Smart Meters Bill

Lord Grantchester Excerpts

Committee: 1st sitting (Hansard): House of Lords
Tuesday 24th April 2018 Grand Committee

Moved by

[Lord Grantchester]

1: Clause 1, page 1, line 5, leave out “2023” and insert “2026”

[Lord Grantchester (Lab)]

My Lords, I will speak also to Amendments 2 and 4 in this group. Amendment 1 gives the Secretary of State a further three years beyond the date the Government are asking for in the Bill. The Government seek to extend the existing powers provided to the Secretary of State to develop, amend and oversee regulations relating to the licensing of smart meters from 2018 to 2023. Unusual as it may seem, we would like the Government to have more time. We want them to get the smart meter implementation programme right.

We are all in favour of smart meters and the benefits that they will bring to energy efficiency and customer satisfaction. I could cheekily say that we do not want to have to grapple with whatever state of distress the smart metering programme has reached when we take over at the next general election. We want the plan to work for consumers, and at the moment we see a smart meter rollout that is unclear, incoherent and unco-ordinated in its approach. The Second Reading debate revealed the delays, complexities and escalating costs at this juncture. We want the Government to take more time. We think that they will need more time. Ostensibly, they are seeking the five-year extension—three years beyond the 2020 deadline—in order to conclude a review of the data access and privacy framework by the end of 2018, and to fulfil any actions needed from the review.

In addition, I understand that the National Audit Office review of the cost-benefit analysis, due in July, will also be delayed because of a lack of resources. The review was also going to consider the technological choices made to ensure that the programme was not going to be installing obsolete equipment. I would appreciate it if the Minister would include the latest position on the NAO report in his remarks. This indicates that there is going to be a pause in any case. We believe that this time should be used constructively. Experience has already shown that the timetable has slipped. We say to the Government, “Take more time. We think you might need it. And in return, let’s get it right. Let’s be more ambitious. Let’s capture the latest technology to bring real benefits to consumers”.

Also contained in the amendment is the consideration that the statutory obligation to complete the rollout by 2020 needs to be reassessed. First, there is a mixed message or misunderstanding about what is to be completed by 2020. I am grateful to the Minister for his letter of 22 March, after Second Reading. In his second paragraph, he writes:

“The obligation on energy suppliers … is to take all these steps to install smart meters … by the end of 2020”.


However, in the first paragraph of page 2 of the letter he writes:

“The Government is committed to ensuring all homes and small businesses are offered smart meters by the end of 2020”.


There is a lack of clarity between installation and being offered a smart meter by 2020.

The Government needs to reassess the whole programme, revisit the milestones and reset the parameters in a collaborative way with the various interested parties charged with making smart metering happen. Just as the Government need sufficient time to undertake and execute actions from the post-rollout review of the programme, as the Minister’s letter states, so the industry needs the confidence to implement worthwhile solutions for its consumers.

I move to Amendment 2, which was moved in the other place, and we repeat it here merely to retest under what circumstances the Secretary of State may wish to remove certain licensable activities to which his department has drawn attention in its memorandum, submitted to your Lordships’ Delegated Powers and Regulatory Reform Committee. Although it is stated that there is no intention to use this power, one licensable activity that could be removed is a revision of the smart meter communications service, the DCC. In line with the ambitions under Amendment 4, perhaps the Minister might clarify why his department may wish to use the power included here.

On Amendment 4, although the Minister and the Government may wish to portray that smart metering is now back on track and proceeding constructively towards its objectives, very few independent assessments concur with that view. There continues to be confusion regarding which types of SMETS 1 meters can be upgraded without replacement to be interoperable and from what date. There is confusion around differing standards and the use of differing technologies around the UK; confusion over whether pursuing the 2020 deadline has the potential to increase costs and risks and jeopardise the programme’s increasingly suspect credibility to consumers; and concern that a lack of fully tested SMETS 2 meter devices will further undermine meeting supposed timescales.

