Smart Meters Bill

Lord Henley Excerpts

2nd reading (Hansard): House of Lords
Tuesday 13th March 2018 Lords Chamber

Moved by

[Lord Henley]

That the Bill be now read a second time.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, the rollout of smart meters is a key enabler for the transformation of our energy system. Smart meters are a critical part of the platform for the development of a smart grid and demand-side measures. Smart meters will facilitate greater flexibility in the production and consumption of energy by providing better information and improving communication between consumers, suppliers and network companies. In particular, they will improve the ability to shift demand to match supply, allowing us to make use of excess renewable electricity when it is available and use less electricity at peak times when it is more expensive. They will also improve distribution network companies’ understanding of and control over the use of their networks, allowing more power to flow through the existing wires without reinforcement, improving reliability and safety as well as reducing costs.

The development of a world-leading smart energy system, which delivers secure, cheaper and cleaner energy, is an important part of our industrial strategy. The vision of a smarter energy system, built on a platform of smart metering, is a prize worth striving for. The smart metering programme is one of the most significant infrastructure projects our country has seen. Over 50 million gas and electricity meters are expected to be installed in over 30 million homes and small businesses. The Government are committed to ensuring that all homes and small businesses are offered smart meters by the end of 2020, and considerable progress has been made. The enduring national data and communications service has been built, tested and launched. The Government have also established much of the regulatory, policy and technical framework necessary for this programme to be a success.

Energy suppliers are now actively installing smart and advanced meters, backed by Smart Energy GB’s national consumer awareness-raising campaigns. By September 2017, over 8.6 million smart and advanced meters were operating in homes and businesses across Great Britain. Rates of installation are also increasing, with around 400,000 being installed each month. Households and small businesses can start saving energy and money as soon as their smart meters are installed. Indeed, smart meters are expected to take £300 million off domestic energy bills in 2020 alone, rising to £1.2 billion a year by 2030. These are not small sums of money, and it is right that the Government continue to oversee and monitor the rollout to ensure that it delivers effectively, bringing benefits to GB consumers.

The costs of the rollout were debated extensively in another place, and the Government have listened to the concerns raised. Along with the regulator Ofgem, we closely monitor progress and costs to ensure that the significant benefit case, estimated at £5.7 billion net benefits, is secured. It is worth highlighting to the House that, following those debates and as part of our broader commitment to transparency, we agreed to publish a further update of the cost-benefit analysis for the programme in 2019. The Bill received broad support at Third Reading in another place, as would be expected for a well-established programme that has its origins in the Energy Act 2008 and was considered further when its powers were amended in the Energy Act 2011. I hope that we can continue the same constructive debate that has characterised the Bill’s passage to date.

Let me turn to the Bill itself, which has three measures. The first measure in the Bill extends by five years the Government’s powers to direct the rollout of smart meters, which are due to expire in November 2018. The most important of these is the power to modify energy licence conditions and industry codes, for the purposes of supporting the smart metering rollout. The Government have used their powers to put in place minimum common technical standards and consumer safeguards, including in relation to data access and privacy. Extending these powers to 1 November 2023 is necessary to maintain coherence in the rollout of smart meters and ensure that relevant activities are co-ordinated. This could include situations where new technical solutions are required to address any residual challenges to full smart meter coverage to ease industry-wide delivery challenges. In addition, the Government will look to take opportunities to maximise benefits from smart meters once installed.

The second measure will enable the establishment of a special administration regime for the smart meter communication licensee—currently the Data Communications Company, or DCC—to ensure the continuity of the smart meter communication service in the unlikely event of the licensee’s insolvency. The DCC is a licensed private sector entity and provides the national communications infrastructure for smart metering. The DCC enables energy suppliers and networks to collect energy consumption data remotely and securely, supporting them in delivering the full benefits of smart metering. Meters operated within the DCC will also be fully interoperable, enabling consumers to switch their energy supplier and keep their smart services. The special administration regime for the smart meter communication licensee is similar to that for energy networks and energy suppliers. The provision of a special administration regime has also been adopted across other sectors, including rail and water. The DCC’s financial arrangements are constructed so as to make the risk of insolvency low. However, the special administration regime is a sensible precaution, with the aim of ensuring continuity of the DCC’s services and so protecting consumers and industry from the impact of any hiatus in service provision.

The third measure relates to the delivery of half-hourly electricity settlement by Ofgem. Half-hourly settlement is a key enabler of the move to a smart energy system and will help deliver benefits to consumers and the energy system by providing incentives on energy suppliers to develop and offer innovations such as time-of-use tariffs, which will enable customers to use energy when it is cheaper, reducing their bills and the costs of the future energy system. This will also help the energy system become more resilient as we move towards an increasingly low-carbon generation mix. Ofgem is currently working with industry and consumer groups to assess the costs, benefits and market design options for market-wide half-hourly settlement. It intends to take a decision on whether and how to implement it, informed by an impact assessment, by the second half of 2019. This third measure will provide Ofgem with new powers that would allow it to deliver these reforms more swiftly and smoothly than under existing processes by allowing it to directly modify relevant industry codes and documents.

