Smart Meters Bill

Lord Harrington of Watford 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

[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.)

Smart Meters Bill (First sitting)

Lord Harrington of Watford Excerpts

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

[Dr Whitehead]

Q Why do you think that the 2020 deadline is not realistic?

Bill Bullen: I just do not think that the programme is anywhere near the level of completion that it needs to be. The DCC was originally intended to be up and running in 2014, at which point 2020 was perhaps a realistic timeframe. We are now nearly at the end of 2017, and the DCC is clearly not up and running at anything like full capacity. It will just not be possible to deliver the remaining 40 million–plus meters in three years. It is logistically impossible.

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

Q Good morning to both of you. Would you care to comment on how you feel that smart meters are transforming the experience for prepayment customers?

Bill Bullen: Business is completely focused on the prepay market. We have nearly 600,000 prepay customers now, and more than 85% of those already have smart meters installed. The prepay market in total is something like 20% of the market—5 million households in the UK use prepay, and about 20% of those already have smart meters installed. There is a very simple reason for that: it completely transforms that product and service for those customers. It has huge value benefits for prepay households, which is why they have adopted the technology more quickly. Until the price cap came in, there were also significant price reductions because prepay smart meters allow people to cut their cost to serve ratio, and therefore they deliver a better price as well as a better product. It is a bit of a no-brainer, to be honest.

Audrey Gallacher: I echo that. We know from a lot of early research done on the Government’s smart meter programme that the customer service benefits go beyond improvements and engagement in reducing consumption. The sheer customer service benefits have been massive. Right now, people have to go outside the house to top up their meter, but with a smart meter they can do that in their home. As Bill says, that has proved massively popular.

--- Later in debate ---

[The Chair]

We now hear oral evidence from Ofgem and the Data Communications Company. We have until 10.40 am for this session. Could the witnesses please introduce yourselves for the record?

Rob Salter-Church: Good morning. My name is Rob Salter-Church. I am a partner in the consumers and competition division at Ofgem, and I have responsibility for our work on smart metering.

Angus Flett: Good morning. My name is Angus Flett. I am the CEO of DCC.

[Richard Harrington]

Q Thanks to both of you for coming this morning. May I ask Ofgem, in particular, what you are doing to ensure energy suppliers deliver their obligations?

Rob Salter-Church: I might first explain the role of Ofgem and the Government in the roll-out, because that sets out the context for answering that question. To be clear, the roll-out of smart metering is Government policy. The Government have powers, and one of the parts of the Bill we are considering today is to extend their power to put in place the licence arrangements around smart metering. Ofgem’s role is to oversee suppliers and DCC compliance with the policy framework that the Government have put in place.

We are hugely supportive of smart metering, and we think it has real potential to improve consumers’ outcomes. Through regular engagement with suppliers, we are overseeing their compliance with their licence obligations. We do that through regular bilateral engagements, gathering significant information from suppliers and working in partnership with Citizens Advice and the energy ombudsman to gather information about consumers’ experience of smart metering.

We use the data we gather to hold suppliers to account, challenge them and make sure they are doing what they are required to do in terms of installing smart metering—adhering to their roll-out plans and, perhaps more importantly, delivering a good-quality installation, providing energy-efficiency advice to consumers when they do that and making sure consumers are aware of how they can realise the benefits of smart metering.

We have a range of tools in our toolkit that we can use to secure supplier compliance. Ultimately, if we feel that a supplier is not doing what they need to do to stick to the rules and make the programme a success, we can take enforcement action against them—a process that enables us to levy a fine against that organisation if it is failing to meet what is required of them.

[Steve McCabe]

Q I notice that it says in your written evidence that you see a significant benefit for consumers, and you have repeated that. How will the benefit be realised? What are the practicalities? How will it be realised for the most vulnerable customers—the elderly and the most disadvantaged? How will we see that, and what kind of timescale are we talking about?

Rob Salter-Church: There is a whole range of benefits that consumers—including vulnerable consumers and those on prepayment meters—can get. One of the key ways in which consumers can benefit from smart meters is through being in control and having access to real-time information about their energy usage and what it is costing them. Many people, including vulnerable people, are often worried about getting an unexpected bill—having a bill shock that they are unable to meet—and falling into debt. One of the great things about smart meters is that they give real-time information so people are in control and can manage their energy usage to prevent those kinds of issues from arising.

Another benefit that will accrue to all people, but may well have particular relevance for more vulnerable customers, is the end to estimated billing. They will know exactly what they are being billed and will be able to make sure they are not being over-billed by their supplier.

The last thing I will say is about prepayment meters. Smart metering has the potential to absolutely transform the realities of energy for prepayment customers. People will no longer have to go out in the rain to go down to the shop to put credit on their meter; they will be able to very simply and easily top up the meter when they need to. The functionality also enables suppliers to help customers manage their energy usage. For example, rather than running out of credit overnight, the smart meter technology allows the supplier to offer services to customers that enable them to have a small amount of energy to ensure that the heating and lights are still on in the morning. Those kind of quality of service benefits are huge, and they should accrue to customers through the point at which they get a meter installed.

Smart Meters Bill (Second sitting)

Lord Harrington of Watford Excerpts

Committee Debate: 2nd Sitting: House of Commons
Tuesday 21st November 2017 Public Bill Committees

[The Chair]

Thank you very much, gentlemen. You are very welcome. I believe that the Minister has indicated that he would like to ask the first questions.

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

Q 46 Thank you, Mrs Gillan, and welcome to the Chair. It is very nice to see you. I will ask just a brief question to give plenty of people a chance.

Thank you for coming today, gentlemen, and helping us. As you probably know, the evidence you are giving today is the beginning of the Committee stage of the Bill. May I ask you both to comment on the interop—I cannot pronounce it—on how the Data Communications Company system will help the SMETS 1 meters to be operable throughout the whole system? We keep hearing about it and my shadow and I have discussed it at different times, but I would be very interested in your comments.

Derek Lickorish: I think that interoperability for SMETS 1 meters will come about in two ways. But first, what is interoperability? At the moment, SMETS 1 meters have their own mini data communications company. They have their own communications infrastructure, and it is generally all made by the manufacturer who supplies the meters. There are several of those systems out there. The initial interoperability can come about by making SMETS 1 meters interoperable through their communication systems. That is already available technically, but it requires the participation of the big six to make it happen.

You asked specifically about how the DCC deals with enrolment and adoption—those are the terms used. In the case of Secure Meters, it will take the output from its smart meter service operator system and plug it into the DCC. That, on the current timeline, is due to take place next October. That is based on a whole range of assumptions, and I think it is more likely to come about at some time during 2019, subject to all things here on in going very smoothly for the DCC. So there are two options to make interoperability work.

Richard Wiles: Likewise, at Trilliant, with our meters we offer integration into third-party systems that allow interoperability and for the devices to remain smart. We do that through one of our clients. We also offer a cloud-based smart meter systems operator—SMSO—solution ourselves, and we can provide that interoperability for people who take up our service. That enables them to put meters on the wall pretty quickly, using a similar platform to that of our larger suppliers from the big six energy companies.

We also provide that service through an aggregator that can do secure file transfers that allow even quicker adoptability and the ability to get meters on the wall, but we adhere to the same standards as the DCC for enrolment and adoption as to how we would build that development interface to communicate to our existing infrastructure and make sure that the service requests that come through the DCC path meet the criteria of the DCC, similarly to what happens with SMETS 2.

Derek Lickorish: So SMSO interoperability could be achieved now.

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

Q The Government have indicated that SMETS 1 meters will no longer be installable after a particular date and have given guidance about what can be installed up to that date. There is a consultation at the moment about whether that date might be changed slightly to arrange for a smoother handover from SMETS 1 meters to SMETS 2 meters. What effect will that arrangement have on the overall passage of the roll-out, and what do you think about the present availability of SMETS 2 meters to ensure that that roll-out proceeds?

Derek Lickorish: We are kidding ourselves if we think that we are about to have a mass roll-out of SMETS 2 meters any time soon. As we heard this morning from the gentleman responsible for DCC, there are 250 SMETS 2 meters connected to DCC, and they are electricity-only; that is 200 more than I thought were connected to DCC. If we were about to have a mass roll-out, we would have at least 200,000 fully interoperable SMETS 2 meters connected to DCC to facilitate end-to-end testing of that system. That is currently not the situation.

The July 2018 date is predicated on the fact that SMETS 2 meters are going to roll out very soon. For that to happen, those meters need to be declared interoperable. Interoperability is essential not only now but in the future. What does that mean for people who do not follow all this stuff at the molecular level? We decided at the outset of the smart meter programme that we would have many world firsts. There are about seven or eight first-in-the-world developments in this programme, one of which is that every meter must be interoperable with other meter manufacturers’ meters so that, should a meter fail, it can be replaced by another meter manufacturer’s meter without the in-home display being replaced. That is a key tenet of the programme.

A process known as smart meter design assurance is supposed to be up and running to prove that SMETS 2 meters are interoperable. That is not up and running, and it has some technical difficulties. Yesterday, a letter arrived to say that one SMETS 2 meter manufacturer has a problem with compatibility of the hub. That is not to say that that will not be solved, but that was only yesterday. Is it just that manufacturer’s SMETS 2 meter or is it all of them? In theory, it should be all of them, because they have all been made to precisely the same specification.

This programme is the first in the world for device-level interoperability, it is the first in the world to separate out the communications system and it is the first in the world to get all the people involved in the SMETS 2 roll-out designing to a 6,000-plus page specification. I hope you can see from that that I do not think we are going to be going very quickly very soon. Having said that, I do not think that the 2020 date should be changed. I believe that the industry should be galvanised into action to solve the problems and then there should be a reflection on what the 2020 date should be. We should not have a date that nobody believes is possible.

Richard Wiles: Trilliant’s view is that there needs to be some coexistence between SMETS 1 and SMETS 2 beyond 14 July next year. Our response to the consultation is that we are concerned that smaller suppliers, which may not have done any SMETS 2 installations to date, may be in a position where they are not first in the supply chain for meters, communications hubs or other parts of the end-to-end system testing. We believe there should be coexistence and that SMETS 1 should run with SMETS 2 until SMETS 2 deployment has been proven at scale and can take over the quantity of SMETS 1 meters that will be deployed.

From our supply chain, we are concerned that if we are forced to turn off our supply manufacturing chain and then we get the go-ahead to recommence production, we will then have to ramp up. For the products that we develop, we have specialist components to ensure that the security is maintained. We need to ensure that other key, core aspects of the supply chain are readily available so that, should the call come to bring SMETS 1 up again at a date beyond 14 July, we can serve and make a credible difference to the actual roll-out and then achieve the 2020 planned deadline.

--- Later in debate ---

[The Chair]

I think you have seen how the sessions are conducted here. Questions come randomly from the members of the Committee as they catch my eye, and may I ask you to speak as clearly as you can for the Hansard Reporters?

I think we will start with the Minister.

[Richard Harrington]

Q Thank you very much, Mrs Gillan.

I will continue from the evidence that I know you heard before, because you were sitting—quite rightly—behind those witnesses. How important do you feel it is that the energy suppliers make a swift and smooth transition to using SMETS 2 meters? I ask that because we have heard from people who have been suppliers of SMETS 1 meters and from others who have taken a broader view, so I would be very interested to hear your view, please.

Dhara Vyas: From the Citizens Advice point of view, we are quite keen to see that transition happen as soon and as rapidly as possible. As I am sure you are aware, SMETS 1 meters do not really provide the same sort of functionality as SMETS 2 meters, and a big part of that is the continuing benefits of SMETS 2 meters. You have heard about the interoperability and the ability to switch, but there is also the kind of loss of functionality in terms of the dynamic currency conversion-enabled services, or DCC-enabled services, that they have access to, and things like “last gasp, first breath”, whereby a network could see if somebody is off supply and act really quickly. SMETS 1 meters do not have that sort of capability built in. So things that really serve to protect consumers are built in to SMETS 2 in a way that they are not with SMETS 1.

Also, there is confusion as the roll-out progresses at a pace and as suppliers and SEGB are working to promote the roll-out and encourage consumers to take up the offer of a smart meter. With different meters going on the wall, consumers are already confused and will ask questions, such as, “My neighbour can do this, and they switched, and they kept their meter. How come I can’t?” So the increased confusion around having more SMETS 1 meters on the wall will cause a problem.

Sacha Deshmukh: I agree that the SMETS 2 roll-out is very important. The only extra contextual point that I would add is that people should remember just what a step forward SMETS 1 meters are from previous meters. So the feedback from consumers who have SMETS 1 meters—several million of them now—is overwhelmingly positive.

I remember a story that was told to me recently. A consumer who had previously been on a prepayment dumb meter had slipped and fallen—she was an elderly lady—and broken her hip, while going out to charge up her key late at night on a petrol forecourt that was wet, in the rain, in a month a little bit like this in weather like this. So a SMETS 1 meter and the capability it offers is a huge step forward for consumers, but I agree that SMETS 2 meters are also incredibly important, for the reasons that Dhara just outlined.

[The Chair]

Minister, anything further?

[Richard Harrington]

No. I will give everybody else a chance. Thank you very much.

--- Later in debate ---

[The Chair]

I will start with the Minister.

[Richard Harrington]

I am happy to let Mr Morris go first. I know he has been waiting for a long time.

[Grahame Morris]

No, that is okay.

[Richard Harrington]

Q Thank you very much for coming, Doctors, as it were. I thank you for the efforts that you have made professionally to get the programme to the stage it is at now. Although difficult, I would like to ask a broad question that will encompass both your areas. In my Government job, I view the smart meter programme as just the very beginning of a future smart grid for people. I have seen prototypes in America and elsewhere, which you will know much better than I do. What change in human behaviour patterns have you seen up to now for people who have what we could call a very prototype smart grid with smart meters? From both the building and the consumer point of view, what is the vision for the future?

Dr Sarah Darby: I am not sure we can yet say that there is a prototype smart grid. The beginnings of smart energy tend to be different in every country and smart metering in this country is different from smart metering anywhere else. In fact, more attention has been paid to the consumer engagement side of smart metering in this country than anywhere else. This is the only country where a fairly intensive effort is put into customer engagement at the time of roll-out of the smart meter, when everyone is offered an in-home display, and all the installers are trained in communication skills to explain what is going on, what can be done with the display, what the smart meter is about and how customers can use it as a tool, if they wish to. This country is a bit special in that way, and we are seeing, on average, modest positive effects.

In the US, where smart metering is widespread, the emphasis has been very much on using it to try to control peak demand, and as an instrument to introduce time-of-use pricing and whack up the prices at peak times to keep peak demand down. They have special problems there, particularly in the hotter states, with air-conditioning in the summertime and very high peak loads, which is an expensive problem for them to manage. The earliest roll-out of smart meters was mostly, in my understanding, to overcome serious problems with fraud.

Dr Richard Fitton: I agree with Sarah, the UK is very strong on smart meters. If you speak to anyone in Europe, a lot of them are envious of the technical standards of the smart meters that are being rolled out. As we have heard from all the sessions, it is a very complicated issue and it is not getting any less complicated, certainly for the consumer.

Our research group’s angle is everything from the consumer side of the meter. We are looking at how to diagnose problems with buildings using the data and systems that are available. We are also developing appliances that will work with smart meters. A big piece of the puzzle that is missing from some of the discussions is the fact that the consumer should be able to engage with the smart meters. As it stands now, they cannot engage with the smart meters. We can log on to the energy supplier’s portal and get a half-hourly reading. But a magic black box called the consumer access device is the gateway to the occupiers having access to their real-time data. This is not a box on the wall that tells them how much energy is costing. It is a consumer access device that streams real-time data to things such as smart appliances and smart heating systems for homes.

That is the whole aim, as far as I can see, of the smart and flexible grid that we constantly talk about. To attach one of these devices is exceptionally difficult and I have never had one successfully connected personally, nor have colleagues or associates. So a big piece of the puzzle is missing in using this data for something that is really smart, rather than just for billing. Billing is clearly important, but the use of the best-value data for the consumer appears to be the missing part of the puzzle. I think that would also push some buttons to help develop the interest in smart meters and get them into people’s homes.

[Dr Whitehead]

Q We have been talking about the other end of the process—the extent to which it will be possible to use smart meter data in aggregate for all sorts of purposes in smartening the grid; developing different tariffs and different resiliencies in grids with knowledge of real-time flows and so on. What sort of penetration of the system do you think is necessary for that data to be usable? Is it a full roll-out, a partial roll-out, 60%, part of the country covered, not other parts? What would be the optimal pattern?

Dr Richard Fitton: I think it is the same with any technology. The greater the penetration geographically across different types of people and property and heating systems, and the greater the spread the better. It is a very difficult question to answer. My thought has always been, when is the roll-out complete; when do we say it is complete? Is it at 90%, or 80%? It may be that 10% of people—I have just made that figure up—will not let you through the door. When is it complete; when do we rubber stamp it?

Dr Sarah Darby: Yes, I think there will always be a section of the population who do not stand to gain very much from having a smart meter; the demand is perhaps very low and there would not seem to them to be a great deal of point. Their impact on the system would also be very small, so I would say yes, we are probably talking in the region of 80%. You would have garnered pretty much all the benefit by then.

Smart Meters Bill (Third sitting)

Lord Harrington of Watford Excerpts

Committee Debate: 3rd sitting: House of Commons
Thursday 23rd November 2017 Public Bill Committees

[Grahame Morris]

This specifically relates to the date.

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

The hon. Gentleman is past the point of no return.

[Grahame Morris]

That is certainly not my intention, Minister. My point relates to the amendment, the justification for extending the date by an additional three years and whether the delivery vehicle is fit for purpose. Was my hon. Friend surprised, as I was, when the witnesses told us that only 250 units had gone live to date? Does that imply that the company is fit for purpose?

--- Later in debate ---

[Dr Whitehead]

Indeed. I hope the Minister will say something reassuring about that, and I am sure he is fully ready to do so.

The final important issue to do with the date is the number of appointments that energy suppliers are making—due to expressions of interest or otherwise—to put a smart meter up on a wall. We heard in evidence from Smart Energy GB about what it calls a pan-supplier customer funnel. That is a fancy way of saying that there is an enormous difference between people who say they would like a smart meter and people who actually get a smart meter at any stage of the installation proceedings. The number of installation appointments booked by energy companies looks very different from the position at the point of interest being expressed and people saying, “I would like a smart meter in my home. When are you coming to install it?” It is not a question of whether people want a smart meter, but whether they get the smart meter on the wall after they have said they want one. That appears to be a continuing problem in the roll-out.

Indeed, if hon. Members look at page 19 of the cost-benefit analysis from the end of 2016, they will see how considerations are changing with regard to the installation profile of smart meters up to the end of 2020. We may need another cost-benefit analysis in the not-too-distant future. As new cost-benefit analyses emerge, and as more information on the ground comes to light, the profile changes. I do not wish to repeat the theory of the four cups on the table from our evidence session, but hon. Members can see from a graph in the cost-benefit analysis the change between the profile of the roll-out and the profile in the cost-benefit analyses of 2014 and 2016: the mountain gets steeper and steeper as we come to the end of 2018 and the beginning of 2019.

It is suggested that a roll-out of some 15 million a year will be necessary in 2019 to get the programme on track in the way we all want and hope. A number of people think that that roll-out profile—a roll-out by the end of 2020—verges on the improbable. That is the fourth—and last, you will be pleased to hear, Mr Gapes—reason that I put forward for why 2023 has been decided on. The question is how that reflects on the roll-out, the communications, the offer and the ability of the whole system to work properly as far as future energy systems are concerned.

As the Minister is itching to tell us which one of the four is the actual reason—or perhaps it is all four or something else; I do not know—I will give him the opportunity to do that, but I hope that we can start the Bill with a very clear idea of what we are talking about as regards the 2023 date, because that will inform the rest of our discussions.

[Richard Harrington]

The shadow Minister took my “itch” comment correctly. I was, as Mr Speaker would call it, mumbling from a sedentary position.

Mr Gapes, I understand fully your rulings on scope. There are points from hon. Members on both sides of the Committee, and particularly Opposition Members, that I would like to speak about, but the issues raised are not within the Bill. If they would like to meet me separately, either formally or informally over a cup of tea, I would be very happy to do that, because I am absolutely obsessed with smart meters, and that is my job; the hon. Member for Birmingham, Selly Oak, who spoke so eloquently, and I have met to discuss the subject. I took on this project quite recently, and I am determined to make a success of it, as are the officials. In my admittedly short and less than illustrious ministerial career, I have never come across people with such enthusiasm and energy for the project. We want to get it right, and I accept fully hon. Members’ statements that the amendments are not designed to wreck the Bill. The expression used is “probing”. We have heard very genuine comments and questions, and I will do my best to answer them.

