Smart Meters Bill

Caroline Flint 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

[Antoinette Sandbach (Eddisbury) (Con)]

I support the Bill, because it will help to ensure that the Government’s roll-out of smart meters achieves its aims. It is an important initiative, allowing consumers to understand their energy consumption better and reduce it accordingly.

Alongside the positive ambitions of the smart meter programme, I urge the Government to push for an agenda of improving energy efficiency, as that is vital to reducing bills and fuel poverty. Smart meters will help to equip us for the future, but we must think about a comprehensive package of measures to reduce consumption. The information and data from smart meters could be used to measure the efficiency of, for example, warm home programmes. Where energy efficiency measures have been installed, the smart meters will effectively register the drop in consumption, which strikes me as a potential additional benefit of the smart meter programme.

I have just had a smart meter installed at home, and it has given me plenty of information, but as we do not currently have half-hourly settlement, there is no incentive for me to set my dishwasher three hours later. Like many other consumers, I have a delay programme on my washing machine. At present, there is no incentive for consumers to make use of the potential saving which would reduce demand on the grid and lower their electricity bills. It would make no difference to me, but at the moment, as a consumer, I am not incentivised.

Smart meters are of huge benefit to consumers and the energy companies, because they allow demand-side management—a technical term, which is rather dry. If it is possible to save 10p or 20p a couple of times a week by delaying starting the washing machine or dishwasher, those amounts start to add up and have a real impact on consumer bills. That is why the roll-out of the programme is so interesting: it has huge potential for the future.

[Caroline Flint (Don Valley) (Lab)]

The hon. Lady makes a good point about the use of technology, but does she also accept that some of the poorest families in our communities cannot afford to buy the white goods that are at the cutting-edge of this technology, and we need to address that problem as well?

[Antoinette Sandbach]

I do accept that, although I know there are some very good companies—including one not too far away from me—that recycle white goods, allowing people who are replacing their dishwashers and washing machines to give them to a charity that then sells them on at very low cost. Moreover, most machines now have an A or A-plus rating, and even quite good value machines are quite energy efficient. I think this will therefore become a consideration when people are considering replacing their white goods. I accept that that will involve a higher up-front cost for more vulnerable households, but it will help them make more informed choices about where they can save money in the long term, and of course those on benefits who qualify for the warm home discount or scheme and for greater efficiency measures will be saving on their electricity bills, and they can set aside the money saved and hopefully in due course therefore be able to replace their machines in an energy-efficient way.

There is a responsibility on consumers to be conscious of energy use and to make the most of the benefits of smart meters, but we must also combine the roll-out with an effective campaign raising awareness of the need for responsible and efficient energy use. I acknowledge the work of Smart Energy GB in this respect, but it clearly must do more. It needs to inform consumers further about the benefits of this programme and reach further into homes. I see lots of adverts on the TV, but am uncertain whether they really do explain the benefits to consumers and how they can save on their bills.

This measure not only improves energy security, but also contributes towards meeting our international decarbonisation obligations. The smart meter roll-out has the potential to address the energy trilemma, but concerted action by consumers and, indeed, suppliers is required in order to maximise the benefits.

We must think on a broader scale if we are to address the three issues I have just mentioned. That is why improving energy efficiency, in conjunction with the smart meter programme, is so important. I have asked the Chancellor to consider having a dedicated infrastructure fund and to incentivise energy efficiency measures in the upcoming Budget, because of the benefits that can be leveraged in conjunction with the smart meter roll-out.

Various concerns need to be addressed, and reassurances need to be provided by the Government on some issues relating to the provision of smart meters. The hon. Member for North Ayrshire and Arran (Patricia Gibson) pointed out the concerns around data; it is important to reassure consumers on that, and that they understand the benefits that data will bring in terms of reducing their bills.

There is also the issue around the 16-bit encryption code for smart meters. EDF and other energy companies have indicated that that smart meter has not yet been developed, but it could have very progressive consequences in terms of protecting data and ensuring there is good interaction to allow easy switching between all the energy companies. One of the concerns about the current roll-out of SMETS 1 is the fact that it does not allow for switching; the consumer is given the information about their energy consumption, but it is a shame that there is this lack of ability to smart-switch. I urge the Government to put a rocket under the energy companies, to make sure they roll out the second generation of meters as soon as possible.

This exciting development by the Government has huge potential benefits, particularly for consumers who fall into the vulnerable category, for whom it could be a complete game changer. I know that some of the newer energy companies, such as OVO, which are particularly active in the pre-payment meter market, are rolling out smart meters. This process is therefore having an impact. I support the Government’s aims, but it is clear that some issues will need to be ironed out in Committee if we are to provide the maximum benefits to consumers, as the Bill is designed to do.

