Smart Meters Bill (Fourth sitting)

Alan Whitehead Excerpts

Committee Debate: 4th sitting: House of Commons
Thursday 23rd November 2017 Public Bill Committees

[Dr Alan Whitehead (Southampton, Test) (Lab)]

This is the first opportunity I have had to express my pleasure at serving under your chairmanship in this Committee, Mrs Gillan. I am sure we will have a great Committee under your chairmanship for the rest of our proceedings.

I commend my hon. Friend the Member for Birmingham, Selly Oak on an excellent presentation of the problem at the moment with SMETS 1 meters being effectively rolled out in a way they were not originally intended to be. Because of various events, some of which I have alluded to, those meters have been rolled out in substantial numbers—in the millions—to date.

As my hon. Friend mentioned, the roll-out of SMETS 1 meters is supposed to stop by July 2018. The ordering process, the supply chains and everything else that has gone into SMETS 1 meters will be effectively extinguished in July 2018. At that point, theoretically, SMETS 2 meters should take over. Those are manufactured by different people and have different supply chains. In theory, those new supply chains and new meters for installation should be in place by July 2018, for the transfer between SMETS 1 and SMETS 2.

As my hon. Friend states, the issue is not quite as simple as that. Originally, SMETS 1 was a foundation model of smart meter, and SMETS 2 was supposed to be the final item that would be the basis for the whole roll-out of smart meters, and the two meters were supposed to have very different properties. When SMETS 1 were first conceived of and introduced, they were not thought to be interoperable. If we wanted a long-term system whereby our meter would retain full functionality if we switched suppliers, we would need a SMETS 2 meter, because that could not be done with a SMETS 1 meter. Indeed, we saw in some of the early switching of SMETS 1 meters that switching does not allow for full functionality, and the meter then effectively acts as a dumb meter—that is to say, it produces the data and the material, but the in-home display and various other things do not happen.

Since that original clear distinction between SMETS 1 and SMETS 2 meters, quite a lot of work has been undertaken on the software arrangements of SMETS 1 meters. Indeed, with later iterations of the model, it now appears that SMETS 1 meters can be made effectively interoperable, as far as overall systems are concerned, through enrolment in the DCC or the mini DCC systems and their enrolment in the DCC. On an immediate basis, it is between the meter, the mini DCC system and the final DCC that is established.

In effect, one of the main issues that divides SMETS 1 meters from SMETS 2 meters may be in the process of being resolved. Indeed, that was the basis of some of the evidence we received earlier this week. As my hon. Friend the Member for Birmingham, Selly Oak rightly said, it appears that a number of issues arise from that. Do we continue to say there is a complete cut-off date concerning SMETS 1 meters and assume that SMETS 2 meters are coming on stream, or do we, taking that information into account, look at other ways in which SMETS 2 meters—which, by the way, have other advantages in addition to being interoperable—can eventually be rolled out?

I would add two complications to that scenario. First, the Government are already in the process of consulting on whether the July 2018 date should be moved. A consultation document was issued recently with that aim precisely in mind. The consultation document suggests that suppliers—this is out for consultation, so it is not a final agreement—could for a limited period, I think it is three months after July 2018, continue to install SMETS 1 meters up to a number based on how many SMETS 2 meters they had already installed. They would therefore not be bound by the July 2018 date. That is, among other things, to make sure that the stocks of SMETS 1 meters in the pipeline can be used up properly.

There are problems with that. If the roll-out of additional SMETS 1 meters is allowed after July 2018 based on the number of SMETS 2 meters the suppliers have already put into place, it may not make much of a difference at all, given what we have heard about the number of SMETS 2 meters already installed. It may not make too much of a difference for another reason. As I mentioned this morning, because the DCC was so late in going live—there are still concerns about whether the DCC is live to the extent that we want—one of its central functions has yet to be put into place: the ability for a full end-to-end field testing of SMETS 2 meters, so that we know they really are going to work. That can be done only by installing a number of SMETS 2 meters, testing them against a live DCC and looking at how that all works in practice. That is not just one theoretical meter on the wall, but a whole range of SMETS 2 meters installed in different circumstances in different parts of the country so that we understand how that process actually works. To date, that process has not been undertaken, as far as I understand.