I was going to make a longer speech. I thought that in the first bit of it, it would be better to put on record what the whole Bill and smart meter programme is about, but in the spirit of your ruling that Members’ contributions have been outside the scope of the Bill, Mr Gapes, I think I would be pushing it, but I would have liked to have done that; I would like to put that on record, anyway.

[The Chair]

Try, and see where you get to.

[Richard Harrington]

Well, I would like to make it very clear—this is absolutely within the scope of the Bill and the amendments—that the purpose of the Bill and clause 1 is not to give the Government more time because they or the companies are behind on targets. It really is not; it is to extend the existing powers of the Secretary of State to do quite a lot of things. I will not say this again unless I am asked, but it is not to give the Government more time. Hon. Members’ comments have often probed that point, so I thought I should make that absolutely clear, and then happily go through the measure.

I have seen in my business life quite a lot of targets. They are called hockey sticks. When we look at a business plan, or any plan, suddenly next year seems so fantastic compared with this year, and all of a sudden we wake up on 1 January and say, “Oh great, we’re going to do five times as much as we did in November.” I must say that when I first looked at this plan, that was my thought. It is my job to be cynical. Just as it is the Opposition’s job to be cynical with regard to me, it is my job to be cynical with regard to officials on the programme; that is what the system exists for.

[Grahame Morris]

Will the Minister clarify something? I am slightly confused. If the purpose of the measure is not to give the suppliers more time to meet their obligations, what is the justification?

[Richard Harrington]

I repeat that it is absolutely to extend the Secretary of State’s powers. I was going to mention the 2023 issue and the reason for that. In fact, I scribbled myself a note to answer the hon. Gentleman’s comments about it. So as not to repeat my own scrawl—in fact, I will repeat my scrawl later, because I cannot remember where I put the note.

On the 2023 issue, a lot of things in the powers are not about the targets. Richard Milhous Nixon, whose biography I have just been reading, said, “If you’ve got them by the balls, their hearts and minds will follow.” I do not know if that is unparliamentary; if it is, I apologise. We could easily say, “That’s it; we will leave those powers, because then they will do it”, but that is not what is happening. I am not a fan of Richard Milhous Nixon, for those who might think that, but it struck me that that often in life, that is why people do things.

A lot of things in the powers that are needed will be involved in winding up. I will cover them a little bit later. I do not think it would be possible for any organisation to suddenly give a date—31 December or November or whatever—when the powers run out and that is it. A lot of the things involved go beyond the target. The targets are made with the suppliers. It was asked what happens if suppliers do not do this. There are powers to fine; the regulator has powers to fine suppliers, from memory—if I am wrong by a bit, I will correct the record—10% of turnover if they do not comply with the agreed targets.

[Steve McCabe]

Will the Minister give way on that point?

[Richard Harrington]

Go on—I cannot resist the hon. Gentleman.

[Steve McCabe]

It is a very simple question. The Minister says the regulator has those powers, but is there any evidence that they have been exercised?

[Richard Harrington]

They have not needed to be yet, but they are there. The hon. Gentleman does not mention—no one has given any credit for this—the 7 million smart meters that have been installed. That is quite a lot of smart meters. I have seen the programme that has been put out, and having spoken to so many of the companies and organisations involved, I am satisfied that it is a realistic target. I had better make some progress; I will not be able to address his amendment properly unless I do.

For me, this is the most significant thing that has happened in electricity, but also in power supply to homes, since Edison or whoever it was—hon. Members will have to excuse me; it is a long time since I did it at school.

[Grahame Morris]

Swan.

[Richard Harrington]

That is right. Swan was not matches then.

[The Chair]

Order. Let us get back to the Bill, please.

[Richard Harrington]

Let us get back to business straight away. I was tempted by the hon. Gentleman.

This is a precursor to a smart grid through which everyone—poorer people, richer people, businesses, houses—will be able to make real choices all the time. They might have computer programmes or apps to do it for them. Our children and grandchildren will not talk about SMETS 1 and SMETS 2, as the shadow Minister does in day-to-day conversation over breakfast. They will just look at what they are paying for their power every half hour or whatever, and they will know. That is why we are bringing forward the Bill.

We are committed to ensuring that every home and small business has been offered a smart meter by 2020; I believe that was in the Conservative party manifesto, so it must be true. That is our clear policy, and it is what we are going to do.

[Stephen Kerr]

Will the Minister say exactly what “offer” means in that context? There is an issue over whether “offer” equals mandate, but we have clearly said that there is not a mandate or a requirement for consumers to have a smart meter.

[Richard Harrington]

It is precisely that: it is not compulsory, it is an offer, which is deemed to be people being told by phone or in writing that they can have a smart meter, as indeed I have been and am arranging for. I am sure many hon. Members in this room will be doing the same.

The extension of the powers proposed in the Bill will enable us to drive progress to the 2020 deadline, act on evidence to remove any emerging barriers to the roll-out and then—this is the important thing for the 2023 extension—to respond to the findings of a post-roll-out review, to ensure that the benefits for consumers are fully realised over the long term. Industry and consumer groups have made it clear that they see a need for Government leadership on this, which we hope we are providing.

--- Later in debate ---

[Dan Carden]

I hope that the Minister will respond to one of the points that Derek Lickorish made the other day when he said,

“It is no good having a target that nobody believes in...we need a recognition now that says, ‘We will look at all the issues and have a unity of purpose about what the targets should be’.”––[Official Report, Smart Meters Bill Public Bill Committee, 21 November 2017; c. 37, Q69.]

What proactive undertakings is the Minister proceeding with to bring the suppliers together to make 2020 a realistic date in this context?

[Richard Harrington]

I can reassure the hon. Gentleman that we speak regularly to the suppliers. In fact, yesterday morning I met a group of them. I think Mr Lickorish was there, but certainly others who gave evidence, Mr Bullen and Mr Salter-Church from Ofgem, were there. BEIS has regular meetings. I would not put my name or that of the Department to this target if I thought it was unrealistic. Hon. Members have referred to Mr Lickorish’s evidence showing some cynicism about it. The cliché on these occasions is, “He would say that, wouldn’t he?” I am sure it is a genuinely held belief, but it is the Government’s intent to make sure this happens. I would be hauled, as they say in the press, before whatever Committee if the target is not met in 2020, or whatever the date might be—not 2023, because that would be on a different issue; that is not the target. But I might end up being accused of misleading the House, albeit not on purpose, and being told I was completely wrong and should pay the price. However, I am personally satisfied that the date is not as unrealistic as Mr Lickorish said.

The extension of powers has been mentioned, and I think I have stressed enough that is not because of failing to meet the target. The hon. Member for Liverpool, Walton said earlier that he was concerned that the cost to consumers from the smart meter roll-out could be unlimited. He was probably referring to poorer people in our constituencies, who currently do prepayment and might suddenly be hit with an unlimited charge by suppliers, justified or not. I want to make it clear to him and to everyone else that we are monitoring the costs all the time. The DCC, which is a natural monopoly, simply because it is the only company connecting smart meters, is subject to price control regulated by Ofgem, which has provisions for monopolies. The DCC is slap bang in the middle of that.

[Grahame Morris]

Is there not a danger that building in an overrun will inevitably lead to cost escalation? The estimates presented in evidence were an increase from £1.3 billion to £2.1 billion, and the overall programme is £12 billion, which I think Mr Lickorish told us was the equivalent of 10 200-bed hospitals.

[Richard Harrington]

Actually, concentrating the mind in the Nixonian way, the next couple of years will surely lead to reduced costs because of economies of scale, but we can discuss that another time. I will be happy to.

The shadow Minister said that small suppliers have a weaker obligation in relation to 2020. That is not quite true, although he did not intend to mislead us with the wording he used. It is exactly the same obligation. The only flexibility the small suppliers have been given is that they can deliver their programmes in line with their broader corporate strategy. We are allowing the smaller ones to be later in the programme because, unlike British Gas and others that have been mentioned, they have not got the bulk.

[Dr Whitehead]

Will the Minister give way?

[Richard Harrington]

The hon. Gentleman will have to excuse me. I am being told to make progress.

Amendment 1 relates to the Secretary of State’s power to modify the relevant electricity licence conditions and industry codes, which relate to the detailed regulatory framework, covering the activities of energy suppliers and network operators, and the data and communications licensee. It would cause those powers to expire at the end of 2020, which, again, has nothing to do with the target. I do not think anyone would argue that they should just disappear. I oppose amendment 1 because it removes the Department’s ability to conduct an effective post-implementation review, which, as I said earlier, we will need to do. The aim is for that to happen in 2021. The extension of powers until 2023 allows us to complete that exercise and implement the recommendations.

I know that this is a probing amendment, as the hon. Member for Birmingham, Selly Oak said, but I do not think he took those things into consideration. He concentrated his comments on whether to extend the target, which I hope I have covered. In contrast, in the absence of the power we are asking for to modify the energy licence conditions and industry codes beyond 2020, we would have to bring the review forward. For it to be consulted on properly, and to provide the appropriate parliamentary process, it would be necessary to conclude the evidence gathering the year after next at the absolute latest, which as far as I can see would completely reduce the robustness of the assessment and exclude valuable evidence from the final stages of the roll-out. It would also prevent the consideration of longitudinal research exploring the impact of smart metering on consumer behaviour, which is what this is all about, and energy saving over the course of several years. If it were carried out before 2020, there would not be enough evidence. I believe smart meters will be absolutely revolutionary, and will change the way people use their energy bills. If hon. Members believe in smart metering—I am sure you have been persuaded, as the rest of us have, Mr Gapes, that this is a really good thing to do—and think it is not just a short-term thing, it is right that the Government can ensure that the regulatory framework is there and is fit for purpose for decades to come.

Amendments 2 and 4 would limit the period to which the Secretary of State can veto Ofgem’s proposal to give consent to the transfer of the whole or of any part of the communication licence. Again, if the amendments were passed, the Secretary of State could prevent the transfer only up to the end of 2020. DCC’s smart meter licences were awarded in 2013 for 12 years. The curtailment of that power would create an imbalance in the Government’s arrangements of the smart metering programme, undermining our leadership role within it.

I know it sounds like we want it both ways, but the Government’s role is absolutely central to this. We have to provide the leadership that we have been asked for. I do not want to risk having a situation in which a smart meter communication licence was transferred in a manner that conflicts with activities undertaken by the programme as part of its post-implementation review. It is necessary to extend the power to 1 November 2023 to retain coherence in the Government relating to the smart metering programme and to ensure that these activities are appropriately co-ordinated.

Amendments 3 and 5 would limit the Secretary of State’s ability to introduce new licensable activities in relation to the smart metering roll-out. The power we are talking about was used to set up the provision of the smart meter communications service, which led to the granting of the DCC’s licences. I want to make it clear that we have no specified or defined plans to use the power. Perhaps the hon. Member for Birmingham, Selly Oak will still argue that if the scenarios change, primary legislation will be needed to go through it again, and I understand that. However, I can see scenarios that could develop where we will need the ability to introduce new, licensable activities quickly, in order to overcome barriers and to ensure that the benefits are realised. Such situations can arrive relatively late in the roll-out or in the immediate post-implementation period.

[Grahame Morris]

Will the Minister give way?

--- Later in debate ---

[Richard Harrington]

I would rather make some progress.

[Grahame Morris]

I just wanted an example, that was all.

[The Chair]

Order.

[Richard Harrington]

I know we have four more days, but I would like to make progress on this particular point, although I will give an example that might be acceptable to the hon. Gentleman. As an example, it may be necessary to create new licensable activities to ensure that all premises can secure a home area network if that cannot currently be achieved. Technology develops, as do apps, different systems and inventions. It is for us to be able to act quickly so that there is flexibility for the consumer to take advantage of all those things.

Our current explanation is that we may know when solutions are appropriate and viable for these premises only towards the end of 2020 or even in early 2021. I must say, clearly, that we would use this power only after going through the normal policy development process, including consulting relevant stakeholders. I feel that I have done my best to make that point. It is for us to show leadership in this matter. The decisions taken up to now have driven this momentum, and whatever has been said on cynicism about the targets, the installation volumes are increasing dramatically and it is important that we can keep a robust regulatory framework that enables the delivery of the benefits.

It is vital that this work can continue and that the Secretary of State retains the powers available to him to direct the efficient delivery of the roll-out. I am sure that hon. Members will take these points into consideration, other than the target itself, which we have discussed. The last thing that hon. Members want is a cliff edge—they argue against cliff edges many times on the Floor of the Chamber—and the last thing that we want in this case is a cliff edge. I hope that the hon. Gentleman will find these arguments reassuring and that he will feel able to withdraw his amendment

[Steve McCabe]

I am conscious of the time, but I want to be dead straight: I did not find that particularly reassuring, if I am honest. If hon. Members look through Hansard, they will find that I raised a number of questions that have not really been answered at all. As I said at the outset, the amendment was intended as a probing amendment, so I do not intend to push it to a vote at this stage. I recognise that the Minister is very sincere in his approach to this matter, but will he reflect on some of the points that have been made during this part of the debate? Perhaps at a later stage in Committee or in the Bill’s progress, he will see whether he can be a bit more persuasive with the quality of the answers that he provides. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Ordered, That further consideration be now adjourned. —(Mike Freer.)

Smart Meters Bill (Fourth sitting)

Lord Harrington of Watford Excerpts

Committee Debate: 4th sitting: House of Commons
Thursday 23rd November 2017 Public Bill Committees

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

Like everyone else, I formally welcome you back to the Chair—you were here for the programme motion. I am sure that, if I stray from the scope of what is being discussed, you will be just as much a disciplinarian as Mr Gapes was this morning. I shall do my best to comply with his edicts and yours.

[The Chair]

That is good to hear.

[Richard Harrington]

Well, I promised I would do my best; I did not say anything legally binding. No, of course I shall. You will tell me if I do not.

As with everything else we have discussed, I fully respect the Opposition’s intentions and the contribution from the shadow Minister, as ever. The hon. Member for Birmingham, Selly Oak confirmed again that the amendment is not intended to wreck the Bill, which I fully accept. However, I will point out, from the Government’s point of view, that a lot of myths are doing the rounds about the differences between SMETS 1 and SMETS 2. I felt it might be worthwhile for me to explain them.

First, the hon. Member for Birmingham, Selly Oak repeated some evidence given during oral evidence—the contention that 20% of 7 million smart meters are now dumb meters. I do not recognise that figure from the numbers I have been given or from my conversations with stakeholders and officials. The number we have is 4%, not 20%. I fully accept in principle that, because of a change of supplier, some meters become dumb, but I do not believe the problem is as comprehensive as the evidence given suggests.

Obviously, I will be very happy for that evidence to be given if its numbers could be verified. I felt I ought to make that point, because I think the SMETS 1 programme has been successful in its own right. There are 7 million of them, and the vast majority provide a lot of really helpful information to the residents concerned, and that is what they are for.

I will try to clarify the list, which I scrawled down while the shadow Minister was speaking, of the differences between a SMETS 1 with DCC interoperability—the software that will allow them to talk to each other—and the SMETS 2. It is quite important to know, because very few of us—including me, I might add—are experts on the technical side of things. In practical terms, which I think is the most important matter for our constituents and should therefore be reflected in the laws that we try to make, the differences between a SMETS 2 and a SMETS 1 with DCC software are not very great; there are some differences, but most of their functions are the same. A SMETS 2, rather than a converted SMETS 1, has some technical flexibilities, but they are all fundamentally better than a dumb meter. I have looked at both SMETS 1 and SMETS 2, and have examined them while asking this question, and there is not that much difference between a converted SMETS 1 and a SMETS 2. It is just the fact that technology moves on. The SMETS 2 is certainly better, but when the software comes into being it will be able to do most things. The hon. Member for Birmingham, Selly Oak said that what were smart meters would become dumb meters; that will certainly not be the case.

[Grahame Morris (Easington) (Lab)]

Will the Minister clarify that point on the SMETS 2 meters for my benefit and that of the Committee? The key issue that was raised originally with the witnesses was interoperability. Obviously, that problem is being solved by the SMETS 2 meters, so theoretically it is possible to solve the problem of interoperability. Will the SMETS 1 generation of smart meters require a different methodology to solve that problem in order to recalibrate them to give them that interoperability functionality—if that makes sense?

[Richard Harrington]

The hon. Gentleman makes a lot of sense, but not in a technical way. I cannot answer him in a technical way, other than to say that my understanding is that the software is remotely operated—in our day we might have called it via the lines—through the air to the meter, so it is not a question of people coming out to revisit them to make them nearly as good as SMETS 2s. The SIM card on the dumb ones is reactivated remotely.

One of the good points about SMETS 2s is that they allow energy suppliers to roll out smart meters to premises that just have gas customers. They allow distribution network operators to view maximum electricity demand for a premises in order to plan their network investments. There are a number of specialist types of smart meters, for example, polyphase meters for large electricity users, and smart meters that can be used to replace traditional Economy 7 and 10 teleswitches, which we may have come across in our constituencies, and they can only be SMETS 2. But when upgraded—if I may call it that—with the DCC software, SMETS 1s do most of the smart things that SMETS 2s do. It is just how things move on. We must accept the fact that the foundation stage of the programme was based on SMETS 1, which was infinitely better than the previous option of different companies manufacturing different types of meters for their own customers, perfectly properly, with the technology that there was. This system has replaced that anarchy—although it was legal anarchy—in terms of national organisation.

I accept the point about timing, but the foundation stage was always intended to be different from the main installation phase. We have to see this transition from SMETS 1 to SMETS 2, because it is the latest technology and we want as many people as possible to have it. I feel it is fair to say that the foundation stage has provided real benefits. We are seeing savings. Mr Bullen, in particular, spoke about his 600,000 prepayment customers with the key system, which is very old fashioned and difficult for elderly people and vulnerable people. Anyone can recognise objectively that that has been a very good thing; had we waited for SMETS 2 to be developed, those people would not have had the benefit of smart meters. It is fair to say, like with any new technology, that we want to see the industry move from SMETS 1 to SMETS 2 as soon as possible, for the reasons I have explained.

The witness from the supplier company, Secure Meters Ltd, was basically arguing very much for SMETS 1, presumably because that company is a big supplier of SMETS 1 meters. I do not mean that in any sarcastic or improper way; that is what the company does. It was said very clearly that at the moment 250 SMETS 2 meters have been connected. I hope that in the two days since then, it is a lot more than that, but it is a small number. [Interruption.] Well, at least 251, if I may say so to the shadow Minister. Anyway, they are being installed.

[Dr Whitehead]

They have not been tested yet.

--- Later in debate ---

[Richard Harrington]

I will try to come on to that.

Secure Meters was saying that its kit can offer interoperability; why do we need the DCC? I state again that via the DCC network operators can access meters to provide a lot of system benefits. All suppliers are required to use DCC for SMETS 2 meters, which allows full interoperability for enrolled meters; we are not talking about just one company. Several hon. Members have mentioned fear about the DCC’s price control. DCC offers opportunities to enhance security arrangements. The main point is that the DCC systems have been future-proofed. This is not one company providing a system that, with the best intentions, works but is not part of a national system and is not future-proofed in the same way as we expect DCC to be.

In answer to the question that was asked, DCC has published an approved plan, which was agreed by BEIS, for this system to begin in late 2018, so that consumers can keep their smart services when they switch supplier. That will be done. There is, if I may say so, some cynicism—I mean that in a polite way—about whether it will work or work quickly. It has been suggested that it is untested and so on, but it is being done in phases, batch by batch. We heard evidence from the chief executive officer of DCC that this is a very serious operation. Some could say that it is a very expensive operation, but it is not a wing-and-a-prayer type of thing, as much as any software roll-out is not—I am perfectly prepared to accept that. From big Government projects all the way through, I accept that recent history is littered with disappointments in the efficiency of these roll-outs, but the DCC was very carefully appointed and has very carefully been tested. BEIS is monitoring very successfully, and we are happy with what we have produced. Subject to a cost and security assessment, we expect all SMETS 1 meters to be enrolled in DCC. As I have said, that will make them similar but not exactly the same as the SMETS 2 meters.

I say this in the spirit in which the amendment was meant—I say it in good faith; it is not some political point. I believe that the amendment could undermine delivery of this project, for example where changes to the regulatory framework are needed after the current expiry date of October 2018 to ensure that the process for enrolling the meters into DCC runs smoothly. Were the amendment to apply, such changes could not be made. That would risk delaying or even preventing the benefits of an interoperable service for energy consumers. I state again that I know that that is not the intention of the amendment. That would be irresponsible, and the hon. Member for Birmingham, Selly Oak is anything but irresponsible about this project; he cares for it as much as me or anyone in the Committee or, indeed, in the House generally.

In addition, the amendment would mean that any new consumer protections or other obligations on suppliers introduced after our powers’ current expiry date would not be applicable to SMETS 1 meters or consumers with those meters. Again, I am sure that the hon. Gentleman does not intend that. I know he wants to ensure that relevant consumer protections extend to consumers, whatever type of smart meter they happen to have.

