Smart Meters Bill

Baroness Featherstone Excerpts

2nd reading (Hansard): House of Lords
Tuesday 13th March 2018 Lords Chamber

[Baroness Featherstone (LD)]

My Lords, this has been a good debate and a master class in damning the Government with faint praise.

In the future our energy supply, transmission and storage—everything—will change. The future will be different from the past. The big six will no longer be the big six but, we hope, just six among the many. There will be on-grid and off-grid, feed-in and feed-out. The customer will be at the heart of managing their own usage or contribution, and there will be savings of energy and in the energy cost to customers. This is an energy revolution and smart meters are a vital part of that future.

However, as many have said across this House, before they went downhill, smart energy needs to be smart. That is the lament and sorrow of the Bill because things have not happened in the right way: not the smart meter, because the first one was not interoperable—I will be grateful when I do not have to say “interoperable” too often; not the data collection; not the rollout; not the selling; and not the installation. There were delays to completing the rollout; costs which might result from delays to the system; issues around the financial security of DCC and the financial status of its parent company, Capita. It was helpfully pointed out by the noble Lord, Lord Grantchester, that there has been a recent profit warning. There were concerns over whether appropriate data protection and privacy would be provided; connectivity concerns; issues around installation visits; concerns about doorstep selling; problems with the disconnection and disposal of old meters; and problems around inaccessible homes. Between them, Members across the House have raised all those issues.

On the hoped-for benefits, in the other place the Secretary of State, Greg Clark, said that a third of the savings come from potential reductions in the use of energy, just over 40% come from the suppliers’ costs saving—not having to read meters and so on—and that he expects those savings to be passed on to the customers in their bills. I am concerned that this was put as an expectation rather than an instruction. What will the Government do if this expectation is not met? I do not think we should leave this to expectation. We should be able to assure the customer and the client that these savings will be passed on, particularly since, as many across the House have pointed out, they are paying for the whole system.

Another key issue is the extent to which data will be private. We need absolute clarity over who owns that data and for how long, who may have access to it and how it will be protected—and not just clarity but assurances on how such information might be used and by whom, and how an individual can control, with absolute confidence, access to it. Will the proposed review of data usage be widely drawn and will it be published?

Is the Minister aware that some people with disabilities have concerns about this system? As we know, people with disabilities already pay more because of higher fuel consumption, as they are quite often at home all day. I talked to one of my noble friends only today who was very concerned she would be made to feel guilty if she could not use or calibrate a smart meter to use power at a different time of day because her needs were at critical times. Could the Minister speak to that? The Minister also raised the issue of smart energy awareness. Perhaps some of those campaigns could target those with disabilities and the most vulnerable.

Looking outside of that range of issues still needing attention, the Government want the Bill to have a narrow focus on three key things. The first is the extension of existing powers, which of course they want—and need to rectify all the things that have gone wrong. I shall not reiterate all those issues other than to say that 8.5 million first-generation meters have been installed and the Government are hoping to see the rollout of SMETS 2 meters, which do not have the interoperability problems of the older meters. In a private letter to energy companies, the Government said that systems designed to handle the newer meters were not ready and so they moved back the deadline for rolling them out from July to October. That means that more than 1 million extra first-generation smart meters will be fitted in homes, despite, as others have said, the devices being criticised for going dumb when customers switch. With the deadline moving from July to October, hundreds of thousands of people will receive the older devices. Therefore, SMETS 2 and the DCC are critical, and this sort of delay, along with all the issues to do with dealing with the installation of meters in your own home, with variable fitters and information, is damaging.

One of the challenges, as mentioned by my noble friend Lady Maddock, is that the reputation of smart meters is suffering because of all the problems that have arisen, which is damaging people’s willingness to adopt the new system. The extension of the Government’s powers and the delay to the rollout of SMETS 2 are concerning. It appears the Government are extending the period because of original targets being missed and they are worried there will be further issues for which an extension of powers will be required. Will the Minister confirm that this is the rationale for the extension of powers? Will he also confirm that their extension until 2023 is not connected to a potential overrun of the 2020 deadline for the rollout of the new meters—although a number of noble Lords have put a question mark on that deadline?