[Caroline Flint (Don Valley) (Lab)]

It is quite clear from the speeches of the hon. Member for Eddisbury (Antoinette Sandbach) and others who have spoken that we all agree that being able to end estimated bills is a good goal to achieve. In fact, an EU directive in 2006 stated that getting rid of estimated bills was the way to go. In 2009, European Union guidance indicated that it was looking to member states to roll out intelligent metering systems to 80% of consumers by 2020. That related just to electricity; no deadline was given for gas. The interesting aspect of all this is that no other European Union member state apart from the UK decided to go through the distribution network operators rather than through the retail suppliers. I think that that was a mistake on our part.

We have gone for the 2020 target and stated that it should be for 100%, but my worry is that across Governments, including the last Labour Government and the coalition, the execution of this programme has been badly managed and consumers have always been given the lowest priority when it comes to effective practical project management of this important scheme. There is now a danger of that happening under the Conservative Government. We have heard that the 2020 target is unlikely to be met, which is probably why clause 1 of the Bill extends the power to amend licensing conditions from 1 November 2018 to 1 November 2023. In my view, we should have stood back and made a choice about who should be involved in the implementation of this service, rather than having 10 different companies competing to fit smart meters in any one street. I think we would have been better off going down the network operators route, rather than the one that has been chosen.

We know that the cost of this programme, which is being paid for entirely by household bills, is £11 billion and rising. Indeed, as ITV and the Big Deal campaign highlighted, the estimated cost has risen by over £1 billion in the past year alone. The reasons for this involve cross-Government departmental incompetence. They include underestimating the number of properties requiring one meter, not two, and the number of homes that require two visits because they are not dual fuel customers, as well as underestimating by about 10% the number of properties that will require a second visit because the smart meter does not communicate properly.

I have already had individuals telling me that, having had their smart meter fitted, they might end up with a dumb meter if they choose to switch. They are coming to me and saying, “Caroline, what is going on here?” Everything in this debate on energy always gets laid at the door of the consumer. They are told, “It’s your fault for not switching enough. It’s your fault for not acknowledging the adverts on smart meters and getting one fitted.” When are we going to ensure that the energy companies take responsibility for this, and when are we going to ensure that the Government take responsibility for acting on behalf of consumers? All this is adding to the cost burdens on consumers through no fault of their own. When are the Government going to cap the cost to the consumer of this programme? When it tops £12 billion, £13 billion, or £15 billion? This is something that the Government should look at seriously.

It has become clear that there are problems with the first generation of smart meters because they use mobile networks to forward the data from the household, and we do not yet know how many will fail to operate if customers exercise their right to switch supplier. After all the time and cost involved in installing them, many may well become dumb meters once more when moved to a new supplier, which would be unacceptable. This revelation has led to the installation of a new data network, managed by the Data Communications Company, which went live in November 2016, but the new meters, which use the new data network, will not be available until November 2018. The Government required the DCC to produce a delivery plan to rectify the situation. The plan, which was announced last week, will ensure that all first-generation smart meters will be fully functional, but that process will not be completed until July 2019—another cost borne by the taxpayer for mistakes made by the industry.

The House of Commons Library reports a Government claim that the net benefits up to 2030 are an estimated £5.8 billion to be shared between consumers, suppliers and networks, but that estimation has already been downgraded. However, if consumers were to gain all the benefits, that would mean just a £19 a year saving on bills for a decade. To gain even that modest saving from this expensive programme, energy suppliers would have to pass on all their savings to consumers, but I have not heard that from the energy companies. The truth is that the benefits for energy companies’ bottom lines are obvious: no more meter reading, and fewer staff in customer service centres fielding enquires from angry customers about delayed switching or inaccurate bills. As I asked at the Energy UK conference last week, will the savings be invested into better customer services or just into greater profits?

So far, the benefits of smart meters appear to be stacked in favour of the suppliers unless we make huge assumptions about smart meters boosting switching. One benefit to the networks would be if suppliers provided incentives for consumers to shift their energy usage. A past example is Economy 7, which encouraged people to heat their water overnight at lower unit costs, and that principle could be extended with smart metering. Given what we know, I am sure that consumer groups will be concerned if smart meters lead to proliferation of time-of-use tariffs, which enable companies to charge higher unit costs at peak time—perhaps above any cap imposed by Government.

When smart meters were introduced by the Government of Ontario, they tried to manipulate demand at key times of day and did so by inflating costs at peak times of use. The result was not a shift in demand to off-peak hours and a reduction in energy bills; the pattern of demand barely moved, so consumers simply ended up paying more for the energy they received. We should also be mindful of the concerns of the fire service and the Fire Brigades Union about people putting their washing machines and dishwashers on overnight, because if something malfunctions when people are asleep in their beds, that presents the greatest fire risk.

