Smart Meters Bill

David Drew Excerpts

3rd reading: House of Commons & Report stage: House of Commons
Monday 5th February 2018 Commons Chamber

[Dr Whitehead]

As all the new clauses and amendments are grouped together, I intend to address them in turn. I promise that I will not say anything after this speech, but will instead make all my points in one go.

When the Bill went into Committee, it did two things. However, as the Minister himself agrees, an opportunity was taken in Committee to add to it what is effectively another small Bill, so it now does three things. First, it extends to 2023 the period during which the Secretary of State has powers over the roll-out to organise and command licensable activities. It does so in part because the end date for such control was set out in previous legislation as 2018. It is now apparent that the roll-out will go on until at least 2020 and, depending on progress, perhaps even later. It is therefore not only prudent to change the date but important, because as things stand the power over the roll-out will be lost halfway through its implementation.

Secondly, the Bill provides for the circumstances under which the functioning of the Data Communications Company, which has been set up to manage and co-ordinate all the communications necessary to make smart maters work—the data they are collecting and sending; and the communications within and around the home, and on a wider network—can be maintained in the event that that company goes into administration. That is important because the functioning of the DCC is central to the whole operation of the roll-out and what happens afterwards, and a hiatus in that function while any administration was being processed would be disastrous—so much so that we might question, as we did in Committee, why such a provision was not in the original legislation that set up the procedures for smart meter roll-out, and why it has taken several years of the DCC’s operation, albeit not live, to get around to implementing such a crucial measure.

Thirdly, the Bill now provides for arrangements to bring about the half-hourly settlement of domestic bills, which was hitherto not possible, but has been facilitated by the smart meter roll-out. We welcome this potentially enormous benefit of smart meters, in that it eliminates estimated bills and allows for accurate billing on the basis of what has been supplied each half hour, thereby allowing households to pitch their use at times of best value. The provisions inserted by the Government allow such a system to be organised and regulated.

Altogether, we have a set of proposals relating to the existing smart meter roll-out, which has been under way since 2016, that are uncontentious in the main and, indeed, strengthen the fabric of the roll-out. The Opposition support the objectives of the smart meter roll-out and believe that smart meters will lead to considerable benefits, not only for billing and the use of energy by householders, but for the future operation of the whole system. We share the aim of ensuring that as many as possible of Britain’s 30 million households have a smart meter installed by the end of the roll-out target date, albeit on the clear understanding that this is a voluntary programme and that no one will have a smart meter forced on them if they do not want one to be installed.

Why, then, have we tabled the new clauses and amendments? I assure the House that it is not because we want to derail the roll-out process or to place obstacles in its path. Some real questions are emerging from the roll-out process, and our prime aim is to ensure that those questions are addressed, and that the roll-out takes account of them and their potential solutions.

I have identified six major questions that have appeared as the roll-out has progressed. First, what is the actual progress of the smart meter roll-out, and is it realistically on target to ensure that everyone who wants a smart meter can have one installed by the end of 2020?

Secondly, bearing in mind that the huge cost of installing smart meters now falls on the consumer, what assurances can we have that the cost-benefit ratio of the whole programme remains positive? How can the costs of the programme be properly managed so that it remains positive for consumers in the end?

Thirdly, why have millions of first generation SMETS—smart metering equipment technical specifications—meters been installed to date and virtually no SMETS 2 meters? SMETS 1 meters were supposed to be a small proving mode and SMETS 2 meters were supposed to be the backbone of the roll-out, originally from 2014 onwards.

Fourthly, why has the DCC taken so long to get up and running, and how much of an impediment to the full roll-out of smart meters will that prove to be? If the DCC does go into administration, for whatever reason, what guarantees are there that it will be subsequently owned by a body that has the security and integrity of the programme at its heart?

Fifthly, will everyone be covered by the communications network that is being put in place? Will people who live in blocks of flats, for example, have home-area networks that are fully able to reach them? Will those who live in remote areas enjoy the wide-area coverage that will enable their meters to work reliably?

Finally, what will happen to all the old meters, and indeed to a considerable number of SMETS 1 meters that will be replaced by SMETS 2 meters? Will they be recycled or reused in a suitable way?

[Dr David Drew (Stroud) (Lab/Co-op)]

I refer to my declaration in the Register of Members’ Financial Interests.

Does my hon. Friend accept that another problem—I have just had a response to a written question on this issue—is that when some people, particularly in rural areas, have a smart meter installed, their boilers are condemned because they are not compatible? There is no scheme or funding to help those people to put heating back into their houses. Does he agree that that is a significant problem?

[Dr Whitehead]

I agree that when that occurs, it is a problem, but I am not sure that it is just related to smart meters, so a combination of issues needs to be addressed. We need to ensure that such occurrences happen as little as possible and can be overcome.

Our new clauses and amendments seek to address the six questions that I have identified in the context of the Bill. By doing so, they would considerably strengthen the Bill. After all, as I am sure that all hon. Members will agree, it is important in such a large project that requires public confidence that questions are properly anticipated and addressed, and that assurances are given, otherwise we will have a roll-out that eventually rolls out to not many people, and that fails to achieve the aggregate coverage that will enable the sort of benefits that we would want from the roll-out as a whole.

--- Later in debate ---

[Richard Harrington]

As the hon. Gentleman said, I am convinced that consumers will get the benefit from smart meters. In this day and age, it is absurd that people—I include myself—have to read their meters on their hands and knees, with a torch and a duster to remove the cobwebs and everything else. I think that the hon. Gentleman would agree that that is an intolerable situation and that smart meters are the cure.