In summary, smart meter rollout will deliver a much-needed digital transformation to our energy system, providing the platform for a smarter, more flexible energy system that supports innovation in new, smart products and services. For consumers, smart meters provide the foundation for smarter living, creating opportunities for the emergence of innovative products and services, and taking us to a future where, for example, smart appliances such as dish-washers and fridges use energy when it is cheapest and to help reduce peak demand and energy system costs; energy networks know who has been affected by a power cut; and new tools support assisted living. Access to detailed, accurate energy consumption information will also support the delivery of tangible and immediate benefits to households and small businesses across Great Britain. I beg to move.

--- Later in debate ---

[Lord Lennie (Lab)]

My Lords, I should start by making a declaration—or perhaps a confession. I am a smart meter user. I accepted the offer made by the company. It is a SMETS 1, so it is not doing me much good in terms of reducing my consumption or the cost—but at least I have one. That, I think, may be unique among Members of this House, but not so much so among the wider public. I also thought until yesterday that we might be able to have a debate which did not involve the European Union. However, having seen E.ON’s and RWE’s proposals, we are reminded that this is not taking place in a vacuum and that E.ON will now become the major provider for the customers of electricity while RWE is getting back into green research and the provision of electricity—reversing a decision that was taken before our decision to come out of the European Union.

I thank all noble Lords who have taken part in the debate. I share with everyone their support for the Bill—with reservations, and unfortunately it is those reservations which are going to take up most of my time. I thank in particular my noble friend Lord Grantchester for his analysis at the start of the debate. It has saved me a lot of time because he has already done the work. I shall try to avoid any repetition during the course of what I have to say. I also thank the Minister for the meetings and briefings we have had about the proposals prior to this debate. They have been very helpful in our preparations.

The Bill has three stated interrelated purposes. The first is extending the powers of the Secretary of State in regulations for smart meters. The second is introducing a special administrative regime, the SAR, with a Data Communications Company, the DCC, to ensure that service continues in the event of their insolvency. The third is to introduce new powers to allow Ofgem to facilitate half-hourly settlements.

First, the extension of powers that are currently due to expire on 1 November 2018. The Bill seeks a further five-year period, until 2023, during which time the completion of the rollout of the smart meters and their claimed benefits will have become evident. That is the plan. What are the chances of this and what benefits will consumers see? The rollout requires companies to have offered every household and small business, and there are 40 million to 50 million of them, a meter by the end of 2020. The offer of the smart meter 1 has been slowed down, while the smart meter 2 is in some kind of preparatory phase and is being tested for workability and interoperability. So the chances of meeting the 2020 deadline are fast receding, unless the Government announce some huge increase of capacity to achieve their intention. The benefits to consumers are deemed to be so positive that they will take little persuasion—but, in this House and in other places, the consumer seems less trusting of the benefits than the Government seem to think. The record tells a different story.

Thus far, the second-generation SMETS 2 have been installed in only 70, perhaps 100, households out of a total of 50 million. If the SMETS 1s can be upgraded to SMETS 2 capability, it will account for some of the increase—but it will still need three times the current rate of approach, interchange and offer of these meters to achieve the 2020 deadline.

The benefit for the customer is that he or she will be in control of their pattern of energy usage, with real-time information being provided and an end to estimated billing. That is true: the smart meter tells you how much you have spent today. At any point in time, it will give you a scare. You have spent £5, £10 or whatever it is you have spent today. It does not tell you anything about what it is that is consuming that money. The DCC will be provided with a half-hour readout of the overall usage of our electricity consumption in order to benefit its purchasing power and allow it to more accurately purchase electricity to meet our needs, each half-hour of the day, as I understand things.

That should lead to a reduction in the price it pays at certain times in the day. That will then be passed on to the consumer in reduced billing. Someone talked about half-hour billings; I do not know if that is going to come about any time soon, but we will certainly know when it is cheaper to run certain types of electricity consumption. In order to make those changes, the customer has to be sure of the benefits or they are not going to change anything. They are going to carry on doing what they do at the time they prefer to do it. The chances of the lower-end pre-paid customer changing their habits, given the other pressures that there are in their life, are more remote than for those who perhaps have more time on their hands, can study these things and can make adjustments to habits that have been ingrained for some years, as they go through life, with family, children who move away and so on.

How will the Government force the energy companies to pass on savings that they will make to the customers? There was some talk in the energy committee in the other place that the Government will make sure that this happens, but how do they intend to enforce it? The Energy Minister in the other place quoted Richard Nixon, who said:

“If you’ve got them by the balls, their hearts and minds will follow”,—[Official Report, Commons, Smart Meters Bill Committee, 23/11/17; col. 73.]


but if you have not, they are not going to. That is about the size of it. I am not sure that the squeeze is happening quite where it needs to happen. Do the Government anticipate a change of heart among the energy companies towards their customers? That is unlikely. They are private businesses; they are in business to make a profit. That is their right and that is what they are set up to do. Their shareholders are their principal guides and they expect a return. It is hard to see where the customer fits into the squeeze there might be on the price of electricity to suppliers. The Government need to think through how the customer benefits are to be realistically delivered.