We are saying that in July 2018—or three months afterwards, subject to the consultation—there will be no more SMETS 1 meters and they will be replaced by a meter that is yet to have any field testing at all, regarding its operation. We are then saying that we are sufficiently confident—I hope the Minister will be able to advise us on this—that by that particular date, a large number of SMETS 2 meters will be available for installation, so that that handover can take place.

The problem, as I mentioned this morning, is that if that is not the case, the programmes to install smart meters—already underway, and ramping up considerably —will grind to a halt, because there will be no meters in the vans to go out and install. Even though people want a smart meter, have asked for one and have an appointment for one to be installed, it will not be possible to install that smart meter. The smart meter installation programme may well just pause because of that particular issue. Unless that issue is resolved, all the targets and milestones being put in place for supply companies could be completely overthrown; if the companies do not physically have the meters, they cannot meet the milestone requirements for a complete roll-out by 2020.

As the consultation alludes to—inadequately, I think—there has to be some kind of solution to that potential impasse. Either we have to be clear that SMETS 2 meters will be available in volume, reliably and tested, so that they can get into the vans, or we look further at the position of SMETS 1 meters. That is at the heart of the amendment.

As we have established, SMETS 1 meters were originally supposed to be only part of the foundation programme, but they have had a use far beyond that, and people have been working on their development far beyond what was supposed to be the case. We have therefore developed a substantial supply chain and manufacturing base for SMETS 1 meters that was never supposed to be. There was supposed to be a limited manufacture and limited supply, with a small number rolled out that would be replaced by SMETS 2 meters, and that would be the end of the SMETS 1 meter. They were never supposed to be on the walls of millions of households. People were never supposed to potentially have to rip those smart meters out at some stage to put new ones in, if some of the fixes had not been put forward.

Indeed, I suggest that the development of those fixes and programmes to make those smart meters interoperable arose precisely because of that hiatus. If the people manufacturing those smart meters and concerned with their roll-out had not done that work, we would be in a desperate place. All the smart meters rolled out to date would effectively have to be junked, and we would have to start all over again, several years down the line, with the 2020 roll-out date looming. It looks like that will not be necessary, but the consequence is that SMETS 1 meters have taken on a different dimension as far as the whole roll-out is concerned.

Does the Minister have further intentions for the use of SMETS 1 meters in the instance that SMETS 2 meters are simply not ready and available for installation? If he does have plans for further installation of SMETS 1 meters beyond the July cut-off date, is he confident they will work as well as he might think? If he does think they will work in the eventual scheme of things, does that not suggest there is a further potential role for SMETS 1 meters up to the end of roll-out, over and beyond what the Minister has considered so far? That is to say, is it possible to think about a much longer-term roll-out arrangement for SMETS 1 meters? SMETS 2 meters would come on in the future, as meters are replaced by new ones by the end of the roll-out date overall, but the bulk of the heavy lifting in the initial roll-out would be done by SMETS 1 meters.

This needs to be considered in conjunction with all the other issues we will discuss in Committee about the difficulties and problems to overcome leading up to the end of the roll-out period. Are we not creating an additional hurdle to get over in the roll-out by how we are doing the SMETS 1 and SMETS 2 changeover? Might we not lower the height of that hurdle by furthering considering what we do about SMETS 1 meters over the next period?

--- Later in debate ---

[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.

[Dr Whitehead]

They have not been tested yet.

[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?

--- Later in debate ---

I was present when the Minister proposed the Nuclear Safeguards Bill just a few weeks ago. I do not think I can quote him verbatim, but if I recall correctly, his argument for the provisions he was promoting was that he wanted to have sensible legislation in place in case he needed to take action for the benefit of the wider community. On that occasion, I thought he was absolutely right. I suggest that he would be equally right to accept those powers now to safeguard against events about which we cannot be entirely confident at this stage.