I do not want to see UK consumers’ energy bills rise or the energy price cap circumvented because consumers have opted into a complicated tariff that appears to offer savings they cannot fully work out. I had hoped to amend the Bill to include a price cap, because this is about customers saving on their bills, but I hope the Government will ensure that new time-of-use tariffs, aided by smart meter monitoring, will not lead to the energy price cap being circumvented by an industry that, let us face it, has run rings around the Government for seven years and has not acted in consumers’ best interests.

--- Later in debate ---

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

I do not argue with plans for a special administration regime in the event of a failure of the DCC, but I have a number of questions about the programme’s roll-out, extension, monitoring and costs. The current smart meter programme is at stage 2, alternatively referred to as the main roll-out, and that is scheduled to end in 2020.

As we have heard, the vast majority of energy companies are still installing the earlier generation of smart meters rather than the more efficient, cheaper and longer-lasting second generation. The Government have announced that, as of July 2018, SMETS 1 will no longer count towards the 2020 target. As that phase was due to be completed in 2016, what are the reasons for allowing the installation of those less efficient meters until 2018? Has the Minister received any representations from energy companies urging it and, if so, what reasons have they given?

Lord Bourne told the Energy and Climate Change Committee that there were 2 million smart meters in store. Could that have anything to do with the decision? If so, is there a risk that the Minister might be accused of massaging the figures with what is essentially an inferior meter?

I know from information supplied in answer to parliamentary questions that by December 2016 some 330,000 smart meters were operating in dumb mode—not operating as smart meters—and that by March 2017, that figure had risen to 460,000, involving a cost of between £30 million and £50 million. Who is responsible for keeping tabs on the costs of this programme?

I asked in a parliamentary question how much had been spent on the installation of SMETS 1 meters to date, and the answer was

“the Government does not hold data on expenditure on smart meter installations”.

EDF Energy has also questioned the extension proposed in the Bill and argues that

“if these powers are to be extended a clearer rationale should be provided for the need, and length, of any extension.”

The Minister will be aware that the Energy and Climate Change Committee raised questions about the 2020 target, and he will know that both the Institute of Directors and some in the industry have suggested that the purpose of the extension might be to give the Government wriggle room.

The Minister will also be aware that, in May 2015, the Energy and Climate Change Committee warned that problems with smart meters are

“symptomatic of a national programme that the Government has left largely to suppliers and failed to drive forward effectively.”

The Committee also warned that, without significant changes,

“it could prove to be a costly failure.”

Part of the justification for this programme is that it should mean that consumers benefit because they are able to shop around for the best deals, but if a SMETS 1 meter can no longer function as a smart meter when a customer switches, is that not a barrier to switching rather than an encouragement? As this is a voluntary programme, would someone not be well advised to wait until they are offered a SMETS 2 meter, or indeed to demand one? MoneySavingExpert.com, the UK’s biggest consumer website, is advising its readers to do just that.

As we have heard, the Government’s cost-benefit analysis estimates that by 2030 smart meters will have delivered £5.8 billion of net benefits. Those benefits, which are to energy suppliers, networks and consumers, are offset by a cost of £11 billion paid for by consumers. According to answers to parliamentary questions I submitted, the net benefit was reduced by a further £1.5 billion between 2014 and 2016. Can the Minister explain that reduction? Although the Government have said in answer to a parliamentary question that there is no link between this reduction and the issue of the interoperability of SMETS 1 meters, they also say that the 2016 cost-benefit analysis has already made allowance for the plan to enrol and adopt SEMTS 1 into the DCC. I understand that the cost of the DCC has already risen by a further half a billion pounds since it was first proposed. Who is responsible for monitoring and containing these costs?

In September 2016, the House of Commons Science and Technology Committee suggested that the essential aims of the smart meter programme are likely to fail without

“a programme of user engagement before, during and after installation.”

It is becoming clear that there is a lack of consumer trust and confidence in, and understanding of, the smart meter roll-out. As we have heard, the Department for Business, Energy and Industrial Strategy’s most recent public attitudes tracker found that people were less than convinced about smart meters, and a recent article in The Daily Telegraph claimed that only one in five consumers is accepting the offer of a smart meter. I know the Minister is eager to promote customer satisfaction, but without a renewed campaign to increase public awareness and improve perceptions of smart meters, there must be a concern that the benefits will not be realised.

