Smart Meters Bill

Lord Harrington of Watford Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Monday 5th February 2018 Commons Chamber

[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.

[Dr Drew]

Will the Minister give way?

[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]

Will the Minister give way?

[Richard Harrington]

Yes, I apologise.

[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

--- Later in debate ---

[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.