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.