I also want to ask about evidence that has emerged about the behaviour of energy suppliers and those they engage to promote their plans. They are required to take reasonable steps to offer smart meters, so why are people receiving cold calls claiming that accepting one is a legal requirement? I understand that the Minister might have already referred this to Ofgem, but can he confirm that that is the case? If so, will he indicate when we might expect to hear some response? There are also some safety concerns, as highlighted by—

[Caroline Flint]

On that last point about what happens when our constituents hit those sort of buffers—when they are faced with inaccurate information—they say to me that they just do not know who to approach to complain about it. That is a fundamental weakness in the system—where should people go?

[Steve McCabe]

I absolutely agree. I understand that there is a code of practice, but who is making sure that it is being enforced?

I understand that there are also some question marks about the safety of the installations, as was highlighted in a BBC “Watchdog” programme, which showed that some gas and electricity meters have led to safety issues in homes. So what I really want to ask the Minister is: what checks are carried out on the behaviour of energy suppliers to ensure that they are complying with the smart metering installation code of practice? As my right hon. Friend asks, what redress do the public have when they are clearly being misled by people who are supposed to be giving them the best possible information?

--- Later in debate ---

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

We have had a very good debate this afternoon, with informed and engaged contributions from hon. Members on both sides of the House on a wide range of issues relating to smart meter roll-out and, in some instances, going a little beyond that. However, the contributions have all been relevant to a debate about a Bill with some very specific and relatively narrow elements.

Two of the clauses are very specific. One relates to the extension of the termination period during which the Secretary of State has powers over activities connected to smart meters from an end date in 2018 to an end date in 2023. The second addresses the lack in legislation of a smart meter communication and licensing administration regime by establishing one.

If we look very narrowly at the Bill, we might ask two important questions: why did the Government decide in 2014 that there should be a 2018 termination date for Government control over the smart meter roll-out, and why is that date now being extended to 2023? Is it being extended because, as hon. Members have said, the Government do not think the smart meter roll-out will in fact be completed in 2020, or are there other reasons for the extension? We might ask why, if there is a real risk of the roll-out being delayed by the Government’s inability hitherto to wrestle the operation of the DCC from possible paralysis—should it, or presumably the company to which it has been outsourced and of which it is now a wholly owned subsidiary, go bust, or should payments not come in to that company—these operations have apparently been conducted with no such safeguard written into legislation for almost four years since the establishment of the DCC in 2014.

Both questions, unless they have particularly good answers attached to them, demonstrate a certain, shall we say, laxity in the Government’s approach to the oversight of the roll-out of smart meters, and might prompt further questions: what else is possibly in the woodwork that may be impeding the progress of the smart meter roll-out to a successful conclusion, and are there further things we might do to ensure that the process works well in moving towards that goal?

Hon. Members have raised a number of those possible issues this afternoon. In an intervention, my hon. Friend the Member for Chesterfield (Toby Perkins) talked about dumb meters being replaced by smart meters and about what would happen to them. The hon. Member for Eddisbury (Antoinette Sandbach), in a very thoughtful contribution, raised the issue of what we should do about energy efficiency in conjunction with smart meters, and talked about how those two issues might go hand in hand. My right hon. Friend the Member for Doncaster North—

[Caroline Flint]

Don Valley.

[Dr Whitehead]

I am very sorry—it’s Don Valley now, isn’t it?

My right hon. Friend talked about the continuing imbalance of benefit in the roll-out of smart meters, with the benefit appearing to be accruing to energy companies, as opposed to customers. For our part, we support the idea of introducing smart meters across the country to replace the dumb meter system that serves the customer very badly and has historically done so, and is certainly not fit for purpose for the requirements of the different ways of supplying, using and measuring power that are coming our way with the energy revolution that is upon us.

The gain not only to customers but to our energy systems as a whole of having collectively installed, sufficient smart meters across the country to bring in new ways of measuring and predicting use of associating smart meters with smarter grids, thereby saving enormous amounts of further future expenditure in grid strengthening and capacity additions—all to the benefit of a smarter, more resilient, more efficient energy system for the future—suggests that supporting smart meters is right thing to do.

But then we come to the process by which smart meters are rolled out, and there is much to raise an eyebrow about. First, there is the Government’s original choice of who should undertake the roll-out—the energy companies: a model not adopted by any other country managing a smart meter roll-out programme, as my right hon. Friend the Member for Don Valley (Caroline Flint) pointed out. Secondly, there is, as a number of hon. Members have mentioned, the high overall costs built into the roll-out—costs that will eventually land on consumers in the shape of bills on their doormats. Thirdly, there is the truly lamentable performance so far in getting the DCC—the communications company responsible for making smart meters communicate well and on an interoperable basis—up and running so that smart meters, once installed, really can communicate with other and with the system. That communications company has now only just gone live, at the very end of the window for doing so before serious repercussions arise. Fourthly, there was the decision, halfway through the roll-out, to transition from one type of smart meter to another—a process akin to trying to change the wheel of a car while it is driving along the road.

