out. Independent official quarterly statistics on the progress of the smart meter roll-out by the large energy suppliers are published every quarter and have been since September 2013. They are a report on the number of smart and advanced meters installed, as well as the number of meters in operation at the end of a reporting quarter. In addition, a summary of annual roll-out progress for the calendar year of the roll-out is published every March. This captures performance of both small and large suppliers for the preceding calendar year. The number of smart meters operating in traditional mode can be determined from these reports, but I am happy to look at ways to express that more clearly, because I think, as my protection officer has requested, clear and accurate information is important for people. There is no reason to provide clouds of vagueness on this. It is in everybody’s interest to be clear.
Steve McCabe
The Minister is giving the Committee helpful information. Why, after 2014, did the Department abandon the progress reports that he is now proposing to reinstate? Was there an obvious explanation for that?
Richard Harrington
I do not have an obvious explanation for the hon. Gentleman, but I am perfectly prepared to find out and write to him. As far as I am concerned, when I took over, annual reports seemed an obvious thing to do. I would like them to be as comprehensive as possible. I think that that is in everybody’s interest. I hope that they get press coverage and that people read them and say “I want one of these.” That is what we want.
In his erudite speech, the hon. Member for Warwick and Leamington made a point about changing behavioural patterns. In my previous job in pensions, they called it nudging people. Publicity about the annual report or anything else to do with it is going to nudge people’s behaviour. Instead of people reacting to nonsense offers that pretend that it is compulsory, as mentioned by the hon. Member for North Ayrshire and Arran, I hope that they will think, “I want to find out about those. I’ll go online or call. I want one.” That is what the advertising campaign on buses, the tube and so on is doing: it is nudging people and trying to change their behavioural pattern. The reporting side of it, which should be as comprehensive as possible, is very much part of that.
The smart metering programme is being delivered with a high degree of transparency through our existing reporting regime, and I am certainly going to reflect on how reporting can be made clearer. In particular, I undertake to deliver further information via the annual update of the smart meter implementation programme, and I will make copies available to both Houses. If there are changes in the interim, I do not think it would be right to undertake to produce quarterly reports. That would be a very bureaucratic process. There would probably not be enough information to change, and they would quickly become outdated. I do not think that would be reasonable. However, if there are fundamental changes, or even good incremental changes—or, indeed, bad incremental changes—it is in our interests to publicise them and to deal with them. I am going to look at ways to make this as sharp and clear as possible. In the light of that explanation and commitment, I hope that the hon. Member for Birmingham, Selly Oak will withdraw the motion.
Patricia Gibson
It may not be a bad thing for certain people who are in a position to do that, but when kids come in from school and they need to have their dinner—people cannot really work around that and say “You need to wait until 8 o’clock to get your dinner because energy is cheaper then.” There are people for whom that might yield great benefits, but some are trapped in that peak period and cannot work around it. That is a real concern for a lot of consumers, as I am sure the Minister will understand.
Richard Harrington
As per the practice that I started in discussing the previous group of amendments, before addressing the substantive point perhaps I could try to answer the hon. Lady’s questions. The sentiments expressed by my hon. Friend the Member for Stirling are right—this issue is a double-edged sword. The very people that the hon. Lady described, who have children coming home and need to get the tea on, might also have a choice about when to do their washing and such things. The smart meter and the information that comes from it, can help as well as hinder people in those circumstances.
The choice of which tariffs to accept, even with the smartest of smart meters, will remain entirely with the customer. Smart meters facilitate time-of-use tariffs, which can influence demand and help to shift consumption away from peak times—that is a good thing—but they will also give people a choice that they do not have now. At the moment, if someone does not have the meter to give them the information, they cannot take an informed decision. Based on conversations I have had, I expect that suppliers will develop and offer new, smart, time-of-use tariffs that will be attractive to most consumers and help them to realise their benefits.
I accept the hon. Lady’s core point—people must be aware of the choices available, and they must be the type of customer that can take advantage of that choice. If their only function, apart from basic lighting and heating, is to hugely increase their use of electricity at a certain time because of cooking and children coming home, I accept that such a tariff would not be suitable for them. People must have the information to take that decision. I think I have laboured the point, but the hon. Lady raises an interesting issue that is not at all unreasonable —that is what I would expect, given her other consumer-based questions.
I shall try to deal briefly with the new clause in the spirit in which it was meant. Should the Secretary of State commission an independent review of public awareness and satisfaction of the roll-out? That is what is being asked. In answering, perhaps I should outline our approach to smart meter and consumer engagement in our programme up until now. It is set out formally in the programme’s consumer engagement strategy, which was published in December 2012, and it was based on extensive consultation and evidence gathering, as well as polling and market research. Although energy suppliers are at the forefront of installing smart meters, it was recognised that their consumer engagement would benefit from support by a central body that was independent of them and Government. We heard evidence from a representative of that body—Smart Energy GB—which enables consumers throughout the country to get consistent messages from a single simple campaign, rather than from multiple suppliers who are jumping over one another to get customers.
Both Smart Energy GB and the energy suppliers therefore have a role. The energy suppliers have the primary consumer engagement role, because they have the main contact with customers—they are who customers get their bills from and have their contracts with. Smart Energy GB, which is an independent, not-for-profit organisation, leads a national awareness and advertising programme to drive the behavioural change that the hon. Member for Birmingham, Selly Oak mentioned and to help consumers to benefit from smart metering.
The energy supply licence conditions require that Smart Energy GB assists consumers on low incomes or with prepayment meters. Bill Bullen explained in our evidence session that that is his main market. That is really good—it is to those consumers’ advantage and I hope it is to his commercial advantage, too. From what he said, he seems to have done a good job of it.
That two-pronged approach has increased awareness of smart metering from 40% to 80% of consumers in three years, and it has driven a lot of demand. A recent survey of 10,000 people from all demographics and all parts of Great Britain showed that 49% of people would like to get a smart meter in six months. The campaign is resonating with people all over the country. Independent audits of Smart Energy GB show that two in three people recall its campaign. That is actually quite a lot in advertising. Findings from the latest “Smart energy outlook”, the independent barometer of national public opinion, show that detailed knowledge of smart metering is high—in some cases higher than in the general population—among groups that we might consider to have vulnerabilities, such as elderly people.
But nobody underestimates the challenge—I absolutely do not. We get a lot of information from Smart Energy GB. Suppliers share their information with it and with us, because it is in everyone’s interests to do so. They are transparent about their activities, both because it is in their interests and because they are required by law to publish an annual report outlining their performance against targets, alongside an updated consumer engagement plan. All that is available to the public via the internet and the usual channels.
As recently as August, the Government published the findings of external research that we commissioned on consumer experience of smart metering. We will produce further findings from ongoing fieldwork in the next few months. Our evidence to date shows that consumer satisfaction with smart meters is high. Some 80% of consumers are satisfied with them and 7% are dissatisfied. That information is all publicly available. Interestingly—I know that vulnerability is of interest to every Committee member, but particularly to the hon. Member for North Ayrshire and Arran—there was higher satisfaction among prepayment respondents, who are much more likely to be vulnerable consumers.
I support the positive intention behind the new clause. The Government really have to consider how consumer engagement can be better reflected in annual reports, which have to be consumer-facing as well as Parliament-facing. I am not quite sure about the answer, but that needs to be considered in detail. On balance, though, I consider that the requirements of the new clause are well met by existing arrangements. I promise that I do not say that through complacency. I have explained about external research agencies, and Smart Energy GB, which is independent, continually reviews consumer engagement. A review is therefore not needed at this stage—not because we do not intend to do that or because it does not need to be done, but because it would duplicate existing activities and would not represent good value for money. I hope that the hon. Member for Birmingham, Selly Oak will withdraw the motion.
Steve McCabe
The Minister has persuaded me. I am happy to beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
New Clause 3
Ownership restrictions to successor licensees
“(1) The Secretary of State may impose conditions on to the future DCC successor licensee as appropriate.
(2) Conditions in subsection (1) may include restrictions to British owned companies subject to the expiry of any contrary obligations under EU or retained EU law, as defined in the EU (Withdrawal) Act 2018.”—(Dr Whitehead.)
This new clause allows the Secretary of State to restrict future DCC successor licensees to British owned companies.
Brought up, and read the First time.
Dr Whitehead
I beg to move, That the clause be read a Second time.
The new clause, as I flagged up to the Committee earlier, relates to clause 4(1) and to the circumstances in which a successor to a company that has gone into administration might be brought about, and the safeguards concerning the identity of that successor company should it take over the reins. My understanding of those circumstances is that, should there be a period of administration, a successor company would take over prior to 2025 when administration is determined. There could then be a retendering, as it were, of the process by which a company runs the DCC in 2025. At both of those points, there would potentially be a question about the identity of that company. We know the identity of the company at present: Capita is running the DCC, and the DCC as an organisation is a fully owned subsidiary of Capita.
I must say for the record that my ideal way of running the DCC would be for it to be a public body and not responsible to a company. The formation of the DCC, maybe at a future date should the circumstances be different, as a not-for-profit public interest body concerned with the proper administration of the whole smart meter arrangement, in the public interest and for the public good, would be the best way to organise things. That is not the position now, however, and it may not be for some while.
The amendment would look at how one might align the public interest and public good with circumstances under which a successor company might be called on, in the event of administration procedures. On this occasion it would give a power to the Secretary of State, since it would give the Secretary of State discretion to look at the circumstances of a tender or a post-administration arrangement—presumably also by tender—in circumstances where a non-GB company were to become the successor or putative successor company running the DCC.
Without entering into any great conspiracy theories, we have to have some regard for the ownership and running of an organisation that holds a huge amount of information about what we do, who we are and how we work. That is vital information concerning not just our activities but our aggregate activities. Ensuring that the company running the DCC is working appropriately in the national interest with that information and that crucial role seems to me quite an important thing, which we ought to consider.
As things appear to stand at the moment—I do not wish to name any companies for fear that, outside the privilege of the House, they decide to deal with me appropriately—
Dr Whitehead
Indeed. I was going to say to the Minister, who has gone on the record as having nudged people in his previous post, that I cannot offer him full protection if he carries on nudging people, particularly in pubs. My protection is conditional.
We ought to consider the issue seriously. I appreciate that under the present circumstances of our membership of the EU it would be difficult for the Secretary of State to exercise the sort of powers I am suggesting he might have. However, by the time 2025 comes around, one way or another we will not be a member of the EU. The Secretary of State could therefore exercise that power in the public and the national interest, unfettered by other considerations.
It would be prudent for the Secretary of State to have that power available to him or her so that we can put our affairs in order concerning what I agree continues to be an unlikely sequence of events. We ought to have it on our minds, however, in case those events occur. In that way, we can rescue not only the position of the administrator but what the company subsequently does in the national interest as far as keeping control of all this data and running a smart meter programme are concerned.
Richard Harrington
I thank the shadow Minister for his comments. The important part of the amendment is valid. Again, it is “what if”, and we have to consider that. I have tried to assess those points. The new clause would give the Secretary of State a non-time-limited power to impose conditions on future smart meter communication licences as appropriate, which could include restricting future licensees to being British-owned companies.
The licences that are valid at the moment were granted to Smart DCC Ltd in 2013 for a period of 12 years, which is why 2025 has been mentioned quite a few times. That would be the earliest time at which they could be re-tendered. It is the intention that any competition to grant a new smart meter communication licence carried out after November 2018 would be conducted by Ofgem, the first one being appointed by the Secretary of State. That reflects our policy of transferring responsibility from the Government to the smart metering programme, from the Government to the regulator, and recognising that smart metering will eventually become business as usual for the energy industry after this period.
Grahame Morris
I know that the Minister is the soul of reasonableness, but is the issue not so much about the regulator? The regulator’s principal task is the interest of the consumer. Are there not political considerations if a foreign-owned company becomes the regulator? There is an elephant in the room that no one is mentioning, but that is at the back of everyone’s mind. It would surely be prudent to take steps to ensure that the Secretary of State or the Minister has reserve powers to prevent that from happening, given the sensitive and pervasive nature of the data involved.
Richard Harrington
The hon. Gentleman makes a very good point. If he will be patient with me for a few minutes, his good constituents in Easington will, I hope, be reassured by what I am about to say about foreign ownership.
The shadow Minister’s point was not directly about nationalising the DCC but about whether this kind of organisation would be better off as a not-for-profit publicly owned organisation. That, obviously, was not the Government’s policy. The Government’s policy is to favour competition while protecting the interests of the consumer.
For those less familiar with the details of the licence than I am and the shadow Minister is—he knows it intimately—I should say that the licence’s clear objective is to foster the competitive supply of energy. As a natural monopoly, which is what it is—that is what it would be, whether state owned or privately owned—the price is regulated by Ofgem, so that the costs flowing to consumers are controlled. I felt it worth while to make that point.
The new clause seeks to ensure that the process for awarding the next licence is future-proofed and that the interests of consumers, industry and the country as a whole are protected, irrespective of who is responsible for running the future licensing competition, be it Capita, another company or a not-for-profit organisation.
I would like to highlight two areas. This, I hope, is the answer to the question of the hon. Member for Easington. On the critical national infrastructure point, which this is part of, the shadow Minister mentioned the strategic value—not in money terms but foreign power terms—of this database on all the millions of people who will hopefully have these meters. The Government take the issue seriously.
Under the Enterprise Act 2002, Ministers have the ability to intervene in mergers and takeovers that give rise to public interest concerns, including those relating to national security. That means the Government can ensure that any national security issue arising from mergers or takeovers is correctly investigated and that mitigating measures are put in place.
Our review of the existing regime has highlighted that it needs to be updated to take into account the changing structure and size of companies and the sophistication of this kind of corporate movement, which is why the Government are looking again at how best to scrutinise the ownership of our important infrastructure and have committed to a White Paper next year as the next step in our strategic reforms. That cuts across the new clause.
We recently published a Green Paper review in this area. The proposed reforms have a particular focus on ensuring adequate scrutiny of whether significant foreign investment in our most critical business, which this would be, raises any national security concerns. Those businesses are, by definition, essential to our country and society, and clearly a company or entity carrying out this DCC operation would be, because of the significant data points mentioned.
The aim of the proposed reforms in this area will be to provide Government with the ability to act in circumstances where security concerns are raised. In that context, the Government seek to strike the right balance between protecting national security, having general competition and investment, and being an open and liberal international trading partner, which has worked very well. It is a balance, and the security side is very important.
As far as the EU exit point is concerned, notwithstanding the proposal outlined in the Green Paper, the UK takes its international obligations seriously. We need to ensure that any ownership restrictions are lawful, under not only retained EU law but future trade agreements with countries across the world. We all know that this precise form of agreement between the UK and the EU will be subject to negotiations. It is stating the obvious, but the Government are looking at all possible options. It would therefore not be appropriate at this stage to introduce provisions that may contradict or conflict with the Government’s approach to foreign investment. I hope the hon. Gentleman finds my explanation reassuring and will withdraw the amendment.
Dr Whitehead
I thank the Minister for his explanation. Perhaps I could seek a slight amount of further clarification on his confidence that, in these particular circumstances, he would be able, in principle, to intervene using the powers he has set out that exist elsewhere in Government. He appears to be saying that powers already exist that would allow him to address the issue, and that new clause 3 is therefore not necessary. Is he confident that in the specialised circumstances pertaining to administration and subsequent events, those powers would be fully applicable in terms of the concerns that I have raised?