Let me respond to the shadow Minister’s comments about progress to date. There are now over 8.6 million smart and advanced meters operating across homes and small businesses across Great Britain. Nearly 400,000 smart meters—obviously they affect a lot more people, because of the number of people per household—are installed every month as suppliers ramp up their delivery, and that figure is increasing significantly every quarter. The Government are committed to ensuring that all homes and small businesses are offered smart meters by the end of 2020.

Let me turn to new clause 1. Future smart meter communication licensees will need to demonstrate that they are a “fit and proper person” to carry out relevant functions. That will include factors such as the ownership of the proposed licensee, but it is not appropriate to judge suitability solely on that basis, nor to exclude non-GB companies by default. Doing so would risk failing to deliver value for money for consumers, which could undermine the effectiveness of the smart meter system. I also emphasise that the Government take the national security implications of foreign control and ownership seriously. We have powers under the Enterprise Act 2002 to intervene in mergers and takeovers that give rise to public interest concerns, including about national security.

New clause 2 is about the technical development of smart meters. Overall, we expect that more than 99.25% of premises will be covered by the national communications network. In homes, the standard wireless network will serve the majority of premises successfully. We want 100% of energy consumers to be able to benefit from smart meters, but it is true—this was raised by the Opposition—that the physical characteristics or location of a consumer’s home can affect connectivity. Challenges for systems include a diverse range of building types, including those in which meters can be a long way from the living space. We are working with the industry to identify innovative solutions and extend regulatory powers, because it is very important to have that flexibility.

[Dr Drew]

Will the Minister give way?

[Richard Harrington]

I will, but I will make some progress first.

New clause 3 concerns the efficient removal and disposal of old meters. My officials have discussed this in detail with those from the Department for Environment, Food and Rural Affairs, as this falls within their remit. This point was brought up very eloquently by the hon. Member for Birmingham, Selly Oak. I am satisfied that energy suppliers, installation contractors and meter asset providers are already subject to appropriate regulation for the proper removal, recycling and disposal of redundant meters. However, as I said in Committee, we plan shortly to host a roundtable so that interested Members can hear from representatives from across the meter disposal chain. It is my intention that that will allow us collectively to agree some action. I look forward to the hon. Gentleman and other interested Members being there, because the whole supply chain has to understand fully its responsibilities.

I will briefly focus on concerns raised about the programme costs and benefits.

[Dr Drew]

Will the Minister give way?

[Richard Harrington]

Yes, I apologise.

[Dr Drew]

I thank the Minister for giving way. What I am concerned about, as always, is the urban-rural divide. We know that many rural areas are still suffering from a lack of access to broadband. Will he assure us that the rural delivery of this project is a priority, given that a lot of people in rural areas suffer because they are off the gas grid anyway?

[Richard Harrington]

I totally give that undertaking to the hon. Gentleman, and I apologise for saying that I would take his intervention and then forgetting to do so. I hope he will forgive me.

I said during previous debates that we would update our analysis if there were new and substantive evidence or changes in policy design. As a result of the representations that have been made in Committee and today, I am prepared to go further by committing to publishing an update of the programme cost-benefit analysis in 2019. As hon. Members know, 2018 marks a significant programme transition, with the shift from first to second-generation smart meters, so I think that 2019 really is the time to assess this.

As for new clauses 5 and 6, I do not believe that it is sensible to establish powers that enable the Government to require the provision of information on the costs of the programme in consumers’ energy bills, because I do not understand what benefit such a move would have for consumers. However, it is important that consumers understand the information that smart meters and in-house displays give them, because in that way, they understand the cost of their energy usage in pounds and pence—or as my hon. Friend the Member for Erewash (Maggie Throup) would say, pounds, shillings and pence, and probably farthings. She is a lady after my own heart. That will empower them either to change how they use energy, or to get a better tariff.

The hon. Member for Birmingham, Selly Oak has raised concerns, as he did in Committee, about the MAPs—not pictures of the world, but meter asset providers—because he believes that the provider market is not working to deliver the programme objectives. I remain of the view, however, as I have clearly stated to him before—we will have to agree to disagree, I think—that the market is operating competitively and that there is no need for regulatory intervention. There are currently two typical rental arrangements available: churn contracts and deemed contracts, which he mentioned. Churn contracts are often similar to the original rental agreements, including with the presence of an early-repayment charge in the event that a supplier chooses to remove the meter from the wall early. Deemed contracts do not include that charge, but carry the added risk for a MAP that they can involve higher rental charges. The important point is that the DCC has published its detailed plan for the enrolment of SMETS meters from late 2018, and as progress is made, I fully expect energy suppliers’ confidence in choosing churn contracts over deemed rentals to increase. Initial indications support that expectation.

I turn briefly to the amendment on the draft licence modifications envisaged under a power in the Bill to allow the costs of smart meter communication administration to be recouped from the industry, in so far as there is a shortfall. The potential scale of the costs will depend on a number of factors, including the timing and reason for the DCC licensee entering special administration, and costs arising from any legal and technical expertise appointed by the administrator in support of the execution of its duties. As I committed to doing in Committee, we have formally agreed to consult on these licence modifications. We will consider and set out an assessment of the estimated potential costs that need to be recouped from the industry.

I would like to reflect on the points made about the DCC’s parent company, Capita, and to emphasise that Smart DCC Ltd is required to operate at arm’s length from Capita. Provisions in the licence prevent Capita from taking working capital out of Smart DCC Ltd. Furthermore, the DCC’s financial arrangements are constructed so as to make the risk of insolvency low. Putting in place a special administration regime is entirely precautionary and, I believe, the prudent thing to do.

The smart metering programme will secure an overall net benefit to the nation of £5.7 billion. The Bill is important to ensuring that this vital platform for our smart energy future is rolled out effectively, allowing the Government to respond to developments as the roll-out continues. I hope that these arguments will persuade Opposition Members not to press their new clauses and amendments.