Smart Meters

Charles Hendry Excerpts

Monday 23rd April 2012 Commons Chamber

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

As the right hon. Member for Wentworth and Dearne (John Healey) said, less than three weeks have elapsed since we published a number of smart metering consultations and decisions. The debate is therefore timely and I congratulate him on securing it and commend him for the measured way in which he introduced it, supporting the ambition but raising realistic, sensible and constructive questions about how it is being taken forward. I assure him that the Government are alive to the issues and that, for us, the interests of the consumer are at the heart of the programme. It is the consumer experience that will determine its success, and if consumers do not have the experience we want, it will not deliver and satisfy the ambition we all share.

I agree with the right hon. Gentleman that the roll-out of smart meters will unlock huge benefits for consumers. We have brought forward the timetable because we think those benefits are so substantial. We want every home in Great Britain to have a smart meter and an in-home display by the end of 2019, enabling people to manage their energy consumption and reduce their carbon emissions.

The roll-out will play an important role in Great Britain’s transition to a low-carbon economy and will help us to meet some of the long-term challenges that we face in ensuring an affordable, secure and sustainable energy supply. This is a huge and challenging project. It is one of the largest and most comprehensive smart metering projects in the world, and it is the largest change-over programme in the energy industry since the introduction of North sea gas about 40 years ago.

The smart meter implementation programme must ensure that the roll-out is achieved in a cost-effective way, and the benefits to consumers and to industry need to be maximised. We have completed the first year of the foundation stage, which is critical preparation for the mass roll-out that will start in 2014. The publications on 5 April represent a key milestone in the implementation programme. They provide further detail on the technological and regulatory framework, and they set out substantial new proposals for engaging and protecting consumers throughout that period.

Of course, there would be little point in such an undertaking without its bringing real and substantial benefits. Alongside our recent consultations, we have published updated economic impact assessments. These show a slight increase in the net benefits over the previous assessments, resulting in total net benefits of £7.2 billion over the next 20 years. For me, the consumer benefits will always be at the heart of the smart meter programme, so in my comments I shall focus on how we are working with industry and consumer groups to make sure that smart meter installation delivers all it promises for consumers.

Most importantly, smart meters will give consumers near real-time information on their energy consumption to help them control their energy use, save money and reduce emissions, but as the right hon. Gentleman says, for smart meters to work effectively, the consumer needs to know how to work with them. Smart meters will bring an end to estimated billing, so no more surprises for consumers, and switching between suppliers will be smoother and faster. When consumers want to switch because they feel that the companies are not passing on the benefits that they expect from the smart meter programme, they will be in a stronger position to do so. We expect that new products will be supported by a more vibrant, more competitive and more efficient market in energy and energy management.

We know that for consumers to realise all the benefits, an effective consumer engagement strategy will be needed—one that can ensure that consumers have confidence in the benefits and are reassured when they have concerns, and one that helps them to understand how to use their smart meters and better manage their consumption. More importantly, we need to recognise that some vulnerable consumers may struggle to access all the benefits of smart meters without additional help. In short, we need to place consumers’ interests at the heart of the roll-out, and on 5 April we announced a package of measures designed precisely to do that.

Fundamental to consumers’ experience of smart metering will be the installation visit. That is why we are setting rules through a licence-backed code of practice to make sure that consumers have a good experience throughout the installation process, and that they are given the information they need to understand how to use their new meter and display, and how both can help them to use their energy more efficiently. We consulted last year on rules governing installation, and our recently published documents included our response to the consultation. They will place licence obligations on installing suppliers to offer customers an in-home display, allowing them to see what energy is being used and how much it is costing, as well as requiring suppliers to provide efficiency advice as part of the installation visit. Suppliers must also identify and meet the needs of vulnerable consumers, whether by arranging for a relative or carer to be present at the installation or by providing additional help in understanding and using the in-home display.

We have also been clear that householders should not be subject to unwelcome sales or marketing in their own home, an experience that would be a huge turn-off for many and would risk putting vulnerable consumers under unacceptable pressure. The licence conditions for the code will therefore ban any sales during the installation visit, and they will require that suppliers must obtain consumers’ permission in advance of the installation visit if they are to talk to them about their own products. In all those areas we have been strongly guided by the interests and views of consumer groups.

The code of practice will be developed by suppliers and approved by the regulator. It is right that suppliers should develop the code of practice because they know their customers, and they will be at the front end of installation, but if suppliers fail to submit an acceptable code, Ofgem will be able to direct changes or designate another code in its place. Ofgem will be able to take enforcement action if any supplier breaches the code.