The second part of the Bill concerns the introduction of,

“a special administration regime for the national smart meter communication and data service provider … ‘DCC’ … in the event of its insolvency”.

I am unsure whether we have 100 SMETS 2 meters installed or 80—or 250, as was discussed in Committee in the other place. If the number is that small, there has to be a question about how robust and how well tested the function of the DCC is at that level. That does not seem an adequate supply of data to test that system. Coming to the DCC itself and the concerns over Capita’s financial status, what checks are the Government carrying out on Capita? In addition, does the role of the special administration regime exist as of the passage of this Bill or only when there has been trouble, or can it kick in in advance of any collapse in the system? What are the protections for the consumer in this event? If a special administration regime has to be put in place because there has been a failure on the part of DCC or Capita, what can official scrutineers and the public expect in the way of transparency and information about what has happened? Can the Minister give an assurance that we parliamentarians and the public at large will not be kept in the dark about why a special administration regime has been put in place? Obviously, a further concern has to be that the costs will be passed on to the consumer. Can the Minister explain why the consumer should be in any way liable for such a failure? Would any of the costs pertaining to such a failure fall to the consumer? Would it be the whole cost or part of it? In responding, it would be helpful if the Minister could set out the costs and savings to consumers and other players so that we can see who is benefiting and who is paying, and whether we think that is fair.

I turn to the provision of new powers for Ofgem to directly modify industry codes and documents to deliver a market-wide half-hourly settlement which uses smart metering data. Noble Lords across the House have welcomed this because it is the future. The idea is that incentives are placed on suppliers to meet their customers’ demands in each half hour of the day, and smart metering is intended to produce accurate half-hourly reports to get a better settlement and thus drive innovation and the efficient use of energy. However, suppliers can already choose to settle with consumers on a half-hourly basis via an elective half-hourly settlement, but Ofgem believes that it will have to make all suppliers do this to get the best results for customers. That, as I understand it, is a decision that Ofgem will take in the second half of 2019 and will be subject to a cost-benefit analysis, which I was pleased to hear the Minister say will be published.

However, the strange part is that it was introduced in the other place through a government amendment. That is of great concern. Why did the Government know only at the end of the process that such an analysis would be needed? One does kind of expect that, given that this is a complex new system, the Government would have known in advance that an analysis was necessary. Perhaps the Minister can explain its late appearance.

Lastly, I want to reflect on the contribution made by my noble friend Lord Teverson. I am glad he will not have to fix the electricity under the stairs any more. He recognises, as have other noble Lords across the House, how important this programme is. He said that the acronyms were suspicious. Perhaps the Minister can allay our suspicions, although I have to say that the acronyms are not as bad as they were when I was a Minister in DfID. My noble friend Lady Maddock pointed out that some of us think that parts of the Bill are rosy, but then referred to the rest of it as having rosacea, or words to that effect. She spoke for those in fuel poverty and expressed her concern about the role of Ofgem under the code of practice and the approach being taken towards vulnerable people. I would welcome it if the Minister could pay special attention to responding to those and other points raised in the debate.

Smart Meters Bill

Baroness Featherstone Excerpts

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

[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.

[Lord Teverson (LD)]

My Lords, I congratulate the noble Lord, Lord Grantchester, on this major amendment in terms of a plan. I have been searching to find a way in which this project can be put right. The difficulty is in making it deliverable and coherent without going back to where we were 12 years ago. This programme started in 2006 and it has taken since then—the time taken for the First World War, the Second World War, the Korean War, plus a bit more—to get to 300 SMETS 2 meters. That is what we have achieved over that period of time. That suggests to me that it has not been good. Obviously, a number of Governments have been involved during that time. We all understand how important this is. This programme is not just about people not having to read the meter any more, as one of my colleagues said over lunch, but about how we manage energy in the whole economy and our nation for decades ahead. We should be leading a cultural, technical and economic change.

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[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.

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[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.