Richard Harrington
Yes, I am satisfied, but subject to the fact that the legislation on the security aspect of it is evolving and currently under consultation. From what I have read in the Green Paper and all the work that has gone into it, it is precisely the security aspects of the circumstances the hon. Gentleman is describing that would be covered.
Dr Whitehead
I thank the Minister for that clarification. In those circumstances, I beg to ask leave to withdraw the clause.
Clause, by leave, withdrawn.
New Clause 5
Review: Use of powers to support technical development
‘(1) Within 12 months of this Act coming into force, the Secretary of State shall commission a review which shall consider how the extended use of powers provided for in section 1 will support the technical development of smart meters, with reference to—
(a) alternative solutions for Home Area Network connections where premises are not able to access the HAN using existing connection arrangements,
(b) hard to reach premises.
(2) The Secretary shall lay the report of the review in subsection (1) before each House of Parliament.”
This new clause requires the Secretary of State to review how the extension of powers support technical development of smart meters.—(Dr Whitehead.)
Brought up, and read the First time.
Dr Whitehead
I beg to move, That the clause be read a Second time.
I am afraid, Mrs Gillan, that you have got me for the rest of the running. New clause 5 relates back to clause 1 and deals with the extent to which, as a result of the extension of time for the exercise of powers, the Minister may consider what licensing may be necessary over the period in respect of particular aspects of the roll-out: in this instance, the use of the home area network and wider area network. Hon. Members will know the distinction: the home area network is the communications that happen between the meter, the house and the immediate external data receiver. The second, the wide area network, relates to the extent to which data receivers can operate in certain areas where population is sparse, there are geophysical difficulties in getting coverage and so on.
In those circumstances, the Government reported in the documents that went before the regulatory committee:
“Smart meters make use of a home area network to link the smart meter to consumer devices such as the in-home display or smart appliances. The technical solutions already being delivered currently apply to approximately 96.5% of premises. In some premises such as apartments in high-rise buildings where there is a long distance between the smart meter and the premises, these solutions are not viable.”
Essentially, the Government are saying that they know that under the present comms arrangements, all but 3.5% of properties can reasonably reliably be considered as covered, but there are certain circumstances, such as some basement buildings or high-rise flats, in which the home area network cannot easily communicate its data properly and safely back to the external devices. The Government state:
“It is necessary to provide a technical solution to ensure that all devices in these premises are linked to the smart meter using the home area network. This work is currently being progressed through the Alternative HAN Forum”.
I am not sure whether anybody would get very far at parties by saying they were a member of the Alternative HAN Forum, but such a body exists and it brings together suppliers to develop and procure new solutions for those premises.
The Department then states:
“It might be considered appropriate to separately license these activities to provide a greater degree of regulatory control over them.”
It is considering whether there is a need for a separate licence arrangement, so far as those activities are concerned, to ensure that, when solutions for that 3.5% of premises come about, they should be properly controlled by licensing within the terms of the roll-out. Similarly, the Department considers that a little over
“99% of premises in Great Britain are capable of connecting to the DCC through the wide area network”.
That is the WAN. I do not know if there is an alternative WAN forum as well as an Alternative HAN Forum, but under those circumstances it would clearly be thinking about that 1% of premises that look unlikely to be able to connect through that wide area network. The Department states:
“A different solution may be necessary to provide coverage to smart meters in the remaining hard to reach premises which the wide area network does not cover. It might be considered appropriate to create a licensable activity that relates to arranging the establishment of communications to these properties.”
The Department has in mind two licensable activities that may arise when those solutions are under way. I certainly understand, so far as the wide area network is concerned, that technical solutions such as patching—essentially patching in areas that are not available to the wide area network to what is available—are in a reasonably advanced state.
The new clause essentially asks the Minister to consider these two particular issues relating to the licensing of those activities and asks the Secretary of State to commission a specific review to look at how the extended use of powers provided for in proposed new section 1 will support those two areas of development—alternative solutions to the home area network and hard-to-reach premises that the wide area network cannot reach. Rather than there being a feeling that it might be appropriate to create a licensable activity, the new clause will make it rather more formalised by requiring the Secretary of State to actually produce a report on those particular issues and how they can be sorted out as the roll-out progresses.
Clearly, the extension of time for the roll-out gives the Secretary of State the ability to consider the issue in more detail and get, at a reasonably early stage, licensable arrangements, or would-be licensing arrangements, in such a report that would cover those activities in those particular areas. That would also be a sensible addition to the Bill—either securely in the Bill or, alternatively, through an acknowledgement and understanding that this is an issue for the future that needs to be considered and which should come under licensing arrangements, and that work will be undertaken to ensure that that happens.
Richard Harrington
The new clause has two points, as I see it. First, the smart meter system establishes a wireless home area network—HAN—in a consumer’s home that links the gas and electricity meters’ in-home display and the communications hub; and the communications hub establishes the network and manages the data across it. As with any wireless technology, various physical factors affect the performance of the HAN, such as what the building is made of or the thickness of the walls, as indeed we find with mobile phones in parts of the Palace of Westminster—in some places it works and in some it does not.
Richard Harrington
The hon. Lady has been to my office. She is welcome again any time.
Those things do affect the signal strength in exactly the way that we are joking about—it is actually true. The distance between the various pieces of smart meter equipment will also affect the performance of the HAN—for example, where a meter is located away from the main residence or in the basement of a block of flats—but it is important that the HAN works, to deliver the benefits for consumers, such as the in-home display.
For the vast majority of premises the communications hub provides the necessary home network. In the small number of premises that it does not, some form of alternative will be needed to ensure there is a working HAN. If there is not, how can we ask people to take on smart meters? We have already used our section 88 powers to place obligations on energy suppliers to develop and deliver an alternative to this, which—to continue the use of expressions and abbreviations by the shadow Minister—I would call “Alt HAN.” The Alt HAN Forum, the Alternative Home Area Network Forum—believe me, there is one—has been established along with the Alt HAN Company and its board. This gives suppliers the framework to get on and develop the solutions they will need. The forum has developed a commercial strategy, which is being implemented, and a procurement exercise is currently under way, and we expect the pace of delivery to pick up next year. It is an important part of the roll-out and the Department has worked closely with the forum throughout the early stage of its setup, and we are continuing to do so. We are tracking progress through the smart metering implementation programme’s governance, and we will monitor on an ongoing basis and determine whether further regulation is needed—so it is ongoing work.
The second point mentioned in the new clause was the arrangement for the so-called “hard-to-reach” premises. Here we are talking about communication of data to and from the premises through the Wide Area Network—referred to so gracefully by the shadow Minster as the WAN—to energy suppliers via the DCC. There are some premises that it may be difficult for WAN communications to reach, due to the location’s surroundings, for example in built-up areas with tall buildings, but also in remote and mountainous areas. By the end of 2020, on the basis of existing solutions, we expect that 0.75% of premises will be without DCC WAN and reaching these will be disproportionately expensive, with costs likely to exceed benefits, but it is not a static solution. Through its licence we placed obligations on the DCC to take steps to explore other solutions, which could be used to fill any coverage gap. We have to look for ways to ensure that these premises are serviced, because otherwise they will never get full access to smart services, and we are pushing suppliers to innovate to find solutions that work for them and their customers. We have facilitated an industry-led group for this purpose, to consider possible solutions. Finally, customers without DCC WAN can still benefit from some smart services, such as consumption data shown on the in-home display.
Those are important areas, and I know they are quite technical and not of interest to many people, but I felt it was necessary to take the opportunity to explore them. As I have outlined, we are closely monitoring activity and development—we really are. That is very important and is part of the whole development. I do not consider it necessary to add a separate review process on top of the existing working arrangements, which are all very comprehensive. I hope the shadow Minister finds my explanation reassuring and on that basis will agree to withdraw the amendment.
Dr Whitehead
I do find that reassuring and it is good to know that these processes are under way, albeit under circumstances where we are a little way from where we want to go. I hope that those processes can lead to a good result for what I appreciate are fairly small proportions of the population that one way or another cannot access the HAN or the WAN. Hopefully, we will be able to provide that reassurance that the roll-out really will be the roll-out that we want it to be in terms of the full connectivity of everyone who is being offered a smart meter for the future. That is an important consideration that we have on the table in the latter stages of the roll-out, and I hope that the current developments can reach that happy conclusion. Under those circumstances, I beg to ask leave to withdraw the clause.
Clause, by leave, withdrawn.
New Clause 6
Review: Use of powers to support rollout of smart meters
“(1) Within 12 months of this Act coming into force, the Secretary of State shall commission a review which shall consider how the extended use of powers provided for in section 1 will support the rollout of smart meters, with reference to—
(a) providing for efficient removal and disposal of old meters,
(b) reviewing the exemptions for smaller suppliers from a legally binding requirement to roll out smart meters.
(2) The Secretary of State shall lay the report of the review in subsection (1) before each House of Parliament.”
This new clause requires the Secretary of State to review how the extension of powers supports the rollout of smart meters.—(Dr Whitehead.)
Brought up, and read the First time.
Dr Whitehead
I beg to move, That the clause be read a Second time.
I think that the Minister’s defence may be that the new clause is not properly drafted and therefore he cannot accept it. It is not the case that it is not properly drafted in terms of being in order or making sense, but it states something about smaller suppliers that is not quite right. Nevertheless, I want to set out the sentiment of the paragraph that refers to smaller suppliers and seek the Minister’s view on what might be done. We have already had a substantial debate on the subject of paragraph (a)—the efficient removal and disposal of old meters—so I want to concentrate my thoughts and remarks on the second part of the clause.
Although it is the case that smaller suppliers—non-obligated suppliers that have fewer than 250,000 customers, including dual-fuel customers—are not as obligated as companies that have more than 250,000 customers in the smart meter roll-out, it is true that all suppliers eventually are obligated to get meters into homes by the end of the roll-out period. Smaller suppliers are not legally obligated in the way that larger suppliers are to reach the milestones and the attainment agreements in place, which I mentioned earlier and which are undertaken through a legal directive from Ofgem. Therefore, it would be quite possible for those suppliers not to install smart meters until the last quarter of the last year of the roll-out, and then rush and install them all, while still meeting their final obligations, because they are not subject to milestones in the way larger suppliers are.
It can be suggested that that non-obligation means that smaller suppliers, by and large, are not very advanced in smart meter installation programmes. Obviously, there is a question about arrangements that smaller suppliers have to make when dealing with their often dispersed group of customers—if, for example, they are responsible for installing five smart meters in Congleton, three smart meters in Biggleswade and six smart meters in Clacton, depending on the distribution of their customers. In those circumstances, they will clearly factor out the installation of those smart meters to a third party. We have already discussed what happens with third-party meter installation arrangements on occasions in this Committee.
Overall, there are a number of not exactly worrying incidents but incidents in which it appears that smaller suppliers are slow off the mark in getting smart meters installed. Clearly, as we approach the point at which we have to get those smart meters in—towards the end of the 2020 period—that could become a significant factor, even though small suppliers of fewer than 250,000 represent about 6.5% of the total market. That is not an insignificant amount, particularly towards the end of the smart meter roll-out period.
The new clause, or certainly its sentiment, indicates that the particular circumstances might be reviewed as the roll-out progresses. The smaller suppliers should be more closely bound into the milestones than is the case at the moment so that we can have reasonable certainty that we are progressing across the board so that, by the time we get towards the end of 2020, we will not have a bit of the roll-out jigsaw that is not in place, possibly to the detriment of the roll-out as a whole. Will the Minister assure me that he is actively considering how that particular problem might be resolved? That would in turn be very helpful in my considerations about the new clause.
Richard Harrington
I thank the hon. Gentleman for his contribution. His new clause would require the Secretary of State to review how the extended use of powers will support the efficient removal and disposal of the old meters that are replaced by smart meters, as well as to review the roll-out obligations applicable to smaller energy suppliers.
As the shadow Minister said, we have discussed the first one at some length. A meeting is being convened with officials from BEIS and DEFRA and, I believe, the hon. Member for Birmingham, Selly Oak. I hope that the shadow Minister will also be available—I hope both Members will be because the purpose is to discuss fully the valid points that they made.
On the exemptions for small energy suppliers, it is true that the pressure is not on them as it is on the larger suppliers, for reasons that have been explained formally and informally. At the moment, the smaller suppliers are growing but they have a very fragmented customer base, as the shadow Minister explained well. That does not mean that they are being let off. In fact, Ofgem asked smaller suppliers for annual reports on progress and, ultimately, will take a view on it and whether it needs to be speeded up, noting that the progress has still to be consistent with taking all reasonable steps to comply with the 2020 regulations. They are not exempt; practically, however, the regulator has gone for the suppliers with the larger consumer bases first, to give the smaller ones a chance to get a mass of membership. In my area, I keep speaking to people who have basically followed the same thought process as me and gone for my smaller supplier, just on the internet. I can see that happening in practice.
In developing the regulations, the Government have been cognisant of the fact that the resources of smaller suppliers and big ones are different. That is a question—a point I have made—not only of the bulk of customers being concentrated but of the necessary IT systems and completion of the requisite security assessment to become a DCC user, which they can do six months later than large suppliers, for good reason.
We have also taken steps to manage the financial burden on small energy suppliers. The policy is to get as many smaller companies into the market as possible, for reasons of competition. The charges—the costs of the DCC data and communications services—are proportionate to an energy supplier’s market share. The larger suppliers pay the most and the smallest the least; it is not a flat rate at all. The Government have also made explicit provisions to facilitate an active market for a number of IT service businesses to provide the connection between the DCC and small energy suppliers, rather than allowing large companies to have a monopoly of it.
In conclusion, the design of the smart metering infrastructure means that, regardless of size, an energy supplier can access any smart meter enrolled on the DCC system and can therefore operate on a level playing field with all other energy suppliers. That is constantly under review by Ofgem. I repeat that their progress and their obligations are exactly the same, it is just a question of when and how. I hope the hon. Member for Southampton, Test finds my explanation reassuring and will agree to withdraw the new clause on that basis.
Dr Whitehead
I do find the Minister’s explanation reassuring. I hope, however, that what those smaller suppliers are doing is kept closely under review as the roll-out progresses. They are an integral part of the roll-out process, and they should not be able easily to evade their responsibilities to ensure that the roll-out is a success due to their circumstances. The Minister has reassured me that light that will be shone on that progress so I beg to ask leave to withdraw the new clause.
Clause, by leave, withdrawn.
Title
Amendments made: 18, title, line 2, leave out “and”.
See the note to amendment 19.
19, title, line 3, at end insert “and to make provision enabling half-hourly electricity imbalances to be calculated using information obtained from smart meters”.—(Richard Harrington.)
This amends the Bill’s long title so that it covers the provision about smart meters made by NC8 to NC10.
The Chair
Before I put the final question, on behalf of the Committee I would like to thank everybody who has looked after us, particularly the members of the Committee, but also the Clerks, Hansard, the doorkeeper and the officials who have supported the Government Front Bench team.
Question proposed, That the Chair do report the Bill, as amended, to the House.
Richard Harrington
I would like to thank you, Mrs Gillan, and Mr Gapes for chairing so well and for having such patience with the shadow Minister, me and others. I reinforce what you said about the Clerks and the House authorities who have equally behaved in an exemplary manner. I also take this chance to thank my Bill team, who have lived and breathed this Bill. I commend them for everything that they have done. I thank members of the Committee on both sides for their patience and for all their good intentions to try to make something of the Bill and to improve it.