All these issues raise legitimate and far-reaching questions about whether the goal of having a critical mass of smart meters in place by the end of 2020 is likely to be achieved and whether, in the short time available to us, moves can be made to get us back to that goal. The recent reports in the 2016 impact assessment suggest that we are not doing very well on installation—that we are set for an almighty bunching of installations in late 2018 and 2019 that is very daunting, even if vans of installers are not starved of meters to put up because they have been told not to install the old ones and are awaiting supplies of the new ones to install. I welcome the consultation on methods of resolving the possible hiatus in supply during the changeover from SMETS 1 to SMETS 2 meters. However, I am minded—I think the Government will have some difficult decisions to make in this regard—of what we need to do by 2020 in populating the country with smart meters to the extent that we can really make these changes possible, for our collective good, given the sheer number of smart meters that have been installed across the country.

We need to judge the very modest changes to the smart meter roll-out regime in this Bill against that wider background of decisions and progress made in the roll-out itself, and of how far away we are from the goal of having a national smart meter presence that makes all the other energy innovations—and cheaper energy and gas—possible, and to decide whether we should take the opportunity to add further elements of “getting on with it” into the Bill as it progresses through Committee.

We will not oppose this Bill on Second Reading. However, I place the Minister and the Government on notice that in Committee we will closely scrutinise the roll-out provisions currently in place to look at ways in which we can make amends for some of the frankly sloppy decision making that has occurred in the progress of the roll-out, and stiffen the sinews of the programme so that it works as well as it can. It is perhaps no coincidence that the—

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington)]

Earlier this year when I decided I was going to switch my supplier, I found myself on my hands and knees with a torch and a duster, clearing cobwebs away. That is no way to go on. The purpose of this Bill is to give us all a way of changing supplier and put us in control of our destiny when it comes to our power.

I thank hon. Members from both sides of the House for their contributions, none of which I take lightly. I look forward to the Bill Committee, and I will be delighted when we have agreed with the Opposition the time needed to go through the Bill in great detail. I will not go into as much detail in this speech as I will do in the Committee, because I am delighted that everything has been agreed. I remind Members on both sides of the House that the Bill is not about money saving, modernisation for the sake of it or replacing old kit; it is the platform for a new smart and flexible energy system that gives control to all customers—vulnerable customers and others alike. That is absolutely necessary, which is why we are doing it.

Of all the points made by hon. Members on both sides of the House, I particularly want to clear up one first made by my hon. Friend the Member for Rugby (Mark Pawsey). The SMETS 1 and SMETS 2 meters have been much discussed, and I can confirm that a software programme is being developed that will allow full conversion between the two. That will be done remotely, so customers who have had the meters installed will not have to worry about people coming to their house and changing them again. That conversion programme will start within a year.

[Caroline Flint]

Will the hon. Gentleman give way?

[Richard Harrington]

I am very sorry, but there is not time. The smart meter programme is the foundation of this whole system of freedom. It is one of the most significant engineering projects that has been undertaken in our country, and I am delighted to report that about 370,000 smart meters are being installed each month. I have met the suppliers, and they have all made arrangements to double or triple that in the next few months. I thank hon. Members on both sides of the House for their contributions today, and I look forward to the agreed scrutiny of this Bill. I commend it to the House.

Question put and agreed to.

Bill accordingly read a Second time.

Smart Meters Bill (Programme)

Motion made, and Question put forthwith (Standing Order No. 83A(7)),

That the following provisions shall apply to the Smart Meters Bill:

Committal

(1) The Bill shall be committed to a Public Bill Committee.

Proceedings in Public Bill Committee

(2) Proceedings in the Public Bill Committee shall (so far as not previously concluded) be brought to a conclusion on Thursday 30 November.

(3) The Public Bill Committee shall have leave to sit twice on the first day on which it meets.

Proceedings on Consideration and up to and including Third Reading

(4) Proceedings on Consideration and any proceedings in legislative grand committee shall (so far as not previously concluded) be brought to a conclusion one hour before the moment of interruption on the day on which proceedings on Consideration are commenced.

(5) Proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion at the moment of interruption on that day.

(6) Standing Order No. 83B (Programming committees) shall not apply to proceedings on Consideration and up to and including Third Reading.

Other proceedings

(7) Any other proceedings on the Bill may be programmed.—(Rebecca Harris.)