[Baroness Maddock]

My Lords, Amendment 6, in my name, refers to issues that I raised at Second Reading. It calls for a review of the code of practice for energy suppliers. It is a probing amendment. I am anxious to get a bit more information from the Government about how they understand consumer engagement because I feel that whenever we are trying to deal with these issues human behaviour is the last thing about which we have serious concern. If we look back at the Green Deal, some of the disasters there were due to human behaviour, so it is important that we understand how people react. Indeed, the success of the rollout depends on consumers and consumer confidence, yet, as we have already heard, they are not obliged to have a smart meter. Therefore, how they react to the proposals is very important.

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[Baroness Featherstone]

I shall speak to Amendment 7, which is in my name and that of my noble friend Lady Maddock. Much was and is made about the upside of the benefits, or the hoped-for benefits, to the consumer of the rollout of smart meters. In the other place, the Secretary of State Greg Clarke said:

“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 … We expect those savings to be passed onto consumers as savings in their bill”.—[Official Report, Commons, 24/10/17; col. 238.]


We want a new clause that makes that expectation of the Secretary of State into a reality by putting it into the Bill, and we do that by amending the Energy Act 2008 to put in a provision,

“requiring the holder of a supply licence to pass on any savings made by the holder as a result of the Smart Metering Implementation Programme to the consumer”.

I do not really feel that I need to labour the point—I think that it is clear. A promise has been made, and this is the methodology for making sure that that promise is delivered.

[Lord Stevenson of Balmacara]

My Lords, this is a wide-ranging group of amendments and it is a bit hard to find the right balancing point to address it, so I am going to give up at the beginning and just go through them one by one—in a slightly different order, just to confuse everyone.

Amendment 5 is right on the money in trying to make us focus again on why we are doing this and what it is about. It will not be worth doing unless there is an impact on energy efficiency. As we were reminded in the first group by the noble Lord, Lord Teverson, the problem we face and the one that the Government have to open themselves to be honest about is whether this will be worth having in the sense that it will actually change people’s behaviour and therefore save us some of the costs that we have from our expensive use of energy. If that is not part of what we are thinking, we need to make it part of the process and, indeed, the plan, if we go that way.

I was listening hard to what the Minister was saying, but I was expecting him to say a lot about the industrial strategy, since it is seated in his department and it seems to me that this is part of the industrial strategy. Our energy efficiency should have a material effect on our ability as a nation to continue to operate as a net importer of energy and as we gradually try to be more effective and efficient in what energy we can produce and how we use it. Those things seem crucially the bedrock on which any industrial strategy, and therefore any chance of this country surviving in the long term, is placed. I would have thought that it would be important to the Government to put this at the heart of what they were saying about the future stages of this process, because that will be helpful in convincing consumers, both those in fuel poverty and others who are just interested in the overall economics and efficiency of the country. So the requirement to lay a report that focuses on that might help us to win the battle of hearts and minds to get people more to accept it, and we support the amendment.

Amendment 7 is a bit more on the money in real terms, because it says that, if there are economic and other efficiencies in the process, the consumer should benefit from them. Again, we would support that. You do not have to be a conspiracy theorist—well, probably you do, but you do not have to be a genuine conspiracy theorist—to sense that there is something a bit odd going here. In a curious sort of way, the noble Lord, Lord Teverson, said it. Here we have an £11 billion programme. It is not being financed out of general taxation; there is a money tree, and that money tree is consumers who are being asked to pay for this without actually knowing what they are paying for. This is being loaded on to their bills and recouped by the companies. It is not being passed on to those who are benefiting from efficiencies. Nor is it being used for useful purposes for trying to help those who are suffering fuel poverty. Have I got this wrong? If I am right in this, we ought to confess that this is what we are doing and think much more carefully about the £11 billion price tag. The noble Lord, Lord Teverson, put his finger on it in saying that we ought to be certain about the benefits that will flow from this before we push the button, and his amendment, which we are coming on to, focuses on that.

The noble Baroness, Lady Featherstone, talked about real benefits to individuals. If we were interested in the consumer approach and in consumers buying this programme, getting behind it and saying that everybody should have one of these things because not only do they give you pretty pictures about what energy you are using but you get money out of it because it shows you how to reduce your costs and that benefit comes back to you, that would be an advantage to the Government, who might otherwise be struggling to get people behind this.