Dr Whitehead
I add my thanks to the members of the Committee for the positive way in which our debate has been conducted and for the conclusions that we have reached at the end of the Bill, and to you, Mrs Gillan, for your superb chairing of our proceedings and for your patience with me when I no doubt tested you to some considerable extent on matters of arcane constitutional interest. You conducted proceedings with complete impartiality, fairness and concern for the welfare of all members of the Committee. I pay specific thanks to our outstanding Committee Clerks, who have been of tremendous assistance to Opposition Members in getting our material together for the Committee, and who went way beyond the call of duty in ensuring that that happened. I thank them for that considerably.
Monday 5th February 2018
(6 years, 9 months ago)
Commons ChamberSmart Meters Act 2018 Read Hansard Text Amendment Paper: Consideration of Bill Amendments as at 5 February 2018 - (5 Feb 2018)
This text is a record of ministerial contributions to a debate held as part of the Smart Meters Act 2018 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington)
May I say what a pleasure it is to see you in the Chair, Mr Deputy Speaker, even though it obviously means a higher level of behaviour from all of us, as well as our obeying your edicts on timekeeping and so on? I thank all Members who have contributed to the debate, particularly the shadow Minister, the hon. Member for Southampton, Test (Dr Whitehead); the hon. Member for Birmingham, Selly Oak (Steve McCabe); the hon. Member for North Ayrshire and Arran (Patricia Gibson)—I always forget the second bit—and my hon. Friends the Members for Stirling (Stephen Kerr) and for Chippenham (Michelle Donelan).
We have covered a number of areas in our debate, which has built on the consideration given to the Bill on Second Reading and in Committee. The main point about the Bill and the roll-out of smart meters—I am not making light of any of the comments made by Opposition Members, or indeed Conservative Members—is that the prize is a great one: everyone, in their own household, controlling a smart grid that will give them independence, flexibility and consumer choice. In the long run, I hope that that will lead to very significant savings for them. I felt that I should put that into perspective.
Steve McCabe
I recognise that that is the Minister’s genuine view, but how much should consumers pay for the privilege, and at what point will he feel that they are not getting the benefits they have been promised?
Richard Harrington
As the hon. Gentleman said, I am convinced that consumers will get the benefit from smart meters. In this day and age, it is absurd that people—I include myself—have to read their meters on their hands and knees, with a torch and a duster to remove the cobwebs and everything else. I think that the hon. Gentleman would agree that that is an intolerable situation and that smart meters are the cure.
Let me respond to the shadow Minister’s comments about progress to date. There are now over 8.6 million smart and advanced meters operating across homes and small businesses across Great Britain. Nearly 400,000 smart meters—obviously they affect a lot more people, because of the number of people per household—are installed every month as suppliers ramp up their delivery, and that figure is increasing significantly every quarter. The Government are committed to ensuring that all homes and small businesses are offered smart meters by the end of 2020.
Let me turn to new clause 1. Future smart meter communication licensees will need to demonstrate that they are a “fit and proper person” to carry out relevant functions. That will include factors such as the ownership of the proposed licensee, but it is not appropriate to judge suitability solely on that basis, nor to exclude non-GB companies by default. Doing so would risk failing to deliver value for money for consumers, which could undermine the effectiveness of the smart meter system. I also emphasise that the Government take the national security implications of foreign control and ownership seriously. We have powers under the Enterprise Act 2002 to intervene in mergers and takeovers that give rise to public interest concerns, including about national security.
New clause 2 is about the technical development of smart meters. Overall, we expect that more than 99.25% of premises will be covered by the national communications network. In homes, the standard wireless network will serve the majority of premises successfully. We want 100% of energy consumers to be able to benefit from smart meters, but it is true—this was raised by the Opposition—that the physical characteristics or location of a consumer’s home can affect connectivity. Challenges for systems include a diverse range of building types, including those in which meters can be a long way from the living space. We are working with the industry to identify innovative solutions and extend regulatory powers, because it is very important to have that flexibility.
Richard Harrington
I will, but I will make some progress first.
New clause 3 concerns the efficient removal and disposal of old meters. My officials have discussed this in detail with those from the Department for Environment, Food and Rural Affairs, as this falls within their remit. This point was brought up very eloquently by the hon. Member for Birmingham, Selly Oak. I am satisfied that energy suppliers, installation contractors and meter asset providers are already subject to appropriate regulation for the proper removal, recycling and disposal of redundant meters. However, as I said in Committee, we plan shortly to host a roundtable so that interested Members can hear from representatives from across the meter disposal chain. It is my intention that that will allow us collectively to agree some action. I look forward to the hon. Gentleman and other interested Members being there, because the whole supply chain has to understand fully its responsibilities.
I will briefly focus on concerns raised about the programme costs and benefits.
Dr Drew
I thank the Minister for giving way. What I am concerned about, as always, is the urban-rural divide. We know that many rural areas are still suffering from a lack of access to broadband. Will he assure us that the rural delivery of this project is a priority, given that a lot of people in rural areas suffer because they are off the gas grid anyway?
Richard Harrington
I totally give that undertaking to the hon. Gentleman, and I apologise for saying that I would take his intervention and then forgetting to do so. I hope he will forgive me.
I said during previous debates that we would update our analysis if there were new and substantive evidence or changes in policy design. As a result of the representations that have been made in Committee and today, I am prepared to go further by committing to publishing an update of the programme cost-benefit analysis in 2019. As hon. Members know, 2018 marks a significant programme transition, with the shift from first to second-generation smart meters, so I think that 2019 really is the time to assess this.
As for new clauses 5 and 6, I do not believe that it is sensible to establish powers that enable the Government to require the provision of information on the costs of the programme in consumers’ energy bills, because I do not understand what benefit such a move would have for consumers. However, it is important that consumers understand the information that smart meters and in-house displays give them, because in that way, they understand the cost of their energy usage in pounds and pence—or as my hon. Friend the Member for Erewash (Maggie Throup) would say, pounds, shillings and pence, and probably farthings. She is a lady after my own heart. That will empower them either to change how they use energy, or to get a better tariff.
The hon. Member for Birmingham, Selly Oak has raised concerns, as he did in Committee, about the MAPs—not pictures of the world, but meter asset providers—because he believes that the provider market is not working to deliver the programme objectives. I remain of the view, however, as I have clearly stated to him before—we will have to agree to disagree, I think—that the market is operating competitively and that there is no need for regulatory intervention. There are currently two typical rental arrangements available: churn contracts and deemed contracts, which he mentioned. Churn contracts are often similar to the original rental agreements, including with the presence of an early-repayment charge in the event that a supplier chooses to remove the meter from the wall early. Deemed contracts do not include that charge, but carry the added risk for a MAP that they can involve higher rental charges. The important point is that the DCC has published its detailed plan for the enrolment of SMETS meters from late 2018, and as progress is made, I fully expect energy suppliers’ confidence in choosing churn contracts over deemed rentals to increase. Initial indications support that expectation.
I turn briefly to the amendment on the draft licence modifications envisaged under a power in the Bill to allow the costs of smart meter communication administration to be recouped from the industry, in so far as there is a shortfall. The potential scale of the costs will depend on a number of factors, including the timing and reason for the DCC licensee entering special administration, and costs arising from any legal and technical expertise appointed by the administrator in support of the execution of its duties. As I committed to doing in Committee, we have formally agreed to consult on these licence modifications. We will consider and set out an assessment of the estimated potential costs that need to be recouped from the industry.
I would like to reflect on the points made about the DCC’s parent company, Capita, and to emphasise that Smart DCC Ltd is required to operate at arm’s length from Capita. Provisions in the licence prevent Capita from taking working capital out of Smart DCC Ltd. Furthermore, the DCC’s financial arrangements are constructed so as to make the risk of insolvency low. Putting in place a special administration regime is entirely precautionary and, I believe, the prudent thing to do.
The smart metering programme will secure an overall net benefit to the nation of £5.7 billion. The Bill is important to ensuring that this vital platform for our smart energy future is rolled out effectively, allowing the Government to respond to developments as the roll-out continues. I hope that these arguments will persuade Opposition Members not to press their new clauses and amendments.
Dr Whitehead
I am disappointed that the Minister did not give us a better explanation and understanding of what “offer” means as far as smart meter roll-out is concerned. Indeed, that question was raised from the Conservative Benches. It might be that the Secretary of State can better illuminate us on Third Reading. Strictly speaking, however, that does not relate to the new clauses and amendments, on which we have had a good debate. If necessary, there will be further such debate in another place. This evening, however, it would not be wise to divide the House, so I beg to ask leave to withdraw the motion.
Clause, by leave, withdrawn.
Third Reading
The Secretary of State for Business, Energy and Industrial Strategy (Greg Clark)
I beg to move, That the Bill be now read a Third time.
The roll-out of smart meters, on which the Bill is focused, forms an important foundation for the smart systems and flexibility plan, which was published last year, and which sets out a number of actions to deliver a smarter, more flexible energy system that supports innovation in smart products and services. It is part of our industrial strategy ambition to make Britain one of the best places for energy innovation and clean growth, to the benefit of consumers, workers, investors and the environment. More broadly, the roll-out is an important part of our reforms of the energy market, driving engagement and competition. Smart meters will offer consumers much more knowledge about their energy use, which they can use to get the best deals possible. It complements the measures in our forthcoming retail energy Bill, which will protect consumers and ensure that the market is working for loyal customers.
Before I say more about the Bill, let me take a moment to express my gratitude to Members for the way in which they have engaged with the Bill. I thank all Members on both sides of the House who have contributed to its development, especially those who participated in the Committee and Report stages. I thank my hon. Friend the Under-Secretary of State for Business, Energy and Industrial Strategy, the Clerks and the House authorities, the experts who gave oral evidence to the Committee, the organisations that took time to provide expert written evidence, and my officials, who have worked very hard and will continue to do so as the Bill proceeds.
I also thank both Opposition spokesmen. As ever, the hon. Member for Southampton, Test (Dr Whitehead) brought to bear his long-standing interest in and deep knowledge of these matters. Members have offered challenges and insight throughout the Bill’s passage, and their contributions—in response to many of which my hon. Friend has been able to make commitments—will aid this important programme.
Debates on a number of amendments have resulted in commitments to publishing more substantive annual reports on the progress of the smart meter roll-out, undertaking a public consultation on the expected cost impact on consumers before laying the licence modifications enabling the special administration regime cost recovery mechanism to take effect, and working with the Under-Secretary of State for Environment, Food and Rural Affairs, my hon. Friend the Member for Suffolk Coastal (Dr Coffey), to promote best practice in the recycling and reuse of old meters.
The extended regulatory powers proposed in the Bill will enable the Government to continue to oversee and facilitate the smart meter roll-out. It will enable them to maintain appropriate consumer safeguards, and, in particular, to act on the findings of monitoring and a post-roll-out review. It will protect smart meter services for both consumers and businesses by providing the enabling framework for a special administration regime for the national data and communications provider. Having been amended in Committee, it will also support the efficient and effective delivery of half- hourly settlement by the energy regulator Ofgem.
As the House knows, half-hourly settlement is another important stepping stone to that smarter, more flexible energy system. It will help to deliver benefits both to consumers and to the energy system as a whole by incentivising energy suppliers to develop and offer time-of-use tariffs. That will empower consumers by enabling them to use energy when it is cheapest, and reward them for being flexible about when they use energy. It will also help to make the energy system more resilient as we move towards an increasingly low-carbon generation mix.
The Bill will ultimately ensure that this country is more efficient, resilient, empowered and smart in its consumption of energy. I commend it to the House.
Patricia Gibson
It is important to point out that we in the SNP accept that there are some real advantages to the consumer in switching to a smart meter and to smart meters in general. However, that does not mean that I suggest that the roll-out will be trouble-free and that I have no concerns about it, because that would not be true. Before proceeding, however, I would like to point out that I accept that the Minister has been receptive throughout to my concerns and the concerns of others across this House in Committee and beyond, and I thank him for that. I know he is keen to get this right, as we all are, and I thank him for his listening, consensual and constructive approach.
In the past, I pointed out to the Minister that I had concerns about aggressive selling which I believe is, as I have said, a result of Ofgem having the power to fine energy companies up to 10% of their annual turnover if they fail to meet their licence conditions—or certainly not assisted by that fact. One of the licence conditions is that each energy company should install smart meters in consumer homes by the end of 2020. Failure to do so can result in a massive penalty for the company. That being the case, aggressive selling starts to make more sense, given the pressure that energy companies are under to deliver smart meters to consumer homes within a rather tight deadline. I continue to detect a level of suspicion and scepticism about smart meters among far too many consumers. I hope that the Minister will accept that the licence conditions place pressure on the energy companies to roll out smart meters by 2020, and that that can place pressure on consumers in turn.
I am sure that, like me, the Minister will have been disturbed to learn of recent reports of energy companies employing salespeople to go out and proactively sell smart meters to consumers. If the reports are true, those salespeople can earn commissions of more than £1,000 week, which equates to bonuses of twice what the average worker earns in a year. Will the Minister acknowledge that this can lead to overbearing and aggressive doorstep selling, which can put consumers under pressure? Does he share my concerns about this? If so, what steps can he take to address it?
Cold calling is a discredited way of selling that puts undue pressure on consumers, particularly vulnerable ones. Does the Minister think that this is an acceptable way to proceed, given the rewards that sales reps can earn if they “persuade” enough people to install a smart meter? Is sending target-hungry salespeople to chap on the doors of the elderly and vulnerable the most desirable way we can think of to roll out smart meters? I would be extremely disappointed if the Minister—and indeed Ofgem—thought so. We know that doorstep energy selling was left with a very poor reputation after a series of investigations by Ofgem led to suppliers being fined millions of pounds for misleading customers over how much they could save. This resulted, between 2011 and 2012, in all the big six suppliers scrapping face-to-face sales practices, but smaller energy companies are now once again sending staff out to knock on doors. Is the Minister entirely comfortable with that? What reassurances can he offer to consumers and vulnerable members of our communities that they have the protection they need from such companies?
The Minister will also be aware of concerns about misleading letters being sent to consumers suggesting that smart meters are compulsory rather than optional. I want to put on record my thanks to the Minister for sending me samples of letters that have gone out to consumers from various energy companies, in order to reassure me. However, very few of those letters point out that smart meters are optional, and that the customer can refuse to have one. All the power companies in the sample of the largest suppliers say absolutely nothing about smart meters being optional. Does the Minister think that that is acceptable? Is he, like me and the trading standards authorities, concerned about this? If so, what action can Ofgem take to address the situation?
What is going on with the “You have been chosen for a free upgrade to a smart meter” letters that some companies are sending to consumers? I wish all consumers were aware that when a business tells them that they have been “specially selected” for something, it usually means that everyone has been “specially selected” for it and that the term is meaningless. Another old favourite involves the words “You are eligible”, which is also misleading, because everyone is eligible. If we all have the option to have a smart meter, why do some companies feel that it is honest and in order to tell us that we have been “specially selected”, or that we are “eligible” for one? Does the Minister have concerns about this way of misleading customers?
Richard Harrington
I thank the hon. Lady for giving way. I was trying to attract her attention while she was mid-speech. The type of sales proposal she has mentioned is totally unacceptable. It is not within the regulations, and if she would like to write to me or see me with specific examples, I will take the matter up with the regulators myself.
Patricia Gibson
I thank the Minister for his response, but the information that I am imparting tonight comes from the sample of letters that the Minister sent to me, so some energy companies are clearly using this sharp practice. I would not say that all of them are, but some are certainly not saying that smart meters are optional, instead using language such as “You are eligible” or “You have been specially selected,” which is unacceptable.