I hope that my explanation reassures hon. Members that we recognise the benefits of moving to SMETS 2 as soon as possible and have established a clear end-date for SMETS 1. We are delivering a solution to resolve the interoperability issues that may be experienced when a consumer with a SMETS 1 meter switches energy supplier. We have thought about this issue, and I am very happy to discuss it with individual Members if they feel that I have missed something out. I hope that on that basis, the hon. Member for Birmingham, Selly Oak feels able to withdraw his amendment.

[Dr Whitehead]

Will the Minister say something briefly about the consultation that is under way on extending the period after which SMETS 1 meters cannot be installed? Will he perhaps inform us of the intention behind the consultation, and whether it has any bearing on our discussion today about the interface between SMETS 1 and SMETS 2?

[Richard Harrington]

I want to make the answer very precise, so I would prefer to write to the hon. Gentleman about the consultation, if that is acceptable, rather than give him a vague answer that does not have the precision he deserves.

[Steve McCabe]

As I said at the outset, the amendment’s purpose was to explore this problem and to help Members to get a better understanding of interoperability. A question mark hangs in the air about how successful the SMETS 2 roll-out will be and what the problems will be if we end up with a lot of SMETS 1 meters installed but no longer counted in the Government’s target or, as my hon. Friend the Member for Southampton, Test said, with a hiatus in which there are no meters available. The amendment’s purpose was to explore that point.

The Minister has done his best to explain where he stands. I am not sure that we have reached complete agreement on that, if I am truthful with him, but he has done his best and it would not serve any useful purpose to force the amendment to a Division. That would be a wrecking amendment, which is not my intention, and I am grateful for what he said. I ask him to continue to reflect on this issue, which will be central to the roll-out programme and needs to be considered. However, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

--- Later in debate ---

[Dr Whitehead]

That is because the WEEE directive operated properly, but before it was implemented there were a number of small alps of electrical goods around the country. It will reflect badly on the smart meter roll-out if we end up with Dolomites of old meters as a memorial to it.

We must sort this problem out. Amendment 6 gives the Minister a golden legislative opportunity to do so; we may not get another, so he should be anxious to grasp this one with both hands. I hope he will.

[Richard Harrington]

I will try to deal separately with supply and disposal, just as the hon. Members who spoke to the amendments did. The Government are clear that we support free markets and the benefits of competition generally. However, we have also shown that we are quite prepared to regulate where necessary to protect consumers.

We have done a lot to regulate energy suppliers. Their licence conditions require them to use smart electricity and gas meters that meet the SMETS standard. All energy suppliers must install smart meters that conform to minimum common standards, including ensuring that they are, or can become, interoperable and can be used by competing energy suppliers.

The supply of the meters themselves is a competitive market. There are quite a few suppliers, and they compete with each other; some manufacture both SMETS 1 and 2 meters. The Government set the technical standards, but it is up to the market and the suppliers to compete for the best price. Competition from other energy suppliers would mean that if smart meters supplied were unreliable, incompatible or unduly costly, suppliers would risk losing customers. I do not mean risking losing consumer customers—the wholesale supplier of the product rather than the end user. There is strong competition. Energy suppliers and meter asset providers have plenty of choice.

--- Later in debate ---

[Clive Lewis]

I apologise. It seems to me that the Minister is ignoring the fact that many of these meters are being switched to being dumb meters. Therefore it seems that this system is not working and the market is failing. The Minister may say that the market is working, but it is not, because so many meters are being switched to dumb meters.

[Richard Harrington]

I actively disagree with the hon. Gentleman. I accept the problem—whether it is 4%, 20% or the numbers that have been talked about that do not work—but I do not view that as an aspect of market failure. In my submission, market failure would mean the charge being 400% or 500% of the cost of manufacture. I regard it as a failure, but a technical failure that we hope will be changed within months by the operability technical changes, as I explained. I understand what the hon. Gentleman means, but I do not regard it as market failure. My contention is that the regulation of the supply, or the ability to regulate, as the hon. Member for Birmingham, Selly Oak mentioned, would not have made a difference to the technical failure side of it.

[Steve McCabe]

I just want to clarify what the Minister said, in case I misheard him. I think he said it is not a market failure but a technical failure, which within months we hope to address. As I pointed out earlier, his Department’s position is that it is meant to be addressed by the end of this year. In fact, I asked him if he would produce the plan by the end of the Committee. Is the Minister now revising that timescale? Is that what he is telling us?

[Richard Harrington]

I used the expression “within months” as a figure of speech; I apologise for that.

[Steve McCabe]

I just want to be clear.

[Richard Harrington]

It is a very fair point. I did not do it as a way of pulling back on what I said before, I promise. The point I want to make is that the Government do not believe it necessary to make provision to require MAPs, as asset providers, to be licensed because the competition is working and providing good value to energy consumers.

Away from the Committee, the hon. Gentleman and I had a discussion on meter disposal, and I have given it considerable thought. This is not an excuse, but the responsibility for disposal lies with the Secretary of State for Environment, Food and Rural Affairs. I have not discussed this issue with the Secretary of State, or in fact anything to do with general disposal issues, particularly not gas and electricity meters.

If the hon. Gentleman will bear with me, I suggest that we hold a roundtable with DEFRA and BEIS officials, himself and the shadow Minister, if he is prepared to come—I hope he will—so that we can discuss this. It is not something I can give a short answer to; it is much more complex than I first thought. Having made both those points, I would be delighted if the hon. Gentleman agreed to withdraw his amendment.

Smart Meters Bill (Fifth sitting)

Lord Harrington of Watford Excerpts

Committee Debate: 5th sitting: House of Commons
Tuesday 28th November 2017 Public Bill Committees

[The Chair]

Minister?

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

Thank you, Mr Gapes. I wondered whether you were looking for someone else to stand. I thought that perhaps there had been a reshuffle without my being told, or something like that.

[The Chair]

Well, I would not know; that is beyond my powers.

[Richard Harrington]

It is beyond most of our powers, but I am delighted still to be in position to try to resist the amendment—in a civilised way, I hope—and to reassure the hon. Member for Southampton, Test. As ever, I accept fully the nature and tone of his amendment, because he means exactly what he says. I take a similar approach in reading his amendment and trying my best to consider whether it is practical to agree with what he says or whether there is a way I can accept what he says so that he accepts what I am trying to say. I am conscious that hon. Members are itching to make a lot of progress on the Bill, but I will try to answer his points.

I think that the hon. Gentleman would accept, despite the fact that we are trying to do this in different ways, that the Government are trying to protect the interests of energy consumers in this whole programme. The only current licensable activity is the provision of a smart meter roll-out communication service, so the situation is comparatively simple. Like a lot of things in legislation, it is really more complicated than that, but that is what it boils down to. We have done this to ensure that we have a communications and data system that supports secure, reliable and interoperable services for smart meters. The Government would not remove this service without putting in place an alternative. We currently consider that doing so would not be in line with the Secretary of State’s principal objective, for which he or she must use their discretion.

Let me explain the concern from the Government’s point of view. In future, the whole smart meter system will expand and become, we hope, exponentially greater than it is now—not just because everyone will have one, but because it will be able to do so many other things that we all want. I am thinking of operations with apps. Perhaps water meters or other devices in people’s homes could be applied to it. The current licensable activity may then be redundant, because things will have developed beyond that. In such circumstances, it would not be appropriate, or indeed in line with better regulation principles, to leave in place a licensable activity that is not required in the future.

I hope that everyone accepts that the DCC has a fundamental role in driving the smart meter benefits. I do not currently consider that we would exercise the power to remove licensable activities, but I feel that it is necessary for the Secretary of State to keep that, given that principal objective. I hope that the hon. Gentleman will consider our concerns, just as I have tried to consider his, and agree to withdraw the amendment.

[Dr Whitehead]

I am not quite sure what that meant. I understand that at present, as the memorandum indicates, there is only one licensable activity that could be removed, and that is indeed the DCC service. The Minister rightly puts it to us that it is difficult to conceive of circumstances in which the Government would decide to remove that licensable activity, but that is not what legislation is about. Legislation is not about whether, on the balance of probability and taking all things into account, including the bona fides of the Government, something that one might legislate on should not be legislated on because it is unlikely to happen; legislation is supposed to ensure that, in all circumstances we can think of, those things that we do not want to happen should not happen.

Although I take on board what the Minister has said—I do not doubt for one moment his bona fides—I do not think that he has added anything to the debate this morning, other than to repeat what was in the Department’s memorandum.

[Richard Harrington]

The hon. Gentleman has been gracious in his comments about me personally, about the Secretary of State and, I hope, about most people who would do the job, but should there one day be an evil Secretary of State who, in the middle of the night, while plotting the destruction of society, realised that they could use this power, which in the scale of things is pretty tiny, how would they use it in so destructive a way that a future Parliament might think, “Oh, I wish we had been stronger in this Bill and that we had the power suggested by the then hon. Gentleman”? I hasten to add that I am not hoping that he will have gone to the great energy supplier in the sky, as we all will at some stage. The serious point is this: were that to happen, what is the bad way in which this power could be used?

[Dr Whitehead]

A future Secretary of State does not necessarily have to have quite the intents suggested by the Members making non-verbal interventions. I can easily envisage such circumstances. For example, bearing in mind that the present DCC is set up as the subsidiary of a private company—

--- Later in debate ---

I cannot help thinking that, if the amendment is not accepted, there must be deeper reasons that the Minister has not articulated this morning. I am willing to hear about those other reasons, if there are any, but certainly in this debate, unless a deeper reason is about to arrive, I have not heard exactly what that reason might be.

[Richard Harrington]

I do not know whether to thank the hon. Gentleman for giving way or not.

[The Chair]

I think you are responding to the amendment. It makes it a bit more procedural. You are allowed to speak more than once, and we have not yet got to the summing-up speech from Dr Whitehead.

[Richard Harrington]

I was going to thank the hon. Gentleman for giving way, but I will not now. I am grateful that I am not abusing the system, which I was going to.

I think we have to agree to disagree on this point, because I believe that, given the restrictions in the Bill and everything else, it is a minor point. I accept that the hon. Gentleman is not doing it to bring down the Government or anything like that, because opposition is opposition. I respect him not just for his position but, much more than that, for the person he is. If he wishes to press the amendment to a vote, then I understand that I have not persuaded him. If he wishes me to ponder the matter further, or even to meet him and talk about it, I am perfectly prepared to do so. I think it is making a mountain out of a molehill.

He thinks changing the licensable activity is quite an important thing that needs to be brought before Parliament. Any decision to remove a licensable activity would still be subject to parliamentary scrutiny through the affirmative procedure, but it is ultimately a question of what discretion a Secretary of State should have in the consumer’s interest. We could politely agree to disagree on that, but if the hon. Gentleman would like to discuss this further and withdraw his amendment for that purpose, I would respect both things. At the moment, I disagree with him not because we are the Government and he is the Opposition but because I do not see the significance of the points he is making.

[Dr Whitehead]

This is not a cosmically important thing, and I agree with the Minister that it is unlikely to change the course of the roll-out, but I say gently that that is not necessarily what we are supposed to do in Committee. We are not supposed just to grade the importance of the things in the Bill and then decide to act on them according to their relative importance; we are supposed to examine the Bill line by line and, between us, suggest ways that it can be strengthened so that it is as good as we can make it when it returns on Report and Third Reading. That means that things may be added to the Bill that are not in themselves important but could be regarded, in the context of the work we are supposed to do in Committee, as a result of our discharging our responsibilities properly.

I am in a bit of a dilemma. I agree with the Minister that this is not a really important thing, but I cannot see for the life of me why it cannot be placed in the Bill so that at the end of its passage it is as good as we, between us, can make it and that it contains things that, although they may not be that important, add to its overall strength. I simply have not heard any reason why that cannot be done. I have heard reasons why the amendment is not that important. The Minister might suggest—and he might be right—that if we put it to a vote we would over-emphasise its importance. However, I am—“annoyed” is not quite the right word—a little concerned that something that can be seen as reasonably obvious, if not as significantly strengthening the Bill, regardless of our party positions or of the position we take on the Bill overall, is rejected in this way. For that reason, I seek to divide the Committee.

Question put, That the amendment be made.

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[The Chair]

With this it will be convenient to discuss new clause 4—Conditions of extension of time for exercise of powers—

‘(1) Prior to making any directions during the extended time period provided for in section 1, the Secretary of State shall commission a review which shall consider—

(a) data access and privacy issues arising from the smart meter rollout,

(b) the benefits realised during the smart meter rollout and the scope for greater benefits to be realised,

(c) the effectiveness of the policy framework for future smart metering operations.

(2) The Secretary shall lay the report of the review in subsection (1) before each House of Parliament.’

This new clause requires the Secretary of State to carry out a review of matters relating to the current status of the smart meter rollout.

[Richard Harrington]

The new clause would make it a condition of primary powers being extended that the Secretary of State carry out a review of smart meter roll-out, and that the review cover the data access and privacy issues, the benefits realised during the roll-out and the scope for greater benefits to be realised, and the effectiveness of the policy framework for future smart metering operations. I will now turn to each area that it is suggested be covered in the review in turn.

In 2012, the Government established a data access and privacy framework to ensure consumers’ interests are protected. This framework applies to domestic consumers and micro-businesses. It seeks to strike a balance so that consumer privacy is protected while enabling the proportionate access to data necessary to deliver energy system-wide benefits. For example, the framework determines the level of access that energy suppliers, networks and authorised third parties can have to energy consumption data. It also establishes the purpose for which data can be collected and the choices that consumers have about that. The central principle is that consumers have control over who can access their detailed energy consumption information, except when it is required for regulated purposes, a good example of which is billing.

The framework was welcomed when it was established, and the Information Commissioner’s Office, which is the data protection regulator, commented that it felt the framework offered a good level of control and protection for consumers. We publicly committed to carrying out a review of the framework, and intend to do that in 2018. Subject to the extension of the relevant powers, we will then be able to act quickly if there is any evidence that the framework is not delivering against its objectives.

On the second area, the Government are focused on the delivery of benefits and have regularly updated the cost-benefit analysis for the smart metering programme to reflect the latest available evidence. We are also very keen to ensure that even greater benefits can be achieved than forecast. For example, that is why we published our clean growth strategy and made a commitment in it to undertake further research and to trial approaches to using the data from smart meters to provide tailored post-installation energy efficiency advice on heating—the largest part of domestic energy bills—so that consumers will be able to make further changes to reduce consumption while maintaining comfort levels. That will further increase benefits.

We are looking at innovations that build on the smart metering infrastructure more widely, for example through the use of consumer access devices, which will enable greater home automation. I think that that is critical for the future and know that hon. Members on both sides of the Committee will agree—the nirvana is everybody having an app on their phones, knowing exactly what is going on in their house or flat and being able to adjust accordingly their patterns of usage, not just of heating but when they want to put on a washing machine or any other device, to save electricity. In fact, that may be done automatically in the future through algorithms and things. I could not possibly understand how they work, but I know they will transform people’s lives. As we know, the whole smart meter system is to provide the building blocks for that to happen.

In terms of policy framework—the third area that was suggested for review—we have made a public commitment to undertake a post-implementation review of the smart metering programme, drawing on evidence from the roll-out itself and a period after its completion during which smart metering systems will have been operating in steady state. The review will evaluate the overall programme, the realisation of the benefits and the overall effectiveness of the policy and regulatory framework.

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[Dr Whitehead]

There is not too much more to say on clause 1 stand part, inasmuch as we have undertaken a good examination of the clause. We have made a number of suggestions to strengthen it. Although we had a little fall-out just recently, in general the discussion has proceeded in such a way that we are satisfied that the points we have raised have either been taken into account, explained properly, or given rise to some undertakings about how matters might proceed not within the context of the clause, but perhaps administratively in backing up the clause. Therefore we would not want to oppose clause 1 stand part.

New clause 4 has been grouped with the clause 1 stand part debate. That is sort of the wrong way around, because the Minister has given his assurances about new clause 4 before I had the opportunity to say what I wished to have assurances about, but we will let that one pass and proceed as if it was the other way around. Just to explain to the Committee, new clause 4 is drafted very specifically, again, in the context of the memorandum in which the Department set out the Delegated Powers and Regulatory Reform Committee, where the Department states its justification for taking powers in clause 1. It says:

“We consider this extension was necessary so that the Government can remove any barriers to the roll-out of smart meters which emerged and ensure that benefits for consumers are maximised in the continuing operating of smart meters following completion of the roll-out”.

It then states:

“The Government has made public commitments to undertake reviews in the following areas of the smart meter roll-out…data access and privacy to ensure the regulatory framework remains fit for purpose in 2018…benefits realised during the roll-out to assess whether we can do anything to encourage greater benefits in 2019…overall effectiveness of the policy framework post-implementation for future smart metering operations in 2021”.

As hon. Members will observe, that is exactly what has been set out in subsection (1)(a), (b) and (c) of our new clause. The commitments to reviews that the Department has already undertaken in principle for the extended period of the roll-out are transferred to the Bill. The Minister has already mentioned this morning his commitment to undertake an annual review that, I assume, would incorporate these particular concerns and considerations.

[Richard Harrington]

That is a perfectly fair assumption —that is our intention.

[Dr Whitehead]

I thank the Minister for that clarification. A commitment to an annual report to be laid before both Houses goes a long way towards satisfying our concerns about whether these particular wider commitments should be placed in the Bill. I thank the Minister for his commitment and will not press new clause 4 to a vote.

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

I want briefly to add my voice and that of my party on new clause 4. I know that the Minister will agree that we need continually to reassure consumers that their data are securely and robustly protected in the course of this roll-out. I know that he will agree how important it is to ensure that meters currently installed are always to the highest specification of function and data security.

The Minister will also be concerned—like, I am sure, everybody else in the room—about the evidence that was taken that the smart meter network is being installed before its requirements as an internet-connected energy system have been fully determined. We would expect—I know that the Minister will feel this—that the Minister would do everything in his power to ensure that consumers are best protected amid this roll-out.

I impress on the Minister and remind him of the concerns raised in March 2016 in the Financial Times that GCHQ had intervened in smart meter security, claiming that the agency had discovered glaring loopholes in meter design. As we move forward with these considerations, I want to impress those concerns on the Minister.

[Richard Harrington]

I thank the hon. Lady for her comments and am very pleased that GCHQ did that, because it shows how it was included in the process of getting to the security stage that we are at today.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Smart meter communication licensee administration orders

Question proposed, That the clause stand part of the Bill.

[Dr Whitehead]

We have talked about the extension period; the second part of the Bill is about administration orders. These might be made in the context of the DCC’s failure to operate either because it has gone bankrupt or because its supply of funds dries up or is diluted for any reason and it can no longer continue—it is entirely dependent on the resources it receives from suppliers to operate. A number of clauses in the Bill relate to setting up a procedure to enable the roll-out to continue by recovering the DCC’s procedures, if and when in administration, in such a way that the flow of the roll-out is not interrupted. At this stage of the legislation, therefore, we need to concentrate on whether the things put forward—what can and should be done by Government to make that change while at the same time continuing with the roll-out in the unlikely event of administration—are good enough to ensure the roll-out continues and we achieve the purpose of ensuring a smooth passage.

I want to make two brief points, to which the Minister may want to respond. The first is about provisions in the Bill relating to what are unlikely events that probably will not happen, but conceivably could. It might be prudent to legislate to ensure that we are in a position to do something in the unlikely event of that happening. We had a debate about that recently in this Committee. What we are doing in considering the second part of the legislation is roughly what we were doing in the first part to try and strengthen the Bill. We did not succeed in doing that, but we will not be churlish or childish about that. We will go along with the idea that this is an unlikely event, for which we have to make prudent legislation to ensure that catastrophe does not take place as far as the roll-out is concerned.

The second point is that we are legislating this morning for an event that could occur to an organisation that has been in operation for several years already without this legislation being on the statute book. One might ask, therefore, what was happening in the meantime. Were we operating over a period of time where there was no protection for the smart meter roll-out programme from the possible bankruptcy or administration of the organisation that was essential to the running of the whole operation? That seems to me to be a considerable omission on the Government’s part.

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[Dr Whitehead]

My hon. Friend is right. That is the situation at the moment, and that is what the Bill, very late in the day, seeks to rectify. I am not saying that one should not take part in the rectification of that problem. Clearly it should be rectified, and we need legislation that protects us in those circumstances.

I wonder if, as a gateway into this part of the Bill, the Minister might share some thoughts with the Committee on why this has not happened before and why we have had these circumstances for several years. I appreciate that it was before the DCC went live, which was only relatively recently, but the DCC was set up and a lot of money was put into it. All the various arrangements went through, and it was by no means impossible for that problem to arise to date. I am pleased that we are taking this step, but slightly alarmed that we have not done it previously. Can the Minister shed any light on why that was the case? Did the Government simply forget? Was the legislation so difficult to undertake that it has not been drafted until now, or was it not thought necessary to have this protection prior to the DCC being in its present position? It would be useful to have some guidance on what thinking went on before the legislation appeared.