Amendments 12 and 13—effectively, Amendment 13 —take us back to our discussions on the first group of amendments and Amendment 4, which is tabled in my name and that of my noble friend Lord Grantchester. Amendment 13 sets as a condition of minimum confidence 500,000 SMETS 2 meters—still a very small number—which are so far really untested in operation. Going back to what I said earlier about the need to operate in the wider context of opening up for innovation and bringing in new ideas, new ways of saving money and new ways that consumers could try to do things differently in their home in their use of equipment and the internet of things, we know all these other things are there and should be part of this process and package, but they cannot be until this project goes well. This amendment might look like a simple delaying tactic, but it sets an important pausing point at which everybody who is concerned in this, whether there is a proper plan or not, can say that they have confidence to go ahead with this project because they know it works and that at least at the level of the first 500,000 of these SMETS 2 meters it is a going concern, it is terrific, we can talk it up and we can all get behind it. There is a lot to commend this amendment to the Minister and I look forward to hearing him respond to it.

The Government have a rather uncomfortable choice. It would be very sensible for them to accept either this amendment or Amendment 4 because without some sort of overall bringing together of the consumer interest, the supplier interest, the regulator interest, Parliament, which needs to have a role in this, and the Government we will not get this working properly. That will be suboptimal for the country and for everyone in the long term.

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Moved by

[Baroness Featherstone]

8: Clause 3, page 2, line 34, at end insert—
“(aa) that the cost incurred when the smcl administration order is in place is not passed on to the consumer; and”

[Baroness Featherstone]

Clause 3 seeks to protect the consumer from any costs that might ensue following a failure of the DCC. How could the DCC fail? It is a new service and there is a change in the top management at this critical point. No aspersion is intended but it is a change right at the top, and of course there are questions about the financial security of the DCC, should the parent company, Capita, run into problems. That is a timely point to make, given that my right honourable friend Vince Cable has secured an Urgent Question which is being debated right now. This afternoon Capita has revealed losses of £500 million last year, it has launched a £700 million fundraising effort to reduce its vast debt pile and its share price has plunged by 47.5%. At Second Reading it was mentioned by noble Lords across the House that Capita had issued a profit warning. They were right to do so.

We are all nervous since the collapse of Carillion. Is Capita too big to fail? What will we do if it does? Clause 3 is about insuring against the unknown, because the costs of any failure should not be a liability for the consumer. I beg to move.

[Lord Stevenson of Balmacara]

My Lords, in this group we have Amendment 10, which I think takes the debate a little further forward. The noble Baroness, Lady Featherstone, made the case very well about the immediacy of the problem that now faces the Government and how they make progress with a company which has given a profits warning and has had to raise funding. Although it says that it might have access to many billions of pounds in borrowings and other things, it obviously raises questions of an order similar to those in the Carillion episode of a few months ago. I look forward to the Minister’s response on that, which I hope will cover the question of whether the Crown’s official involved in checking out companies that have major contracts with the Government has considered its longer-term prospects, making sure that any contracts placed with that company are satisfactorily secured in terms of delivery.

Our amendment fits in very neatly with this, at least in the sense that the reality of an administration is that it is a failure not only of the operations but of the possible costs. Like the noble Baroness, Lady Featherstone, and the noble Lord, Lord Teverson, we do not wish to see those costs passed on to the consumer. However, it also raises wider questions about what is going on here. In a sense, this is relatively familiar territory in that the Government are achieving a social objective using private sector activities. As was said in the other place only this afternoon, this is not new to Governments; Governments of all shapes have for the last 20 years or so increasingly used the private sector. Indeed, it is a long and distinguished history: Governments do not do very much on the ground in terms of buildings or roads. They may well carry responsibility for them and pay for them but the physical work is done by others. Outsourcing can deliver benefits. However, at a time when margins are being decreased and there is a bit more concern about whether these companies will be able to survive, we have to be very careful in what we do.

The thinking behind Amendment 10 concerns not just the mechanics of what happens in a default but whether the Government can think a bit more widely about how the company operates. Obviously, the new company, the DCC, is crucial to the delivery of the SMETS 2 programme. It is wholly owned by Capita; it has a ring-fenced arrangement with Capita but is nevertheless entirely under the control of that company. Although there are independents on the board, and everything else, do the Government really feel that that is sufficient at a time when so much is riding on it? We are talking about £8 billion worth of investment and work going forward, and everything that we have said this afternoon in relation to the future of our energy policies and initiatives and to consumer interests is certainly part of the whole operation.