Tuesday 13th March 2018
(6 years, 8 months ago)
Lords ChamberSmart Meters Act 2018 Read Hansard Text Amendment Paper: Consideration of Bill Amendments as at 5 February 2018 - (5 Feb 2018)
This text is a record of ministerial contributions to a debate held as part of the Smart Meters Act 2018 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)
My Lords, the rollout of smart meters is a key enabler for the transformation of our energy system. Smart meters are a critical part of the platform for the development of a smart grid and demand-side measures. Smart meters will facilitate greater flexibility in the production and consumption of energy by providing better information and improving communication between consumers, suppliers and network companies. In particular, they will improve the ability to shift demand to match supply, allowing us to make use of excess renewable electricity when it is available and use less electricity at peak times when it is more expensive. They will also improve distribution network companies’ understanding of and control over the use of their networks, allowing more power to flow through the existing wires without reinforcement, improving reliability and safety as well as reducing costs.
The development of a world-leading smart energy system, which delivers secure, cheaper and cleaner energy, is an important part of our industrial strategy. The vision of a smarter energy system, built on a platform of smart metering, is a prize worth striving for. The smart metering programme is one of the most significant infrastructure projects our country has seen. Over 50 million gas and electricity meters are expected to be installed in over 30 million homes and small businesses. The Government are committed to ensuring that all homes and small businesses are offered smart meters by the end of 2020, and considerable progress has been made. The enduring national data and communications service has been built, tested and launched. The Government have also established much of the regulatory, policy and technical framework necessary for this programme to be a success.
Energy suppliers are now actively installing smart and advanced meters, backed by Smart Energy GB’s national consumer awareness-raising campaigns. By September 2017, over 8.6 million smart and advanced meters were operating in homes and businesses across Great Britain. Rates of installation are also increasing, with around 400,000 being installed each month. Households and small businesses can start saving energy and money as soon as their smart meters are installed. Indeed, smart meters are expected to take £300 million off domestic energy bills in 2020 alone, rising to £1.2 billion a year by 2030. These are not small sums of money, and it is right that the Government continue to oversee and monitor the rollout to ensure that it delivers effectively, bringing benefits to GB consumers.
The costs of the rollout were debated extensively in another place, and the Government have listened to the concerns raised. Along with the regulator Ofgem, we closely monitor progress and costs to ensure that the significant benefit case, estimated at £5.7 billion net benefits, is secured. It is worth highlighting to the House that, following those debates and as part of our broader commitment to transparency, we agreed to publish a further update of the cost-benefit analysis for the programme in 2019. The Bill received broad support at Third Reading in another place, as would be expected for a well-established programme that has its origins in the Energy Act 2008 and was considered further when its powers were amended in the Energy Act 2011. I hope that we can continue the same constructive debate that has characterised the Bill’s passage to date.
Let me turn to the Bill itself, which has three measures. The first measure in the Bill extends by five years the Government’s powers to direct the rollout of smart meters, which are due to expire in November 2018. The most important of these is the power to modify energy licence conditions and industry codes, for the purposes of supporting the smart metering rollout. The Government have used their powers to put in place minimum common technical standards and consumer safeguards, including in relation to data access and privacy. Extending these powers to 1 November 2023 is necessary to maintain coherence in the rollout of smart meters and ensure that relevant activities are co-ordinated. This could include situations where new technical solutions are required to address any residual challenges to full smart meter coverage to ease industry-wide delivery challenges. In addition, the Government will look to take opportunities to maximise benefits from smart meters once installed.
The second measure will enable the establishment of a special administration regime for the smart meter communication licensee—currently the Data Communications Company, or DCC—to ensure the continuity of the smart meter communication service in the unlikely event of the licensee’s insolvency. The DCC is a licensed private sector entity and provides the national communications infrastructure for smart metering. The DCC enables energy suppliers and networks to collect energy consumption data remotely and securely, supporting them in delivering the full benefits of smart metering. Meters operated within the DCC will also be fully interoperable, enabling consumers to switch their energy supplier and keep their smart services. The special administration regime for the smart meter communication licensee is similar to that for energy networks and energy suppliers. The provision of a special administration regime has also been adopted across other sectors, including rail and water. The DCC’s financial arrangements are constructed so as to make the risk of insolvency low. However, the special administration regime is a sensible precaution, with the aim of ensuring continuity of the DCC’s services and so protecting consumers and industry from the impact of any hiatus in service provision.
The third measure relates to the delivery of half-hourly electricity settlement by Ofgem. Half-hourly settlement is a key enabler of the move to a smart energy system and will help deliver benefits to consumers and the energy system by providing incentives on energy suppliers to develop and offer innovations such as time-of-use tariffs, which will enable customers to use energy when it is cheaper, reducing their bills and the costs of the future energy system. This will also help the energy system become more resilient as we move towards an increasingly low-carbon generation mix. Ofgem is currently working with industry and consumer groups to assess the costs, benefits and market design options for market-wide half-hourly settlement. It intends to take a decision on whether and how to implement it, informed by an impact assessment, by the second half of 2019. This third measure will provide Ofgem with new powers that would allow it to deliver these reforms more swiftly and smoothly than under existing processes by allowing it to directly modify relevant industry codes and documents.
In summary, smart meter rollout will deliver a much-needed digital transformation to our energy system, providing the platform for a smarter, more flexible energy system that supports innovation in new, smart products and services. For consumers, smart meters provide the foundation for smarter living, creating opportunities for the emergence of innovative products and services, and taking us to a future where, for example, smart appliances such as dish-washers and fridges use energy when it is cheapest and to help reduce peak demand and energy system costs; energy networks know who has been affected by a power cut; and new tools support assisted living. Access to detailed, accurate energy consumption information will also support the delivery of tangible and immediate benefits to households and small businesses across Great Britain. I beg to move.
Lord Lennie (Lab)
My Lords, I should start by making a declaration—or perhaps a confession. I am a smart meter user. I accepted the offer made by the company. It is a SMETS 1, so it is not doing me much good in terms of reducing my consumption or the cost—but at least I have one. That, I think, may be unique among Members of this House, but not so much so among the wider public. I also thought until yesterday that we might be able to have a debate which did not involve the European Union. However, having seen E.ON’s and RWE’s proposals, we are reminded that this is not taking place in a vacuum and that E.ON will now become the major provider for the customers of electricity while RWE is getting back into green research and the provision of electricity—reversing a decision that was taken before our decision to come out of the European Union.
I thank all noble Lords who have taken part in the debate. I share with everyone their support for the Bill—with reservations, and unfortunately it is those reservations which are going to take up most of my time. I thank in particular my noble friend Lord Grantchester for his analysis at the start of the debate. It has saved me a lot of time because he has already done the work. I shall try to avoid any repetition during the course of what I have to say. I also thank the Minister for the meetings and briefings we have had about the proposals prior to this debate. They have been very helpful in our preparations.
The Bill has three stated interrelated purposes. The first is extending the powers of the Secretary of State in regulations for smart meters. The second is introducing a special administrative regime, the SAR, with a Data Communications Company, the DCC, to ensure that service continues in the event of their insolvency. The third is to introduce new powers to allow Ofgem to facilitate half-hourly settlements.
First, the extension of powers that are currently due to expire on 1 November 2018. The Bill seeks a further five-year period, until 2023, during which time the completion of the rollout of the smart meters and their claimed benefits will have become evident. That is the plan. What are the chances of this and what benefits will consumers see? The rollout requires companies to have offered every household and small business, and there are 40 million to 50 million of them, a meter by the end of 2020. The offer of the smart meter 1 has been slowed down, while the smart meter 2 is in some kind of preparatory phase and is being tested for workability and interoperability. So the chances of meeting the 2020 deadline are fast receding, unless the Government announce some huge increase of capacity to achieve their intention. The benefits to consumers are deemed to be so positive that they will take little persuasion—but, in this House and in other places, the consumer seems less trusting of the benefits than the Government seem to think. The record tells a different story.
Thus far, the second-generation SMETS 2 have been installed in only 70, perhaps 100, households out of a total of 50 million. If the SMETS 1s can be upgraded to SMETS 2 capability, it will account for some of the increase—but it will still need three times the current rate of approach, interchange and offer of these meters to achieve the 2020 deadline.
The benefit for the customer is that he or she will be in control of their pattern of energy usage, with real-time information being provided and an end to estimated billing. That is true: the smart meter tells you how much you have spent today. At any point in time, it will give you a scare. You have spent £5, £10 or whatever it is you have spent today. It does not tell you anything about what it is that is consuming that money. The DCC will be provided with a half-hour readout of the overall usage of our electricity consumption in order to benefit its purchasing power and allow it to more accurately purchase electricity to meet our needs, each half-hour of the day, as I understand things.
That should lead to a reduction in the price it pays at certain times in the day. That will then be passed on to the consumer in reduced billing. Someone talked about half-hour billings; I do not know if that is going to come about any time soon, but we will certainly know when it is cheaper to run certain types of electricity consumption. In order to make those changes, the customer has to be sure of the benefits or they are not going to change anything. They are going to carry on doing what they do at the time they prefer to do it. The chances of the lower-end pre-paid customer changing their habits, given the other pressures that there are in their life, are more remote than for those who perhaps have more time on their hands, can study these things and can make adjustments to habits that have been ingrained for some years, as they go through life, with family, children who move away and so on.
How will the Government force the energy companies to pass on savings that they will make to the customers? There was some talk in the energy committee in the other place that the Government will make sure that this happens, but how do they intend to enforce it? The Energy Minister in the other place quoted Richard Nixon, who said:
“If you’ve got them by the balls, their hearts and minds will follow”,—[Official Report, Commons, Smart Meters Bill Committee, 23/11/17; col. 73.]
but if you have not, they are not going to. That is about the size of it. I am not sure that the squeeze is happening quite where it needs to happen. Do the Government anticipate a change of heart among the energy companies towards their customers? That is unlikely. They are private businesses; they are in business to make a profit. That is their right and that is what they are set up to do. Their shareholders are their principal guides and they expect a return. It is hard to see where the customer fits into the squeeze there might be on the price of electricity to suppliers. The Government need to think through how the customer benefits are to be realistically delivered.
Another thing concerning the change in our pattern of usage of night-time electricity for white goods is that there are increased risks that the Government should be aware of. Household fires are more likely with unsupervised white goods. Nuisance neighbour noise disputes will be on the increase as energy powers machines at night, particularly in places where people live one on top of another, in blocks of flats and so on. So the attractions of changing patterns of usage of electricity may not lead to the greenfield nirvana the Government seem to believe in.
One of the things that might have been possible—maybe the Minister will comment on this—was the Government taking responsibility for providing the customer with tariff information. Would it have been possible under SMETS 1? Is it possible under SMETS 2? SMETS 3 could possibly, if it has not been thought of before, inform customers about their best possible energy price sources. It is hard enough right now to know exactly where my best deal is, comparing tariffs within one supplier, let alone across a range of suppliers, with six major companies and a number of other minor providers. It is a complicated matter. Could the Government introduce this into the SMETS system and pass on the information to customers? That would be a real benefit and a real selling point for the meters being accepted by more customers.
I turn to the DCC. The Government intend the regime to take back control should the company go into administration. A special administration regime is to be established. The provocation for this lies somewhere between the recent failure of Carillion, an oversight in the original setting up of the DCC and doubts about the performance of Capita, the current DCC operator. If the DCC fails, the customer will foot the bill. The risk of failure is said to be extremely low. However, the impact would be high. Could the Government provide some analysis or report to reassure us that the DCC’s remote chances of failure are so unlikely that no one can see it happening? What happens if the DCC decides to walk away from the contract? Are there penalties? What are they? Might the Government be left high and dry, not by the failure of the company but by the company no longer wishing to provide the service because it does not believe it will meet the 2020 deadline, let alone those beyond it?
These are some of the questions. We support the Bill. It is deficient in some areas and these will be explored more as we go through Committee and Report, but I would be grateful if the Minister could answer some of the questions raised so far.
Lord Henley
My Lords, on the last or second to last point made by the noble Lord, Lord Lennie, he looked forward to a world with a SMETS 3 or 4 that might be able to assist a customer in finding a new supplier and direct him in that way. I think we are already there. I imagine that the noble Lord reads the Guardian more often than I do, but the Guardian of 11 March was talking about one company that is developing some sort of dongle that can be plugged into one’s meter and will automatically switch one to the best supplier according to the programme one puts in. One can put in, “I want the greenest supplier” or “I want the cheapest supplier” and one could find oneself having a different supplier from month to month, possibly two or three times a year. The future is good. I refer the noble Lord to that article to see just what is happening out there and what smart meters, as they are at the moment, could possibly lead to.
I have to say that, listening to the debate, I felt that it was a fairly Eeyoreish performance, even by the standards of this House. The noble Baroness, Lady Featherstone, was politer—she referred to it as a masterclass in faint praise. The noble Baroness, Lady Maddock, was, as always, very kind to me: after making her Eeyoreish speech, along with her colleagues and all other noble Lords, she said that she expected something more optimistic from me, “Because the noble Lord always is very optimistic”. I think there is nothing wrong with being optimistic when one has technical developments that are going to bring great benefits to everyone. They are going to bring benefits to the consumer, as I made clear in my opening speech, but they will also bring benefits in terms of reducing our overall consumption and in many other ways.
Like the noble Baroness, Lady Featherstone, I was very amused by the picture of her noble friend Lord Teverson under the floorboards or somewhere—I am not quite sure where he was; it was rather a confusing picture, but he was in the rain with a torch. All I can do is refer the noble Lord to Hilaire Belloc’s “Lord Finchley”. The noble Lord will remember that Lord Finchley came to an untimely end because he tried to do these things himself. In future, the noble Lord can get someone else to look at these things, but smart meters will solve the problem for him.
Others, such as the noble Lord, Lord Whitty, and me, took us back to 2008. I was very grateful to him for doing that and for saying that back in 2008 he was giving warnings, in his Cassandra-like way, and now he could say, “I told you so”. The great thing is that he can say “I told you so” to everyone here, in that the 2008 Act, as the noble Lord and others on the Benches opposite will remember, was passed under a Labour Government. The 2011 Act that I referred to was passed under the coalition Government. I think that we had a Liberal Democrat in both the business department and the energy department during that time, so their fingers must have touched this at some point. Now, in 2018 we have a Conservative Government, so perhaps, like Peter Simple’s Dr Heinz Kiosk, I can just say, “We are all guilty!”, if something has gone wrong. I think, from the degrees of optimism I have listened to in the course of the debate, that there is a general acceptance that smart meters are going to be able to do something that has not been available before and that, as I said, that will bring great advantages to us.
A very large number of questions of a fairly detailed sort have been raised and I will try to address a number of them. However, I think that what a debate of this sort also shows is that even a Bill such as this—a Bill that is broadly welcomed on all sides, that has been through pre-legislative scrutiny, that has had a very useful trip through another place since that pre-legislative scrutiny and that is now here—will benefit from what your Lordships can do in Committee. I look forward to that Committee and hope that we can tease out just where the problems are so that I can give appropriate assurances on matters that are relevant to noble Lords and, if necessary, make amendments, but I do not think that that will be necessary. As the noble Lord, Lord Grantchester, put it, this is a largely technical Bill dealing with three small matters, but its title allows us to discuss the generality of smart meters, smart metering and how we get the rollout completed. I hope that in the course of this debate, Committee and further stages we can continue that process and provide the proper assurances.