[Dr Whitehead]

My hon. Friend the Member for Birmingham, Selly Oak has tabled an amendment that is not only interesting but timely and important. As he says, it would be overwhelmingly helpful to the roll-out procedure and would not force anyone to do anything. It would give the Minister the opportunity to consider what should be done, perhaps by secondary legislation or something similar, to confront the issues raised by what we might call reverse meter logistics, which the industry is beginning to talk about.

The amendment is particularly helpful, because this problem is not a theoretical problem for the future, or something that we can think about during the extension period; it is happening now. Indeed, the problem is not only happening now, but its extent and complexity will inevitably increase hugely as the number of new meter installations ramps up, and it will increase even more if we have any further issues with replacing SMETS 1 and SMETS 2 meters as we go through the roll-out process.

There are several aspects of the problem. First, what about malfunctioning and existing smart meters that are no longer installed and are now redundant? Secondly, what about the huge number of existing meters that will be removed and need to be disposed of as smart meters are installed? It is a combination problem. However, it is joined together by the issue of the status of meters generally—not just smart meters—in the firmament of electricity and gas supply.

Indeed, my hon. Friend has pointed out the existence of the MAPs, and it has been a long-standing arrangement in the industry that the meters are not owned by the suppliers; the meters are merely read by the suppliers. The supplier will contract others, even, as happens currently, when a dumb meter is being replaced by another dumb meter. The normal thing is that the supplier will contract with a MAP to put a meter in. The MAP has a very secure asset, inasmuch as they put the meter in, get a charge for the operation of the meter and they carry out a contract for the supplier, but they always essentially own the meter in the last instance.

When we pursue a programme of removing old meters, whether they are dumb meters or previous generation smart meters, we have a problem that is precisely the reverse of the situation when the meters go in, namely that the meters being removed by suppliers—because they are the people putting the new meters in—do not actually belong to them. So as I understand it, we now have a situation where, in warehouses up and down the country, there is supposed to be a process of reverse meter logistics taking place. That consists, essentially, of triaging those old meters, deciding who the actual owner of a meter is, and then inviting the owner of that meter to come and collect it, in order to dispose of it. The suppliers themselves do not have the ability, in their own right, just to dispose of the meter, because it is not their meter to dispose of.

The consequence of that is, first, one is not entirely sure who the owner of the meter is in some circumstances, when a meter has been taken off a wall. Unless there has been careful archiving and, as it were, archaeological numbering of meters, to determine where they need to be taken, and unless there are absolutely first-class systems of triaging, inevitably the system of getting those old meters out becomes jumbled up.

We could have meter mountains across the UK. The meters are potentially valuable assets. They are worth having, with their rare earths, rare metals and all the rest of it; they can be recycled well. However, if there are warehouses full of meters whose provenance is not known and nobody is coming to claim them, and the meters cannot be processed, the only solution is to go and tip them into landfill. Then we will get a terrible outcome to what should be an entirely different process as far as meter re-provision is concerned.

My hon. Friend the Member for Birmingham, Selly Oak touched on the reason for that; it is because of the waste electrical and electronic equipment directive. In case hon. Members think that directive will no longer apply once we leave the EU, I remind them that it has already been implemented into UK law.

The WEEE directive introduces producer responsibility for disposing of electrical and electronic goods. In principle, that is a good thing: when someone needs to dispose of their fridge, freezer or hi-fi system, the company that produced it should have a hand in that. Quite sophisticated systems have evolved for sending electrical goods back to their producers for disposal. That is fine for goods labelled “Panasonic” or “Electrolux”, but I am sure hon. Members can see that it is much more difficult for redundant meters.

If we are not careful, this issue will overwhelm the roll-out or at least have a significant negative effect on the overall atmosphere of it. After all, before the directive was implemented we had fridge mountains in this country, as the Committee may recall.

[Mark Pawsey (Rugby) (Con)]

But not any more.

[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.