When we were considering the green bank—I am waiting for the head of the noble Lord, Lord Teverson, to snap up at this point—we came across a similar problem, which was trying to make sure that the body that was being set up in the private sector, which we knew at that time was to be sold, had imposed within its structures a set of conditions under which the Government retained a golden share, to make sure that its original purposes, and green purposes in particular, were not polluted or changed by subsequent changes in the operational management of the company when it was set up or in its eventual sale. It turned out to be a very complicated issue, and I pay due credit to the noble Lord, Lord Teverson, for pursuing it to the point where we found a solution, which was not one that the Government ever thought we would come up with. But it was possible to come up with something that met the requirements that the Treasury set, unrealistic though they were, that the arrangements should not leave the Government in a direct power relationship to the company, because that would require any costs and everything else to go on to the balance sheet, but still retained the ability of the company to operate so that the green objectives were retained and operated. I am simplifying to make the point.

Does not this arise also with DCC? Is there not a worry here that we are talking about an organisation, a structure, a delivery function and an operation which suggests that we really ought to be thinking harder about the overall structure here? If the narrow question about what happens in an insolvency is insufficient to probe it, should not the wider concerns about all the companies that are going through difficulties with their delivery of public service obligations? The newspapers will be full of questions about what is happening to recruitment to the Army, because Capita is not performing very well on that, and what happens to other areas of activity. We may find that, £3 billion into the programme, the main structural body responsible for organising the network for our safety and data and all the operations that will lead to customer buy-in to this is unable to fulfil its objectives because of other financial constraints, and we do not have the right regulatory structures in place to ensure that it carries on the way it does. This amendment gives the Government at least some incentive to look at that, and I hope that they will respond positively to it.

--- Later in debate ---

[Baroness Featherstone]

I thank the Minister. I am comforted to some extent to know that he believes that the service will carry on, regardless of financial issues. I look forward to seeing the potential scale of the costs, but I disagree with him about those costs. From what has been said and from what I can glean from this whole business, I do not think at the moment that the savings to the consumer will come anywhere near the costs to the consumer. However, for the time being, I am content to withdraw my amendment.

Amendment 8 withdrawn.

Smart Meters Bill

Baroness Featherstone Excerpts

Report stage (Hansard): House of Lords
Tuesday 15th May 2018 Lords Chamber

[Lord Grantchester (Lab)]

My Lords, the Bill is a largely technical Bill, introducing three elements, namely: extending the Government’s powers; introducing a special administration regime for the national smart meter communication and data service provider, the DCC; and providing powers for Ofgem to deliver half-hourly settlement using smart metering data. By and large, these elements have been critically examined in the other place, as well as in your Lordships’ House. We do not particularly take issue with these measures but we recognise that Ofgem’s monitoring and powers over pricing should enable adjustments to make the possibility of a special administration regime extremely unlikely. It is fair to say that we remain concerned that consumers could ultimately pay the price either way.

However, on the analysis of the present circumstances in the rollout of smart metering, the programme is to a large extent in disarray, with enormous confusion and uncertainty in the marketplace. This inevitably leads to reticence and a lack of confidence in the mind of the consumer. We continue to highlight this in our Amendment 1 today. The technical nature of the Bill belies its national importance; it deals with critical national infrastructure, whose modernisation is crucial. We agree with the Minister that the large-scale rollout of smart meters across the UK by 2020 is a substantial technical, logistical and organisational challenge. Everyone is clear that meeting that challenge depends on collective and co-ordinated delivery. In Committee and in subsequent discussions, the Minister has been emphatic that the programme should be led by government. We have therefore altered our amendment and recognised that Ofgem has a different role to play.

The amendment puts the challenge to the Government to provide the leadership. We still believe that a national plan is required. The Government may challenge our diagnosis and claim that they have a high-level plan. However, the perception in the marketplace is very different. The mixed message—on the one hand that the consumer needs only to be offered a smart meter while, on the other, that smart meters need to be installed to a rollout target programme—has not been helpful. We need technical difficulties to be resolved, solutions to be promoted and accountability to be put into the hands of government to make this infrastructure upgrade the success that it needs to be.