This afternoon, I propose to answer a few of the questions to the best of my ability. I think it would be useful if I write another letter to all noble Lords who have taken part in this debate and place a copy in the Library, setting out a more detailed answer of the sort that one cannot properly give to some of the more detailed questions and very sensible suggestions made by my noble friend Lady Manzoor. I give that assurance that I will send that detailed response to all noble Lords.
In the meantime, I shall answer a few of the questions that have been asked. The first, and most important, is to give some sort of assurance that we believe that it is still possible, despite the numbers which the noble Lord, Lord Grantchester, quoted from Which?. The numbers probably appeared in the Daily Mail as well, for all I know—that was another publication that was mentioned. We believe that we will be able to get there in due course. The rollout to date has been growing. Around 400,000 smart meters are being installed every month. That has to get up to a bigger figure if we are going to get to the end in the three years that are available. I do not think that is representative of the next phase of the programme when most suppliers will be installing smart meters with greater numbers of installers and more types of customers across Britain. We will certainly continue to collect data—this was something that the noble Baroness, Lady Maddock, asked about—on the rollout, getting independent, official, quarterly statistics on progress by the large suppliers, and we will make sure that they are published quarterly, as I think they have been since September 2013. In addition, a summary of the annual rollout progress for the calendar year is published every March, so we should have that in due course. I do not know whether it will be before Committee, as no one has yet given me a suggested date for the next stage of the Bill.
Lord Teverson
As I said, I think it is impossible to get to that. Can I just be clear about the commitment? It is to offer everybody a smart meter. Are the Government clear with the suppliers about what “offer” means and that it is not just an email saying, “Do you want a smart meter”? Are we clear about the target? Not everybody wants one. Is that a potential get-out clause in this target?
Lord Henley
The noble Lord knows that we are not going down the route of saying that everyone will have one, but we hope everyone will see the benefits of them and that everyone will be offered one, and I hope that offer will be more than just the email that the noble Lord suggests. It is difficult to persuade people to change. Some months ago we discussed the ease with which one can change one’s electricity supplier. However, because of inertia, few people do. The easier that it becomes and the more benefits that there are, the more people will switch supplier. The same applies to smart meters: people will adopt them as they see the benefit. We shall continue to push suppliers to do what they can, because of the benefits. That is not only those benefits to consumers that we all recognise, but those to the country through reducing our overall electricity consumption by evening it out and those other benefits identified.
Lord Grantchester
I thank the Minister for giving way. It is the responsibility of Ofgem to report on the companies’ taking all reasonable steps to offer consumers a smart meter.
Lord Henley
The noble Lord is absolutely correct. I apologise for not making that clear. There will be information available from Ofgem.
On rollout, I agree with points made that there is more that we can do to engage with customers in moving to smart metering. This is important and we shall certainly do more. As noble Lords will know, we have required the establishment of Smart Energy GB. This is an independent not-for-profit organisation leading the centralised programme to raise national awareness alongside activities to drive behaviour change and help consumers to benefit from smart working. The situation is changing. I think that the noble Baroness, Lady Maddock, quoted figures about satisfaction rates, but on awareness of smart metering, this has increased from some 40% to over 80% in three years and has driven demand for millions. Research shows—I believe that this is a figure that the noble Baroness quoted—that some 80% of consumers who have smart meters would recommend them to friends and family.
The question of safeguards, safety of data and related issues, is a concern of my noble friend Lady Manzoor, the noble Lord, Lord Whitty, the noble Baroness, Lady Maddock, and others and it is something to which we shall come back in due course. National smart meter infrastructure has been developed from the outset in consultation with experts from industry and government including the National Cyber Security Centre, which is part of GCHQ. The smart meter security model establishes physical, regulatory and operational security controls backed by independent security assurance arrangements. For instance, critical commands will only be accepted by the smart meter if they are issued by the responsible energy supplier and authenticated through strong encryption. Moreover, they have to be countersigned independently by the DCC.
The Government have also put in place a strict data access framework that protects consumers’ privacy. This is important. I think that this was at the heart of some remarks of the noble Baroness, Lady Featherstone. Households will have control over who can access their detailed energy consumption data and for what purposes, except where this is required for regulated purposes—that includes billing.
I am beginning to run out of time. I shall write in greater detail. The final point that I shall address now is that of the noble Lord, Lord Broers. He highlighted the importance of more work to ensure that a promise of a connected home was delivered. The noble Lord will be aware of a joint BEIS-Ofgem smart systems and flexibility plan that was published in July 2017. That reaffirmed that smart meters are the foundation of a smart meter energy system. It included a commitment to work with industry to develop standards for smart appliances that will allow consumers to provide flexibility and benefit from demand-side response.
I appreciate that I was asked many more questions and that there is much detail that will need to be gone into. What I hope to do is to write a letter as soon as possible to all those who took part in the debate detailing all those points that need to be covered. The important point is that we can then sit down—or stand up—and discuss these matters in detail in Committee, make sure we have the Bill right when we send it back to the Commons and make sure that we can look forward to broad, sunlit, happy uplands. As I said, I will continue to be the optimist rather than one of the series of Eeyores I have heard speaking on this occasion. I look forward to a bright future for smart meters, whether that is SMETS 1, SMETS 2 or even SMETS 3 as mentioned by the noble Lord, Lord Lennie.
Tuesday 24th April 2018
(6 years, 7 months ago)
Grand CommitteeSmart Meters Act 2018 Read Hansard Text Amendment Paper: HL Bill 83-I Marshalled list for Grand Committee (PDF, 88KB) - (20 Apr 2018)
This text is a record of ministerial contributions to a debate held as part of the Smart Meters Act 2018 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
This information is provided by Parallel Parliament and does not comprise part of the offical record
Lord Stevenson of Balmacara (Lab)
My Lords, I support my noble friend Lord Grantchester in his Amendment 4 and reiterate his important suggestion. He accepts that his amendment is not necessarily the definitive way forward and is inviting the Government to engage with him and others to try to find a form of words, process and activity that would enable a national plan to come forward that we could all get behind. I hope that when the Minister responds he might signal that this is something he will consider.
Like the noble Baroness, Lady Featherstone, I have come to this relatively late. Those who have not been living the ups and downs of this over the past few years are completely and utterly shocked that it could have got to this stage without some very serious consequences. At a superficial level—I know it is more complicated than this—the initial programme has had to be restarted and reset but is now about to stop, and people are being laid off and made redundant because there is no guarantee that the SMETS 1 meters will be continued after October 2018. A completely new, untested and uncertain scheme involving SMETS 2 will be brought in on top of that and will therefore go back over ground already covered in a way that is as yet unforeseen.
At the same time, the whole costs of this are hidden and difficult to ascertain. The process under which levers can be exercised on people is not clear and the role of Ofgem, the regulator, is very passive in relation to the capacity it has now. It all smacks of being a complete and utter train crash of enormous proportions, and the only solution appears to be to keep ploughing on. British pluck is all very well but it has not always been the most successful way forward, particularly in matters involving technology.
I urge the Minister, when he comes to respond, to think very carefully about the way in which the Opposition are proposing this and about the support we have received from others. If we do not come out of this with a clear and approachable process—whether it is this national plan or not—the real danger is that consumers will literally be switched off in the sense that they will not wish to be involved in this. As a result, the huge upside of this, the benefits of bringing in a new technology, opening up innovation and bringing in new thinking about how we manage our energy supply—which was the point made by the noble Lord, Lord Teverson—will be lost if consumers are not prepared to walk along. This is not about individual customers having a better time; it is about how we as a country can cope with the energy demands that we will face, and minimising them while strengthening our approach as we go through. This is a terrific chance to get this right in a proper and positive way.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)
My Lords, the noble Lord, Lord Teverson, used the examples of the length of a number of wars. I will not follow him down that track because I think one could come up with some longer wars as examples. He mentioned that this had started under a Labour Government, continued under a coalition Government and was now being dealt with by a Conservative Government. I have been a member of two of those—obviously I was not a member of the Labour Government. It has been going some time but we want to get it right.
When things have been going some time I am always faintly surprised when Oppositions put forward amendments to suggest that we should take even longer. I suppose that is why the noble Lord, Lord Grantchester, prefaced his remarks with, “Unusual as it may seem”. I take note of that. I will not rise to his bait to make any comments about the likely outcome of the next election. Quite rightly, he wants whoever is in government at the time, whomsoever that may be, to be helpful, possibly referring to the remarks on the word “helpful” made by the noble and learned Lord, Lord Goldsmith, in yesterday evening’s debates. We will try to avoid “helpful” in the future.
To continue on the helpful theme, I would obviously like to be helpful. The noble Lord asked whether we could have further meetings. I will make myself available when the noble Lord, the noble Lord’s colleagues and the noble Baroness, Lady Featherstone, and others want to have meetings between now and Report if we feel that we can discuss things further and take things forward.
In the meantime, I will respond in a little detail to the specific amendments—Amendments 1, 2 and 4 in the first group. As I said, the first amendment proposes to extend certain powers that the Secretary of State has to develop, amend and oversee regulations relating to smart meters until November 2026, although in this Bill we have sought only the powers that we think are justified, which extend to 2023. Extending the powers to 2023 would allow the Government to continue to oversee the programme, while suppliers meet the obligation on them to take all reasonable steps to install smart meters in homes and businesses by the end of 2020.
The noble Lord referred to my letter where I talked about them offering rather than installing—we are trying to make sure that they have at least offered something to everyone. Obviously no Government can guarantee that one can be installed in every home because it is quite possible that a number of individuals will refuse to have a meter for whatever reason. It also allows the Government to undertake a post-rollout review once the programme has been operating in a steady state and then implement any of the recommendations that emerge. We hope this will help to ensure that the smart metering programme is fit for purpose—whether SMETS 1 or SMETS 2—for decades to come.
Lord Stevenson of Balmacara
I am sorry to interrupt, but on the narrow point, what specification are the Government adhering to? Is it the obligation on energy suppliers to take all reasonable steps to install smart meters or not?
Lord Henley
We hope that they will offer—and if they do, obviously they must then install. There is no point offering to install one unless they do so. So we hope that all of them will have offered and installed by that date.
Lord Stevenson of Balmacara
It is important that we get this right, because there is a world of difference between making an offer to install and having an installation completed. My noble friend Lord Grantchester, in making his proposal, would give an additional three years because the understanding we had from the first paragraph of the Minister’s letter was that it was about the completion of that process. If the noble Lord is saying that the licence obligation placed as a condition of licence on energy suppliers is only to offer, does he not accept that that completely changes the process?
Lord Henley
No. I wanted to make clear that there is no obligation to have got to a 100% rate of installation because we know we can never get to that target. What we are looking for is that they must make the offer and then make the installation—that is the undertaking—by the appropriate date. We do not think that extending the time is necessary. Does the noble Lord follow me?
Lord Stevenson of Balmacara
I will try one more time and then I will stop. The obligation placed statutorily on companies operating as energy suppliers is, as I understand it, to have made an offer to take all reasonable steps to install smart meters in homes covered by the mandate by the end of 2020. That will be considered to have been completed if they have written to and received information back from all those who would be eligible to receive these things, and, where there has been an acceptance, have completed the installation. Obviously, as the Minister said, you cannot install a meter if somebody says that they do not want one, so those people are taken out of it—but must everyone else, if they say that they want a meter, have had one installed by 2020? That seems extraordinary.
Lord Henley
It is not simply a matter of writing a letter to the individuals concerned. One letter would not be enough. The energy suppliers must show that they have made reasonable efforts with all their customers while allowing a degree of flexibility in certain circumstances. The rollout obligation puts that onus on them. Ofgem has made it publicly clear in an open letter that it will need to adapt its approaches to consumer engagement, using other approaches where necessary. It is not merely a letter, but it must make a genuine attempt—merely making a solitary offer is not sufficient—to get hold of those people to make an installation.
Lord Grantchester
I shall interject very quickly to follow up on my noble friend’s comments. There has been a lot of confusion about what sort of meter will be installed. The Government have backed away from SMETS 1, but I am also hearing industry commentators suggesting that if SMETS 1 meters can be interoperable, the process should continue beyond October as they will then be interoperable as though they were SMETS 2 meters. So if, as we are hearing from other commentators, people are standing down staff from being able to put meters into premises where they have said yes because of the unavailability of SMETS 2 meters, that in itself will mean there will be a considerable delay to implementation. In the circumstances, it is rather unclear to the consumer what exactly their expectations will be and what will be delivered by what date—hence my argument. The Minister needs to appreciate that there is probably still a lot of confusion out there regarding what meters will be done by what date, when they might be installed and when any benefits will be appreciated.
Lord Henley
As the noble Lord is aware, SMETS 2 meters are now being installed. I cannot remember the figures given at Second Reading, but so far there have been very few. However, we expect to see a fast increase over the coming months.
We have also made clear—the noble Lord alluded to this—is that SMETS 1 will no longer count by October, the date to which he referred, and thereafter SMETS 2 will be installed. If a SMETS 1 is installed after that date and is upgraded to a SMETS 2, obviously that will count as a SMETS 2. I will take advice and write to the noble Lord if I am wrong on that. However, as the noble Lord knows, from October SMETS 2 will count in meeting that commitment.
With that, with the changes and with the gradual rise in the number of SMETS 2 installed, no suppliers will have problems in finding work for their staff, and so will not have to lay people off and bring them back on during this process.
Baroness Featherstone
My understanding is that there are so few SMETS 2 meters out there—mainly in supplier homes—that their testing with the DCC cannot be relied upon at this stage. Surely it cannot be done with fewer than 50,000. I am not a technician—I do not know what the number is—but 300 or fewer is not enough to ramp up the rollout of SMETS 2 in the way the Minister is suggesting.
Lord Henley
Again, I will take advice on that. We will come back to it on a later amendment. The noble Lord, Lord Teverson, has spoken about not moving further until we have a large number rolled out. However, my understanding is that this process is beginning to happen and that numbers are going up. The noble Baroness is looking at me in disbelief, as she so often does. We often disagree.
Baroness Maddock (LD)
In defence of my noble friend, we have had briefings which tell us what she has just said to the Minister. I do not know where he gets his briefings, but the industry has briefed us and it is clear that SMETS 2 is not at the stage that he thinks it is.
Lord Henley
My Lords, I am not sure whether, strictly speaking, the noble Baroness is correct. My understanding is that the number of SMETS 2 installations will go up over the coming months, in which case it will be possible to test them, and therefore that by October we will be at a stage where we can go ahead. We have time on our hands on this matter and, as I said, I would like to have further meetings with the noble Baroness and others between now and Report. We could then go through some of these particular points.
At the moment perhaps I may get on with these amendments and come back to my point. As I said in response to the noble Lord, Lord Grantchester, there will be this change in October. SMETS 1 meters will no longer count, but suppliers will still be able to make use of their workforce in the installation process.
On the extension that the noble Lord is generously seeking on behalf of the Government, we do not think it can be justified. It would not send out the right signals and could even have—dare I say it?—an unhelpful impact. It could suggest that the Government would play an active role in leading the programme well beyond the point at which the self-sustaining industry model overseen by Ofgem is due to take over. It also risks undermining industry momentum in progressing the rollout just as suppliers are accelerating deployment with the new generation of meters being brought in. Delay to investment decisions and deployment would also bring delay to the benefits that accrue to consumers from receiving smart meters. In turn, that could impact on the pace of moving to a smart meter system with dynamic time-of-use tariffs made possible by smart meter installation. That is why we are firmly committed to the programme’s timetable as reflected in Clause 1.