Another thing concerning the change in our pattern of usage of night-time electricity for white goods is that there are increased risks that the Government should be aware of. Household fires are more likely with unsupervised white goods. Nuisance neighbour noise disputes will be on the increase as energy powers machines at night, particularly in places where people live one on top of another, in blocks of flats and so on. So the attractions of changing patterns of usage of electricity may not lead to the greenfield nirvana the Government seem to believe in.

One of the things that might have been possible—maybe the Minister will comment on this—was the Government taking responsibility for providing the customer with tariff information. Would it have been possible under SMETS 1? Is it possible under SMETS 2? SMETS 3 could possibly, if it has not been thought of before, inform customers about their best possible energy price sources. It is hard enough right now to know exactly where my best deal is, comparing tariffs within one supplier, let alone across a range of suppliers, with six major companies and a number of other minor providers. It is a complicated matter. Could the Government introduce this into the SMETS system and pass on the information to customers? That would be a real benefit and a real selling point for the meters being accepted by more customers.

I turn to the DCC. The Government intend the regime to take back control should the company go into administration. A special administration regime is to be established. The provocation for this lies somewhere between the recent failure of Carillion, an oversight in the original setting up of the DCC and doubts about the performance of Capita, the current DCC operator. If the DCC fails, the customer will foot the bill. The risk of failure is said to be extremely low. However, the impact would be high. Could the Government provide some analysis or report to reassure us that the DCC’s remote chances of failure are so unlikely that no one can see it happening? What happens if the DCC decides to walk away from the contract? Are there penalties? What are they? Might the Government be left high and dry, not by the failure of the company but by the company no longer wishing to provide the service because it does not believe it will meet the 2020 deadline, let alone those beyond it?

These are some of the questions. We support the Bill. It is deficient in some areas and these will be explored more as we go through Committee and Report, but I would be grateful if the Minister could answer some of the questions raised so far.

[Lord Henley]

My Lords, on the last or second to last point made by the noble Lord, Lord Lennie, he looked forward to a world with a SMETS 3 or 4 that might be able to assist a customer in finding a new supplier and direct him in that way. I think we are already there. I imagine that the noble Lord reads the Guardian more often than I do, but the Guardian of 11 March was talking about one company that is developing some sort of dongle that can be plugged into one’s meter and will automatically switch one to the best supplier according to the programme one puts in. One can put in, “I want the greenest supplier” or “I want the cheapest supplier” and one could find oneself having a different supplier from month to month, possibly two or three times a year. The future is good. I refer the noble Lord to that article to see just what is happening out there and what smart meters, as they are at the moment, could possibly lead to.

I have to say that, listening to the debate, I felt that it was a fairly Eeyoreish performance, even by the standards of this House. The noble Baroness, Lady Featherstone, was politer—she referred to it as a masterclass in faint praise. The noble Baroness, Lady Maddock, was, as always, very kind to me: after making her Eeyoreish speech, along with her colleagues and all other noble Lords, she said that she expected something more optimistic from me, “Because the noble Lord always is very optimistic”. I think there is nothing wrong with being optimistic when one has technical developments that are going to bring great benefits to everyone. They are going to bring benefits to the consumer, as I made clear in my opening speech, but they will also bring benefits in terms of reducing our overall consumption and in many other ways.

Like the noble Baroness, Lady Featherstone, I was very amused by the picture of her noble friend Lord Teverson under the floorboards or somewhere—I am not quite sure where he was; it was rather a confusing picture, but he was in the rain with a torch. All I can do is refer the noble Lord to Hilaire Belloc’s “Lord Finchley”. The noble Lord will remember that Lord Finchley came to an untimely end because he tried to do these things himself. In future, the noble Lord can get someone else to look at these things, but smart meters will solve the problem for him.

Others, such as the noble Lord, Lord Whitty, and me, took us back to 2008. I was very grateful to him for doing that and for saying that back in 2008 he was giving warnings, in his Cassandra-like way, and now he could say, “I told you so”. The great thing is that he can say “I told you so” to everyone here, in that the 2008 Act, as the noble Lord and others on the Benches opposite will remember, was passed under a Labour Government. The 2011 Act that I referred to was passed under the coalition Government. I think that we had a Liberal Democrat in both the business department and the energy department during that time, so their fingers must have touched this at some point. Now, in 2018 we have a Conservative Government, so perhaps, like Peter Simple’s Dr Heinz Kiosk, I can just say, “We are all guilty!”, if something has gone wrong. I think, from the degrees of optimism I have listened to in the course of the debate, that there is a general acceptance that smart meters are going to be able to do something that has not been available before and that, as I said, that will bring great advantages to us.

A very large number of questions of a fairly detailed sort have been raised and I will try to address a number of them. However, I think that what a debate of this sort also shows is that even a Bill such as this—a Bill that is broadly welcomed on all sides, that has been through pre-legislative scrutiny, that has had a very useful trip through another place since that pre-legislative scrutiny and that is now here—will benefit from what your Lordships can do in Committee. I look forward to that Committee and hope that we can tease out just where the problems are so that I can give appropriate assurances on matters that are relevant to noble Lords and, if necessary, make amendments, but I do not think that that will be necessary. As the noble Lord, Lord Grantchester, put it, this is a largely technical Bill dealing with three small matters, but its title allows us to discuss the generality of smart meters, smart metering and how we get the rollout completed. I hope that in the course of this debate, Committee and further stages we can continue that process and provide the proper assurances.