[Richard Harrington]

Before making a few brief comments, I will try to answer the two very reasonable questions raised by the hon. Members for Southampton, Test and for Birmingham, Selly Oak.

I will deal with the unlikely event point first. The Government have to try to gauge how unlikely an unlikely event is. I hope the hon. Member for Southampton, Test accepts that it is a question of judgment. We have to draw the line somewhere on the level of unlikeliness, and we drew it on the wrong side of what he thinks is unlikely.

[Dr Whitehead]

The theory of relative unlikeliness.

[Richard Harrington]

Yes, that is very good. I wondered what the hon. Gentleman did his doctoral thesis on, and now I have discovered it.

It is a judgment call. I hope I made it clear in my previous comments that I do not think his amendment is unreasonable, mad or anything like that; it is just that we have to try to make a judgment, and it is on a different side of the line to his.

The question of why we have not done this before is, like many of the hon. Gentleman’s points, very valid. It is one of the first questions I asked officials when considering this. I have been given a note, which I have not read; I will answer from what I think, rather than what I have been told. I asked that very question. I understand that this was consulted on in 2011 by the Department. The official reason—genuinely—is that there is a lot of competition for parliamentary time, and this is the first opportunity we have had to deal with something that is reasonable, but at the highest level of unlikeliness on the unlikely-o-meter, if there were such a thing. There must be an unlikeliness app to gauge the level of unlikeliness.

I personally think this should have been done before. It was probably less important than it is now and going forward, simply because of the scale of use and the containability of unlikeliness. This was the first opportunity I had to introduce the clause on what to do in the event of these unlikely circumstances, and it is important. It is to stop other interested parties putting in administrators. There are always commercial administrators—for example, companies that have not been paid. There is a normal system to do this that still exists, but it does not have the level of control that the Department or Ofgem would have.

This is important. I could spend 10, 15 or 20 minutes of the Committee’s time going through the reasons why it is important, but those reasons will be debated later on in the Bill’s passage. I hope I have answered the points raised to the best of my ability.

[Steve McCabe]

I do not want to dwell on this, but I am genuinely curious. When the Minister says that the Department consulted on this and decided that there was no need for this sort of protection or safeguard because of parliamentary time, or whatever reason, who did they consult? Presumably not the customers, who would have been the first to say, “Hang on, we don’t like the sound of this.”

[Richard Harrington]

I thank the hon. Gentleman for that comment. Those consulted were stakeholders and so on. I would remind the hon. Gentleman and the shadow Minister that the DCC only went live in 2016. I accept that there would have been a point between 2016 and now that would have been ideal. It is not uncommon to have special administrative regimes in this kind of world—this is the first one for this particular administrator—and it seems obvious for Government or the regulator to have powers basically to override the normal administration system. Given the millions of smart meters around, and given in particular the system whereby they are all electronically talking to each other—which we all want—it would have been negligent for the Government to leave this for another four or five years. It is quite reasonable for this to be the first legislative slot since it went live.

Having said that, I accept that there has been no unreasonable comment in the points made by the hon. Gentleman. There is plenty to discuss in this Bill, and everyone would agree that a special administration regime guards against a risk that the licensee might go into normal insolvency proceedings, which is a standard process within the Companies Act 2006 and something that companies do. The reason that this is a level of unlikeliness that makes it really unlikely is that the income side is more or less guaranteed, as we heard in the evidence from the experts. It is prudent, given that these risks could be there, to have safeguards in place. That is what the clause does. These measures all have precedents in other special administration regimes for energy networks and suppliers. The clause is a sensible measure and I commend that this clause stand part of the Bill.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Clause 3

Objectives of a smart meter communication licensee administration

[Steve McCabe]

I beg to move amendment 8, in clause 3, page 2, line 34, after “efficiently”, insert “, transparently”.

This amendment would make it an objective of the smart meter communication licensee administration to operate in a way which would allow the general public to be aware of his functions.

It is probably quite fortunate that this debate follows the discussion that just took place, because the purpose of amendment 8 is to make it an objective of the smart meter communication licensee administration to operate in a way that would allow the general public to be aware of its functions.

We are talking about a situation that is clearly about accountability, albeit one that people think is unlikely. This is a situation in which a massive investment goes wrong and the Minister is forced to set up a special administration regime. In those circumstances, it makes sense for people to know what is going on. It is a matter of accountability for the public, who, as I have said a number of times, are paying for this programme through their bills. It is therefore right that if ever a situation arises in which a smart meter communication licensee administration is in place as a result of a failure of the DCC, that administration should operate in a way that is transparent, open and obvious to Members in all parts of the House and, most importantly, obvious and transparent to members of the public.

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[Dr Whitehead]

My hon. Friend underlines the importance of putting the word “transparently” somewhere in clause 3. An event may happen that the public would properly be interested in; they may be concerned about what might happen to them as far as administrative processes are concerned or about the effect on their bills of an event that caused substantial additional money to be spent over and above what had already been set aside. We must emphasise that all the costs that have been set out for the smart meter roll-out—be that the cost of the smart meter, the cost of the advertising campaign or the cost of the DCC itself—will, one way or another, be recovered from customers’ bills.

With that in mind, putting in the Bill a requirement for processes to be fully transparent would serve the consumer positively. I support the addition of that single word—“transparently”—to the Bill. I cannot see any downsides to that. It would not in any way impede the process of administration. All the objectives and procedures in clause 3 to ensure that the DCC runs as effectively as possible and protects the roll-out are sound. Inserting the word “transparently” would add to that protection and do nothing to undermine it, so I hope that the Minister will seriously consider doing so.

[Richard Harrington]

I understand the purpose of the amendment well. On the surface, it seems to be a good thing. Transparency is good anyway, and I will argue that the provision would lead to transparency. It is reasonable to argue that this is an important matter and that we want everyone to know what is going on. We are all here because we are part of a democratic process; I do not think anyone could disagree with that principle.

However, I cannot agree with the hon. Members for Southampton, Test and for Birmingham, Selly Oak because of what the amendment would mean in practice for the administration. Thankfully, none of us have experience of this kind of public, as opposed to commercial, administration—I know that is not quite the technical word—and I accept that. By the way, there will be plenty of legal requirements on the administration, which I will come to in a minute. It is just totally unrealistic for an administrator, given those requirements and all the complexities that it will have to deal with, unlikely though it might be, to spend hours ensuring that the public—I think this is what the amendment would mean—are kept informed of all the administrator’s moves, given that administrators have to meet plenty of requirements. I ask the Committee to bear that in mind; I cannot accept what the hon. Gentlemen said. That is not because we are secretly against transparency or anything like that.

[Clive Lewis]

It is not so much that the administrator would need to keep the public informed of every step they were taking, but that if the public, MPs or parliamentarians or others were interested, they would have access to the information to ensure that lessons could be learned in the future, if they felt that that was a requirement. Rather than the administrator giving out the information, it would be for the public or others to access the information; they would be able to access it.

[Richard Harrington]

I thank the hon. Gentleman for that intervention. I can see that afterwards, but not in the course of an administration, when there are very complex duties for the administrator to learn, be instructed to learn, and so on. I find this proposal quite difficult in practice; I am quite concerned about the effects of it. I am not concerned about the purposes of it, which I think are very noble. Perhaps I will answer the hon. Gentleman’s question in my remarks in a way that is more satisfactory to him; I hope so, anyway. Perhaps it is a victory of hope over logic; I do not know, but we will see.

I confirm for the record that the object in clause 3 is to ensure that the DCC’s functions under its relevant licences are performed efficiently and economically, pending the rescue of the company or transfer of its business. However unlikely that might be, as we know its revenues are guaranteed, we are on the Government’s side, rather than the shadow Minister’s side, of the line on unlikeliness. The intention behind the clause is to ensure the continuity of the smart metering service while minimising the costs incurred. In providing for continuity of services, the benefits of smart meter services are maintained and the costs—financial costs, but also the huge inconvenience that would come from any interruption to smart meter services—are avoided. I do not mean an interruption to the supply of electricity; I am talking about the gauging of how much people are using and, I hope, in the future, more fancy tricks, to allow them to control their costs, supply and everything that we have mentioned before.

Under the Insolvency Act 1986, as modified by this Bill, there is already an obligation for the name of the smart meter communication administrator to be stated on the DCC website; it should also be stated that the affairs, business and property of the company are being managed by that administrator. There are clear provisions setting out the functions of a smart meter communication administrator, including its powers.

As with the energy network operator and energy supplier special administration regimes—the nearest comparable regimes—we would expect the smart meter communication licensee SAR rules to require the smart meter communication administrator to file various documents at Companies House. That would include, for example, a copy of the administrator’s proposals for achieving the objective of the smart meter communication licensee administration, which would contain information about the administration. The administrator has to submit regular progress reports. Once filed at Companies House, those documents would be available to the public and would keep them informed about the administration and its progress in the way that I hope the hon. Member for Norwich South meant in his question.

I hope that hon. Members will recognise that information would already be available to the public and other interested parties through the existing procedures to ensure transparency about the administration. I hope that they will consider the points that I have made, because they are important. This proposal implies that the administration process could be helped dramatically by the public’s having access to information and knowing what is going on all the way through. I think that it is very important that the public experience no interruption whatever and that the administration is carried out quickly and efficiently. We must not forget that the whole reason for the SAR is to reassure consumers and other stakeholders that their smart meter services and the benefits that arise will be protected, and not interrupted in any way.

I state again that the administrator would be under a duty to manage the company efficiently and economically. When companies such as KPMG, PwC and other big companies act as insolvency practitioners, they do so as part of a regulated profession. All normal insolvencies, and not just special administration regimes, are covered by that. I therefore ask the shadow Minister and the hon. Members for Birmingham, Selly Oak and for Warwick and Leamington to consider what I have said and to withdraw this very reasonable amendment. I fully commend the purpose behind the amendment, but I think we are already fulfilling that purpose in this provision and with the existing rules on administration.

[Steve McCabe]

It is a devastating blow to hear that the Minister cannot bring himself to accept the word “transparent”, but in the circumstances I do not think that we would gain very much by pressing this to a vote. I hope that the Minister will seriously reflect on what has been said, because the circumstances in which he would have to exercise this power would be a massive failure and, almost certainly, a massive loss to the public, and I do not think anyone would be comfortable thinking that there had been any attempt to hush that up or push it to one side. I hope that he will reflect very seriously on why it has been raised. I do not wish such a failure to occur at all, but I am very clear that if it did, I would be one of the first at the front of the queue saying, “What on earth went on here?” I do not think there would be any gain in pushing it, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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[Richard Harrington]

As with the last amendment, I perfectly understand this amendment’s purpose: to require that any regulations that the Secretary of State lays down about prioritisation of DCC activities following administration

“would have to take into account the context of the full services offered by the DCC.”

I understand the purpose, but I will do my best in the next few minutes to argue that there would be no effect on the policy. The precise intention of the proposed regulations is to specify the activities carried out by the DCC to which the smart meter communication administrator must give priority, and how that should be done, taking account of the full range of activities that the DCC is carrying out under its licences at that time. That is exactly what we are trying to do; we are just trying to ensure that the functions of the DCC under its licences are performed efficiently and economically, as I said before.

The administrator may face a judgment on which DCC services to prioritise; it is quite normal for an administrator to do that. The most appropriate judgment will depend on the circumstances, but that may not be clear to the administrator on the day that they take over the administration, and there may be a trade-off, as there are in administrations, between prioritising different services.

The clause to which the amendment relates gives the Secretary of State the power to make the regulations specifying which activities carried out by the DCC under its licences must be prioritised by the administrator, and how that should be done. As the smart metering programme develops beyond the foundation stage—the stage we are fundamentally preoccupied with as the purpose of the roll-out—we expect the number of services provided by the licensee to increase. The licensee can, for example, offer bespoke services for suppliers and others, building on the smart metering programme. I know that is what we all want. As part of that, consumers may be able to choose to give third parties permission to access their data, allowing a much wider range of energy-related services to be developed: products, advice, switching suppliers, tariff choices and all that sort of thing.

Smart metering data may also be used, where the consumer so chooses, as part of taking that service—for example, in supporting home energy management services and even for non-energy-related services, such as smart washing machines that do the laundry at different times so it costs less. That is not directly to do with the supply of energy but with the consequences that matter to most people: “How much will it cost and how can I save money?” I suppose it could be used to identify faulty or inefficient appliances, or to support carers, through a service that allows family members to be updated about changes in routine. That sounds futuristic, but there are many interesting things that could come from the programme if we take the big picture for the future.

It might be in the interests of consumers and the wider energy market for the administrator, if that day comes—I do not think it will—to prioritise core services. If we keep smart metering working, the other stuff is all very nice, but for a time it could not be a priority, in order to keep the core system going. I believe it must be the role of Government to guide the administrator in that respect, because of the speed that must be taken into consideration within an administration. The precise aim of the regulations is to provide future flexibility to ensure the full range of activities carried out by the DCC at that point can be taken into account. That prioritisation will support the continuation of services in the overall interests of the public.

I believe the Bill delivers the noble aims of the hon. Gentleman’s amendment. I hope he will consider what I have said and the explanations I have given, and will agree to withdraw the amendment.

[Dr Whitehead]

In the context of the fact that what is set out in Hansard has some legal bearing, the Minister has this morning set out in terms fairly similar to the amendment the scope of clause 3 and the Government’s intention in regulations made under subsection (6). I do not want to press the amendment. I think it is agreed that we aim to ensure that the DCC’s circumstances prior to administration should be repeated as closely as possible post-administration for the general good of the roll-out. That is what I understood the Minister to say, and I hope he will confirm that.

[Richard Harrington]

I confirm that what the hon. Gentleman just said is precisely the case. I tried to be as clear as possible, and I am glad that he, like me, respects that things in Hansard are meant to be as they are said. I can clear that one up.

[Dr Whitehead]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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[Richard Harrington]

Thank you, Mr Gapes. I am sure Opposition and Government alike will take your warning on a Division. I hope it is not necessary because I hope to explain in the time allowed, as I have done with other amendments—some successfully and some less than successfully.

I can see clearly that this amendment would mean that in the unlikely event of insolvency—we all agree it is unlikely—any regulations that we will need to bring forward about the administrator’s priorities, which we have discussed before, would need to be approved by a resolution of both Houses. I can see the principle behind that, and it is a noble one, but I would argue that because of the speed required and the technical nature of these regulations, it is appropriate to use the negative procedure, which the hon. Member for Southampton, Test does not like.

I made points in the debates on the previous amendments about the choices that the administrator has to make and the speed with which they have to make them. It is considered reasonable—and I know the hon. Gentleman would agree—that the Government should guide the administrator in respect of this. That is why we are asking for these powers, so that the Secretary of State can make regulations specifying which activities carried out by DCC must be prioritised by the administrator and how this should be done. The question boils down to the nature of these provisions, which I argue are technical and therefore suitable for this kind of procedure.

The DCC has core services that provide energy suppliers and others with around 110 service requests. Again, I would ask both Mr Gapes and the Committee to consider the practicality of the affirmative system. This covers a range of areas, for example the provision of pre-payment services, the management of security credentials, changes of supplier events, the technical configuration of devices, access to network—I could go on, there are 110 of them. It would be necessary to review these services and prioritise them against new services, which I have mentioned before and which may be offered.

I argue that the regulations made under clause 2 would be largely administrative and technical in nature, focused on the specifics of implementation and acting to narrow rather than add to policy scope, entirely to protect consumers’ interests. We need to act promptly to achieve this, so that the administrator has appropriate direction. I believe that the procedure proposed will provide Parliament with sufficient oversight for supporting this ambition. I hope, not just because of time constraints but because I think it is the right thing, that the hon. Gentleman will understand our concerns and agree to withdraw his amendment.

[Patricia Gibson]

I want to speak to this amendment in relation to parliamentary scrutiny. In my party, we would welcome any enhancement of parliamentary scrutiny, but I need to draw the Minister’s attention to a number of concerns, and I am worried about time.

I am speaking about the need for enhanced scrutiny because I do not believe that the amendments allow for sufficient scrutiny, for reasons I will go on to discuss. Energy UK and Ofcom both state that aggressive selling is wrong. I am sure we would all concur with that, but that is little comfort until aggressive selling is properly addressed. That is going on and that is why more and enhanced scrutiny is so important.

It is my understanding that Ofgem has the power to fine energy companies up to 10% of their annual turnover if they fail to meet their licence conditions.

--- Later in debate ---

[Patricia Gibson]

I will raise my concerns at another time.

[Richard Harrington]

I am happy to talk to the hon. Lady about her consumer concerns, but I agree with your ruling, Mr Gapes, that what she has said is not relevant to this amendment, which is about technical considerations, and parliamentary scrutiny of those, in the event of the demise of the DCC and a special administration regime being put in. The point is not relevant to the amendment, but it is a valid concern. I am happy to discuss it with her informally, if not formally now.

[Dr Whitehead]

The Minister has alluded to a particular point about regulations under this clause, which relates to the speed that would be necessary to act under the circumstances of administration. That is a defence of the idea that there should be a negative resolution; presumably, the fact that Parliament at that time did not want to proceed to an annulment would allow things to be done speedily. I understand that, so on that narrow point we will not press the amendment to a vote this afternoon.

I draw the Minister’s attention to our next debate about a similar set of circumstances that concern a negative resolution, and to which that defence cannot be mounted. I hope that he will take his own words from this morning into account when we return this afternoon to debate the relevant clause. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Ordered, That further consideration be now adjourned. —(Mike Freer.)

Smart Meters Bill (Sixth sitting)

Lord Harrington of Watford Excerpts

Committee Debate: 6th sitting: House of Commons
Tuesday 28th November 2017 Public Bill Committees

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

I beg to move amendment 16, in clause 4, page 4, line 9, at end insert—

“(ba) in paragraph 33(3), for “negative” substitute “affirmative”

This amendment would apply the affirmative procedure to the use of provisions of Schedule 20 of the Energy Act 2004 under this Act.

The amendment, which I alluded to this morning, relates to a further clause in the Bill to allow regulations to be made by the negative procedure, not the affirmative procedure that I think hon. Members would prefer in most circumstances. Clause 4(1) deals with the possibility that, as smart metering develops, the licence holder of the Data Communications Company could be a non-GB company. The clause sets out what would be the conditions of administration of the future DCC in the event that the company that was the ultimate owner was not a UK company; separate arrangements might have to be made for it. In the memorandum from the Department for Business, Energy and Industrial Strategy to the Delegated Powers and Regulatory Reform Committee, which I have mentioned previously, the procedure that is set out in the clause is described thus:

“We consider that the negative resolution procedure is justified for providing for what would be detailed modifications narrowly focused on particular provisions of insolvency legislation and their specific application to a non-GB company. Affirmative resolution procedure or new primary legislation is not considered to be appropriate given the nature of the changes.”

No particular reason is given for the fact that affirmative legislation is not considered to be appropriate. A further consideration that is new in this clause—it was not the case with the previous clause that we discussed in relation to affirmative resolution procedures—is that, as the memorandum states at the beginning of the paragraph, legislation on what would happen if the owner was a non-GB company would be undertaken using a Henry VIII power. We have not yet discussed Henry VIII powers in this Committee, although we discussed them in a previous Committee in which the Minister and I were involved. On that occasion it was generally concluded that the use of Henry VIII powers in legislation was a bad idea. As I am sure hon. Members will know, Henry VIII powers essentially allow primary legislation that is on the statute books to be amended by secondary means. As a general principle in this House, one would have thought that enabling the Government to do that—depending on what bounds have been placed on the procedure—is potentially a worrying development. Without recourse to the Floor of the House and a full debate on the legislation, a Government can, if that legislation contains Henry VIII clauses, use secondary legislation to alter what Parliament had previously discussed during the full process of Second Reading, Committee, Report and so on, through both Houses of Parliament. The Government can amend that legislation through a regulation that substitutes for a piece of the primary legislation that was discussed previously by the House. That seems a bad principle of legislation, and if it is to be used, it should be used extremely sparingly and only in emergency circumstances.

This Bill is generally quite benign and innocuous, but surprisingly it contains a Henry VIII power to amend the Insolvency Act 1986 and the Energy Act 2004 and its schedule by secondary legislation. In this instance, the proposal to allow that is not only suggested in terms of providing detailed modifications on particular aspects of the insolvency rate legislation by secondary legislation, but it enables a Henry VIII power to be put through Parliament on the basis of a negative resolution which, as I said this morning, would give Parliament very little scrutiny of the whole process.