The noble Lord referred to the NAO report. We welcomed it and the follow-up study on smart meters, and will work closely with the NAO to help review the progress of the programme, but I do not believe that the report necessarily means that we need a pause in the rollout. As the noble Lord knows, it is routine for the NAO periodically to examine every major government programme, as it did on smart metering in 2011 and 2014. We will take note of the report and discuss it with the NAO, but I do not think that the programme needs a pause.
Amendment 2 relates to the power to remove licensable activities. This amendment seeks to limit the extension of the Secretary of State’s power, so that beyond 1 November 2018 he would not be able to exercise the power to remove any licensable activities in respect of smart meter communications. The Government have so far used the power only to establish the provision of a smart meter communication service as a licensable activity. That ensures that we have a communications and data system that supports secure, reliable and interoperable services for smart meters. The DCC is playing a fundamental role in driving smart metering benefits, and we do not currently consider that we will exercise this power to remove the provision of a smart meter communication service as a licensable activity.
However, we cannot rule out that evidence could emerge to suggest that the removal of at least some elements of this licensable activity to the market could be justified. Retaining the power to remove licensable activities in respect of smart meter communications is therefore necessary as a backstop and is consistent with the Secretary of State’s principal objective of protecting the interests of energy consumers. The Secretary of State may also determine that it is appropriate and in energy consumers’ best interests to introduce further licensable activities in support of smart metering by 2023.
As detailed in our delegated powers memorandum, the smart metering programme continues to develop policy in a number of discrete areas, including overseeing the development of technical solutions delivering smart benefits to the small number of premises which are currently not expected to be served by the smart meter communications network as to do so would be disproportionately expensive. This is typically due to location and surroundings. For example, this can affect premises in highly built-up areas with many tall buildings as well as remote or mountainous areas.
One of the tools we may wish to use to deliver the policy is requiring activity to be licensed. For example, it might be considered appropriate to create a licensable activity that relates to arranging the establishment of communications to these properties. Should we introduce a new licensable activity here that is subsequently found no longer to be justified or needed, we would need to have retained until 1 November 2023 the ability swiftly to remove that licensable activity.
As the noble Lord will be aware, we have used the affirmative resolution procedure. We have also referred it to the Delegated Powers and Regulatory Reform Committee. It did not raise any issues with it. Further—I shall read this out because it is not often that one gets praise of this sort—the memorandum from the committee, in the part that I have highlighted, states:
“There is nothing in this Bill we would wish to draw to the attention of the House. We do, however, wish to commend the helpful and well-drafted memorandum about the delegated powers in the Bill, provided by the Department for Business, Energy and Industrial Strategy”.
We do not often get praise, so I think that it is worth repeating it on this occasion to make sure that it is properly on the record. Obviously, it was already on the record, as it was in the committee’s 17th report—but I am grateful for the opportunity to repeat it.
Amendment 4 is the big amendment tabled by the noble Lord, Lord Grantchester, and principally supported by the noble Baroness, Lady Featherstone, and the noble Lord, Lord Teverson. I am grateful to the noble Lord, Lord Grantchester, for what he said about it. He talked about there being confusion on a number of points, which I hope I can help deal with. He also spoke about moving from rollout by suppliers to rollout by DNOs, as happens in another country. I suggest to him that making such a change might bring more confusion and chaos than absolutely necessary. Let us first deal with the amendment and no doubt we can talk about that later.
The amendment would task Ofgem with consulting stakeholders and publishing a national plan for smart meters by 31 December 2018. It would then require the Secretary of State to specify the final version of such a plan in regulations. The large-scale rollout of smart meters across Great Britain by 2020 is a substantial technical, logistical and organisational challenge. As we have made clear, meeting that challenge depends on collective and co-ordinated delivery. I think that that programme should be led by the Government, who set the policy and regulatory framework for the realisation of the benefits. The rollout is delivered by energy suppliers, networks and others. Ofgem’s role is to make sure that consumers remain protected during the rollout, to monitor energy suppliers’ compliance with their obligations and potentially to enforce against any non-compliance. The Government have provided strong leadership and established governance frameworks, with clear roles and responsibilities, across all these parties. Under this leadership, the smart metering programme has already made substantial progress.
Given the scale of the challenge, I understand and welcome the noble Lord’s appetite for information and reassurance on progress. I remind him of the commitments that the Government made earlier in the passage of the Bill—namely, that we will publish an annual report on the progress of the smart metering implementation programme as well as an updated cost-benefit analysis in 2019, to reflect the state of play after the transition from SMETS 1 to SMETS 2 meters has taken effect.
In that context, it is not clear what the additional value of a national plan of the type proposed by the noble Lord would be. The purpose seems to be to task Ofgem with the oversight of smart metering implementation and to reduce the Government’s role. Such a change in approach would simply divert attention and resources from the rollout delivery and associated consumer benefits. The Government are rightly accountable for safeguarding the benefits of smart metering. The new clause would duplicate existing efforts to deliver an efficient rollout and would put an undue burden on Ofgem. Furthermore, requiring the Secretary of State to specify the final version of the national plan in regulations would limit his ability to use the Section 88 power, of which the noble Lord will be aware, to modify the smart metering framework in future. The purpose of the Bill is to enable the Government to respond to the operational realities of the rollout and to adjust the monitoring framework as may be required. The new clause would undermine that intent.
In summary, a high-level plan for the rollout of smart meters was set by the Government in their 2011 prospectus document, which establishes the framework for the rollout.
Lord Campbell-Savours (Lab)
I was engaged in debates on these matters with the noble Lord, Lord Teverson, 10 years ago, when the original legislation was put through. I am unable to understand what pressure is on the Government to get on with this before the National Audit Office produces its report. I would have thought that that report was critical in all this, as it may well make recommendations that do not fit within the proposals of this legislation. What is the pressure? Could we not have waited for another six months? What would have happened if we had?
Lord Henley
I have been criticised for the Government going rather slowly on something that was introduced in 2006 by the Government of whom the noble Lord was a supporter. As the noble Lord, Lord Teverson, said, this has continued through the length of two world wars and a bit more; I asked him not to specify any further wars. The NAO has already reported three times. As I said, we will respond to the NAO’s report, but I do not see why we should not continue with what we are doing at the moment. As far as I know, we are all in full agreement on the general benefits of a smart metering programme and of getting as many people as possible on to it, so that they will be wiser about their use of energy and more able to consider which energy supplier to choose—I am just giving all the benefits of smart meters. I do not think that there is any need to pause for the NAO report. As I said, we will consider it and respond as appropriate.
Lord Campbell-Savours
Has the NAO expressed a view on whether the legislation should have been delayed? It will have a view. Is it happy for us to proceed with legislation without its report?
Lord Henley
I am not aware that the NAO has asked for any delay, but the noble Lord can look at its three reports, including the most recent one, which I have referred to. I will leave that to him.
As I said, we published our prospectus document in 2011, which established a framework for the rollout and was the basis for the regulatory framework through which the rollout is now being delivered. It is right that we have progressed from planning to implementation. Both the Government and Ofgem are focused on monitoring the rollout to ensure that it delivers in a timely way—albeit, as the noble Lord, Lord Teverson, put it, slightly less timely than he would have liked. Where our monitoring activity identifies areas where the course of the rollout needs to be adjusted, we will of course take action.
In due course, we want smart metering to be business as usual in a competitive retail market. The Government will then be able to step back when it is right so to do. However, in the short to medium term, the Government do not intend to step back from their leadership role. Through the powers in the Bill, we will sustain our active engagement with the industry to ensure that any risks to meeting the 2020 deadline are identified and addressed as quickly as possible. I repeat what I said about hoping to have ongoing discussions with the noble Lord and others, but I hope that in the meantime he will feel able to withdraw his amendment.
Lord Grantchester
Before the noble Lord sits down, could I just come back to the NAO report, just to be clear in my mind about exactly what is happening? Am I to understand that the NAO is still planning to report by July 2018 on the cost-benefit analysis of introducing smart meters? The noble Lord has correctly said that the NAO has already done two reports—in 2011 and 2014. It is now four years since the report of 2014 and I understood that the general consensus was that it was about time to do another cost-benefit analysis, in order to prove to consumers that what is happening is for their benefit, even though the costs are going up. However, if the review is being shelved, it is important to know that. We understand that it was not part of any legislative programme but that it was going to improve consumers’ perspectives on accepting an offer that would be beneficial to them. Can the Minister be precise: is the NAO report going ahead in July 2018 or not?
Lord Henley
I do not know about the precise timing of that report. Obviously, that has to be a matter for the NAO. We will respond at that moment, but I do not think it is necessary for the Government to delay what we are proposing to do. As the noble Lord, Lord Teverson, said, there has already been too much delay. We will await with interest the report from the NAO.
Lord Grantchester
I do not think that the NAO wants to cause any delay. I understood that it did not have the resources to undertake this work and therefore that it would not happen, although it is crucial for the continuing rollout that consumers can easily see the benefit over and above the cost of the programme. It is not easy to understand it within their own bills, but if the NAO produced a report showing that overall it was beneficial to consumers that this was going ahead, it could be very constructive in allaying some people’s fears that this is not for them because of the cost. I want only to understand whether the NAO still has a commitment to produce the report this year.
Lord Henley
Again, I do not know about this year. I understand that the NAO still plans to undertake a review. It has not confirmed its timetable. Obviously, that is a matter for the NAO. When there is a new cost-benefit analysis, obviously we will look at it—but I cannot go into the NAO’s timetable.
Lord Teverson
Perhaps it might be useful if we could meet the NAO and go through this and make sure that the audit is broad enough in scope without it taking longer. I realise that this question is not completely to do with these amendments, but I did ask the Minister about the transferability of SMETS 1 meters, which is different from interoperability—SMETS 1 meters are surprisingly interoperable generally—and the problem of taking one out and replacing it with one that is almost identical but is from a different supplier. Is the Minister aware of that? Do his officials see that as a significant problem? Is there a solution so that we can stop this almost immediately, if it is happening?
Lord Henley
I think I had better take advice on that and possibly write to the noble Lord, or deal with it in any meeting that we have. I understand that some SMETS 1 meters can be upgraded. But I do not want to put on the record anything that I might have to make a personal statement about and correct the following day. Perhaps we could leave that to a letter or a discussion with the noble Lord.
Lord Teverson
I am very happy with that. I stress that it is an asset and financing issue, rather than an interoperability issue.
Lord Grantchester
I support Amendments 6 and 11 which are also in this group. In Amendment 6, the noble Baroness, Lady Maddock, seeks a review of the code of practice energy suppliers must follow in the installation of smart meters. We agree with that as a necessary and constant reassessment of best practice should become part of any post-rollout review.
Similarly, Amendment 11, also in the names of the noble Baronesses, Lady Maddock and Lady Featherstone, calls for a review of the use of data from the operation of smart meters. I am grateful to them and my noble friend for highlighting some of the problems that could arise if we are not careful in this operation. We agree that it should be kept under constant review by the department to make sure that the risk of errors and non-compliance is kept to a minimum.
Lord Henley
Like the noble Lord, Lord Grantchester, I take it that we are dealing with Amendments 3, 6 and 11. The noble Baroness, Lady Maddock, caused me some confusion when she said Amendment 7. However, I am sure she meant Amendment 6 if she did say Amendment 7. I take it she was speaking to Amendment 7, and I will come to it in due course. I will deal with the amendments in the order in which the three leads took them and so I will deal first with Amendment 3, then Amendment 11 and then Amendment 7. If I get confused in my note I hope the noble Lord, Lord Grantchester—who is always quick on these things—will stop me.
I will also take note of the points raised by the noble Lord, Lord Campbell-Savours, and his general remarks about service charges in flats and the consumption of water by himself and others. Obviously that is wide of the Bill. I am sure the noble Lord uses appropriate amounts of water and comes to the House as clean as he always should be. We will read nothing into the amount of water that appears on his service charge. However, he makes a perfectly good and valid point about what people can understand from information about the use of a particular flat or residence by the consumption of gas, electricity or whatever. I hope that can be partly dealt with in what I have to say about security but it might also be helpful if I write to the noble Lord and others about it in due course.
Amendment 3 asks GCHQ to undertake an annual risk assessment of smart metering’s vulnerability to cyberattacks. Considerable effort has been invested by the energy industry as a whole and by government—including the National Cyber Security Centre, which is part of GCHQ—in designing security protection into the end-to-end, trust-based security architecture. Robust security requirements have been developed for smart metering equipment, the DCC and participating organisations, as well as assurance on the implementation of these requirements. These are a fundamental part of the smart metering regulatory framework.
In April 2016, the NCSC technical director published a blog on the security of smart meters in which he stated,
“we’re confident that the Smart Metering System strikes the best balance between security and business needs, whilst meeting broader policy and national security objectives”.
The NCSC continues to be fully engaged on smart metering, providing an annual threat report and practical guidance.
Underpinning the security requirements, assurance and governance arrangements currently in place is a security risk assessment. This has been through a number of iterations on the back of public consultation to ensure emerging and future security threats are appropriately addressed. This is in turn informed by the annual threat assessment that the NCSC provides. Additionally, each organisation must carry out an assessment of its processes for the identification and management of risk at least annually.
The end-to-end security model is also subject to ongoing monitoring and review. Smart metering regulations require that a review of the end-to-end security model is undertaken at least annually. This is undertaken by industry in the form of the Smart Energy Code security sub-committee, which is independent of government and composed of security experts from industry. Industry is also subject to an independent security assessment prior to using systems and annually thereafter. This assessment is set against a security controls framework, which is detailed in regulations. This is the basis for a consistent level of review across all organisations and provides a guide to the types of evidence that should be provided to demonstrate compliance.
Based on the detail I have just outlined, an additional security assessment annually by GCHQ, most likely by the NCSC, is unnecessary given the existing and ongoing risk management and security assessment arrangements and the close engagement GCHQ and the NCSC have had and continue to have in relation to smart metering. I hope that the noble Lord will feel that his amendment is largely dealt with.
I move to Amendment 11, tabled by the noble Baroness, Lady Featherstone, which deals with data privacy. It refers to data obtained by energy suppliers, both as a result of half-hourly settlement and due to smart metering in general. This data has the potential to deliver benefits for consumers, suppliers and the energy system, but we recognise again that appropriate safeguards are required on who has access to data, in which circumstances and for which purposes.
Lord Campbell-Savours
I ask a consumer question: if someone wanted to know now whether it was possible for their meter to be hacked, who would they ask? Who could tell them?
Lord Henley
The first people to ask would be the suppliers of that meter, to ask them what evidence they have and to take it from there. The same is true for any IT equipment that the noble Lord buys for any purpose. None of us can give any absolutely cast-iron guarantees as to what can and cannot be done by nefarious people.
Lord Campbell-Savours
This is one of the reasons why the amendment asking for this sort of national plan would have been interesting. Those are the kinds of questions that the consumer would expect to find in a report of that nature. I would not ask my supplier; I would ask the manufacturer whether its equipment could be hacked. If it said that it could be, I would want assurances as to how that would be dealt with. I am not altogether convinced that manufacturers have been asked, or whether GCHQ has been asked that question for it to appraise separately. It is on the list; I presume it too has been asked about the system that is being introduced.
Lord Henley
The point I am making to the noble Lord is that it would be wrong for anyone to give an absolute cast-iron guarantee of any sort with equipment of this sort. I can think of a whole range of other questions on other subjects. I remember that it used to be said that if you went to a school and asked about its policy on bullying and were told there was no bullying, you should immediately reject that school because quite obviously it had no idea of what was going on. Similarly, if someone offered a cast-iron guarantee that their equipment was unhackable, I would have some doubts about it. They could say that they had done everything possible to make sure it was unhackable, but we have the right processes in place with suppliers and others to make sure that checks can be done—which is what I have set out—to make metering as secure as possible. In response to the noble Baroness, Lady Featherstone, who dealt with privacy, that is why we have also had consultations with the privacy commissioner. I think that we have all the appropriate checks in place—but if I offered the noble Lord the guarantee he is asking for, he would know that I was a charlatan.