This afternoon, I propose to answer a few of the questions to the best of my ability. I think it would be useful if I write another letter to all noble Lords who have taken part in this debate and place a copy in the Library, setting out a more detailed answer of the sort that one cannot properly give to some of the more detailed questions and very sensible suggestions made by my noble friend Lady Manzoor. I give that assurance that I will send that detailed response to all noble Lords.

In the meantime, I shall answer a few of the questions that have been asked. The first, and most important, is to give some sort of assurance that we believe that it is still possible, despite the numbers which the noble Lord, Lord Grantchester, quoted from Which?. The numbers probably appeared in the Daily Mail as well, for all I know—that was another publication that was mentioned. We believe that we will be able to get there in due course. The rollout to date has been growing. Around 400,000 smart meters are being installed every month. That has to get up to a bigger figure if we are going to get to the end in the three years that are available. I do not think that is representative of the next phase of the programme when most suppliers will be installing smart meters with greater numbers of installers and more types of customers across Britain. We will certainly continue to collect data—this was something that the noble Baroness, Lady Maddock, asked about—on the rollout, getting independent, official, quarterly statistics on progress by the large suppliers, and we will make sure that they are published quarterly, as I think they have been since September 2013. In addition, a summary of the annual rollout progress for the calendar year is published every March, so we should have that in due course. I do not know whether it will be before Committee, as no one has yet given me a suggested date for the next stage of the Bill.

[Lord Teverson]

As I said, I think it is impossible to get to that. Can I just be clear about the commitment? It is to offer everybody a smart meter. Are the Government clear with the suppliers about what “offer” means and that it is not just an email saying, “Do you want a smart meter”? Are we clear about the target? Not everybody wants one. Is that a potential get-out clause in this target?

[Lord Henley]

The noble Lord knows that we are not going down the route of saying that everyone will have one, but we hope everyone will see the benefits of them and that everyone will be offered one, and I hope that offer will be more than just the email that the noble Lord suggests. It is difficult to persuade people to change. Some months ago we discussed the ease with which one can change one’s electricity supplier. However, because of inertia, few people do. The easier that it becomes and the more benefits that there are, the more people will switch supplier. The same applies to smart meters: people will adopt them as they see the benefit. We shall continue to push suppliers to do what they can, because of the benefits. That is not only those benefits to consumers that we all recognise, but those to the country through reducing our overall electricity consumption by evening it out and those other benefits identified.

[Lord Grantchester]

I thank the Minister for giving way. It is the responsibility of Ofgem to report on the companies’ taking all reasonable steps to offer consumers a smart meter.

[Lord Henley]

The noble Lord is absolutely correct. I apologise for not making that clear. There will be information available from Ofgem.

On rollout, I agree with points made that there is more that we can do to engage with customers in moving to smart metering. This is important and we shall certainly do more. As noble Lords will know, we have required the establishment of Smart Energy GB. This is an independent not-for-profit organisation leading the centralised programme to raise national awareness alongside activities to drive behaviour change and help consumers to benefit from smart working. The situation is changing. I think that the noble Baroness, Lady Maddock, quoted figures about satisfaction rates, but on awareness of smart metering, this has increased from some 40% to over 80% in three years and has driven demand for millions. Research shows—I believe that this is a figure that the noble Baroness quoted—that some 80% of consumers who have smart meters would recommend them to friends and family.

The question of safeguards, safety of data and related issues, is a concern of my noble friend Lady Manzoor, the noble Lord, Lord Whitty, the noble Baroness, Lady Maddock, and others and it is something to which we shall come back in due course. National smart meter infrastructure has been developed from the outset in consultation with experts from industry and government including the National Cyber Security Centre, which is part of GCHQ. The smart meter security model establishes physical, regulatory and operational security controls backed by independent security assurance arrangements. For instance, critical commands will only be accepted by the smart meter if they are issued by the responsible energy supplier and authenticated through strong encryption. Moreover, they have to be countersigned independently by the DCC.

The Government have also put in place a strict data access framework that protects consumers’ privacy. This is important. I think that this was at the heart of some remarks of the noble Baroness, Lady Featherstone. Households will have control over who can access their detailed energy consumption data and for what purposes, except where this is required for regulated purposes—that includes billing.

I am beginning to run out of time. I shall write in greater detail. The final point that I shall address now is that of the noble Lord, Lord Broers. He highlighted the importance of more work to ensure that a promise of a connected home was delivered. The noble Lord will be aware of a joint BEIS-Ofgem smart systems and flexibility plan that was published in July 2017. That reaffirmed that smart meters are the foundation of a smart meter energy system. It included a commitment to work with industry to develop standards for smart appliances that will allow consumers to provide flexibility and benefit from demand-side response.