This morning we discussed the difficult conditions that might apply if the DCC became insolvent, and the need for speed and urgency might conceivably justify passing such a measure through the House by negative resolution. We cannot, however, really apply those arguments to this clause because this is not something that will need to be done as a matter of urgency. As the memorandum states:

“The earliest the licence is expected to be re-tendered and could potentially be transferred to a non-GB company would be 23 September 2025.”

What we are considering is not exactly an urgent process, and neither is it in parallel with the ideas put forward when we discussed the previous clause. This is a Henry VIII power that proposes to amend primary legislation by means of a negative procedure where no urgency is envisaged—it is as simple as that. In those circumstances, it seems to me, and even given the Minister’s own words, that there can be little justification for taking through these legislative procedures with a negative resolution. That is why the amendment substitutes the word “affirmative” for “negative”. Bad though we think Henry VIII powers are generally, if there is to be such a power, it should at least be passed by affirmative, rather than negative procedure, and I hope that the Committee will accept the amendment.

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

I thank the hon. Gentleman for his comments. Henrys were discussed in the Committee that considered the Nuclear Safeguards Bill, including under the illustrious chairmanship of the then Mr McCabe, whom we must now refer to as the hon. Member for Birmingham, Selly Oak. It was interesting to hear contributions from the hon. Gentleman not just about Henry VIII, but about Henry VII, the French king, I seem to recall, who I looked up on Wikipedia that very evening.

[Dr Whitehead]

I need to put a correction on the record in that case, Mrs Gillan, because I did mention Henry IX, the French king. It was, in fact, Henry IX of Bavaria. I was mistaken at that point, but there was indeed a Henry IX and he lived in Bavaria.

--- Later in debate ---

[Richard Harrington]

I must formally apologise and hope that the Hansard writers are able to expunge the fact that I got the wrong Henry in the wrong country at the wrong time. In no way was it meant as any form of insinuation, implication or anything improper about the historical knowledge, or indeed, any knowledge, that the hon. Gentleman has. I must apologise for any offence caused. If this were outside in the world where one gets sued, I would have to make a donation to the charity of his choice, but I do not think the difference in Henrys is quite the point he was making.

It is a true and interesting point, which is relevant to so much legislation in this place—many things far more politically contentious than what we are discussing here today. Where it is appropriate for Government to have powers that are delegated is a big issue. I know that in the European Union (Withdrawal) Bill that is going through at the moment this has become quite a big cause célèbre, and it is one with which I have a lot of sympathy. I will try before you rule me completely out of order, Mrs Gillan, to talk about the specifics of this particular Bill, which, by powers of the Henrys, is quite limited in the powers it asks for.

The powers we need are of two types: first, as the hon. Gentleman gracefully and properly conceded, in some cases there is the need for urgency; a Secretary of State of whichever political complexion may need to be able to act quickly. Secondly, there is the question of the general type of statutory instruments, which are dealt with in the affirmative or negative way.

[Stephen Kerr (Stirling) (Con)]

Is there any precedent for using negative resolutions in relation to non-UK companies that have been awarded licences in any facet of our economy?

[Richard Harrington]

I cannot tell him about companies generally, but I know within energy, which is my field, that there are precedents within the Energy Act 2004. My hon. Friend the Member for Finchley and Golders Green next to me has told me the actual point—in fact he has not, he has told me exactly what I have just said. I was trying to be clever and remember the clauses, but I know it was the Energy Act 2011, which set up other special administrative regimes. This is a common system for SARs. There is ample precedent for that and it would seem very strange, for no particular reason, to give this special administrative regime a different rule to others. I hope that the hon. Gentleman will take that point into consideration.

The SAR has largely been formulated with GB-registered companies in mind, since a GB company is the current Smart Meter Communications Licence holder; that is true. However, there is a possibility that at some point in the future the licence holder could be a non-British company. He is right to say that the earliest the licence is expected to be re-tendered is September 2025. I know that delegated legislation moves slowly, but I accept his point that this is not a speed matter. I could not even try to argue in front of him or yourself, Mrs Gillan, that this was the case.

Although a number of adaptations to the special administration regime catering for non-GB companies have already been made by the Energy Act 2004 applied by this Bill, we may find that further modifications are needed to account for a non-British company becoming active in the provision of smart meter communications services.

--- Later in debate ---

[Dr Whitehead]

The Minister tried quite hard, but did not actually say anything new, other than what is already on the delegated legislation memorandum that I myself read out to the Committee. That was essentially the Minister’s defence of the procedure he is seeking to introduce.

I might have anticipated some other, particular reason—in addition to it not being urgent—for putting this forward as a negative resolution. There apparently is not one, other than that it is fairly narrowly drawn and relates to the Insolvency Act 1986, but nevertheless it amends the Insolvency Act 1986 by secondary legislation and negative procedure. That is the point that I was making: it is not the narrowness of it but the procedure by which the legislation is amended. This is an important principle for legislation in general, and I am therefore afraid that I do not think we can withdraw the amendment this afternoon. We would like to see this an affirmative procedure. In the absence of any good ideas that might arise in the next few minutes—a bit like the EU negotiations on the border—we may have to divide the Committee on this.

[Richard Harrington]

I hope the hon. Gentleman knows that I do try to accommodate wherever I can. To disagree with the argument I have put forward—which is “the other ones are like that”—would be basically to say that the other ones are wrong. I cannot see any rationale—perhaps the hon. Gentleman will enlighten me—why one should be different from the other energy one. To me that is the important point; to him, I do not think that it is.

I would ask him to reconsider. If it is really important to him, rather than put it to a vote—which he is welcome to—he could sit down and discuss it with me before Report, when he would still have the option to do what he wanted. I am very happy to do that, but it seems to me to be an administrative matter and, to him, it does seem to be a point of principle. It if is a point of principle, I cannot really accommodate him because I have to show the precedents, but there may be other things we could explore. If that were a suitable option, I would be very happy to do it.

[Dr Whitehead]

I am afraid that we must press the point.

The fact that there is some bad legislation on the statute book does not mean there should automatically be more. I am afraid that that does not take us much further forward.

Question put, That the amendment be made.

--- Later in debate ---

Question proposed, That the clause stand part of the Bill.

[Richard Harrington]

I have discussed the clause extensively and will not repeat my points other than to say that the powers are absolutely necessary. Hundreds of pages of things, such as quorums of meetings, have to be dealt with in this way. We propose to extend the application of the existing power, for which there is plenty of precedent, in relation to the energy supply company special administration regime.

[Dr Whitehead]

There is a new clause that refers effectively to what we are considering here, but I am happy for it to be discussed separately, even though it has a substantial bearing on whether a non-GB company might be a successor to the DCC. As far as this stand part debate is concerned, I have no further comments other than that I will save my fire for later when we discuss the new clause.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 5 ordered to stand part of the Bill.

Clause 6

Modifications of particular or standard conditions

--- Later in debate ---

[The Chair]

Just to reassure you, Mr McCabe, you will have the opportunity to visit this point briefly when we discuss new clause 11. I think you will find that a good place for it.

[Richard Harrington]

Many of the points made by the hon. Member for Birmingham, Selly Oak had to do with the general costs passed on to customers in the electricity market, a small part of which involve the smart meters that we are discussing. The justification for smart meters, as far as I am concerned, is ultimately to give customers a control over their electricity bills that they do not have now. Now they have one choice, which is to move. It is a good choice, and one that I have exercised myself, but compared with what they will get out of smart meters, it is crude.

I am not making light of the costs charged—this amendment is not about the general costs—but I hope that they will be small fry compared with the huge savings that they will create over the years, although the costs of installation have unquestionably gone up; I will not pretend that they have not.

I will try to deal with the amendment generally. I made a note of the hon. Gentleman’s questions while he was speaking, as you would expect me to do, Mrs Gillan. He asked about the fines that can be levied. I point out that the fines are levied by Ofgem rather than by the Department via the Secretary of State. By the way, I was most impressed and surprised to hear the hon. Gentleman quote Centrica and its complaints as an example to all of us. Apparently, it did not want to bear the costs of smart meters or charge its customers for them; it wanted to pass them on to the general taxpayer.

[Grahame Morris (Easington) (Lab)]

The Minister’s defence is that lots of the powers rest with the regulator, Ofgem. However, the explanatory notes say that the Energy Act 2008 and later Acts have given the Secretary of State powers to veto any proposals by Ofgem to consent to a number of things, including the transfer of the DCC licence, which we discussed earlier. He already has extensive reserved powers.

[Richard Harrington]

To continue with the comments of the hon. Member for Birmingham, Selly Oak: if British Gas was fined 10% of its turnover, in theory that would be passed on to its consumers. In practice, of course, that would make it so uncompetitive that all its consumers would move somewhere else. The purpose of these measures is not the fines; it is all the things that happen before the fines to make suppliers comply.

Technically, the hon. Gentleman’s point is correct: in theory, all costs go on to consumers, just as in general Government finances all Government expenditure goes on to the taxpayer. I do not think the point is that relevant, but I cannot disagree with what he said other than to say that the fines are not a tool for compliance; they are the ultimate response.

It is true that Ofgem administers the programme and the legal requirements are on it to take all reasonable steps to ensure that households and small businesses have smart meters. The fine is for Ofgem to decide. I remind the hon. Gentleman, before I move to the substance of the amendment, that we have to consider the net benefits as well as the costs. Every single consumer who has a smart meter is making savings on their bill from day one, so experience shows. The real prizes are for the future: the information the meter gives and the change in behavioural habits that happens surely make this worthwhile.

It is not appropriate or feasible to change the policy to move the cost on to the general taxpayer, but it is for us to monitor the situation carefully. With volume, the cost will go down. Compared with many other costs in the generation and supply of gas and electricity, the smart meter bill is quite small given the price of the physical SMETS 2 meter, which, as we have discussed in previous sessions of the Committee, is lower than the SMETS 1 meter’s, and given the cost of the installation and administration that goes with it, which is the same for SMETS 1 and SMETS 2.

I return to the specifics of the amendment. The Bill allows us to reclaim the administration costs that effectively come from the end user via the companies—that is true. It allows the Secretary of State to make such modifications to the licence conditions, where he considers it appropriate to do so, in connection with the special administration regime. The key point is that the clause requires the Secretary of State to consult affected licensees and such other persons as he considers appropriate prior to making modifications to licences. The licence modifications envisaged under this power have been drafted and a version has already been made available along with the explanatory notes to the Delegated Powers and Regulatory Reform Committee and to the public via the parliament.uk website.

The licence conditions try to allow the administration costs to be recouped from the industry insofar as there is a shortfall in the property available for meeting the costs. I accept that, in any business, recouping something from the industry involves recouping it from the customer in the end, which is the point I conceded to the hon. Member for Birmingham, Selly Oak. In the crudest sense, that is true of purchasing anything: the cost of the manufacturer, importer or distributor in any form of good or service is met in the end price. That is bad unless consumers have the choice and the ability to easily switch to a supplier that does not have that incumbence, as is the case here.

I have always envisaged that when we formally consult on those modifications in due course, the consultation will be published. If it is helpful to the hon. Member for Birmingham, Selly Oak, I am happy to provide him and everyone else with an undertaking that the consultation will be publicly available and addressed to the public, as well as to the other consultees involved. On the basis of that undertaking, I hope the hon. Gentleman will withdraw the amendment.

[Steve McCabe]

The Minister made a very helpful offer at the end. He says that every single consumer is making a saving, but I repeat that that is not true if the smart meter is in dumb mode. People are not making a saving in those circumstances.

--- Later in debate ---

[Dr Whitehead]

My hon. Friend the Member for Birmingham, Selly Oak made a very good case for this amendment, to which I want to add only the question of what is happening throughout the roll-out process. My point relates to the cost of the process and the cost-benefit analysis. There will be a better opportunity in discussing a later clause to go into that in greater depth. For the purposes of this particular amendment, the act of funding an administration without knowing the amount involved, which will inevitably go on to customers’ bills, could result in a further deterioration of the cost-benefit arrangements in the context of the process as a whole.

We see already a number of areas in the August 2016 cost-benefit analysis. Page 15 of that analysis sets out how a whole series of areas reduced their net present value by substantial amounts, sliding away from the previously positive cost-benefit finding, with an overall reduction in net present value of some £500 million.

We may well be in for further considerations as more cost-benefit issues arise, and as the programme unfolds we could be in the position of considering the statements made about the benefits to the public of smart meters overall. Let us not forget that the initial cost-benefit analyses looked very rosy compared with the programme’s predicted cost. One could argue that although there may be higher consumer bills to cover the programme’s implementation, the benefits to the customer, consumers and the country as a whole would be considerable.

I will quote from an academic paper entitled “Vulnerability and resistance in the United Kingdom smart meter transition”: the authors describe the expected combined total cost of the programme as being “at least £11 billion”, or more than £200 per household. It adds:

“Even the marketing campaign inspires awe, with £100 million committed over a five-year duration of the program, convincing Barnett”—

an academic authority—

“to estimate that it is the biggest advertising campaign in the world in the ‘next five years.’”

All these costs will go on customers’ bills, one way or another, and will be subject to that cost-benefit analysis as it comes through. In the event that administration is required of the DCC, it seems essential for us to know the impact of that administration on total bills to the public, and the impact on the net benefit. There might be circumstances in which the DCC goes into administration, is rescued in the manner suggested in the Bill, is put forward on a different basis and ends up being a net cost benefit to the public. But, apparently, we do not know the likely cost in such circumstances or what the benefit might be, and we do not have any mechanism for appraising that against what else is in the cost-benefit analysis.

The purpose of the amendment, admirably crafted by my hon. Friend the Member for Birmingham, Selly Oak, is to do just that. It would not stop the Minister from doing anything in particular; it is simply saying, “Have a good mind to that overall cost-benefit situation. Make sure you are clear about the costs and benefits of that process. Make sure that that gets reported and sees the light of day as far as the public are concerned.” That seems to me to be a sensible coda to put in the process that does not in any way put a brake on it. I think the whole Committee could support the amendment.

[Richard Harrington]

I thank the hon. Members for Southampton, Test and for Birmingham, Selly Oak for their contributions. Clause 6 grants the Secretary of State the power to make modifications to licensing conditions when he or she considers it appropriate to do so in connection with the special administration regime for the smart meter communication licensee.

The licence modifications envisaged under the power are already drafted and publicly available. They allow the costs of administration—however unlikely we agree such an event to be—to be recouped from the industry where there is a shortfall in the assets it gets back to meet the costs. As the hon. Members for Southampton, Test and for Birmingham, Selly Oak have said, it is hard—indeed, almost impossible—to estimate the cost of administration up front, and I fully accept their point that there cannot be a blind process or an open cheque; a firm of accountants should not be able to do what they want, when they want, and then charge for it.

One reads about insolvency operations in the press and sometimes one gets the impression that the costs of the administration are more than the insolvency achieves. However, I think that is very unlikely in this case, simply because of the guaranteed revenue stream and all the things we have been through before. The point made in moving the amendment is right: we should try to understand what the costs would be.

It has been estimated that the DCC has cost billions, and that is basically everything aggregated over the period. To put the issue in perspective, it projects its annual costs to be £67 million in 2019-20. Obviously, a significant part of the administration costs would pay the ongoing costs while the business is kept going to get more revenue and find a buyer. Those are already planned for; they are not new costs. In layman’s terms, new costs would be the fees for accountants and lawyers to deal with the actual physical administration itself. Those new costs are not to do with the actual running of the business, and I believe them to be limited. On the issue of scale, I cannot see the administration costs being disproportionate to the annual costs or the huge amount of set-ups.

The key point of the amendment is that the hon. Member for Birmingham, Selly Oak and the shadow Minister feel that we should try to estimate the costs and that a lot more knowledge is needed and should be made available to the public. When the Government come to formally consult on the modifications, which they will in due course, the consultation document will provide an assessment of the potential scale of the cost that might need to be recouped from the industry. That can only be an estimate, because no one knows the exact figures, but there must be comparables. I suspect that the accountancy firms and other relevant parties, such as a regulator, will put in their estimates. I am very happy to provide that assessment in the consultation document. The responses that come in should be very helpful.

On the scale of cost, the assessment will need to take a variety of factors into account. Part of that is the running costs of the licensee and an estimate of the special administration cost. We will take advice from relevant parties—including the independent regulator, Ofgem—when providing the estimate of the potential cost. I undertake that the consultation on the licence modifications will be published and that we will invite comments from energy consumers as well as other representative bodies. One of the questions that we will expressly ask is whether the consultees agree with the assessment that we are laying out in the consultation. I undertake that, prior to the licence modifications being made, I am happy to make available to both Houses of Parliament the Government’s response to the consultation, which will report on the conclusions on the estimated potential scale of costs.

Having considered those points, I hope that the hon. Member for Birmingham, Selly Oak will withdraw the amendment.

--- Later in debate ---

[Dr Whitehead]

We are overrun with Henrys again this afternoon: there are more Henrys in clause 8. I have not tabled an amendment because the question of amendments to Henry VIII clauses has been tested, but the Committee should be aware that clauses 8 and 9 are substantial Henry VIII clauses. Both seek to make regulations by negative procedure. The clause to which I drew attention earlier is therefore not an accident; it is part of a theme that runs right through this Bill and that theme ought to be looked at.

We could have a debate about the justification for the procedure in clauses 8 and 9. Frankly, I think they have been written to make the Government’s life easier. That is not a sufficient reason to justify the enactment of legislation. I hope that I can recruit the Minister on future occasions for what I might call a crusade—

[Richard Harrington]

Wrong Henry.

[Dr Whitehead]

Different Henrys. I hope to recruit the Minister to drive such arrangements as far as possible out of our legislative procedure. I appreciate that there are circumstances in which they are necessary, but they do not apply to clauses 8 and 9. I want to register my concern about what is in the Bill, but I will not take the matter further at this stage.

[Richard Harrington]

I have carefully noted the shadow Minister’s comments. I would call this a minor piece of Henrying—not a Henrietta but a Henryette. I think we disagree on the scale. The powers are very limited and very necessary. I accept the good spirit in which the shadow Minister made his comments, but the powers are necessary for the reasons I have already given. We disagree, but I thank him for his good grace and his acceptance that I have made the arguments before, albeit unsuccessfully as far as he is concerned.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Clauses 9 and 10 ordered to stand part of the Bill.

Clause 11

Short title, commencement and extent

[Richard Harrington]

I beg to move amendment 17, in clause 11, page 9, line 19, at end insert—

“(2A) Sections (Modification of electricity codes etc: settlement using smart meter information) to (Date from which modifications of electricity licence conditions may have effect) come into force on such day as the Secretary of State may by regulations appoint.

(2B) Regulations under subsection (2A) are to be made by statutory instrument.”

This amendment gives the Secretary of State power to bring NC8 to NC10 into force by regulations.

[The Chair]

With this it will be convenient to discuss the following:

Government new clause 8—Modification of electricity codes etc: settlement using smart meter information.

Government new clause 9—Modification under section (Modification of electricity codes etc: settlement using smart meter information).

Government new clause 10—Date from which modifications of electricity licence conditions may have effect.

Government amendments 18 and 19.

[Richard Harrington]

I find myself in the rare position, in any Committee, of moving an amendment. I usually spend my time responding to amendments, but I shall do my best because these amendments and new clauses are important. They refer to half-hourly settlement.

Before I set out the detail of each new clause, I will, if I may, set out the broader context in which the proposals apply. Smart meters, as we have explained throughout the Committee stage, are a critical foundation for the development of a smart energy system, and provision of the relevant functionality is a core part of our programme. I explained on Second Reading, and have done so again since, my and the Government’s vision, which I think is commonly held: in time to come, when we consider history, the current roll-out of smart meters will be seen as a small part of that programme, providing individuals in their homes and small businesses with more flexibility and information. Everyone will accept that, in the modern age, the old-fashioned system of meters, which were predominantly read by estimation, with the gas or electricity man—they were men in those days—coming occasionally with their brown overalls and torch to do a reading, is totally unacceptable. Most people I speak to still have that system at home, despite the fact that everything else they have—their televisions and computers and so on—is of a completely different era.

Half-hourly billing will provide the platform for that kind of flexibility. I would not argue that people will suddenly wake up and think, “I’m going to change my electricity and gas all the time by pressing a button”, but I do foresee situations in which people will have that kind of flexibility, through their phones, and where they will subscribe to sophisticated services continually whizzing around the whole of the UK and beyond to find the cheapest point of any particular time of supply. That will allow people to choose when their appliances are switched on or off, when they are used, and whether they are necessary.

Under previous clauses we have talked a lot about the costs of smart meters and the administration—the DCC—which is basically the big software interface, but let us not forget that the idea is to reduce system costs by what I hope will be tens of billions of pounds by 2050. The Government’s smart systems and flexibility plan, published in July 2017, set out a number of actions that will build on the smart meter roll-out and deliver a smarter energy system for consumers. That includes the half-hourly settlement, which will help deliver benefits to both consumers and the energy system, by providing commercial incentives on the suppliers to develop and offer time-of-use tariffs, which they have not really had to face before.