In considering the number of reports across the various parameters important to stakeholders, the necessary consumer activity required and the technological challenges inherent in these meters, we concluded that it would be far more constructive if all those intimately challenged by the rollout were to come together to share perspectives and work constructively together to find common solutions and co-ordinate the rollout. We consider that Ofgem as the industry’s regulator would be best placed to lead and develop this national plan. We consider that consumers should be put at the heart of the programme, costs monitored to secure benefits for them and the programme able to take advantage of all developing consumer technologies.

Proposed new subsection (3) clarifies those that Ofgem must consult, and subsection (4) specifies all the ambitions to which the national plan must have due regard. The plan must set out credible milestones with appropriate timescales for achievement, including the installation or termination date. The plan needs careful monitoring and adjustment, with frequent reports from Ofgem. For example, I draw attention under proposed new subsection (4)(g) that all other national rollouts of smart meters have been conducted through DNOs—distribution network operators—not suppliers. Here the rollout has been conducted by energy suppliers. I do not wish to challenge the whole implementation model, but it could be that different answers are required as implementation proceeds, and Ofgem needs to be able to take account of this and promote effective delivery mechanisms.

A reset needs to be made so that the consumer can begin to have confidence again that smart meters will be deliverable and beneficial. Smart metering needs to be the first crucial initial infrastructure in place to deliver the benefits of smart technologies to the home. It needs to be effective—it needs to be got right. I ask the Minister to respond positively to this amendment. It may not be correct in every detail: for example, it does not include a review of the cost-benefit analysis, as it had been understood that the NAO was already going to be doing this. The Minister needs to advise the Committee on the status of that review. It can be included on Report, should the NAO not conduct the review after all. However, I ask the Minister to agree that a national plan along these lines is required and to bring something back himself on Report. Perhaps this can be discussed next week, but a favourable response would be very constructive. I beg to move.

[Baroness Featherstone (LD)]

I support Amendment 4. Compared with other noble Lords present, I came late to the smart meters table. They have participated in a number of debates leading up to where we are now and during that process they have obviously met a number of bodies associated with the smart meters programme. I have to say that I have been somewhat shocked at how what should be an energy revolution, welcomed on all sides of this House and beyond, has turned into a shambolic mess. As was mentioned, the cost—much higher than was ever envisaged—will no doubt end up with the consumer. This could and should never have happened.

I was a member of the London Assembly when it was formed in 2000 and I was chair of the transport committee. When we introduced in London the biggest civil engineering project since the end of the Second World War—the congestion charge—a great deal of planning and work went into making sure that on the day it went live, it was so well thought through that nothing went wrong, despite the Daily Mail circling the perimeter of the charge to, it hoped, see it go wrong. I do not really understand why the commissioning of such a major infrastructure project has not been treated in that fashion. This is an absolutely huge change and an infrastructure priority, heralding a better future for all when energy is very important to this country. It seems to have involved a kind of piecemeal bun fight over which companies will deliver which meters to which people under what circumstances and for how long, with no co-ordination, no collaboration and nothing bringing it together.

Everyone has made it quite clear that the deadline will be missed. I am afraid that I have not met anyone, other than the Minister, who thinks that this deadline will be reached. That being the case, rather than move the programme to 2023 or whatever, it would be far better to grab hold of it now: otherwise, consumer confidence, which is vital to this project, will be completely undermined. I hope that the Government will grasp hold of this and take up the recommendation of the noble Lord, Lord Grantchester, coming back with a similar suggestion for halting the project and promoting a national plan. Not only does what needs to be done to whom, by whom and at what cost need to be thought through but there is a great need for a new communications programme to market the project. There is possibly also a need to incentivise consumers and to find a way not to put them off but to bring them back into the fold after they have become somewhat disillusioned.

The opportunity to make the project work is there, but at the moment we are in danger of the absolute opposite happening, with diminishing returns and diminishing confidence, shooting ourselves in the foot over what should be a fantastic programme for the future. The project has been piecemeal, inadequate and not thought through. If the Minister will excuse me, I believe that he should bring it together, do the necessary and bring back an amendment on Report.

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[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.

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[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.