I appreciate that I was asked many more questions and that there is much detail that will need to be gone into. What I hope to do is to write a letter as soon as possible to all those who took part in the debate detailing all those points that need to be covered. The important point is that we can then sit down—or stand up—and discuss these matters in detail in Committee, make sure we have the Bill right when we send it back to the Commons and make sure that we can look forward to broad, sunlit, happy uplands. As I said, I will continue to be the optimist rather than one of the series of Eeyores I have heard speaking on this occasion. I look forward to a bright future for smart meters, whether that is SMETS 1, SMETS 2 or even SMETS 3 as mentioned by the noble Lord, Lord Lennie.

Bill read a second time and committed to a Grand Committee.

Smart Meters Bill

Lord Henley Excerpts

Committee: 1st sitting (Hansard): House of Lords
Tuesday 24th April 2018 Grand Committee

[Lord Stevenson of Balmacara (Lab)]

My Lords, I support my noble friend Lord Grantchester in his Amendment 4 and reiterate his important suggestion. He accepts that his amendment is not necessarily the definitive way forward and is inviting the Government to engage with him and others to try to find a form of words, process and activity that would enable a national plan to come forward that we could all get behind. I hope that when the Minister responds he might signal that this is something he will consider.

Like the noble Baroness, Lady Featherstone, I have come to this relatively late. Those who have not been living the ups and downs of this over the past few years are completely and utterly shocked that it could have got to this stage without some very serious consequences. At a superficial level—I know it is more complicated than this—the initial programme has had to be restarted and reset but is now about to stop, and people are being laid off and made redundant because there is no guarantee that the SMETS 1 meters will be continued after October 2018. A completely new, untested and uncertain scheme involving SMETS 2 will be brought in on top of that and will therefore go back over ground already covered in a way that is as yet unforeseen.

At the same time, the whole costs of this are hidden and difficult to ascertain. The process under which levers can be exercised on people is not clear and the role of Ofgem, the regulator, is very passive in relation to the capacity it has now. It all smacks of being a complete and utter train crash of enormous proportions, and the only solution appears to be to keep ploughing on. British pluck is all very well but it has not always been the most successful way forward, particularly in matters involving technology.

I urge the Minister, when he comes to respond, to think very carefully about the way in which the Opposition are proposing this and about the support we have received from others. If we do not come out of this with a clear and approachable process—whether it is this national plan or not—the real danger is that consumers will literally be switched off in the sense that they will not wish to be involved in this. As a result, the huge upside of this, the benefits of bringing in a new technology, opening up innovation and bringing in new thinking about how we manage our energy supply—which was the point made by the noble Lord, Lord Teverson—will be lost if consumers are not prepared to walk along. This is not about individual customers having a better time; it is about how we as a country can cope with the energy demands that we will face, and minimising them while strengthening our approach as we go through. This is a terrific chance to get this right in a proper and positive way.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, the noble Lord, Lord Teverson, used the examples of the length of a number of wars. I will not follow him down that track because I think one could come up with some longer wars as examples. He mentioned that this had started under a Labour Government, continued under a coalition Government and was now being dealt with by a Conservative Government. I have been a member of two of those—obviously I was not a member of the Labour Government. It has been going some time but we want to get it right.

When things have been going some time I am always faintly surprised when Oppositions put forward amendments to suggest that we should take even longer. I suppose that is why the noble Lord, Lord Grantchester, prefaced his remarks with, “Unusual as it may seem”. I take note of that. I will not rise to his bait to make any comments about the likely outcome of the next election. Quite rightly, he wants whoever is in government at the time, whomsoever that may be, to be helpful, possibly referring to the remarks on the word “helpful” made by the noble and learned Lord, Lord Goldsmith, in yesterday evening’s debates. We will try to avoid “helpful” in the future.

To continue on the helpful theme, I would obviously like to be helpful. The noble Lord asked whether we could have further meetings. I will make myself available when the noble Lord, the noble Lord’s colleagues and the noble Baroness, Lady Featherstone, and others want to have meetings between now and Report if we feel that we can discuss things further and take things forward.

In the meantime, I will respond in a little detail to the specific amendments—Amendments 1, 2 and 4 in the first group. As I said, the first amendment proposes to extend certain powers that the Secretary of State has to develop, amend and oversee regulations relating to smart meters until November 2026, although in this Bill we have sought only the powers that we think are justified, which extend to 2023. Extending the powers to 2023 would allow the Government to continue to oversee the programme, while suppliers meet the obligation on them to take all reasonable steps to install smart meters in homes and businesses by the end of 2020.

The noble Lord referred to my letter where I talked about them offering rather than installing—we are trying to make sure that they have at least offered something to everyone. Obviously no Government can guarantee that one can be installed in every home because it is quite possible that a number of individuals will refuse to have a meter for whatever reason. It also allows the Government to undertake a post-rollout review once the programme has been operating in a steady state and then implement any of the recommendations that emerge. We hope this will help to ensure that the smart metering programme is fit for purpose—whether SMETS 1 or SMETS 2—for decades to come.

