Smart Meters Bill (First sitting)

Douglas Ross Excerpts

Committee Debate: 1st Sitting: House of Commons
Tuesday 21st November 2017 Public Bill Committees

[Grahame Morris]

Q Can they be used for any other purpose?

Rob Salter-Church: No. We are wholly supportive of the Government taking these powers to ensure an orderly conclusion to the programme.

Angus Flett: The financial governance I have makes it highly unlikely that the special administration will be required. The way I am structured is that I invoice my customers and they are required, under licence conditions, to pay me within five days. I also have the facility to take a month’s worth of my invoicing as a credit balance, so I carry cash.

The way I invoice my suppliers is between 20 and 30 days. I also have a £5 million keep well deed from a shareholder and a guaranteed bond of £10 million that I can draw down on. The special administration is set up so that, in the highly unlikely event that we became insolvent, it could administrate and keep the lights on until another organisation could be found to take us over. The costs of that administration can be recovered back on my customer base. So it is a sensible measure, although highly unlikely to be required.

[Douglas Ross (Moray) (Con)]

Q Our earlier witnesses were speaking about the ways to the roll out and, ultimately, not being able to meet original timeframes. In the report earlier this year, you were looking at roll out and some potential problems with it. The number of installers was highlighted as an issue. Is that still an issue? If we as a Committee agree to a number of things about extending the timescale, will there still be a problem with there not physically being enough people able to do the job?

Rob Salter-Church: The 2020 target for completing the roll-out as set by Government was always going to be a challenge, and it remains a challenge, as was said earlier. One of the things Ofgem has done is put in place a framework where we require suppliers to submit to us a plan for the roll-out, setting themselves annual targets that we can enforce against if they do not meet those targets.

We scrutinise the plans that we see from suppliers; if they say, “We will install x number of meters per year”, we do not just take it for granted that that is going to happen. We require them to show us what that will mean for the installer capacity that you might need. What does that mean in terms of the contracts that you are going to have to sign to buy meters, and so on? We scrutinise that to give confidence that the suppliers have got arrangements in place to make their plans deliverable.

The information you are referring to that we publish is our conclusions, having looked across the piece at some of the biggest risks to the programme, which suppliers must remain focused, laser-like, on managing. Indeed, getting hold of enough installers is one of those issues.

Suppliers’ plans for 2017 are broadly on track for meeting their installation targets at the end of this year. A couple of suppliers are slightly behind, but not significantly so. What that tells me is that, yes, there is a real challenge to get to ’20, but suppliers are pretty much on track with the plans that they have set themselves for how they will meet their obligations.

[Douglas Ross]

Q So the 2016 problems that you reported in June are no longer an issue. Somehow we have been able to attract people to become installers. How has that been done?

Rob Salter-Church: I would describe them as risks that need to be managed as opposed to problems. On the specifics of installers, some of the tactics of suppliers are to think about their recruitment pipelines, and the Government are involved in work with the relevant national skills academy to ensure that training programmes are in place to develop more installers. The reason why we highlighted that as a risk is that we are expecting suppliers to take more and more action to keep managing it. It will be an ongoing risk throughout the whole programme.

[Douglas Ross]

Q When you spoke about the frameworks that these suppliers entered into and the targets that you can judge them against, how are the targets set for the installations in more remote and rural areas? Clearly, in terms of a numbers game, you can do far more installations in an urban area than you can in constituencies like mine in the north of Scotland. Such constituencies and the more remote and rural areas actually have the biggest potential to benefit from smart meters, yet we seem to be at the very tail end of the installation process because we are harder to reach and you can do far less in the same amount of time. What are you doing to ensure that the more remote and rural areas do not fall further behind the urban areas?

Rob Salter-Church: There are challenges to installing smart meters both in rural areas and in urban areas—equal but different sets of challenges that the suppliers may face. It is not necessarily a given that suppliers would automatically choose to prioritise urban areas for installations ahead of more rural areas.

[Douglas Ross]

Q Are you saying that is wrong? It is a complaint that is coming from rural communities. They can see that in the bigger communities—the bigger towns and cities—there does not seem to be a problem getting an appointment to install a smart meter, yet in the more rural areas there is. But you are saying that that is wrong.

Rob Salter-Church: I am not saying it is wrong; I am saying that it is not necessarily the case that rural areas will always be delayed because they are more difficult and challenging. There will be a range of challenges that suppliers encounter. The way that the Government have designed the roll-out policy is supplier-driven or supplier-led, and if certain constraints were imposed on suppliers to install smart meters in certain populations ahead of others, that might add cost and complexity and, overall, become a worse deal for GB consumers.

One of the things that we are doing to ensure that rural communities are not left behind is in relation to DCC’s communication networks. DCC is already required to deliver a network that will cover 99.75% of the GB population. It is also required to look continually at how it can extend the reach of its network to get ever closer to 100%, to minimise the chances that anyone is left behind. DCC periodically has to report to us on the progress it is making to ensure that its network is as comprehensive as possible. I would like to think that over time, as technology develops and costs come down, there will be more and more efficient ways for DCC to extend its network to ensure that all consumers can have the benefits of smart metering.

[Douglas Ross]

Q The 99.75% is a great ambition, but is it still the case that the more remote and rural areas will be at the end of the programme, when the suppliers must get to the 99.75%, because—I am told—it is more difficult to install the meters there than in those areas that will experience the benefits earlier on?

Rob Salter-Church: That might be a question for Angus, in terms of the roll-out and build-out of the network, and where and when it will be reaching different communities in the country.

Angus Flett: We use two technologies, north and south. In the south it is a cellular technology, and that is an established network. In the north it is a radio technology, which gives a higher percentage coverage, particularly for the geographical aspects of Scotland and some aspects of rural areas. You are correct in that the high percentage coverage does not get rolled out until the last part of the programme. However, we have been working with our customers to see if we could speed that up for particular geographic areas. We are also working with Alt HAN, an alternative organisation set up by the Government, to look at that last 1% or 2% and the technologies we could deploy to resolve that. One of the technologies we use is called meshing, which effectively picks up the signal from one house where it is strong and allows that to repeat. So we are reasonably comfortable and confident that we can deliver the coverage footage.

[Matt Western (Warwick and Leamington) (Lab)]

Q I have some quick questions. I am concerned about what I heard in the previous session about the transparency to consumers. I sense that there is no consistency—perhaps you can correct me—between the different suppliers, in terms of information provided to the consumer about the programme, what the customer’s responsibilities are and what the provider’s responsibilities are, such as frequently asked questions and that sort of thing. Can you confirm the situation?

Rob Salter-Church: Suppliers have clear obligations in terms of what they have to explain to their customers. It really, really matters to us that customers get clear information about smart metering—indeed about everything—from their suppliers. It is important that they treat their customers fairly.

In relation to smart metering, suppliers work with the Smart Energy GB organisation to produce common materials and FAQs to make sure that there is clear information for consumers. That information is produced and the suppliers are working to pass that out to individual consumers. There would be potential unintended consequences if either Ofgem or the Government decided that we knew exactly how to speak to customers individually—every single one—and set out very prescriptive rules that suppliers had to follow to the letter. We place clear obligations on suppliers on what they explain to customers. They have clear licence obligations to ensure that they always treat their customers fairly. Suppliers have a programme of work going on, working through Smart Energy GB on common FAQs and information that can be shared with consumers, and they have to do that in a clear way that really engages customers and makes them understand the benefits of smart metering.