Efficient and customer-focused installations will be essential if we are to engage customers and help them to understand smart meters and the opportunities they bring. However, the Government, industry and others recognise that the action of individual suppliers on its own will not be enough. Building the confidence and trust of all consumers—an issue to which the right hon. Gentleman understandably referred—and reaching out to vulnerable or hard-to-reach consumers, needs consistent and co-ordinated communications. We know from research that third parties such as voluntary organisations, local authorities, and housing associations, as well as friends and family, can provide an effective and more credible source of information than either suppliers or central Government. We are therefore consulting on a consumer engagement strategy that would include a central delivery system delivered by suppliers, but with independent direction and external advisory input.

Giving suppliers the responsibility to establish and fund a central body is right in the context of a supplier-led roll-out. It means they can establish arrangements that support their own engagement activities. It also means that efforts designed to raise awareness of and support for smart metering will sit alongside those tasks designed to encourage behaviour change. Of course, it will be important for a central body to reflect wider public policy and consumer interests. The consultation also therefore seeks views on the governance arrangements needed to ensure that a central body delivers the consumer engagement objectives, for example, by proposing an independent board and an advisory board with consumer expertise, and we will take into account the concerns that the right hon. Gentleman expressed on that board set-up.

Consumer engagement also offers the possibility of synergies with other energy policies. Smart metering will support the green deal by encouraging choices that increase energy efficiency, and we are encouraging suppliers to bring together smart meter roll-out with the delivery of obligations such as the affordable warmth element of the energy company obligation. Bringing those together will provide not only efficiency savings but a more comprehensive package for vulnerable and low-income consumers. An essential part of the strategy will be continual monitoring of the delivery of smart meter consumer benefits from the foundation stage onwards. Ahead of the roll-out we will be looking at the results of suppliers' trials and of community-level engagement. Where benefits are not being delivered we will take further action.

As the right hon. Gentleman has said, there is one group of customers who typically already engage with their energy consumption in a different way from most consumers, and those are the prepayment meter customers. As prepayment customers are often already more aware of their energy use and costs, our impact assessment forecasts a lower level of gas savings in particular from that sector. However, we believe that smart metering still has the potential to bring significant benefits to prepayment customers. Every smart meter will have the functionality to operate in either prepayment or credit mode, so the meters enable easy switching between the two payment methods as customers' circumstances change. Smart meters will allow more convenient ways of topping up payments, such as by phone, cash points or online, which should make prepayment appeal to a much wider group of customers. They will also enable periods to be set when disconnection will be prevented, for instance to stop customers losing supply overnight or when shops are shut.

Another important area of consumer protection addressed in our recent consultations is the need to protect the privacy of individuals and make sure they have control over the data recorded by the smart meter. The principle that has been absolutely critical to our thinking in this area from the start is that consumers must have a choice over who has access to their smart meter data, except where the data are needed to fulfil regulated duties. Suppliers need access to a certain amount of data for billing and to fulfil statutory requirements or licence obligations. For these purposes, we are proposing in our consultation that suppliers can have access to monthly data without consumer consent. If suppliers wish to access daily data, we propose that they may do so but that they will have to provide a clear opportunity for the consumer to opt out and that the data cannot be used for marketing without the customer's explicit consent. Beyond that, if suppliers wish to access half-hourly data—for instance, to develop more sophisticated services for consumers, such as the time-of-use tariffs to which the right hon. Gentleman referred—they must obtain explicit consent from the consumer to do so.

It will not just be suppliers who will wish to access data from smart meters; a range of other parties, including individual consumers, network operators, energy service companies and online switching sites, might all have reasons for using data. Our principle—that consumers should have a choice about how their data are used and by whom—will also apply in this regard. Steps are being taken to ensure that consumers are able easily to access their own consumption data and share them with third parties, such as switching sites, should they wish to do so.

We are also requiring that 13 months of data can be stored in the meter itself and that it is accessible to the consumer. That will ensure that the consumer has control over and can access their own data even if they have no wish to share it with other parties. Meanwhile, we have embedded security in the technical design of the meters to ensure that personal data are properly stored.

I hope that I have been able to reassure the right hon. Gentleman about this massive and challenging project. We have come a long way and the publication of key consultations and conclusions earlier this month marked another milestone on the way to mass roll-out. I am grateful to him for securing the debate and hope that what I have been able to say shows that we are absolutely putting consumers’ interests at the heart of the roll-out, because for us that is integral to its success.

Question put and agreed to.