[Lord Stevenson of Balmacara]

I am sorry to interrupt, but on the narrow point, what specification are the Government adhering to? Is it the obligation on energy suppliers to take all reasonable steps to install smart meters or not?

[Lord Henley]

We hope that they will offer—and if they do, obviously they must then install. There is no point offering to install one unless they do so. So we hope that all of them will have offered and installed by that date.

[Lord Stevenson of Balmacara]

It is important that we get this right, because there is a world of difference between making an offer to install and having an installation completed. My noble friend Lord Grantchester, in making his proposal, would give an additional three years because the understanding we had from the first paragraph of the Minister’s letter was that it was about the completion of that process. If the noble Lord is saying that the licence obligation placed as a condition of licence on energy suppliers is only to offer, does he not accept that that completely changes the process?

[Lord Henley]

No. I wanted to make clear that there is no obligation to have got to a 100% rate of installation because we know we can never get to that target. What we are looking for is that they must make the offer and then make the installation—that is the undertaking—by the appropriate date. We do not think that extending the time is necessary. Does the noble Lord follow me?

[Lord Stevenson of Balmacara]

I will try one more time and then I will stop. The obligation placed statutorily on companies operating as energy suppliers is, as I understand it, to have made an offer to take all reasonable steps to install smart meters in homes covered by the mandate by the end of 2020. That will be considered to have been completed if they have written to and received information back from all those who would be eligible to receive these things, and, where there has been an acceptance, have completed the installation. Obviously, as the Minister said, you cannot install a meter if somebody says that they do not want one, so those people are taken out of it—but must everyone else, if they say that they want a meter, have had one installed by 2020? That seems extraordinary.

[Lord Henley]

It is not simply a matter of writing a letter to the individuals concerned. One letter would not be enough. The energy suppliers must show that they have made reasonable efforts with all their customers while allowing a degree of flexibility in certain circumstances. The rollout obligation puts that onus on them. Ofgem has made it publicly clear in an open letter that it will need to adapt its approaches to consumer engagement, using other approaches where necessary. It is not merely a letter, but it must make a genuine attempt—merely making a solitary offer is not sufficient—to get hold of those people to make an installation.

[Lord Grantchester]

I shall interject very quickly to follow up on my noble friend’s comments. There has been a lot of confusion about what sort of meter will be installed. The Government have backed away from SMETS 1, but I am also hearing industry commentators suggesting that if SMETS 1 meters can be interoperable, the process should continue beyond October as they will then be interoperable as though they were SMETS 2 meters. So if, as we are hearing from other commentators, people are standing down staff from being able to put meters into premises where they have said yes because of the unavailability of SMETS 2 meters, that in itself will mean there will be a considerable delay to implementation. In the circumstances, it is rather unclear to the consumer what exactly their expectations will be and what will be delivered by what date—hence my argument. The Minister needs to appreciate that there is probably still a lot of confusion out there regarding what meters will be done by what date, when they might be installed and when any benefits will be appreciated.

[Lord Henley]

As the noble Lord is aware, SMETS 2 meters are now being installed. I cannot remember the figures given at Second Reading, but so far there have been very few. However, we expect to see a fast increase over the coming months.

We have also made clear—the noble Lord alluded to this—is that SMETS 1 will no longer count by October, the date to which he referred, and thereafter SMETS 2 will be installed. If a SMETS 1 is installed after that date and is upgraded to a SMETS 2, obviously that will count as a SMETS 2. I will take advice and write to the noble Lord if I am wrong on that. However, as the noble Lord knows, from October SMETS 2 will count in meeting that commitment.

With that, with the changes and with the gradual rise in the number of SMETS 2 installed, no suppliers will have problems in finding work for their staff, and so will not have to lay people off and bring them back on during this process.

[Baroness Featherstone]

My understanding is that there are so few SMETS 2 meters out there—mainly in supplier homes—that their testing with the DCC cannot be relied upon at this stage. Surely it cannot be done with fewer than 50,000. I am not a technician—I do not know what the number is—but 300 or fewer is not enough to ramp up the rollout of SMETS 2 in the way the Minister is suggesting.

[Lord Henley]

Again, I will take advice on that. We will come back to it on a later amendment. The noble Lord, Lord Teverson, has spoken about not moving further until we have a large number rolled out. However, my understanding is that this process is beginning to happen and that numbers are going up. The noble Baroness is looking at me in disbelief, as she so often does. We often disagree.

[Baroness Maddock (LD)]

In defence of my noble friend, we have had briefings which tell us what she has just said to the Minister. I do not know where he gets his briefings, but the industry has briefed us and it is clear that SMETS 2 is not at the stage that he thinks it is.

[Lord Henley]

My Lords, I am not sure whether, strictly speaking, the noble Baroness is correct. My understanding is that the number of SMETS 2 installations will go up over the coming months, in which case it will be possible to test them, and therefore that by October we will be at a stage where we can go ahead. We have time on our hands on this matter and, as I said, I would like to have further meetings with the noble Baroness and others between now and Report. We could then go through some of these particular points.

At the moment perhaps I may get on with these amendments and come back to my point. As I said in response to the noble Lord, Lord Grantchester, there will be this change in October. SMETS 1 meters will no longer count, but suppliers will still be able to make use of their workforce in the installation process.

