Electricity and Gas (Smart Meters Licensable Activity) Order 2012

Baroness Worthington Excerpts

Monday 23rd July 2012 Grand Committee

[Lord Teverson]

My Lords, it is always good to have smart meters on the agenda in this House. They are a very important and often misunderstood area of energy policy. The great thing about them is that, if they are really smart, we could have a smart grid. We hope that that will be the case following the rollout. The sort of decisions that the noble Lord, Lord Reay, mentioned could then be made by the meter, rather than by people. That is where the big benefits will happen. The point is not so much to reduce demand as to reschedule it. That will mean major reductions in investment.

As the noble Lord, Lord Reay, knows, Ofgem estimates that some £200 billion of investment in the energy networks is required. That seems a Soviet-style level of useless investment; I am sure that he would agree that we should not invest for investment’s sake in assets that stay largely unused for a large proportion of the time. A smart grid would enable us to reduce that investment considerably and to use electricity far more intelligently and intensively, as any commercial and private business would. My concern is that the smart meter rollout should enable that, rather than prevent it. That is why it is so important to have that level of investment; it really does bring savings down.

The Minister said that energy companies are one of the big savers on smart meters. The estimated readings that plague my electricity bills will no longer be necessary, nor will inspection. I would like to understand the Government’s thoughts on how they will make sure that the industry’s benefits are brought back into consumer bills.

When I read the order, I found it quite difficult to understand how DCC was anything other than a non-departmental office and, as the noble Lord, Lord Reay, said, effectively a quango. It is a monopoly by statute that does nothing but allocate contracts and yet it still seems to be a private company. I am not sure what the appointment process is. I would be interested to understand it. I still do not understand why it is necessary, but perhaps the Minister will come back to me on that if I have failed to understand from his opening statement.

I am very pleased to have his reassurance that DCC will not get in the way of other operators. One of the increasingly important areas of activity within corporate business is energy management contracts, for which you need a lot of data communicated to you from very dispersed factory plants, not just nationally, but perhaps globally. I hope that that will not be stopped by this. I would like to understand exactly what DCC has a monopoly of. I guess that it has a monopoly of putting out contracts to do the readings. Presumably the companies that do that do not contravene the secondary legislation. It seems a strange way of going about things.

Finally—I did not enumerate the number of questions that I was going to ask just in case I got that wrong, but this is my last one, so the Minister can intervene on me if there are any more—what happens to places, perhaps not far from me, that do not have mobile phones, GSM network capability or other communications? How does that work? They are usually rural areas, but perhaps there are others. How will the Government make sure that they get the benefits of this system?

[Baroness Worthington]

I thank the Minister for his introduction to this statutory instrument. I believe it is the first of a number that will be coming forward on the smart metering policy, which we support. It is good to hear the Minister reaffirm that by 2019 every home will have a smart meter. However, there are still some questions we would like to have clarified about exactly how smart those meters will be. I shall come on to them.

The first point I want to raise is that today we have received the report from the Energy and Climate Change Select Committee that has been doing pre-legislative scrutiny on the draft Bill. I urge the Government to join up the dots between these processes. RWE npower gave evidence to the Select Committee and clearly pointed out that if we emphasise demand management within that Bill, this smart metering spend could be money wasted. The amount of money proposed here is not insignificant and some of the benefits will not come to fruition if we carry on down the supply-dominated route which, at the moment, the energy Bill seems to be doing. We keep hearing reassurances from the department that work is going on on the demand side, so let us see some of the detail. It should be being done in parallel with the draft Bill, and the earlier it can be published, the better. Noble Lords have mentioned that we are seeking mechanisms to enable us to manage demand so that we do not have hard-to-meet peaks in demand that cause us to keep a huge amount of spare capacity in the system. It is often the most carbon-intensive and expensive to bring on, so smoothing out that demand profile is a real prize. Done well, smart metering will enable that, and that is what we all want to see. The time-of-use tariffs that smart metering could enable are a great prize. Time-of-use tariffs are available today but they are not smart or dynamic; they are the Economy 7 of decades ago. We need to see a modern set of tariffs based on time of use so that we can smooth out the demand as well as using the demand to back off when we have large amounts of renewables on the system. That is a prize worth having, which is why we support the Government’s moves towards enabling this rollout.