The main elements of the amendment remain from our Committee discussions. The Government must galvanise the situation and be seen to be guiding the process: taking ownership of the issues, building ambition into the programme to deliver benefits and putting the consumer in control of their energy use, so that they become more informed and efficient and save themselves money. We have also put a check into the process by the addition of a subsection in our proposed new clause such that should fewer than 500,000 SMETS 2 meters be installed by the end of the year, a review and reassessment must take place. The challenge of careful management is herein included.

Energy efficiency is a crucial element of enabling the UK to meet its energy demands. The achievement of this must be put into the hands of consumers, through the transformation that smart meters will bring to their lives. A smarter, sensor-enabled network would be able to assess live power demand and current usage, transferring power from place to place as needed, reallocating or postponing charging times automatically and potentially allowing the UK to identify the ultimate source of the power through a modern, decarbonised energy mix.

Electrification is still essential to meeting long-term emission targets. It is clear that upgrades to the power network through renewables, storage and additional investment in household-to-grid infrastructure are all crucial elements. This amendment will bring visibility to the process and place responsibility in the hands of the Government. I beg to move.

[Baroness Featherstone (LD)]

My Lords, I support this proposed new clause on the national plan for smart metering, to which I have added my name. As I said in Committee, I came to the smart meter table relatively late, far more recently than most of your Lordships, who seem to have been debating it in one form or another for some years. I was shocked at the seemingly piecemeal way it has evolved, as if it were not one of the major infrastructure projects of this century, which it is. As a consequence of this approach, I have seen a lack of vision, scale and form, which is why this project has been so poorly executed. I was astounded to find that the suppliers were to be the agents of change; I did not understand why it was not the distributors.

However, we are where we are, as they say, so this new clause is proposed to give the opportunity for the rest of the scheme to be conducted in a far more responsible and farsighted way. It would allow the Government and all the players to ensure the best way forward and to deliver certainty and security for consumers, who have been expected to change—we know how difficult change is—but then have heard conflicting and different advice at different times from different people.

The proposed new clause would make sure that all parties are involved; it puts in metrics, targets and incentives to maximise take-up. It makes tracking progress on those tasked with delivering the objectives of smart meters and details what that will require. It would make sure that everything is properly reported, measured and documented. At last, we might actually have a critical path and a critical path analysis from which to work.

The proposed new clause would put this massive civil infrastructure project on a certain basis; it provides certainty for the consumer and a more sure and stable critical path for providers and all those participating in the rollout and beyond. As the noble Lord, Lord Grantchester, said, that is central to all our commitments on energy and energy efficiency in the future.

I very much hope that the Government will take a deep breath and graciously accept that they need help, and that the national plan would be a sensible and professional way forward.

[Lord Teverson (LD)]

My Lords, I support Amendment 1 in the names of the noble Lord, Lord Grantchester, and my noble friend Lady Featherstone, and I should also like to speak to my Amendment 2.

It is important to remind the House that this is an £11 billion programme; it is one of our major national infrastructure programmes, started in concept when I joined the House in 2006. It is now 2018—12 years later—and all of 300 meters have been installed, but we are not sure whether they work. There are another 10,000 which do not comply with the final regulations that we are trying to achieve—that is another potential problem for the future.

The one person I have really missed in this debate is Lord Patrick Jenkin on the Government Benches. He was one of the great analysts who brought together the real facts of a case, and we miss his presence.

One concern I had in Committee was prompted by my noble friend Lady Featherstone, who spoke very cogently of how, when the congestion scheme in London was rolled out, huge testing was carried out to make sure that the system worked when it was launched and that it was effective from day one. Yet when I asked the Government about their tests for SMETS 2 meters and their systems to ensure that the machines were ready for the massive rollout of 50 million meters by 2020—it is almost amusing to say that date—I got no response. The Minister looked at me as if to say, “What are you talking about?” It seems that there is no bar that has to be crossed—there is no test before we roll out these additional 40 million meters, supposedly over the next couple of years.