On the extension that the noble Lord is generously seeking on behalf of the Government, we do not think it can be justified. It would not send out the right signals and could even have—dare I say it?—an unhelpful impact. It could suggest that the Government would play an active role in leading the programme well beyond the point at which the self-sustaining industry model overseen by Ofgem is due to take over. It also risks undermining industry momentum in progressing the rollout just as suppliers are accelerating deployment with the new generation of meters being brought in. Delay to investment decisions and deployment would also bring delay to the benefits that accrue to consumers from receiving smart meters. In turn, that could impact on the pace of moving to a smart meter system with dynamic time-of-use tariffs made possible by smart meter installation. That is why we are firmly committed to the programme’s timetable as reflected in Clause 1.

The noble Lord referred to the NAO report. We welcomed it and the follow-up study on smart meters, and will work closely with the NAO to help review the progress of the programme, but I do not believe that the report necessarily means that we need a pause in the rollout. As the noble Lord knows, it is routine for the NAO periodically to examine every major government programme, as it did on smart metering in 2011 and 2014. We will take note of the report and discuss it with the NAO, but I do not think that the programme needs a pause.

Amendment 2 relates to the power to remove licensable activities. This amendment seeks to limit the extension of the Secretary of State’s power, so that beyond 1 November 2018 he would not be able to exercise the power to remove any licensable activities in respect of smart meter communications. The Government have so far used the power only to establish the provision of a smart meter communication service as a licensable activity. That ensures that we have a communications and data system that supports secure, reliable and interoperable services for smart meters. The DCC is playing a fundamental role in driving smart metering benefits, and we do not currently consider that we will exercise this power to remove the provision of a smart meter communication service as a licensable activity.

However, we cannot rule out that evidence could emerge to suggest that the removal of at least some elements of this licensable activity to the market could be justified. Retaining the power to remove licensable activities in respect of smart meter communications is therefore necessary as a backstop and is consistent with the Secretary of State’s principal objective of protecting the interests of energy consumers. The Secretary of State may also determine that it is appropriate and in energy consumers’ best interests to introduce further licensable activities in support of smart metering by 2023.

As detailed in our delegated powers memorandum, the smart metering programme continues to develop policy in a number of discrete areas, including overseeing the development of technical solutions delivering smart benefits to the small number of premises which are currently not expected to be served by the smart meter communications network as to do so would be disproportionately expensive. This is typically due to location and surroundings. For example, this can affect premises in highly built-up areas with many tall buildings as well as remote or mountainous areas.

One of the tools we may wish to use to deliver the policy is requiring activity to be licensed. For example, it might be considered appropriate to create a licensable activity that relates to arranging the establishment of communications to these properties. Should we introduce a new licensable activity here that is subsequently found no longer to be justified or needed, we would need to have retained until 1 November 2023 the ability swiftly to remove that licensable activity.

As the noble Lord will be aware, we have used the affirmative resolution procedure. We have also referred it to the Delegated Powers and Regulatory Reform Committee. It did not raise any issues with it. Further—I shall read this out because it is not often that one gets praise of this sort—the memorandum from the committee, in the part that I have highlighted, states:

“There is nothing in this Bill we would wish to draw to the attention of the House. We do, however, wish to commend the helpful and well-drafted memorandum about the delegated powers in the Bill, provided by the Department for Business, Energy and Industrial Strategy”.


We do not often get praise, so I think that it is worth repeating it on this occasion to make sure that it is properly on the record. Obviously, it was already on the record, as it was in the committee’s 17th report—but I am grateful for the opportunity to repeat it.

Amendment 4 is the big amendment tabled by the noble Lord, Lord Grantchester, and principally supported by the noble Baroness, Lady Featherstone, and the noble Lord, Lord Teverson. I am grateful to the noble Lord, Lord Grantchester, for what he said about it. He talked about there being confusion on a number of points, which I hope I can help deal with. He also spoke about moving from rollout by suppliers to rollout by DNOs, as happens in another country. I suggest to him that making such a change might bring more confusion and chaos than absolutely necessary. Let us first deal with the amendment and no doubt we can talk about that later.

The amendment would task Ofgem with consulting stakeholders and publishing a national plan for smart meters by 31 December 2018. It would then require the Secretary of State to specify the final version of such a plan in regulations. The large-scale rollout of smart meters across Great Britain by 2020 is a substantial technical, logistical and organisational challenge. As we have made clear, meeting that challenge depends on collective and co-ordinated delivery. I think that that programme should be led by the Government, who set the policy and regulatory framework for the realisation of the benefits. The rollout is delivered by energy suppliers, networks and others. Ofgem’s role is to make sure that consumers remain protected during the rollout, to monitor energy suppliers’ compliance with their obligations and potentially to enforce against any non-compliance. The Government have provided strong leadership and established governance frameworks, with clear roles and responsibilities, across all these parties. Under this leadership, the smart metering programme has already made substantial progress.

