Smart Meters Bill

Alan Brown Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Tuesday 24th October 2017 Commons Chamber

[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 That is decades out of date.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.

[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.

--- Later in debate ---

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

I start with a slight confession: I sometimes wonder whether I am easily confused. I ask that because I have been looking at the information that the Government have put out in the briefings associated with this Bill. I have to ask myself, “Are the Government easily confused, or are the Government trying to confuse us?” I want to highlight some of the issues that I have picked up.

First, it is claimed that the extension of the Secretary of State’s powers to intervene until 2023 does not extend the actual period of the smart meter roll-out beyond the 2020 target date. The Government claim that they are on target to hit their deadline, but analysis shows that 53 million smart meters need to be installed but that only 7.7 million meters have been installed since 2011. That leaves 45 million smart meters to be installed in just a three-year period.

[Stephen Kerr]

Is there not an upside to this? The meters that have been installed so far have fairly limited functionality and interoperability. The upside is that the second generation of meters, which will be fully functional, will allow the Government to put their foot to the floor and move ahead with these meters.

[Alan Brown]

I understand the hon. Gentleman’s point, and I thank him for it. It is a bit like saying that the long-drawn-out introduction of universal credit is good, when the roll-out was a shambles. It is not enough to say, well, this roll-out is a shambles but that is good because better technology is coming further down the line.

[Steve McCabe]

Surely, if the hon. Member for Stirling (Stephen Kerr) was right in his assertion, he was making a perfect argument for not installing any more of these inferior meters.

[Alan Brown]

I thank the hon. Gentleman for his point. I know that that was alluded to in the previous intervention. Yes, if there is better technology, it makes sense to work towards installing that better functionality. There is another consideration when it comes to extending the deadline. If we are going to be honest about things, extending the deadline will actually make the installation process much more efficient. How much will it cost to ramp up and supply the additional labour that is needed to go from 350,000 meters a month to 1.25 million meters a month? It will take extra labour, extra training, a massive recruitment exercise, and then, lo and behold, all these people are out of a job because the installation period has gone by. There is actually some merit in considering doing this over a longer period, as it could work better for consumers in the long run.

[Douglas Ross (Moray) (Con)]

Just while we are still on installation, does the hon. Gentleman agree that the three big suppliers in Scotland—SSE, Scottish Gas and Scottish Power—seem to be focusing much of their work on the urban areas rather than on the more rural and remote areas, where fuel poverty is a bigger issue? Does he agree that the roll-out should be equidistant across the country, and that that is something we could achieve in Scotland?

[Alan Brown]

I thank the hon. Gentleman for that intervention. I agree with his point. There are also other logistical installation problems, which tie in with concern about how practical this 2020 deadline is. For example, at the moment, many properties in Scotland have gas meters installed in their external walls. Right now, smart meters cannot be installed in external walls. Last week, my office manager agreed to get a smart meter installed. Someone from the company came out and said, “I can’t actually give you a gas meter.”

[Stephen Kerr]

The other issue is connectivity. There is not the broadband or mobile telephony coverage that these rural areas need to sustain the functionality of the meters.

[Alan Brown]

I agree. There is an issue with connectivity, and a problem with gas meters on external walls. Flats and tenements quite often have banks of meters installed in communal areas, and there is not yet a solution for the installation of smart meters in those cases. Frankly, the 2020 deadline is dead in the water.

As I said, the consumer pays for any increase in labour costs and recruitment to try to hit a deadline, so that is an additional cost that eats into savings and is probably not yet projected. I am a wee bit unsure about the Government’s estimate of the financial benefits of the smart meter roll-out. I am not saying that the roll-out is not a good thing, but I do question some of the figures attributed to it. The only guarantee that consumers have is that they will have to pay for the £11 billion installation costs. As we have already heard, those costs are increasing.

There is an estimated direct consumption saving of £5.3 billion, which is only half the installation cost. There is also an assumption about long-term behaviour—that customers will continue to operate a reduced energy usage. I have a concern about human behaviour. It may be the natural instinct of many customers to modify their behaviour and turn down their electricity usage when they get smart meters, but bad habits may creep in over a long period and the savings might not be realised at the same level.

There are other estimated savings in the Government’s cost-benefit analysis that are, frankly, quite spurious. The Government estimate £8 billion of supplier benefits, but there is absolutely no guarantee that the £8 billion that suppliers are predicted to save will be passed on to consumers. The Secretary of State intervened earlier to suggest that the market will dictate that these savings will rightly be passed on to consumers, but I draw the Minister’s attention to the fact that market failure is the whole reason that we agree on energy price caps. There is no way that we can guarantee that future savings for suppliers will be passed on to consumers.

Other spurious savings estimates include carbon-related benefits of £1.3 billion and £98 million in air quality savings. Now, reducing carbon emissions is a good thing, but I question how we can quantify those reductions as savings that will go direct to the consumer. The Government estimate savings for each household of £11 per annum by 2020 and £47 per annum by 2030, and £16 billion of savings were estimated overall. However, as my colleagues have touched on, the bottom line is that these estimated savings of £16 million are completely dwarfed by the £30 billion project that is called Hinkley Point C. That wipes out any projected savings from this programme.

Other hon. Members have mentioned that all consumers are paying for this programme, so surely the fuel poor and prepayment customers should be targeted first and given assistance. We should ensure that these vulnerable customers get the smart meters they deserve. Smart meters are supposed to end estimated billing, but it is acknowledged in the Government’s own factsheet that accompanied some briefings that if somebody with a first generation meter changes supplier, it is quite possible that they will lose the functionality of the smart meter. Even if they retain some functionality, they will end up back with estimated meter readings. That is counter- productive and the opposite of what the smart meter roll-out is supposed to achieve.

It was said that the second generation roll-out will start in July 2018. Well, we need the Minister to confirm how certain that is. Will the energy suppliers be forced to move on to the second generation meters, or will they be able to use up the backlog of 2 million first generation meters or whatever the number is? What if the initial companies are doing cheap deals on the first generation meters to get them out the door? Are we still going to be stuck with them?

[Matt Western]

I have spoken to a major energy supplier in my constituency, and it is clear that suppliers are seeking clarity from the Government on not only the timescale in which they are supposed to install these meters but what are deemed to be all reasonable attempts to get them installed. So, overall, there seems to be a lack of clarity, even for the suppliers.

[Alan Brown]

Yes, I agree, and I hope we will get more clarity when the Minister sums up.

I agree that properly functioning smart meters can bring consumer benefits, but it is clear that they are not a silver bullet in reducing bills for energy users. To properly reduce costs, the Government need to look at their wider strategy. Nuclear commitments need to be scrapped. All renewables need to be able to bid in future contract for difference auctions. Much more also needs to be done to manage the smart meter process, and I look for confirmation on that when the Minister sums up. At the moment, the Bill will not achieve that, but it will extend the Government’s powers, and I hope we will hear how those will be used to better implement the roll-out of smart meters.

Finally, the Secretary of State mentioned the smart grid and the use of smart meters for demand management. If we are going to get to that, the future upgrades need to be much more efficient, and I look forward to that happening in due course.