Lord Campbell-Savours
There is another question that would have been answered in this report. It is the question that the public ask all the time. If I have a supplier and I have a piece of equipment installed, will I be able to change supplier? Most people in this Room probably know the answer about retaining that equipment, but the great public outside do not know the answer, and that is what they worry about. So it is essential to the Government’s case to make it clear when and in what circumstances that problem will no longer arise.
Lord Henley
I fully understand what the noble Lord is saying and the need to provide the public with as much reassurance as possible, and clearly to explain the range of steps that the Government have taken with security experts, including GCHQ, which I mentioned earlier, to provide robust security for the smart metering system. We worked in partnership with GCHQ on the blog on smart metering infrastructure. We will continue to support Smart Energy GB, among others, to provide a clear and reassuring message to the public on smart metering security. We will do all we can. Everyone else will do all they can. All I am saying is that one can never get beyond that 99.9% security up to 100%.
Lord Campbell-Savours
The noble Lord, Lord Teverson, drew a distinction between transferability and interoperability. The question I am asking is what the public are asking. When will they be given assurances that it will be possible to change supplier and retain their smart meter? It is a very simple question, and I do not think you will find the answer anywhere at the moment as far as the public are concerned.
Lord Henley
The noble Lord asked what assurance we can give to the public about security, and I think I have given as much assurance as I can. I acknowledge that it is important for the Government to continue to give as much assurance as possible. That is why we talked to GCHQ and others. With regard to changing supplier—is it changing the meter or changing supplier? They are two different matters.
Lord Campbell-Savours
One is the consequence of the other, as I understand it. That is the problem. When you change your supplier, I understand that on occasion you have to change the meter. Am I not correct?
Lord Teverson
Unfortunately, probably after the First World War, the Second World War and the Korean War, the phoney war bit during the coalition Government was around the whole process more or less coming to a halt because this whole security issue came up, which was a major delaying factor at the time. I do not want to talk on behalf of the Government of that time, but security was given huge focus. From a personal point of view, I feel that that area has been dealt with enough at the moment. It clearly needs an ongoing security look, but it was one reason why the whole programme pretty much ground to a halt during part of the period of the coalition Government—if that is at all helpful.
Lord Henley
We will get on to “helpful” again later on. I do not know whether I can take the noble Lord much further. We have talked about security, and I have made it clear that we must give the public as much assurance as possible. I think that the noble Lord is happy about that and the involvement of GCHQ and others.
The noble Lord raised the question about consumers in effect losing functionality when switching supplier. When installing a smart meter, it is necessary for energy suppliers to take reasonable steps to inform the consumer that they may lose some of the functionality when switching supplier—but only some. There is also the question of whether those with SMETS 1 meters can switch supplier. The noble Lord’s question started on one level and moved to quite different levels at different moments, but I think that that was what he was talking about. Consumers with the first generation of SMETS 1 can still switch energy supplier, and they are often in a better position to do so. That is a matter for them, and they can continue to do that.
I shall now move on to the second in this block of amendments—the amendment tabled by the noble Baroness, Lady Maddock, Amendment 6, which suggests that there should be a review of the code of practice by the Secretary of State. Receiving a positive installation experience that leaves consumers satisfied and well informed is vital to ensuring that they can engage with their smart meter and take control of their energy use. Energy suppliers were required by their licence to develop and adhere to an installation code of practice when installing in domestic and microbusiness premises. In developing this code, energy suppliers were required to ensure that it both supported the delivery of overarching objectives and, in a number of key areas, met detailed requirements. Those requirements include providing energy efficiency guidance, not charging consumers up front for the installation, and meeting the needs of vulnerable domestic consumers. Energy suppliers were also required to take into account the views of consumer groups and other interested parties when developing the code.
The code was consulted on in draft in 2013 and subsequently approved by Ofgem in its capacity as the authority in this area. It is overseen by a code governance board composed of representatives from large, small and microbusiness energy suppliers. It also includes representatives from Citizens Advice. Any of those representatives has the ability to propose amendments to the code, which are then presented to Ofgem for consideration. This governance framework ensures that consumer interests are represented on an ongoing basis across all elements of the code’s operation.
Energy supply licence conditions supporting the code of practice also require energy suppliers to put in place monitoring arrangements and procedures for reviewing and updating the code. As part of this activity, energy suppliers are required to obtain views from consumers on the installation process and conduct of their installers. To achieve this, the code requires all energy suppliers installing more than 5,000 smart meters a year to undertake a survey of their customers. These surveys are conducted regularly, the results are anonymised, and reports are provided to the code governance board on a quarterly basis, enabling any areas of concern to be identified and rectified, including through amendment to the code.
As a further backstop, in the event that significant concerns are raised regarding the suitability of the code, Ofgem also has the power to require energy suppliers to review specific features of the code and can direct modifications if necessary. The amendment here would require a one-off review of the code to be undertaken, but I hope that in outlining the governance and monitoring requirements already in place I have demonstrated that the code is already subject to ongoing review and continues to evolve to meet consumer needs.
Baroness Maddock
I made two points about gas. When it is turned off, I certainly do not expect them to allow things that are unsafe. My point was that there is no provision for somebody in poor circumstances—say they are elderly and they have a smart meter put in and it is the middle of winter and they cannot use their boiler—to get a new boiler. I think the Government need to look at this. It is a very small point but there will be several people affected by it.
The Minister has explained how the process works at the moment and how the code of conduct works and how it can be amended. Can he tell us how it has been amended as the process has gone along?
Lord Henley
I would prefer to write to the noble Baroness regarding any amendments that have taken place. I, like others involved in this, but not all, am relatively new to the subject—but it has been going for some time, so I imagine that amendments have been taking place.
I think the noble Baroness suggested earlier—just in terms of the travails on the telephone—a degree of aggression.
Baroness Maddock
It was the lack of understanding of the person who was trying to persuade to have a meter of how it worked and what the options were and whether they were interoperable.
Lord Henley
If the operator could not cope with the noble Baroness, obviously they probably need further training. I think that is probably a matter for that particular supplier. There is guidance for them and they should take every opportunity to treat all domestic customers fairly and to be as transparent and accurate as possible in their communications. I hope that they will continue to do so. I note what the noble Baroness said.
I hope I have dealt with the three amendments in sufficient detail and I hope that the noble Lord will feel able to withdraw Amendment 3.
Lord Grantchester
I thank the Minister for his comprehensive reply. Initially I was slightly alarmed when he talked about the national infrastructure having to be a balance between security and business needs. I would have thought that our national infrastructure is critical and must be entirely secure at all times. However, he went on in his reply to further elaborate that energy threats are assessed each year and I was very satisfied that the situation is under constant review, so I am very happy to withdraw my amendment.
Lord Teverson
My Lords, may I correct something I said about Hinkley Point C? EDF’s latest estimate is actually £19 billion to £20 billion. Preventing that sort of capital expenditure on energy generation is what this programme should be about. I apologise to the Committee that it is a rather larger sum than even I thought.
Lord Henley
My Lords, £1 billion here, £1 billion there and pretty soon we are talking real money. I will deal with the amendments in the order they came: that is, Amendments 5, 7, 12 and 13. Amendments 12 and 13 go together. Actually, all three go together, but there was some confusion.
Starting with Amendment 5, which was tabled by the noble Baroness, Lady Maddock, on energy efficiency and fuel poverty, I ought to say in passing that I very much support the spirit behind these amendments but I am concerned that they could undermine the efficient delivery of the rollout and could lead to unintended consequences and costs for consumers. But I will deal with the amendments one by one, starting with Amendment 5.
One of the main objectives of the smart meter rollout in Great Britain—it does not apply to Northern Ireland—is to put consumers in control of their energy use so that they become more informed and efficient, and save themselves money. Smart metering will reduce the costs for prepayment customers and enable remote topping-up, meaning that some of Britain’s hardest-pressed energy consumers will have access to more competitive deals and more convenience in paying for their energy. I was grateful for what the noble Baroness said about people with prepayment meters and the price cap. We will get on to the price cap for others more generally, but it is already in existence for people with prepayment meters and I think that it has been working with some success.
If I heard her aright, the noble Baroness said that she had heard that SMETS 2 meters posed a problem for some prepayment customers. We believe that SMETS 1 meters provide significant smart functionality to consumers, but SMETS 2 will provide them with additional benefits and will allow consumers always to retain smart functionality when they switch suppliers. SMETS 2 meters will also allow consumers, if they choose, to share data with third parties, and those third parties may be able to offer, for example, tailored energy-efficiency advice, which could be of use to certain customers.
Amendment 5 would introduce a new clause requiring the Secretary of State to commission a review to consider how the extended use of powers would impact energy use in the United Kingdom, with a particular focus on the impact on fuel poverty and energy efficiency.
With in-home displays offered to households as part of the installation, low-credit alerts are more visible, giving consumers an early warning. The ability for consumers to set a budget and to see exactly how much they are using, in pounds and pence, is giving prepayment consumers control over their energy use and contributing to greater levels of satisfaction among prepayment consumers. Certainly, the research that we have done shows that 84% of smart prepayment customers are satisfied with their smart meters and 88% are likely to recommend them. Government research shows that eight out of 10 would recommend them to family or friends, and 82% of people with a smart meter have taken at least one step to reduce their energy use. British Gas is reporting that its dual fuel customers with smart meters are making sustained 4% annual energy savings.
To some extent, that brings me on to the question about accessibility of meters raised by the noble Baroness. As she is well aware, the accessibility of existing meters can be pretty difficult, as I discovered in London the other day as I lay down on the floor trying to read a meter. I realised that I did not have my reading glasses with me but then realised that reading glasses would not help as I was wearing my contact lenses. It is a minor problem for someone in a reasonably fit state, but we accept that reading meters can be difficult for certain people, depending on where the meters are put.
The technical specifications for IHDs require them to be designed to enable the information on them to be easily accessed and presented in a form that is clear and easy to understand, including by consumers with impaired sight, memory, learning ability or dexterity. Energy suppliers, led by Energy UK, have been working together to develop a fully accessible IHD, and we expect that device to be available shortly. If it can be made available to those who have problems, the noble Baroness and I will also find it a great deal easier.
Baroness Maddock
The thing that surprises me—and I have not really had an answer to it—is why, when the Government planned the programme, it was not part of the plan that everybody with a smart meter should have an in-home display. It would be an obvious enhancement and would not be difficult. I do not know why it was not thought that this should be insisted on from the beginning.
Lord Henley
This is going back in history. The past is another country. I do not think I want to go there just for the moment. I do not know the answer to that. If I can find out more, I will certainly let the noble Baroness know.
The noble Baroness also raised the question of smart meters working with solar panels and spoke about the information she had received from one of her noble friends. As I understand it, all SMETS-compliant electricity meters must be capable of both measuring the amount of energy the household consumes or imports from the grid and recording the electricity generated by solar panels or other microgeneration technologies that is fed back or exported to the grid. We are not aware of any technical reasons why smart meters cannot be installed in premises with microgeneration technologies. However, some suppliers may start installing for these customers later in the rollout. If the noble Baroness would like to go back to her unnamed noble friend—perhaps it was not a noble friend, perhaps it was someone misleading the noble Baroness—and get back to me, I will take this up and find out what the real answer is. The initial response is that we feel that this should not be the case, but I will respond when the noble Baroness gives me more information.
Amendment 7 was spoken to by the noble Lord, Lord Teverson, and the noble Baroness, Lady Featherstone. The rollout of smart meters offers an opportunity for consumers to take control of their energy use and realise significant savings as soon as the meter is installed. Like any infrastructure project, the smart metering programme involves some investment, but it will enable a net reduction in consumers’ energy bills over time. Amendment 7 would give the Secretary of State power to modify licence conditions and industry codes so as to require energy suppliers to pass the savings they make from the rollout on to consumers.
We expect that competitive pressures will encourage energy suppliers to pass on the cost savings they make from the rollout of smart meters. If energy suppliers do not pass on the savings to their customers, their customers, as we all know, can switch to a better deal among an increasing number of competitors. As noble Lords will be aware, there is an increasing number of competitors and it is quite simple to switch. We recognise that the market is not working for all customers. That is why we have introduced to Parliament the Domestic Gas and Electricity (Tariff Cap) Bill—it is in another place at the moment—which will require Ofgem to set a cap that protects existing and future domestic customers who pay standard variable and default rates. The cap will last until 2020, and it may be extended annually, up until 2023, if it is assessed that the conditions for effective competition are not yet in place. In setting the cap, we expect Ofgem to take into account the benefits that energy suppliers will achieve from the rollout.
Smart meters are themselves an enabler to greater competition in the energy retail market. Smart meters provide near real-time information to consumers on their energy consumption and how much it is costing them, giving consumers greater awareness, which in turn is expected to further increase consumer switching. The signs on this are encouraging. According to a report on consumer engagement in the energy market, published by Ofgem in 2017, 23% of consumers who say they have a smart meter have switched supplier in the past 12 months, compared with 17% of those who say they do not have a smart meter. It is worth pointing out that we would expect the level of engagement from consumers to help inform Ofgem’s review into whether the conditions for effective competition are in place.
I turn now to the final two amendments in the name of the noble Lord, Lord Teverson—Amendments 12 and 13. The Government want consumers to benefit as soon as possible from the advantages of smart meters. That is why we continually review the rollout and take action to remove any barriers to effective delivery. The amendments would require, as a condition of extending powers that the Secretary of State has to amend or introduce new regulation for the purposes of smart metering, one of two conditions are met first before those powers can commence. The noble Lord suggested either 500,000 second generation—SMETS 2—meters must have been installed or a review of the programme, focused on consumer satisfaction and value for money, must be complete. We do not believe that either of those conditions for commencing the extended regulatory powers are warranted or necessary. We are also concerned that the effect of those amendments would be to leave the Government without powers to intervene to unlock delivery barriers and ensure consumer benefits are being realised.
I will take each condition in turn. I shall deal, first, with the noble Lord’s SMETS 2 target of 500,000. Like the noble Lord, we want to see the SMETS 2 meter installation accelerated. It is very small at the moment, but in the near term this should happen only if it is in the best interests of consumers. Setting a target would remove suppliers’ flexibility to plan and manage the rollout efficiently in order to serve their customers effectively in a competitive market and could lead to unintended consequences. We are assured that larger energy suppliers have commercial and financial incentives to drive them to install SMETS 2 meters as soon as is practicable. SMETS 2 meters unlock more of the customer base, supporting more cost-effective marketing approaches. They also include capability for load control and additional support for consumer access devices, thereby supporting service offers in line with energy suppliers’ potential future business strategies. These incentives align with regulatory imperatives to make progress, not least that our current expectations are that from later this year the installation of SMETS 1 meters will no longer count towards an energy supplier’s rollout obligations. We intend to include in future quarterly statistical publications—subject to sufficient supplier anonymisation—information about the number of SMETS 2 meters that have been installed, allowing for progress to be tracked and transparent.