As I have explained, such tariffs enable customers to choose, when energy is cheaper, to reduce their bills and the costs of the future energy system. That will help make the energy system more resilient, because as we move towards an increasingly low-carbon generation mix, people will want to make more of those kinds of choices. Smaller suppliers—I should not mention my supplier by name, but I am sure many of them do this—already enable people to tick a box electronically in order to choose to receive energy from a particular renewable source. That is a tiny part of the total array of options available to people, as is half-hourly billing.

Ofgem has already delivered changes to provide more cost-effective settlement arrangements for suppliers that want to offer those tariffs, but that is only the first step. We believe that moving to market-wide half-hourly settlements will help deliver the full benefits of the smart meter roll-out. A market-wide approach will also ensure that any necessary consumer protection can be implemented effectively.

[Steve McCabe]

This is a genuine inquiry born out of curiosity. The Minister is making a perfectly reasonable case. Why has the amendment been tabled at this stage, and why on earth did we not hear anything about the issue on Second Reading? The Minister is making a very good case—I am not disputing that—but it sounds like an afterthought. Could he explain how we have got into this position?

[The Chair]

Before the Minister responds to the intervention, I have had a request from members of the Committee to allow the gentlemen to remove their jackets if they so wish, and I am minded to allow that. If you wish to remove your jackets, please feel free to do so.

[Richard Harrington]

Although it is in your power to decide on the jacket rule, Mrs Gillan, I personally think that people should keep their jackets on. That is probably why I will never be Chairman of a Committee.

[The Chair]

I am sure you would not want to make any Member who wishes to remove their jacket uncomfortable.

[Richard Harrington]

Certainly, the next time I appear before Mr McCabe in his capacity as Chairman, I hope that he will not be as liberal as you on the dress codes.

[The Chair]

Let us return to the amendments.

[Richard Harrington]

The hon. Gentleman asked a valid and important question, and I thank him for his preliminary support. He asked why this Government amendment was not included in the first place. I take full responsibility for that. The original intention was that it should be a separate piece of legislation, but I took my chance with this Bill. As those who were involved on Second Reading will know—I think that most members of the Committee were present—it came very quickly. I took my chance in that slot and I thank everybody for voting in support of Second Reading, which is why we are here today, and I also took my chance to table this amendment.

The issue went through pre-legislative scrutiny in 2016, I think—the exact date is in my notes—and I hope that it is non-contentious. I hope that the hon. Gentleman will accept that the clumsiness of its being a Government amendment—I think that is what he was referring to—is not because of any tricks or because we are trying to hide anything. I took my chance. It seemed like the right thing to do and it seemed non-contentious. Given what is going on in both Houses of Parliament at the moment—there is a lot of legislation to do with Brexit—I thought, rather than hope to get another slot, it would be better to take my chances.

I apologise that the process has not been as seamless as it should have been, but the hon. Gentleman asked me a straight question and I have tried my best to give him a straight answer. I will probably be told off by quite a lot of people for putting it like that, but that is exactly how it is. I hope that hon. Members on both sides of the Committee will accept that explanation in good faith, because this is a really good thing to do.

--- Later in debate ---

[Mark Pawsey (Rugby) (Con)]

The Minister has given some accounts of why these clauses are being introduced at this stage. Has he consulted the energy companies, Ofgem and the other bodies that are referred to, to ensure that they are aware of the amendments to this Bill?

[Richard Harrington]

Yes, I can confirm to my hon. Friend that there has been widespread consultation. The amendments are very well spoken about in the industry and they will not come as a surprise at all. In fact, the general reaction is that the industry is very pleased that we have managed to introduce them with an act of pure opportunism of getting them through parliamentary scrutiny—assuming that we do—not as a standalone piece of legislation but as an important amendment.

[Dr Whitehead]

I am in some difficulty here, inasmuch as what the Minister said about the content of the Government amendments is sound and clear. Indeed, they make an addition to the Bill and take us forward on getting ready for some of the benefits of smart meters, such as half-hourly settlements. However, as he indicated, this is effectively a separate Bill that has been lowered into the Smart Meters Bill and attached to it as Government amendments. He quite candidly stated that he took his chance—fair enough—to put it in the Bill, but it creates problems, some of which are at the very least technical, and some of which are possibly of a far wider nature.

As my hon. Friend the Member for Birmingham, Selly Oak pointed out, none of this was mentioned on Second Reading. We went into Second Reading on the basis of the long title of the Bill, which was very restrictive. Indeed, I counselled a number of my colleagues who wanted to table wider amendments to the Bill that the long title prevented that. I said that it is a closely drawn long title, and we are required to stick to what it says. We have done that in this Committee. We have had a good debate about a number of issues within the terms of the long title, but there is a range of issues that hon. Members would very much have liked to discuss, and for perfectly proper reasons relating to the long title it has not been possible to discuss them in this Committee.

Once we got through Second Reading, we found that a procedure had been used that I am not aware has been used regularly—if at all in recent years—for a piece of legislation: changing the long title of a Bill during its passage. That is a very rare procedure in this House. I refer to the authority of Wikipedia—I say that for what it is worth. The Wikipedia people say:

“In the United Kingdom, the long title is important since, under the procedures of Parliament, a Bill cannot be amended to go outside the scope of its long title. For that reason, modern long titles tend to be rather vague”.

This one was not vague, but amendments have clearly been introduced that are outside the scope of the long title.

There are some precedents, albeit not from this Parliament but from associated Parliaments whose precedents nevertheless have some relevance to this Parliament through the processes of the Privy Council. In Australia, a Department wished to amend a Bill whose title was “A Bill to amend the XX Act, and for related purposes”. My note, which is a drafting direction from Parliamentary Counsel, states that:

“The proposed amendments were not related to the subject matter of the Bill, but would have amended an Act administered by the relevant Minister. The Deputy Clerk advised that if proposed amendments fall a long way outside the subject matter of the Bill, it could be considered a misuse of the House’s powers for a motion to be moved to suspend the standing orders. Accordingly, the amendments were not able to be included in the Bill.”

A version of suspending the Standing Orders has been undertaken in this House. Amendments 18 and 19 actually add some new words to the long title of the Bill, so apparently, by magic, things that were outside the scope of the Bill are now inside the scope of the Bill.

--- Later in debate ---

[Dr Whitehead]

I must confess that I am a little bit confused by that ruling. I take your point, Mrs Gillan, but my understanding is that we did have a long title of the Bill and that was the long title that we have been speaking to until this moment, and that was the long title that we spoke to on Second Reading. That was the basis on which all amendments to date, except these amendments, have been drafted into the Bill. So it does create a different series of circumstances, and one that I believe merits at least some kind of review for the future. Although I take your concerns very strongly on board, Mrs Gillan, I think it would be remiss of me not to express those points on the position we find ourselves in as far as the Bill is concerned. [Interruption.] I can see that I am not necessarily gaining the full acclaim of all members of the Committee in pursuing this particular point, but it is important procedurally to put it on the record. I hope we can have some further thoughts on that at a future date.

I turn to the substance of the amendments. What they do is a good idea and, had the Minister been able to bring the amendments on board by slightly different means, we would have had no concerns at all about what they say, what they add to the Bill, and why they are important in taking us to the next stage in terms of some of the benefits that smart meters may bring in the future. We would be happy to give those amendments, therefore, our wholehearted support. We are not going to press any of the amendments to a vote this afternoon, but I am pleased that our concerns are now on the record, as my hon. Friend the Member for Birmingham, Selly Oak suggested. It may well be the case that we have not heard the last of the matter.

[Richard Harrington]

I thank the shadow Minister for his comments. I am quite a simple person. When I was looking at this bit of the legislation, I asked a very simple question of the experts in the Department—the parliamentary advisers and lawyers: is it acceptable, is it within the rules and within the scope of the Bill, to include the half-hourly settlement? The answer was, “It is the decision—many things are—of the House authorities and the Chair, but it seems to us that it is very much within scope.”

I would like to make it clear that the scope of the Bill has not changed with this Government amendment. It remains about smart metering and data from smart meters. As Mrs Gillan has confirmed, the House authorities have said that. As such, the amendments in scope would have been in scope then. Half-hourly settlements are not possible without smart metering.

I promise I am not making light of the comments of the hon. Member for Southampton, Test. He means to get them on the record and he has explained that very reasonably. I thank him for his general support for the amendments, but at the same time I hope that he gives me the credit that this was not some charlatan move to slip something round the corner that was marginal in nature.

[Dr Whitehead]

Forgive me, but the Minister cannot proceed in this manner. The long title makes it evident to all those sitting here. It is to

“Extend the period for the Secretary of State to exercise powers relating to smart metering and to provide for a special administration regime for a smart meter communication licensee.”

It clearly and narrowly states two things. It does not even say “for related purposes.” It refers to extending the period for smart meter licensing arrangements, and to a special administration regime. That is it. As the Minister himself acknowledges, it has been necessary to move two amendments to change the scope of the Bill, essentially in order to omit those elements. So that is the basis on which we should discuss this, whatever the rights and wrongs of the amendments otherwise are.

[Richard Harrington]

I fully accept the hon. Gentleman’s right to discuss the matter, and I did not suggest for a moment that he was doing wrong in bringing this forward, or placing it on the record—far from it. I am just saying that, from my point of view, this was acting upon advice, that it was perfectly proper to get something that I felt was very important. I believe that it has the support of—I hope—most Members in the House generally, because we all think that it is a very good thing. I am sorry that the hon. Gentleman feels as he does, but I thank him for accepting that it was done for the right reason. I believe, as he does, that parliamentary procedure is important.

These rules have evolved over centuries for reasons, and—quite rightly—neither I nor anyone else on behalf of the Government can get things in round the side, or bring in things that should never be. When we decided to introduce the amendment, I did have a meeting with the hon. Gentleman to explain it to him, I suppose in an official capacity but obviously not within a Bill Committee capacity, and he did explain his support generally for it. His points have been noted on the record. I hope that my response—which I do not think he found satisfactory—is also on the record.

The amendments support the move to a smarter, more flexible energy system. Half-hourly settlement billed directly on a smart metering platform is a central aspect of the smart systems and flexibility plan that was published in July. The proposals will allow Ofgem to take forward the reforms in a more streamlined way, and I thank the shadow Minister for his support for the substance of the amendments.

Amendment 17 agreed to.

Clause 11, as amended, ordered to stand part of the Bill.

New Clause 8

MODIFICATION OF ELECTRICITY CODES ETC: SETTLEMENT USING SMART METER INFORMATION

“‘(1) The Gas and Electricity Markets Authority (“the Authority”) may—

(a) modify a document maintained in accordance with an electricity licence, and

(b) modify an agreement that gives effect to such a document,

if the condition in subsection (2) is satisfied.

(2) The condition is that the Authority considers the modification necessary or desirable for the purposes of enabling or requiring half-hourly electricity imbalances to be calculated using information about customers’ actual consumption of electricity on a half-hourly basis.

(3) The power to make modifications under this section includes—

(a) power to make provision about the determination of amounts payable in connection with half-hourly electricity imbalances;

(b) power to remove or replace all of the provisions of a document or agreement;

(c) power to make different provision for different purposes;

(d) power to make incidental, supplementary, consequential or transitional modifications.

(4) A modification may not be made under this section after the end of the period of 5 years beginning with the day on which this section comes into force.

(5) In this section—

“balancing arrangements” means arrangements made by the transmission system operator for the purposes of balancing the national transmission system for Great Britain;

“electricity licence” means a licence under section 6(1) of the Electricity Act 1989;

“half-hourly electricity imbalance” means the difference between the amount of electricity consumed by an electricity supplier’s customers during a half-hour period and the amount of electricity purchased by the electricity supplier for delivery during that period, after taking into account any adjustments in connection with the supplier’s participation in balancing arrangements;

“supply”, in relation to electricity, has the same meaning as in Part 1 of the Electricity Act 1989 (see section 4(4) of that Act);

“transmission system” has the same meaning as in Part 1 of the Electricity Act 1989 (see section 4(4) of that Act);

“transmission system operator” means the person operating the national transmission system for Great Britain.”—(Richard Harrington.)

This new clause gives Ofgem power to modify documents maintained in accordance with an electricity licence, or agreements giving effect to such documents, so as to enable half-hourly electricity imbalances to be calculated using information obtained from smart meters.

Brought up, read the First and Second time, and added to the Bill.

New Clause 9

Modification under section(Modification of electricity codes etc: settlement using smart meter information)

“(1) Before making a modification under section(Modification of electricity codes etc: settlement using smart meter information), the Gas and Electricity Markets Authority (“the Authority”) must—

(a) publish a notice about the proposed modification,

(b) send a copy of the notice to the persons listed in subsection (2), and

(c) consider any representations made within the period specified in the notice about the proposed modification or the date from which it would take effect.

(2) The persons mentioned in subsection (1)(b) are—

(a) each relevant licence holder,

(b) the Secretary of State,

(c) Citizens Advice,

(d) Citizens Advice Scotland, and

(e) such other persons as the Authority considers appropriate.

(3) The period specified under subsection (1)(c) must be a period of not less than 28 days beginning with the day on which the notice is published.

(4) A notice under subsection (1) must—

(a) state that the Authority proposes to make a modification,

(b) set out the proposed modification and its effect,

(c) specify the date from which the Authority proposes that the modification will have effect, and

(d) state the reasons why the Authority proposes to make the modification.

(5) If, after complying with subsections (1) to (4) in relation to a modification, the Authority decides to make a modification, it must publish a notice about the decision.

(6) A notice under subsection (5) must—

(a) state that the Authority has decided to make the modification,

(b) set out the modification and its effect,

(c) specify the date from which the modification has effect,

(d) state how the Authority has taken account of any representations made in the period specified in the notice under subsection (1), and

(e) state the reason for any differences between the modification set out in the notice and the proposed modification.

(7) A notice under this section about a modification or decision must be published in such manner as the Authority considers appropriate for bringing it to the attention of those likely to be affected by the making of the modification or decision.

(8) Sections 3A to 3D of the Electricity Act 1989 (principal objective and general duties) apply in relation to the functions of the Authority under section (Modification of electricity codes etc: settlement using smart meter information) and this section with respect to modifications of documents maintained in accordance with electricity licences, and agreements giving effect to such documents, as they apply in relation to functions of the Authority under Part 1 of that Act.

(9) For the purposes of subsections (1) to (10) of section 5A of the Utilities Act 2000 (duty of Authority to carry out impact assessment), a function exercisable by the Authority under section (Modification of electricity codes etc: settlement using smart meter information) is to be treated as if it were a function exercisable by it under or by virtue of Part 1 of the Electricity Act 1989.

(10) The reference in subsection (8) to the functions of the Authority under section(Modification of electricity codes etc: settlement using smart meter information) includes a reference to the Authority’s functions under subsections (1) to (10) of section 5A of the Utilities Act 2000 as applied by subsection (9).

(11) In this section—

“electricity licence” has the meaning given in section (Modification of electricity codes etc: settlement using smart meter information);

“relevant licence holder” means, in relation to the modification of a document maintained under an electricity licence or an agreement that gives effect to such a document, the holder of a licence under which the document is maintained.”—(Richard Harrington.)

This new clause sets out the procedural requirements that apply to the exercise of the power under NC8.

Brought up, read the First and Second time, and added to the Bill.

New Clause 10

Date from which modifications of electricity licence conditions may have effect

“(1) The Electricity Act 1989 is amended in accordance with this section.

(2) In section 11A(9) (modifications of electricity licence conditions not to have effect less than 56 days from publication of decision to modify), at the end insert “, except as provided in section 11AA”.

(3) After that section insert—

“11AA Modification of conditions under section 11A: early effective date

(1) The date specified by virtue of section 11A(8) in relation to a modification under that section may be less than 56 days from the publication of the decision to proceed with the making of the modification if—

(a) the Authority considers it necessary or expedient for the modification to have effect before the 56 days expire,

(b) the purpose condition is satisfied,

(c) the consultation condition is satisfied, and

(d) the time limit condition is satisfied.

(2) The purpose condition is that the Authority considers the modification necessary or desirable for purposes described in section (Modification of electricity codes etc: settlement using smart meter information)(2) of the Smart Meters Act 2017 (enabling or requiring half-hourly electricity imbalances to be calculated using information about customers’ actual consumption of electricity on a half-hourly basis).

(3) The consultation condition is that the notice under section 11A(2) relating to the modification—

(a) stated the date from which the Authority proposed that the modification should have effect,

(b) stated the Authority’s reasons for proposing that the modification should have effect from a date less than 56 days from the publication of the decision to modify, and

(c) explained why, in the Authority’s view, that would not have a material adverse effect on any licence holder.

(4) The time limit condition is that the specified date mentioned in subsection (1) falls within the period of 5 years beginning on the day on which section (Modification of electricity codes etc: settlement using smart meter information) of the Smart Meters Act 2017 comes into force.”

(4) In paragraph 2 of Schedule 5A (procedure for appeals under section 11C: suspension of decision), after sub-paragraph (1) insert—

‘(1A) In the case of an appeal against a decision of the Authority which already has effect by virtue of section 11AA, the CMA may direct that the modification that is the subject of the decision—

(a) ceases to have effect entirely or to such extent as may be specified in the direction, and

(b) does not have effect, or does not have effect to the specified extent, pending the determination of the appeal.’”—(Richard Harrington.)

This new clause allows licence modifications under NC8 to become effective before 56 days have elapsed.

Brought up, read the First and Second time, and added to the Bill.

New Clause 1

Review of smart meter rollout targets

“(1) Within 3 months of this Act coming in to force, the Secretary of State must prepare and publish a report on the progress of the smart meter rollout and lay a copy of the report before Parliament.

(2) The report under subsection (1) shall consider—

(a) progress towards the 2020 completion target;

(b) smart meter installation cost;

(c) the number of meters operating in dummy mode;

(d) the overall cost to date of the DCC;

(e) the projected cost of the DCC; and

(f) such other matters as the Secretary of State considers appropriate.” —(Steve McCabe.)

This new clause would require the Secretary of State to publish details about the cost and progress of the smart meter roll out, with reference to the 2020 deadline.

Brought up, and read the First time.

[Steve McCabe]

I beg to move, That the clause be read a Second time.

--- Later in debate ---

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

Clearly, the scheme is an incredibly ambitious one; the scale of it as a consumer programme is virtually unprecedented. That is why the hon. Member for North Ayrshire and Arran, my hon. Friend the Member for Birmingham, Selly Oak, and others have said that we have to ensure that what we do is in the public eye, the public interest and the consumer interest.

The intention behind the reporting is clearly a good one, not just for us in terms of monitoring but also for raising the visibility and the importance of the programme. A public relations exercise almost needs to be done because there seems to be so much confusion out there, particularly among consumers. The points made by my hon. Friend the Member for Birmingham, Selly Oak in terms of those metrics are critical, but it is also critical that we begin to understand the sort of behavioural change among consumers, in terms of that cost-benefit analysis for the whole programme and for individual households.

I do not want to spin the wheels and repeat what has been said. The only thing that I would urge is a little more ambition in the reporting. The annual report is not bad—it is a good idea—but like most businesses, which give quarterly updates, given those really important metrics and given that the ambition was set for 2020, arguably there are not many annual reports left between now and then. Perhaps a quarterly summary report would be valuable to see the progress that has been made and, critically, how the scheme has been adopted or accepted and how it is working with the consumer.

[Richard Harrington]

I thank hon. Members for their contributions, particularly the shadow Minister—or should I now call him my protection officer? I have never had one of those before and thought that I was not likely to, but I am very pleased that he has taken it upon himself to appoint himself to that position, which I warmly endorse, I thank him for that.

The new clauses give me the chance to set out the Government’s commitments for reporting on the smart meter roll-out, which is very important and something that I have given a lot of thought to. Before I do, I want to mention a couple of points that the hon. Member for North Ayrshire and Arran made, because they are quite different. She said that consumers were being misled by their energy companies and bullied into getting a smart meter—which is really what she was saying. I reiterate that it is not compulsory for anyone to have a smart meter installed. Consumers have a right to decline them.

[Patricia Gibson]

The Minister knows, as do I and everyone in this room, that smart meters are not compulsory, but my concern is that consumers are not always told that.

[Richard Harrington]

They should be, and I will do everything to make sure that they are. Suppliers have to treat their customers fairly, and that means being transparent and accurate in their communications. Ofgem has been in touch with energy suppliers to remind them of their obligations. It has written to all suppliers about deemed appointments—one of the points she made—to make clear that they have to consider whether deemed appointments are appropriate. Ofgem have marked their card on that because they have to take into account the consumers’ circumstances, for example ability to communicate, whether they may have not got the letter, and more. While I know that the hon. Lady is speaking entirely in good faith and that there have been examples of that, Ofgem is on it, and I shall monitor it carefully, as well as the other points she raised.