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[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 thank the Minister for his response, and I am grateful for all the comments made around the Committee today. It has been very helpful. I am not trying merely to tease the Government in offering them more time, I thought that the Minister might come forward with evidence to show that all this is going to be achieved well within the 2023 timeframe, and the different steps that are going ahead, such that we could be shown to be completely erroneous in our impression that the Government may need more time. I put it to him that we are trying to be constructive and trying to get the right solutions done in an effective way for smart metering to be well accepted, so that when consumers are offered a smart meter they are only too keen to go ahead because of the state of the technology, the benefits that can be shown to them, and so on, and we can all look forward to an early resolution of all these problems for a successful outcome. So if the Minister is happy to take it in that timeframe and does not see a critical issue in the 2023 deadline, I am very happy to beg leave to withdraw the amendment.

Amendment 1 withdrawn.

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Moved by

[Lord Grantchester]

3: After Clause 1, insert the following new clause—
“Cyber security
The Secretary of State must place a duty on the Government Communications Headquarters to conduct an annual risk assessment to ensure that the smart metering system is adequately protected from cyber attacks.”

[Lord Grantchester]

My Lords, I shall speak to Amendments 6 and 11 in due course. Amendment 3 places a duty on GCHQ to conduct an annual risk assessment regarding the security of the smart metering system. One of the delays experienced in the rollout of smart meters concerns whether or not the system is secure from cyberattacks. Considering that the technology used to communicate the information from the smart meters is a basic 2G technology which can hardly be said to be secure, it is remarkable that GCHQ is able to pass the system as fit and secure.

In the Minister’s letter dated 20 March, which I referred to earlier, he clarified that critical communications with smart meters will happen only when authenticated by strong encryption and independently countersigned by the DCC. I would be grateful if the Minister could clarify what that means, whether GCHQ is demanding technological improvements and whether security issues are part of the Government’s review of the data access and privacy framework to be completed this year. What processes do the Government have in place to ensure the robustness of the system? Cybersecurity is a constant challenge, and we believe that an annual risk assessment will be required to keep the UK’s infrastructure secure from potential attack. I beg to move.

[Baroness Featherstone]

My Lords, I tabled Amendment 11 to probe issues around the use of data obtained by the powers in the Bill. It takes the form of a review into the use and potential misuse of the data obtained via the smart meters scheme. The review would look at the risks of data theft and of data being passed to a third party without the consent of the consumer, and if the risk of theft or passing on without consent was substantial the report would bring forward measures to be implemented to combat such events. Lastly, the amendment would require the Secretary of State to lay a report of that review before both Houses within six months of the Act coming into force.

I think the intent of the amendment is quite clear. We have recently seen the extreme value of data to a number of organisations. It is clearly valuable in a world where we create and feed markets through information, and the more personal that information, the more targeted sales or persuasion can be. The amendment seeks to put measures in place to mitigate those risks.

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[Lord Campbell-Savours]

My Lords, I do not profess to have huge knowledge of this subject. It is not an issue which I have researched recently.

When the original legislation went through—I refer to the role played by the noble Lord, Lord Teverson, in about, I think, 2006 or 2008—I spoke at great length during the course of the proceedings because I knew the subject. However, my questions on this occasion are simple and elementary.

When my service charge for my flat in London is issued every three months by the management company, it always shows the amount of water consumed by each flat in a list that is circulated to all members of the residents’ association—there are about 160 flats and a similar number of members—and therefore the occupants of flat 1 in my block will see how much water I use. I have always thought that was rather dangerous—depending into whose hands it fell—because from water consumption you can tell the scale of occupancy of the residents.

When I was having a chat with some colleagues and I saw Amendment 11, tabled by the noble Baroness, Lady Featherstone, in which paragraphs (a) and (b) of subsection (2) of the proposed new clause refer to,

“the risk of data obtained from consumers being stolen”,

and,

“the risk of data obtained being passed on to third parties without the consent of the consumer”,

I was left wondering what would happen with this 2G technology and how easy it would be to hack in and find out how much electricity is being used by the occupant of a particular flat or house. That is exactly the information that burglars, of all people, would want. I wonder to what extent these matters have been taken into account when deciding on the technology supplied. People have meters at the moment, but I do not know if there has been any research on whether this information is already being tapped into and given to people who would misuse it by breaking into people’s homes. Has any work been done to establish to what extent that might be a problem?