We agree with the noble Lord that the programme should understand its impact during operations, in terms of consumer satisfaction and value for money. As regards consumer satisfaction, the department commissions and receives, including via Smart Energy GB, regular survey updates on smart meter consumer satisfaction. I have referred to some of them, and the satisfaction levels that have been achieved. In terms of value for money, my right honourable friend the Minister for Business and Energy, Claire Perry, has committed, as part of the Bill’s passage in another place, to undertaking and publishing an updated cost-benefit analysis in 2019, which will reflect, among other things, the real benefit for consumers. On this basis, the noble Lord’s condition would be duplicative and risks undermining the powers that the Government need to ensure the rollout is progressed smoothly and in consumers’ best interests.
Lord Campbell-Savours
Can I just ask again a rather simple question? I understand that we are not the only country in Europe with a smart meter installation programme. The French claim that they have done it for half the price of the programme in the United Kingdom. They claim it is going to cost them €5.5 billion, whereas we are potentially spending £11 billion. Is there any truth in that? Is our equipment the same as what the French are introducing? Is there some explanation for this suggestion that we are paying rather a lot for our equipment?
Lord Henley
I do not necessarily take all claims from France as seriously as the noble Lord does. I will certainly have a look at that claim being made by the French, but I believe we are doing reasonably well. Obviously, I will have a look at what they are doing and, if there are things that we can learn from that, we should do so. Just as we will continue to monitor delivery in this country, we will study and look at what is happening abroad. I have received advice about what is happening and whether we are sharing our experience with other countries and whether other countries have shared their experience with us. We have looked not just at what is happening throughout Europe—we have met representatives from Ireland, Sweden, Spain, Malta and, I understand, France—but we have looked further afield to India, Australia and the United States. Lessons we have learned include the importance of consumer engagement. That is why I emphasised earlier what we have done on consumer engagement.
On the actual costs, the advice I have received is that the EU average comes in at £181, compared with our figure of around £155 for a single-fuel electricity installation. So that is somewhat lower. On that front we are doing better. If there is anything further I can add about gas distribution grids in Malta or Italy that might be of use or even of interest to the noble Lord, I will pass it on. Another matter that came up was a concern about privacy, which is something that the noble Lord is concerned about and we discussed earlier.
In conclusion, we will continue to monitor the delivery of the programme and will continue to provide updates in annual reports and an updated cost-benefit analysis. I do not think the amendments add much. They risk duplicating those processes and could result, as I said, in unintended consequences that might delay getting the benefits to the consumer. I hope, therefore, that the noble Baroness, Lady Maddock, will feel able to withdraw her amendment.
Lord Teverson
The purpose of my amendment—I accept a lot of what the Minister said about its effects—was to get to understand what the test will be. What criteria will the department use to say, “SMETS 2 meters will work, they will integrate with the systems they have to integrate with, so we will give them the green light”? How will the assessment be made that SMETS 2 works—not just the individual meters but as a system—before we invest the other £8 billion?
Lord Henley
My Lords, we have started. The noble Lord gave his figure for how many SMETS 1 meters have been installed—I think it was about 10 million, which I do not dispute. I do not have the precise figure in front of me. We feel it is likely that we will be ready to cease to count the SMETS 1 meters towards the target in about October and therefore the suppliers will move on to SMETS 2, which brings further benefits. Over this year, we will see a growth in the number. I am not going to give a precise figure now for how that will grow, but we are likely to see the benefits from that. There is no point sticking with SMETS 1 when we can move on to SMETS 2.
Lord Teverson
I agree entirely with that, but it is not the point I am trying to make. SMETS 2 operates through DCC in a different system. It has different software and capabilities; otherwise, there is no point in doing this. SMETS 1 machines work on different systems. They work through the suppliers in bespoke ways. I understand the difference between the two. We need to stop operating SMETS 1 as soon as possible and we want to roll out SMETS 2. What is the test so that we can be happy that SMETS 2 functions correctly and confident that it is all systems go? I do not understand the test.
Lord Stevenson of Balmacara
I suggest that the test has already been passed and we are doing SMETS 2 come what may.
Lord Henley
We are going ahead to SMETS 2. The noble Lord is right there. We will see benefits from that, just as we have seen benefits from SMETS 1. That process will continue. I am suggesting to noble Lords and the rest of the Committee that we will provide appropriate reports back as to how that goes in due course, but I cannot provide any figures on exactly how fast that is likely to go, particularly in the initial stage this year.
Lord Campbell-Savours
I shall put it another way: what would happen if, having fitted 500,000, we found that there was a problem?
Lord Henley
My Lords, I do not believe in crossing bridges until we get to them. When we get to that stage, if there is a problem, I will come back to the noble Lord.
Lord Stevenson of Balmacara
Let us put the noble Lord, Lord Teverson, to bed happily. There is no further testing. The Government have accepted this, on the basis of what we understand to be the evidence of 300 SMETS meters placed into the homes of employees of the companies commissioning them. The network is said to be working, and may or may not be, at two different levels in the north—I am not quite sure where—and the south because there are two different arrangements, with an imperfect but satisfactory, to all intents and purposes, gas approach based on the idea that the SMETS 2 meters that go on to the gas equipment have to be shut down for most of the time that they are there because otherwise they will use up the batteries, which they are restricted to using because you cannot use electricity near gas since it might blow up. Therefore, they are battery-driven and the batteries cannot last forever. It would be ridiculous to have a situation where you had to have teams of people coming in right across the country replacing the batteries all the time because that is what we are trying to stop them doing when they have to read all the meters. The Government are going ahead with this—this is the point I still do not quite get—on the basis of very imperfect testing on a scale of £8 billion to be spent over the next few years, which is effectively a voluntary tax paid by people who did not know that they were being asked to pay it. It is bonkers.
Lord Henley
I am afraid I do not recognise what the noble Lord has offered. I suggest that we continue discussions on this. What the noble Lord is putting to me is not what has been put in front of me in other places. As I said, we will continue to monitor matters and to provide information. That will be sufficient to deal with the amendments. If the noble Lord would like to continue to make these strange allegations about what is happening, we can continue to do that in the discussions that I offered when dealing with the first amendment.
Baroness Maddock
My Lords, I am grateful to the Minister for his full response to me on Amendment 5. I am still not totally convinced that the Government always look very carefully at how their different policies interact. I am grateful that he has asked for extra information about the photovoltaics. It was new to me and I will come back to him with a bit more detail. Let us hope that it is just a one-off—that the supplier was just not very interested in doing this particular person’s house and that there is nothing more to it than that. I was quite shocked: lots of people have photovoltaics and if that really was the case we really need to do something about it. As I said, it was a probing amendment to try to open up discussion on these issues that I am concerned about. At this stage, I beg leave to withdraw Amendment 5.
Lord Henley
My Lords, as the noble Lord, Lord Teverson, says, there is always a lot to be said for asking questions to which one already knows the answer. In fact, I was told that that was one of the firm rules—that one should only ask questions to which one knows the answer.
My noble friend Lord Young will respond to the UQ on Capita debated today in another place—in time, I hope, for noble Lords to go through and listen to it. We do not believe that any of our strategic partners, including Capita, are in anything like a comparable position to Carillion. The current licensee is wholly owned by Capita but is required to operate at arm’s length from it. There are provisions in its licence to prevent Capita from taking working capital out of the licensee. Together those provisions mean that DCC would continue to operate while Ofgem, as regulator, sought to appoint a new licensee or for a new owner to be secured. I shall not say anything further on that subject at the moment but I hope I have dealt with the points raised by the noble Lord, Lord Teverson, and his noble friend Lady Featherstone. If necessary, I shall write to them in greater detail.
Tuesday 15th May 2018
(6 years, 6 months ago)
Lords ChamberSmart Meters Act 2018 Read Hansard Text Amendment Paper: HL Bill 83-R-I Marshalled list for Report (PDF, 67KB) - (11 May 2018)
This text is a record of ministerial contributions to a debate held as part of the Smart Meters Act 2018 passage through Parliament.
In 1993, the House of Lords Pepper vs. Hart decision provided that statements made by Government Ministers may be taken as illustrative of legislative intent as to the interpretation of law.
This extract highlights statements made by Government Ministers along with contextual remarks by other members. The full debate can be read here
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Lord Campbell-Savours (Lab)
My Lords, subsection (5)(b) of the new clause proposed by my noble friend states:
“an assessment of the future developments thought feasible and desirable for the smart meter programme, including monitoring of customer activity so as to deliver least cost tariff benefits combined with the maximum ability to engage with future appliance applications, inter-operability, compatibility with smart phones and tablets, and the encouragement of self-generated capacity in the home”.
I shall concentrate on the word “interoperability”, which I raised in Committee.
I was with some friends last weekend and we had a discussion about smart meters. The general view was that the problem with them is that you cannot switch suppliers. Although we are assured by Ministers that we can switch suppliers, the public believe that that is impossible without losing some information. My friends said that some suppliers refuse to have anything to do with the meters provided by others.
We need today from the Dispatch Box an undertaking that under whatever arrangements are ultimately in place, there will be absolute interoperability whereby, whoever is the supplier, the meter will work and provide information on the number of units consumed, the price per unit and the total paid to that point for the power consumed. The public need the assurance that if they get a smart meter, they can switch between suppliers quite liberally without losing any of the facilities available from an existing meter. I would like that assurance from the Dispatch Box, because I am sure that it would resolve many of the existing concerns in the country on the failure of the equipment to be interoperable.
The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)
My Lords, I thank the noble Lord, Lord Grantchester, and other noble Lords for introducing their amendments. I think that it was the noble Baroness, Lady Featherstone, who said that she came late to this debate. That is true of a great many of us—but she is right to say that it has been going on a long time, through a Labour Government, the coalition Government and now under this Government. I believe we are making progress, and I want to correct the noble Lord, Lord Teverson, who implied that only about 300 smart meters had been installed. I hope that was just a slip of the tongue and he was just referring to SMETS 2. As he is aware, some 10 million smart and advanced meters are operating across Great Britain, which are being installed at a rate approaching 500,000 a month—and I hope that figure will go up, as all those first-generation meters are expected to be enrolled within the national infrastructure from later this year.
I also thank the noble Lords, Lord Grantchester and Lord Stevenson, the noble Baroness, Lady Featherstone, and the noble Lord, Lord Teverson, for the way they have co-operated on this Bill, and the constructive approach they have taken to its scrutiny. I hope that, as a result, we will fairly quickly be able to move on to other matters and then, once the legislation is finished with, get on with the programme and meet the aims shared by the noble Lord, Lord Teverson, and I. We have heard concerns about how well the smart metering programme will deliver benefits for consumers. I hope that in due course we will be able to address the point made by the noble Lord, Lord Campbell-Savours.
I am convinced, perhaps because I am one of those eternal optimists, that the programme will be a success. The noble Baroness, Lady Featherstone, smiles at me because she thinks I am too much of an optimist—or too much of a Tigger—in these matters, but it is better to be a Tigger on this occasion than an Eeyore. I shall continue to do so, and I hope the noble Baroness will accept that progress is on the way.
I recognise the spirit in which the amendments have been proposed. While I cannot accept them, I want to set out several commitments that the Government are making, which I hope will address noble Lords’ concerns.
I turn, first, to the amendment moved by the noble Lord, Lord Grantchester, which would require the Secretary of State to establish and put into regulations a national plan for smart meters with associated implementation requirements. We believe we have the right strategy in place for ensuring that the smart metering programme is delivered cost-effectively and that consumer benefits are optimised. The Bill, in seeking an extension to the duration of the Secretary of State’s regulatory powers, recognises that the Government are accountable for delivering the benefits of smart metering and that we need to maintain close oversight of implementation.
There are various aspects of what is proposed that duplicate work that the Government already have in place, which we do not believe would ultimately work in the best interests of consumers. However, we have reflected closely on the concerns that the noble Lord, Lord Grantchester, has expressed regarding the programme, and have concluded that there is more we can do to address his concerns to help the programme succeed. We have identified three actions we are prepared to commit to as a result.
I recognise that there is an appetite for the Government to do more to ensure that we are transparent with consumers and Parliament in monitoring and tracking delivery. The programme already publishes quarterly rollout statistics, and we have committed in the other place to publish more substantial reports on programme delivery. I can further commit to publishing, by the end of 2018, as part of our annual report on progress, a forward plan of activity. This will show that the Government have a clear plan for resolving the remaining technical and operational challenges to delivering the programme. The report will be placed in the Library of the House.
I sympathise with noble Lords’ desire for further assurance that the Government have a firm hand on the tiller on all aspects of the programme. I therefore commit to publishing, by spring 2019, a report that will provide a stocktake of progress towards delivering the consumer benefits of the programme. We will take evidence from consumer representative bodies and Ofgem in preparing the progress report. The planned National Audit Office inquiry on the smart metering programme, which we currently expect to report by the end of this year, will be another important strand of evidence. It is right that Parliament should have an opportunity to scrutinise the report. The Government will therefore bring forward a ministerial Statement on the final report, allowing some sort of debate in both Houses of Parliament.
We believe that smart meters will be game-changing for how consumers engage with their energy use and the market. The amendment seeks an assessment of how well the programme is future-proofed and we recognise that there are merits in undertaking an assessment of the smart meter platform in support of this. I therefore commit to publishing a paper by the end of this year that will draw out and promote the potential of the data offered by smart meters for future innovative consumer technologies and services.
The noble Lord, Lord Campbell-Savours, raised interoperability and claimed that it is difficult to switch between suppliers. It will be important for suppliers to communicate to consumers that they can switch supplier without risk of losing services. From later this year, the enrolment of SMETS 1 meters is expected to take about a year. All SMETS 2 meters will be fully interoperable from the outset. If the noble Lord requires anything further, I am more than happy to write to him.
Lord Campbell-Savours
My Lords, in the event that a second supplier takes over, will the information on the meter provided by the first supplier be equally made available by the second?
Lord Henley
I think the noble Lord is correct, but if not I will write to him on that matter.
Amendment 2, in the name of the noble Lord, Lord Teverson, relates to SMETS 2 testing. I recognise that at the heart of the amendment is a concern that the Government are pushing ahead with transition to SMETS 2 meters without adequate checks and balances. We want to transition to SMETS 2 meters as they are better for energy consumers. As I made clear, they offer full interoperability from the outset, cost advantages and support for energy network planning and investment decisions, from which efficiencies and consumer energy cost savings can flow. This is why we will put in place a SMETS 1 end date to drive the transition to SMETS 2 meters.
I reassure the noble Lord that we are not driving this transition blindly. We have thorough and mature industry-wide monitoring and governance that allows us actively to scrutinise this transition. We closely monitor energy supplier and DCC operational capability, meter availability and reliability and supply chain maturity. That is underpinned by a robust testing regime across the end-to-end system set out in the regulatory framework via the Smart Energy Code. It requires, and provides assurance, that the DCC’s systems and services meet requirements; that suppliers and other DCC users are capable of using the services that are provided by the DCC; and that the metering equipment which suppliers enrol with the DCC is interoperable with the DCC’s systems and compliant with the relevant technical specifications. This is backed by device certification via the National Cyber Security Centre’s commercial product assurance scheme.
After undertaking their own thorough testing, leading energy suppliers are now rolling out SMETS 2 meters to real customers at low volumes, demonstrating their confidence in the preceding testing. We think it is right to continue to press other energy suppliers to make the same transition, on the back of their own testing. We are in close dialogue with the DCC and suppliers, and if it was shown not to be in the interests of energy consumers, we would provide further time for the transition.
In light of those assurances, and given the substantive commitments to further government action and information that will be made available to both Houses, I hope the concerns of the noble Lord and all other noble Lords who took part in the debate have been dealt with, and I hope the noble Lord will feel able to withdraw his amendment.