There is a conflict between us all wanting smart meters to be installed, because we think it is of long-term benefit to everyone, and protecting people’s right not to have one if they do not want one, for whatever reason, and to be informed of that right. We are putting pressure on the energy companies to install more, in keeping with the targets; the hon. Lady is right about that. However, we do not want any of the mis-selling cases that were well publicised some years ago, of people knocking on doors and getting householders to change supplier on false pretences. While the intentions are much more noble in this case, and however much we might think it is a good thing to have smart meters, we certainly do not want any form of pressure or inappropriate behaviour to mislead people. I tell everyone that it is brilliant to have a smart meter, and hopefully most of us will, but it is not for everybody. People should not feel under any pressure, and they should only want to have one for the best reasons.

I can be accused of many things, but lack of enthusiasm is not one of them. This is a really important element of the modernisation of the country’s energy infrastructure. Supplier switching is good, and I have done it myself, but it is not the answer. It is a right and a good thing to do, but the answer lies in what the smart meters will produce. I keep coming back to that in my head. I will not go through the reasons for it again, because hon. Members have been patient all day and on other days.

I understand and welcome the appetite for information on progress. It is right for us, as parliamentarians, to want that, and it is right for the Government and the Department to want to give that. It is right that customers generally should know, from the general public to what one paper calls the chattering classes—in other words, people who write on it, comment on it and study it. The more knowledge they have, the more it is part of the smart meter revolution, and the more people who have smart meters do not think they are alone and do not listen to the stories I have been sent by constituents—scare stories from the United States, conspiracy theories that MI5 is listening through smart meters and that sort of thing.

[Steve McCabe]

What?!

[Richard Harrington]

I have my own protection officer, so I am not bothered about that kind of thing, but other people are.

The new clauses would require the Government to publish information on programme costs and benefits, as well as details of installation activity and whether meters are operating in smart mode. I would like to address those in turn, to the satisfaction of all hon. Members, and particularly the hon. Member for Birmingham, Selly Oak and the shadow Minister—I always refer to him by his official title, but he is the hon. Member for Southampton, Test.

The programme costs and benefits are dealt with in new clauses 1 and 11. The Government published their initial assessment in 2008. Since then, the Government have updated and published their cost-benefit analysis a number of times, including in 2014 and 2016. Those publications included quite detailed breakdowns of the costs and benefits of the programme, including the DCC cost, which has been discussed before, and the installation of smart meters.

While there have been changes in the estimated costs and benefits over the years as our evidence base has developed, the business case for smart meters has remained good value for money. The benefit-to-cost ratio has remained stable since 2011, at around £1.50 of benefit for every £1 invested. Our latest cost-benefit analysis, published in November 2016, outlines net benefits of the smart meter roll-out of £5.7 billion. It is easy to talk in billions, but that is quite a lot of money, whichever way we look at it.

Our approach on the smart metering programme has been to update the cost-benefit analysis when substantive new evidence on costs and benefits for the programme comes to light through our monitoring and tracking. For example, the most recent update in November 2016 replaced estimates in a number of areas, including meter asset costs and financing and installation costs, with actuals based on information obtained from industry. It is right that estimates are replaced with actuals as soon as we have the information for it.

The hon. Member for Birmingham, Selly Oak asked why costs increased between the 2014 and 2016 assessments. The difference was about 0.5%, which is £500 million. Again, lots of zeroes; not a number to make light of. The increase is roughly equivalent to changes in the cost of fossil fuels, which impacts the value of the energy savings in our assessment. That was really his point; he asked that question before and I found out the answer for him. It is a reasonable question to ask.

It is important to know that it is not common practice for Government policies and programmes to update their cost-benefit analysis regularly in this way, and certainly not beyond the assessment made to inform the panel’s policy decision. With smart meters, we have done so in order to provide the additional public information and transparency. This is such a major upgrade of our energy infrastructure and will be transformational for people when the programme evolves further.

We have no immediate plans to publish an upgraded cost-benefit analysis, but we are regularly monitoring costs and benefits and would certainly update our analysis if there were new or substantive evidence or changes in policy design. I would like to make it clear that if there were substantive changes in the evidence, of course we would. I hope we have a track record that demonstrates that, if and when such evidence emerges, we will update our assessment. We would be negligent if we did not, and I am sure we would be held to account. In addition, the Data Communications Company regularly publishes budgets and cost projections on its website.

In relation to the installation activity mentioned in new clauses 1 and 7, the Government regularly publish statistics on the progress of the smart metering roll-out. Independent official quarterly statistics on the progress of the smart meter roll-out by the large energy suppliers are published every quarter and have been since September 2013. They are a report on the number of smart and advanced meters installed, as well as the number of meters in operation at the end of a reporting quarter. In addition, a summary of annual roll-out progress for the calendar year of the roll-out is published every March. This captures performance of both small and large suppliers for the preceding calendar year. The number of smart meters operating in traditional mode can be determined from these reports, but I am happy to look at ways to express that more clearly, because I think, as my protection officer has requested, clear and accurate information is important for people. There is no reason to provide clouds of vagueness on this. It is in everybody’s interest to be clear.

[Steve McCabe]

The Minister is giving the Committee helpful information. Why, after 2014, did the Department abandon the progress reports that he is now proposing to reinstate? Was there an obvious explanation for that?

--- Later in debate ---

[Richard Harrington]

I do not have an obvious explanation for the hon. Gentleman, but I am perfectly prepared to find out and write to him. As far as I am concerned, when I took over, annual reports seemed an obvious thing to do. I would like them to be as comprehensive as possible. I think that that is in everybody’s interest. I hope that they get press coverage and that people read them and say “I want one of these.” That is what we want.

In his erudite speech, the hon. Member for Warwick and Leamington made a point about changing behavioural patterns. In my previous job in pensions, they called it nudging people. Publicity about the annual report or anything else to do with it is going to nudge people’s behaviour. Instead of people reacting to nonsense offers that pretend that it is compulsory, as mentioned by the hon. Member for North Ayrshire and Arran, I hope that they will think, “I want to find out about those. I’ll go online or call. I want one.” That is what the advertising campaign on buses, the tube and so on is doing: it is nudging people and trying to change their behavioural pattern. The reporting side of it, which should be as comprehensive as possible, is very much part of that.

The smart metering programme is being delivered with a high degree of transparency through our existing reporting regime, and I am certainly going to reflect on how reporting can be made clearer. In particular, I undertake to deliver further information via the annual update of the smart meter implementation programme, and I will make copies available to both Houses. If there are changes in the interim, I do not think it would be right to undertake to produce quarterly reports. That would be a very bureaucratic process. There would probably not be enough information to change, and they would quickly become outdated. I do not think that would be reasonable. However, if there are fundamental changes, or even good incremental changes—or, indeed, bad incremental changes—it is in our interests to publicise them and to deal with them. I am going to look at ways to make this as sharp and clear as possible. In the light of that explanation and commitment, I hope that the hon. Member for Birmingham, Selly Oak will withdraw the motion.

--- Later in debate ---

[Patricia Gibson]

It may not be a bad thing for certain people who are in a position to do that, but when kids come in from school and they need to have their dinner—people cannot really work around that and say “You need to wait until 8 o’clock to get your dinner because energy is cheaper then.” There are people for whom that might yield great benefits, but some are trapped in that peak period and cannot work around it. That is a real concern for a lot of consumers, as I am sure the Minister will understand.

[Richard Harrington]

As per the practice that I started in discussing the previous group of amendments, before addressing the substantive point perhaps I could try to answer the hon. Lady’s questions. The sentiments expressed by my hon. Friend the Member for Stirling are right—this issue is a double-edged sword. The very people that the hon. Lady described, who have children coming home and need to get the tea on, might also have a choice about when to do their washing and such things. The smart meter and the information that comes from it, can help as well as hinder people in those circumstances.

The choice of which tariffs to accept, even with the smartest of smart meters, will remain entirely with the customer. Smart meters facilitate time-of-use tariffs, which can influence demand and help to shift consumption away from peak times—that is a good thing—but they will also give people a choice that they do not have now. At the moment, if someone does not have the meter to give them the information, they cannot take an informed decision. Based on conversations I have had, I expect that suppliers will develop and offer new, smart, time-of-use tariffs that will be attractive to most consumers and help them to realise their benefits.

I accept the hon. Lady’s core point—people must be aware of the choices available, and they must be the type of customer that can take advantage of that choice. If their only function, apart from basic lighting and heating, is to hugely increase their use of electricity at a certain time because of cooking and children coming home, I accept that such a tariff would not be suitable for them. People must have the information to take that decision. I think I have laboured the point, but the hon. Lady raises an interesting issue that is not at all unreasonable —that is what I would expect, given her other consumer-based questions.

I shall try to deal briefly with the new clause in the spirit in which it was meant. Should the Secretary of State commission an independent review of public awareness and satisfaction of the roll-out? That is what is being asked. In answering, perhaps I should outline our approach to smart meter and consumer engagement in our programme up until now. It is set out formally in the programme’s consumer engagement strategy, which was published in December 2012, and it was based on extensive consultation and evidence gathering, as well as polling and market research. Although energy suppliers are at the forefront of installing smart meters, it was recognised that their consumer engagement would benefit from support by a central body that was independent of them and Government. We heard evidence from a representative of that body—Smart Energy GB—which enables consumers throughout the country to get consistent messages from a single simple campaign, rather than from multiple suppliers who are jumping over one another to get customers.

Both Smart Energy GB and the energy suppliers therefore have a role. The energy suppliers have the primary consumer engagement role, because they have the main contact with customers—they are who customers get their bills from and have their contracts with. Smart Energy GB, which is an independent, not-for-profit organisation, leads a national awareness and advertising programme to drive the behavioural change that the hon. Member for Birmingham, Selly Oak mentioned and to help consumers to benefit from smart metering.

The energy supply licence conditions require that Smart Energy GB assists consumers on low incomes or with prepayment meters. Bill Bullen explained in our evidence session that that is his main market. That is really good—it is to those consumers’ advantage and I hope it is to his commercial advantage, too. From what he said, he seems to have done a good job of it.

That two-pronged approach has increased awareness of smart metering from 40% to 80% of consumers in three years, and it has driven a lot of demand. A recent survey of 10,000 people from all demographics and all parts of Great Britain showed that 49% of people would like to get a smart meter in six months. The campaign is resonating with people all over the country. Independent audits of Smart Energy GB show that two in three people recall its campaign. That is actually quite a lot in advertising. Findings from the latest “Smart energy outlook”, the independent barometer of national public opinion, show that detailed knowledge of smart metering is high—in some cases higher than in the general population—among groups that we might consider to have vulnerabilities, such as elderly people.

But nobody underestimates the challenge—I absolutely do not. We get a lot of information from Smart Energy GB. Suppliers share their information with it and with us, because it is in everyone’s interests to do so. They are transparent about their activities, both because it is in their interests and because they are required by law to publish an annual report outlining their performance against targets, alongside an updated consumer engagement plan. All that is available to the public via the internet and the usual channels.

As recently as August, the Government published the findings of external research that we commissioned on consumer experience of smart metering. We will produce further findings from ongoing fieldwork in the next few months. Our evidence to date shows that consumer satisfaction with smart meters is high. Some 80% of consumers are satisfied with them and 7% are dissatisfied. That information is all publicly available. Interestingly—I know that vulnerability is of interest to every Committee member, but particularly to the hon. Member for North Ayrshire and Arran—there was higher satisfaction among prepayment respondents, who are much more likely to be vulnerable consumers.

I support the positive intention behind the new clause. The Government really have to consider how consumer engagement can be better reflected in annual reports, which have to be consumer-facing as well as Parliament-facing. I am not quite sure about the answer, but that needs to be considered in detail. On balance, though, I consider that the requirements of the new clause are well met by existing arrangements. I promise that I do not say that through complacency. I have explained about external research agencies, and Smart Energy GB, which is independent, continually reviews consumer engagement. A review is therefore not needed at this stage—not because we do not intend to do that or because it does not need to be done, but because it would duplicate existing activities and would not represent good value for money. I hope that the hon. Member for Birmingham, Selly Oak will withdraw the motion.

[Steve McCabe]

The Minister has persuaded me. I am happy to beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 3

Ownership restrictions to successor licensees

“(1) The Secretary of State may impose conditions on to the future DCC successor licensee as appropriate.

(2) Conditions in subsection (1) may include restrictions to British owned companies subject to the expiry of any contrary obligations under EU or retained EU law, as defined in the EU (Withdrawal) Act 2018.”—(Dr Whitehead.)

This new clause allows the Secretary of State to restrict future DCC successor licensees to British owned companies.

Brought up, and read the First time.

[Dr Whitehead]

I beg to move, That the clause be read a Second time.

The new clause, as I flagged up to the Committee earlier, relates to clause 4(1) and to the circumstances in which a successor to a company that has gone into administration might be brought about, and the safeguards concerning the identity of that successor company should it take over the reins. My understanding of those circumstances is that, should there be a period of administration, a successor company would take over prior to 2025 when administration is determined. There could then be a retendering, as it were, of the process by which a company runs the DCC in 2025. At both of those points, there would potentially be a question about the identity of that company. We know the identity of the company at present: Capita is running the DCC, and the DCC as an organisation is a fully owned subsidiary of Capita.

I must say for the record that my ideal way of running the DCC would be for it to be a public body and not responsible to a company. The formation of the DCC, maybe at a future date should the circumstances be different, as a not-for-profit public interest body concerned with the proper administration of the whole smart meter arrangement, in the public interest and for the public good, would be the best way to organise things. That is not the position now, however, and it may not be for some while.

The amendment would look at how one might align the public interest and public good with circumstances under which a successor company might be called on, in the event of administration procedures. On this occasion it would give a power to the Secretary of State, since it would give the Secretary of State discretion to look at the circumstances of a tender or a post-administration arrangement—presumably also by tender—in circumstances where a non-GB company were to become the successor or putative successor company running the DCC.

Without entering into any great conspiracy theories, we have to have some regard for the ownership and running of an organisation that holds a huge amount of information about what we do, who we are and how we work. That is vital information concerning not just our activities but our aggregate activities. Ensuring that the company running the DCC is working appropriately in the national interest with that information and that crucial role seems to me quite an important thing, which we ought to consider.

As things appear to stand at the moment—I do not wish to name any companies for fear that, outside the privilege of the House, they decide to deal with me appropriately—

[Richard Harrington]

You might need protection.

[Dr Whitehead]

Indeed. I was going to say to the Minister, who has gone on the record as having nudged people in his previous post, that I cannot offer him full protection if he carries on nudging people, particularly in pubs. My protection is conditional.

We ought to consider the issue seriously. I appreciate that under the present circumstances of our membership of the EU it would be difficult for the Secretary of State to exercise the sort of powers I am suggesting he might have. However, by the time 2025 comes around, one way or another we will not be a member of the EU. The Secretary of State could therefore exercise that power in the public and the national interest, unfettered by other considerations.

It would be prudent for the Secretary of State to have that power available to him or her so that we can put our affairs in order concerning what I agree continues to be an unlikely sequence of events. We ought to have it on our minds, however, in case those events occur. In that way, we can rescue not only the position of the administrator but what the company subsequently does in the national interest as far as keeping control of all this data and running a smart meter programme are concerned.

[Richard Harrington]

I thank the shadow Minister for his comments. The important part of the amendment is valid. Again, it is “what if”, and we have to consider that. I have tried to assess those points. The new clause would give the Secretary of State a non-time-limited power to impose conditions on future smart meter communication licences as appropriate, which could include restricting future licensees to being British-owned companies.

The licences that are valid at the moment were granted to Smart DCC Ltd in 2013 for a period of 12 years, which is why 2025 has been mentioned quite a few times. That would be the earliest time at which they could be re-tendered. It is the intention that any competition to grant a new smart meter communication licence carried out after November 2018 would be conducted by Ofgem, the first one being appointed by the Secretary of State. That reflects our policy of transferring responsibility from the Government to the smart metering programme, from the Government to the regulator, and recognising that smart metering will eventually become business as usual for the energy industry after this period.

[Grahame Morris]

I know that the Minister is the soul of reasonableness, but is the issue not so much about the regulator? The regulator’s principal task is the interest of the consumer. Are there not political considerations if a foreign-owned company becomes the regulator? There is an elephant in the room that no one is mentioning, but that is at the back of everyone’s mind. It would surely be prudent to take steps to ensure that the Secretary of State or the Minister has reserve powers to prevent that from happening, given the sensitive and pervasive nature of the data involved.

[Richard Harrington]

The hon. Gentleman makes a very good point. If he will be patient with me for a few minutes, his good constituents in Easington will, I hope, be reassured by what I am about to say about foreign ownership.

The shadow Minister’s point was not directly about nationalising the DCC but about whether this kind of organisation would be better off as a not-for-profit publicly owned organisation. That, obviously, was not the Government’s policy. The Government’s policy is to favour competition while protecting the interests of the consumer.

For those less familiar with the details of the licence than I am and the shadow Minister is—he knows it intimately—I should say that the licence’s clear objective is to foster the competitive supply of energy. As a natural monopoly, which is what it is—that is what it would be, whether state owned or privately owned—the price is regulated by Ofgem, so that the costs flowing to consumers are controlled. I felt it worth while to make that point.

The new clause seeks to ensure that the process for awarding the next licence is future-proofed and that the interests of consumers, industry and the country as a whole are protected, irrespective of who is responsible for running the future licensing competition, be it Capita, another company or a not-for-profit organisation.

I would like to highlight two areas. This, I hope, is the answer to the question of the hon. Member for Easington. On the critical national infrastructure point, which this is part of, the shadow Minister mentioned the strategic value—not in money terms but foreign power terms—of this database on all the millions of people who will hopefully have these meters. The Government take the issue seriously.

Under the Enterprise Act 2002, Ministers have the ability to intervene in mergers and takeovers that give rise to public interest concerns, including those relating to national security. That means the Government can ensure that any national security issue arising from mergers or takeovers is correctly investigated and that mitigating measures are put in place.

Our review of the existing regime has highlighted that it needs to be updated to take into account the changing structure and size of companies and the sophistication of this kind of corporate movement, which is why the Government are looking again at how best to scrutinise the ownership of our important infrastructure and have committed to a White Paper next year as the next step in our strategic reforms. That cuts across the new clause.

We recently published a Green Paper review in this area. The proposed reforms have a particular focus on ensuring adequate scrutiny of whether significant foreign investment in our most critical business, which this would be, raises any national security concerns. Those businesses are, by definition, essential to our country and society, and clearly a company or entity carrying out this DCC operation would be, because of the significant data points mentioned.

The aim of the proposed reforms in this area will be to provide Government with the ability to act in circumstances where security concerns are raised. In that context, the Government seek to strike the right balance between protecting national security, having general competition and investment, and being an open and liberal international trading partner, which has worked very well. It is a balance, and the security side is very important.

As far as the EU exit point is concerned, notwithstanding the proposal outlined in the Green Paper, the UK takes its international obligations seriously. We need to ensure that any ownership restrictions are lawful, under not only retained EU law but future trade agreements with countries across the world. We all know that this precise form of agreement between the UK and the EU will be subject to negotiations. It is stating the obvious, but the Government are looking at all possible options. It would therefore not be appropriate at this stage to introduce provisions that may contradict or conflict with the Government’s approach to foreign investment. I hope the hon. Gentleman finds my explanation reassuring and will withdraw the amendment.

[Dr Whitehead]

I thank the Minister for his explanation. Perhaps I could seek a slight amount of further clarification on his confidence that, in these particular circumstances, he would be able, in principle, to intervene using the powers he has set out that exist elsewhere in Government. He appears to be saying that powers already exist that would allow him to address the issue, and that new clause 3 is therefore not necessary. Is he confident that in the specialised circumstances pertaining to administration and subsequent events, those powers would be fully applicable in terms of the concerns that I have raised?

[Richard Harrington]

Yes, I am satisfied, but subject to the fact that the legislation on the security aspect of it is evolving and currently under consultation. From what I have read in the Green Paper and all the work that has gone into it, it is precisely the security aspects of the circumstances the hon. Gentleman is describing that would be covered.

[Dr Whitehead]

I thank the Minister for that clarification. In those circumstances, I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 5

Review: Use of powers to support technical development

‘(1) Within 12 months of this Act coming into force, the Secretary of State shall commission a review which shall consider how the extended use of powers provided for in section 1 will support the technical development of smart meters, with reference to—

(a) alternative solutions for Home Area Network connections where premises are not able to access the HAN using existing connection arrangements,

(b) hard to reach premises.

(2) The Secretary shall lay the report of the review in subsection (1) before each House of Parliament.”

This new clause requires the Secretary of State to review how the extension of powers support technical development of smart meters.—(Dr Whitehead.)

Brought up, and read the First time.

[Dr Whitehead]

I beg to move, That the clause be read a Second time.