The Minister cannot have all the answers—I understand that—but if we are not aware today of the incidence of this information being abused, perhaps he could write to the members of the Committee about it because it is important. We are going into a new era with all this technology and I wonder whether it could be abused by people having that important information when they are seeking to burgle or interfere with other people’s properties.

[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.

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[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.

Amendment 3 withdrawn.

Tabled by

[Lord Grantchester]

4: After Clause 1, insert the following new clause—
“National Plan for Smart Metering
(1) Within one month of the passing of this Act, the Secretary of State may direct OFGEM to develop a draft National Plan for Smart Metering which will deliver all the objectives of the smart metering implementation programme, together with an appropriate termination date.(2) The Secretary of State must consult OFGEM before giving a direction under this section. (3) When preparing the draft National Plan, OFGEM must consult—(a) District Network Operators (DNOs);(b) Data Communications Company;(c) energy suppliers;(d) consumer interests bodies;(e) Smart Energy GB;(f) the National Audit Office; and(g) such other relevant bodies as may seem to be appropriate.(4) The draft National Plan for Smart Metering must set out the obligations to be undertaken by the licensed energy suppliers and their associated organisations in delivering all the objectives of the smart metering programme and must include, but is not limited to, the following—(a) detailed targets for each quarter of each year for each energy supplier in pursuit of the objective of complete roll out of smart meters by an agreed termination date;(b) a detailed specification for the functionality and performance required in each meter, so as to ensure reliable service life, ease of installation and maintenance, appropriate inter-operability, future upgrading capacity, and removal and safe disposal of obsolescent equipment;(c) 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;(d) an assessment of the potential of smart meters to be the gateway to additional domestic energy efficiency measures;(e) an analysis of technical developments to provide alternative solutions for Home Area Network (HAN) connections where premises are not able to access the HAN using existing connection arrangements;(f) an assessment of the most effective way of dealing with the inclusion in the programme of hard-to-reach premises and multiple-occupancy dwellings;(g) an assessment of alternative delivery arrangements as between energy suppliers and DNOs which might increase the effectiveness of roll out solutions over time.(5) OFGEM must publish the draft National Plan for Smart Metering by 31 December 2018.(6) After due consideration and consultation, the Secretary of State must in regulations made by statutory instrument specify the final version of the National Plan for Smart Metering.(7) A statutory instrument containing regulations under this section may not be made unless a draft of that instrument has been laid before, and approved by a resolution of, each House of Parliament.(8) OFGEM must report annually on the extent to which the National Plan for Smart Metering is being delivered, in line with the termination date.(9) If at any point it appears to OFGEM that the targets specified in the National Plan for Smart Metering are not likely to be achieved, it must prepare a report for the Secretary of State, who must lay such a report before Parliament, together with recommendations for what consequential action is required to enable the programmes to be completed by the termination date.”

[Lord Grantchester]

Given the noble Lord’s answer on Amendment 4, I merely wish to point out that in putting forward this amendment we are not suggesting a change in approach as he seemed to think. We are suggesting that Ofgem be used as the Government’s regulator in order to critically analyse, on behalf of the Government, the plan that is unfolding in their own eyes and mind. The Minister made the point that there was a high-level plan somewhere in existence. It needs to be dusted down, expressed and promoted because it does not appear to be inspiring confidence around the industry at the moment. Indeed, if this high-level plan was more readily available, we could perhaps look at it and critique it because, in assessing the Bill as it goes through the House, we need to be robustly reassured that everything is in place and likely to be successful, hence the need for the amendment we were proposing.

I will critically analyse the Minister’s response and engage with him further in the coming week. In the meantime, I will not press Amendment 4.

Amendment 4 not moved.