I am afraid, Mrs Gillan, that you have got me for the rest of the running. New clause 5 relates back to clause 1 and deals with the extent to which, as a result of the extension of time for the exercise of powers, the Minister may consider what licensing may be necessary over the period in respect of particular aspects of the roll-out: in this instance, the use of the home area network and wider area network. Hon. Members will know the distinction: the home area network is the communications that happen between the meter, the house and the immediate external data receiver. The second, the wide area network, relates to the extent to which data receivers can operate in certain areas where population is sparse, there are geophysical difficulties in getting coverage and so on.

In those circumstances, the Government reported in the documents that went before the regulatory committee:

“Smart meters make use of a home area network to link the smart meter to consumer devices such as the in-home display or smart appliances. The technical solutions already being delivered currently apply to approximately 96.5% of premises. In some premises such as apartments in high-rise buildings where there is a long distance between the smart meter and the premises, these solutions are not viable.”

Essentially, the Government are saying that they know that under the present comms arrangements, all but 3.5% of properties can reasonably reliably be considered as covered, but there are certain circumstances, such as some basement buildings or high-rise flats, in which the home area network cannot easily communicate its data properly and safely back to the external devices. The Government state:

“It is necessary to provide a technical solution to ensure that all devices in these premises are linked to the smart meter using the home area network. This work is currently being progressed through the Alternative HAN Forum”.

I am not sure whether anybody would get very far at parties by saying they were a member of the Alternative HAN Forum, but such a body exists and it brings together suppliers to develop and procure new solutions for those premises.

The Department then states:

“It might be considered appropriate to separately license these activities to provide a greater degree of regulatory control over them.”

It is considering whether there is a need for a separate licence arrangement, so far as those activities are concerned, to ensure that, when solutions for that 3.5% of premises come about, they should be properly controlled by licensing within the terms of the roll-out. Similarly, the Department considers that a little over

“99% of premises in Great Britain are capable of connecting to the DCC through the wide area network”.

That is the WAN. I do not know if there is an alternative WAN forum as well as an Alternative HAN Forum, but under those circumstances it would clearly be thinking about that 1% of premises that look unlikely to be able to connect through that wide area network. The Department states:

“A different solution may be necessary to provide coverage to smart meters in the remaining hard to reach premises which the wide area network does not cover. It might be considered appropriate to create a licensable activity that relates to arranging the establishment of communications to these properties.”

The Department has in mind two licensable activities that may arise when those solutions are under way. I certainly understand, so far as the wide area network is concerned, that technical solutions such as patching—essentially patching in areas that are not available to the wide area network to what is available—are in a reasonably advanced state.

The new clause essentially asks the Minister to consider these two particular issues relating to the licensing of those activities and asks the Secretary of State to commission a specific review to look at how the extended use of powers provided for in proposed new section 1 will support those two areas of development—alternative solutions to the home area network and hard-to-reach premises that the wide area network cannot reach. Rather than there being a feeling that it might be appropriate to create a licensable activity, the new clause will make it rather more formalised by requiring the Secretary of State to actually produce a report on those particular issues and how they can be sorted out as the roll-out progresses.

Clearly, the extension of time for the roll-out gives the Secretary of State the ability to consider the issue in more detail and get, at a reasonably early stage, licensable arrangements, or would-be licensing arrangements, in such a report that would cover those activities in those particular areas. That would also be a sensible addition to the Bill—either securely in the Bill or, alternatively, through an acknowledgement and understanding that this is an issue for the future that needs to be considered and which should come under licensing arrangements, and that work will be undertaken to ensure that that happens.

[Richard Harrington]

The new clause has two points, as I see it. First, the smart meter system establishes a wireless home area network—HAN—in a consumer’s home that links the gas and electricity meters’ in-home display and the communications hub; and the communications hub establishes the network and manages the data across it. As with any wireless technology, various physical factors affect the performance of the HAN, such as what the building is made of or the thickness of the walls, as indeed we find with mobile phones in parts of the Palace of Westminster—in some places it works and in some it does not.

[Thangam Debbonaire (Bristol West) (Lab)]

Mostly not!

[Richard Harrington]

The hon. Lady has been to my office. She is welcome again any time.

Those things do affect the signal strength in exactly the way that we are joking about—it is actually true. The distance between the various pieces of smart meter equipment will also affect the performance of the HAN—for example, where a meter is located away from the main residence or in the basement of a block of flats—but it is important that the HAN works, to deliver the benefits for consumers, such as the in-home display.

For the vast majority of premises the communications hub provides the necessary home network. In the small number of premises that it does not, some form of alternative will be needed to ensure there is a working HAN. If there is not, how can we ask people to take on smart meters? We have already used our section 88 powers to place obligations on energy suppliers to develop and deliver an alternative to this, which—to continue the use of expressions and abbreviations by the shadow Minister—I would call “Alt HAN.” The Alt HAN Forum, the Alternative Home Area Network Forum—believe me, there is one—has been established along with the Alt HAN Company and its board. This gives suppliers the framework to get on and develop the solutions they will need. The forum has developed a commercial strategy, which is being implemented, and a procurement exercise is currently under way, and we expect the pace of delivery to pick up next year. It is an important part of the roll-out and the Department has worked closely with the forum throughout the early stage of its setup, and we are continuing to do so. We are tracking progress through the smart metering implementation programme’s governance, and we will monitor on an ongoing basis and determine whether further regulation is needed—so it is ongoing work.

The second point mentioned in the new clause was the arrangement for the so-called “hard-to-reach” premises. Here we are talking about communication of data to and from the premises through the Wide Area Network—referred to so gracefully by the shadow Minster as the WAN—to energy suppliers via the DCC. There are some premises that it may be difficult for WAN communications to reach, due to the location’s surroundings, for example in built-up areas with tall buildings, but also in remote and mountainous areas. By the end of 2020, on the basis of existing solutions, we expect that 0.75% of premises will be without DCC WAN and reaching these will be disproportionately expensive, with costs likely to exceed benefits, but it is not a static solution. Through its licence we placed obligations on the DCC to take steps to explore other solutions, which could be used to fill any coverage gap. We have to look for ways to ensure that these premises are serviced, because otherwise they will never get full access to smart services, and we are pushing suppliers to innovate to find solutions that work for them and their customers. We have facilitated an industry-led group for this purpose, to consider possible solutions. Finally, customers without DCC WAN can still benefit from some smart services, such as consumption data shown on the in-home display.

Those are important areas, and I know they are quite technical and not of interest to many people, but I felt it was necessary to take the opportunity to explore them. As I have outlined, we are closely monitoring activity and development—we really are. That is very important and is part of the whole development. I do not consider it necessary to add a separate review process on top of the existing working arrangements, which are all very comprehensive. I hope the shadow Minister finds my explanation reassuring and on that basis will agree to withdraw the amendment.

[Dr Whitehead]

I do find that reassuring and it is good to know that these processes are under way, albeit under circumstances where we are a little way from where we want to go. I hope that those processes can lead to a good result for what I appreciate are fairly small proportions of the population that one way or another cannot access the HAN or the WAN. Hopefully, we will be able to provide that reassurance that the roll-out really will be the roll-out that we want it to be in terms of the full connectivity of everyone who is being offered a smart meter for the future. That is an important consideration that we have on the table in the latter stages of the roll-out, and I hope that the current developments can reach that happy conclusion. Under those circumstances, I beg to ask leave to withdraw the clause.

Clause, by leave, withdrawn.

New Clause 6

Review: Use of powers to support rollout of smart meters

“(1) Within 12 months of this Act coming into force, the Secretary of State shall commission a review which shall consider how the extended use of powers provided for in section 1 will support the rollout of smart meters, with reference to—

(a) providing for efficient removal and disposal of old meters,

(b) reviewing the exemptions for smaller suppliers from a legally binding requirement to roll out smart meters.

(2) The Secretary of State shall lay the report of the review in subsection (1) before each House of Parliament.”

This new clause requires the Secretary of State to review how the extension of powers supports the rollout of smart meters.—(Dr Whitehead.)

Brought up, and read the First time.

[Dr Whitehead]

I beg to move, That the clause be read a Second time.

I think that the Minister’s defence may be that the new clause is not properly drafted and therefore he cannot accept it. It is not the case that it is not properly drafted in terms of being in order or making sense, but it states something about smaller suppliers that is not quite right. Nevertheless, I want to set out the sentiment of the paragraph that refers to smaller suppliers and seek the Minister’s view on what might be done. We have already had a substantial debate on the subject of paragraph (a)—the efficient removal and disposal of old meters—so I want to concentrate my thoughts and remarks on the second part of the clause.

Although it is the case that smaller suppliers—non-obligated suppliers that have fewer than 250,000 customers, including dual-fuel customers—are not as obligated as companies that have more than 250,000 customers in the smart meter roll-out, it is true that all suppliers eventually are obligated to get meters into homes by the end of the roll-out period. Smaller suppliers are not legally obligated in the way that larger suppliers are to reach the milestones and the attainment agreements in place, which I mentioned earlier and which are undertaken through a legal directive from Ofgem. Therefore, it would be quite possible for those suppliers not to install smart meters until the last quarter of the last year of the roll-out, and then rush and install them all, while still meeting their final obligations, because they are not subject to milestones in the way larger suppliers are.

It can be suggested that that non-obligation means that smaller suppliers, by and large, are not very advanced in smart meter installation programmes. Obviously, there is a question about arrangements that smaller suppliers have to make when dealing with their often dispersed group of customers—if, for example, they are responsible for installing five smart meters in Congleton, three smart meters in Biggleswade and six smart meters in Clacton, depending on the distribution of their customers. In those circumstances, they will clearly factor out the installation of those smart meters to a third party. We have already discussed what happens with third-party meter installation arrangements on occasions in this Committee.

Overall, there are a number of not exactly worrying incidents but incidents in which it appears that smaller suppliers are slow off the mark in getting smart meters installed. Clearly, as we approach the point at which we have to get those smart meters in—towards the end of the 2020 period—that could become a significant factor, even though small suppliers of fewer than 250,000 represent about 6.5% of the total market. That is not an insignificant amount, particularly towards the end of the smart meter roll-out period.

The new clause, or certainly its sentiment, indicates that the particular circumstances might be reviewed as the roll-out progresses. The smaller suppliers should be more closely bound into the milestones than is the case at the moment so that we can have reasonable certainty that we are progressing across the board so that, by the time we get towards the end of 2020, we will not have a bit of the roll-out jigsaw that is not in place, possibly to the detriment of the roll-out as a whole. Will the Minister assure me that he is actively considering how that particular problem might be resolved? That would in turn be very helpful in my considerations about the new clause.

[Richard Harrington]

I thank the hon. Gentleman for his contribution. His new clause would require the Secretary of State to review how the extended use of powers will support the efficient removal and disposal of the old meters that are replaced by smart meters, as well as to review the roll-out obligations applicable to smaller energy suppliers.

As the shadow Minister said, we have discussed the first one at some length. A meeting is being convened with officials from BEIS and DEFRA and, I believe, the hon. Member for Birmingham, Selly Oak. I hope that the shadow Minister will also be available—I hope both Members will be because the purpose is to discuss fully the valid points that they made.

On the exemptions for small energy suppliers, it is true that the pressure is not on them as it is on the larger suppliers, for reasons that have been explained formally and informally. At the moment, the smaller suppliers are growing but they have a very fragmented customer base, as the shadow Minister explained well. That does not mean that they are being let off. In fact, Ofgem asked smaller suppliers for annual reports on progress and, ultimately, will take a view on it and whether it needs to be speeded up, noting that the progress has still to be consistent with taking all reasonable steps to comply with the 2020 regulations. They are not exempt; practically, however, the regulator has gone for the suppliers with the larger consumer bases first, to give the smaller ones a chance to get a mass of membership. In my area, I keep speaking to people who have basically followed the same thought process as me and gone for my smaller supplier, just on the internet. I can see that happening in practice.

In developing the regulations, the Government have been cognisant of the fact that the resources of smaller suppliers and big ones are different. That is a question—a point I have made—not only of the bulk of customers being concentrated but of the necessary IT systems and completion of the requisite security assessment to become a DCC user, which they can do six months later than large suppliers, for good reason.

We have also taken steps to manage the financial burden on small energy suppliers. The policy is to get as many smaller companies into the market as possible, for reasons of competition. The charges—the costs of the DCC data and communications services—are proportionate to an energy supplier’s market share. The larger suppliers pay the most and the smallest the least; it is not a flat rate at all. The Government have also made explicit provisions to facilitate an active market for a number of IT service businesses to provide the connection between the DCC and small energy suppliers, rather than allowing large companies to have a monopoly of it.

In conclusion, the design of the smart metering infrastructure means that, regardless of size, an energy supplier can access any smart meter enrolled on the DCC system and can therefore operate on a level playing field with all other energy suppliers. That is constantly under review by Ofgem. I repeat that their progress and their obligations are exactly the same, it is just a question of when and how. I hope the hon. Member for Southampton, Test finds my explanation reassuring and will agree to withdraw the new clause on that basis.

[Dr Whitehead]

I do find the Minister’s explanation reassuring. I hope, however, that what those smaller suppliers are doing is kept closely under review as the roll-out progresses. They are an integral part of the roll-out process, and they should not be able easily to evade their responsibilities to ensure that the roll-out is a success due to their circumstances. The Minister has reassured me that light that will be shone on that progress so I beg to ask leave to withdraw the new clause.

Clause, by leave, withdrawn.

Title

Amendments made: 18, title, line 2, leave out “and”.

See the note to amendment 19.

19, title, line 3, at end insert “and to make provision enabling half-hourly electricity imbalances to be calculated using information obtained from smart meters”.—(Richard Harrington.)

This amends the Bill’s long title so that it covers the provision about smart meters made by NC8 to NC10.

[The Chair]

Before I put the final question, on behalf of the Committee I would like to thank everybody who has looked after us, particularly the members of the Committee, but also the Clerks, Hansard, the doorkeeper and the officials who have supported the Government Front Bench team.

Question proposed, That the Chair do report the Bill, as amended, to the House.

[Richard Harrington]

I would like to thank you, Mrs Gillan, and Mr Gapes for chairing so well and for having such patience with the shadow Minister, me and others. I reinforce what you said about the Clerks and the House authorities who have equally behaved in an exemplary manner. I also take this chance to thank my Bill team, who have lived and breathed this Bill. I commend them for everything that they have done. I thank members of the Committee on both sides for their patience and for all their good intentions to try to make something of the Bill and to improve it.

[Dr Whitehead]

I add my thanks to the members of the Committee for the positive way in which our debate has been conducted and for the conclusions that we have reached at the end of the Bill, and to you, Mrs Gillan, for your superb chairing of our proceedings and for your patience with me when I no doubt tested you to some considerable extent on matters of arcane constitutional interest. You conducted proceedings with complete impartiality, fairness and concern for the welfare of all members of the Committee. I pay specific thanks to our outstanding Committee Clerks, who have been of tremendous assistance to Opposition Members in getting our material together for the Committee, and who went way beyond the call of duty in ensuring that that happened. I thank them for that considerably.

Smart Meters Bill

Lord Harrington of Watford Excerpts

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

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

May I say what a pleasure it is to see you in the Chair, Mr Deputy Speaker, even though it obviously means a higher level of behaviour from all of us, as well as our obeying your edicts on timekeeping and so on? I thank all Members who have contributed to the debate, particularly the shadow Minister, the hon. Member for Southampton, Test (Dr Whitehead); the hon. Member for Birmingham, Selly Oak (Steve McCabe); the hon. Member for North Ayrshire and Arran (Patricia Gibson)—I always forget the second bit—and my hon. Friends the Members for Stirling (Stephen Kerr) and for Chippenham (Michelle Donelan).

We have covered a number of areas in our debate, which has built on the consideration given to the Bill on Second Reading and in Committee. The main point about the Bill and the roll-out of smart meters—I am not making light of any of the comments made by Opposition Members, or indeed Conservative Members—is that the prize is a great one: everyone, in their own household, controlling a smart grid that will give them independence, flexibility and consumer choice. In the long run, I hope that that will lead to very significant savings for them. I felt that I should put that into perspective.

[Steve McCabe]

I recognise that that is the Minister’s genuine view, but how much should consumers pay for the privilege, and at what point will he feel that they are not getting the benefits they have been promised?

[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.

[Dr Whitehead]

I am disappointed that the Minister did not give us a better explanation and understanding of what “offer” means as far as smart meter roll-out is concerned. Indeed, that question was raised from the Conservative Benches. It might be that the Secretary of State can better illuminate us on Third Reading. Strictly speaking, however, that does not relate to the new clauses and amendments, on which we have had a good debate. If necessary, there will be further such debate in another place. This evening, however, it would not be wise to divide the House, so I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Third Reading

--- Later in debate ---

[Patricia Gibson]

It is important to point out that we in the SNP accept that there are some real advantages to the consumer in switching to a smart meter and to smart meters in general. However, that does not mean that I suggest that the roll-out will be trouble-free and that I have no concerns about it, because that would not be true. Before proceeding, however, I would like to point out that I accept that the Minister has been receptive throughout to my concerns and the concerns of others across this House in Committee and beyond, and I thank him for that. I know he is keen to get this right, as we all are, and I thank him for his listening, consensual and constructive approach.

In the past, I pointed out to the Minister that I had concerns about aggressive selling which I believe is, as I have said, a result of Ofgem having the power to fine energy companies up to 10% of their annual turnover if they fail to meet their licence conditions—or certainly not assisted by that fact. One of the licence conditions is that each energy company should install smart meters in consumer homes by the end of 2020. Failure to do so can result in a massive penalty for the company. That being the case, aggressive selling starts to make more sense, given the pressure that energy companies are under to deliver smart meters to consumer homes within a rather tight deadline. I continue to detect a level of suspicion and scepticism about smart meters among far too many consumers. I hope that the Minister will accept that the licence conditions place pressure on the energy companies to roll out smart meters by 2020, and that that can place pressure on consumers in turn.

I am sure that, like me, the Minister will have been disturbed to learn of recent reports of energy companies employing salespeople to go out and proactively sell smart meters to consumers. If the reports are true, those salespeople can earn commissions of more than £1,000 week, which equates to bonuses of twice what the average worker earns in a year. Will the Minister acknowledge that this can lead to overbearing and aggressive doorstep selling, which can put consumers under pressure? Does he share my concerns about this? If so, what steps can he take to address it?

Cold calling is a discredited way of selling that puts undue pressure on consumers, particularly vulnerable ones. Does the Minister think that this is an acceptable way to proceed, given the rewards that sales reps can earn if they “persuade” enough people to install a smart meter? Is sending target-hungry salespeople to chap on the doors of the elderly and vulnerable the most desirable way we can think of to roll out smart meters? I would be extremely disappointed if the Minister—and indeed Ofgem—thought so. We know that doorstep energy selling was left with a very poor reputation after a series of investigations by Ofgem led to suppliers being fined millions of pounds for misleading customers over how much they could save. This resulted, between 2011 and 2012, in all the big six suppliers scrapping face-to-face sales practices, but smaller energy companies are now once again sending staff out to knock on doors. Is the Minister entirely comfortable with that? What reassurances can he offer to consumers and vulnerable members of our communities that they have the protection they need from such companies?

The Minister will also be aware of concerns about misleading letters being sent to consumers suggesting that smart meters are compulsory rather than optional. I want to put on record my thanks to the Minister for sending me samples of letters that have gone out to consumers from various energy companies, in order to reassure me. However, very few of those letters point out that smart meters are optional, and that the customer can refuse to have one. All the power companies in the sample of the largest suppliers say absolutely nothing about smart meters being optional. Does the Minister think that that is acceptable? Is he, like me and the trading standards authorities, concerned about this? If so, what action can Ofgem take to address the situation?

What is going on with the “You have been chosen for a free upgrade to a smart meter” letters that some companies are sending to consumers? I wish all consumers were aware that when a business tells them that they have been “specially selected” for something, it usually means that everyone has been “specially selected” for it and that the term is meaningless. Another old favourite involves the words “You are eligible”, which is also misleading, because everyone is eligible. If we all have the option to have a smart meter, why do some companies feel that it is honest and in order to tell us that we have been “specially selected”, or that we are “eligible” for one? Does the Minister have concerns about this way of misleading customers?

[Richard Harrington]

I thank the hon. Lady for giving way. I was trying to attract her attention while she was mid-speech. The type of sales proposal she has mentioned is totally unacceptable. It is not within the regulations, and if she would like to write to me or see me with specific examples, I will take the matter up with the regulators myself.

[Patricia Gibson]

I thank the Minister for his response, but the information that I am imparting tonight comes from the sample of letters that the Minister sent to me, so some energy companies are clearly using this sharp practice. I would not say that all of them are, but some are certainly not saying that smart meters are optional, instead using language such as “You are eligible” or “You have been specially selected,” which is unacceptable.