Given the scale of the challenge, I understand and welcome the noble Lord’s appetite for information and reassurance on progress. I remind him of the commitments that the Government made earlier in the passage of the Bill—namely, that we will publish an annual report on the progress of the smart metering implementation programme as well as an updated cost-benefit analysis in 2019, to reflect the state of play after the transition from SMETS 1 to SMETS 2 meters has taken effect.

In that context, it is not clear what the additional value of a national plan of the type proposed by the noble Lord would be. The purpose seems to be to task Ofgem with the oversight of smart metering implementation and to reduce the Government’s role. Such a change in approach would simply divert attention and resources from the rollout delivery and associated consumer benefits. The Government are rightly accountable for safeguarding the benefits of smart metering. The new clause would duplicate existing efforts to deliver an efficient rollout and would put an undue burden on Ofgem. Furthermore, requiring the Secretary of State to specify the final version of the national plan in regulations would limit his ability to use the Section 88 power, of which the noble Lord will be aware, to modify the smart metering framework in future. The purpose of the Bill is to enable the Government to respond to the operational realities of the rollout and to adjust the monitoring framework as may be required. The new clause would undermine that intent.

In summary, a high-level plan for the rollout of smart meters was set by the Government in their 2011 prospectus document, which establishes the framework for the rollout.

[Lord Campbell-Savours (Lab)]

I was engaged in debates on these matters with the noble Lord, Lord Teverson, 10 years ago, when the original legislation was put through. I am unable to understand what pressure is on the Government to get on with this before the National Audit Office produces its report. I would have thought that that report was critical in all this, as it may well make recommendations that do not fit within the proposals of this legislation. What is the pressure? Could we not have waited for another six months? What would have happened if we had?

[Lord Henley]

I have been criticised for the Government going rather slowly on something that was introduced in 2006 by the Government of whom the noble Lord was a supporter. As the noble Lord, Lord Teverson, said, this has continued through the length of two world wars and a bit more; I asked him not to specify any further wars. The NAO has already reported three times. As I said, we will respond to the NAO’s report, but I do not see why we should not continue with what we are doing at the moment. As far as I know, we are all in full agreement on the general benefits of a smart metering programme and of getting as many people as possible on to it, so that they will be wiser about their use of energy and more able to consider which energy supplier to choose—I am just giving all the benefits of smart meters. I do not think that there is any need to pause for the NAO report. As I said, we will consider it and respond as appropriate.

[Lord Campbell-Savours]

Has the NAO expressed a view on whether the legislation should have been delayed? It will have a view. Is it happy for us to proceed with legislation without its report?

[Lord Henley]

I am not aware that the NAO has asked for any delay, but the noble Lord can look at its three reports, including the most recent one, which I have referred to. I will leave that to him.

As I said, we published our prospectus document in 2011, which established a framework for the rollout and was the basis for the regulatory framework through which the rollout is now being delivered. It is right that we have progressed from planning to implementation. Both the Government and Ofgem are focused on monitoring the rollout to ensure that it delivers in a timely way—albeit, as the noble Lord, Lord Teverson, put it, slightly less timely than he would have liked. Where our monitoring activity identifies areas where the course of the rollout needs to be adjusted, we will of course take action.

In due course, we want smart metering to be business as usual in a competitive retail market. The Government will then be able to step back when it is right so to do. However, in the short to medium term, the Government do not intend to step back from their leadership role. Through the powers in the Bill, we will sustain our active engagement with the industry to ensure that any risks to meeting the 2020 deadline are identified and addressed as quickly as possible. I repeat what I said about hoping to have ongoing discussions with the noble Lord and others, but I hope that in the meantime he will feel able to withdraw his amendment.

[Lord Grantchester]

Before the noble Lord sits down, could I just come back to the NAO report, just to be clear in my mind about exactly what is happening? Am I to understand that the NAO is still planning to report by July 2018 on the cost-benefit analysis of introducing smart meters? The noble Lord has correctly said that the NAO has already done two reports—in 2011 and 2014. It is now four years since the report of 2014 and I understood that the general consensus was that it was about time to do another cost-benefit analysis, in order to prove to consumers that what is happening is for their benefit, even though the costs are going up. However, if the review is being shelved, it is important to know that. We understand that it was not part of any legislative programme but that it was going to improve consumers’ perspectives on accepting an offer that would be beneficial to them. Can the Minister be precise: is the NAO report going ahead in July 2018 or not?

[Lord Henley]

I do not know about the precise timing of that report. Obviously, that has to be a matter for the NAO. We will respond at that moment, but I do not think it is necessary for the Government to delay what we are proposing to do. As the noble Lord, Lord Teverson, said, there has already been too much delay. We will await with interest the report from the NAO.

[Lord Grantchester]

I do not think that the NAO wants to cause any delay. I understood that it did not have the resources to undertake this work and therefore that it would not happen, although it is crucial for the continuing rollout that consumers can easily see the benefit over and above the cost of the programme. It is not easy to understand it within their own bills, but if the NAO produced a report showing that overall it was beneficial to consumers that this was going ahead, it could be very constructive in allaying some people’s fears that this is not for them because of the cost. I want only to understand whether the NAO still has a commitment to produce the report this year.

[Lord Henley]

Again, I do not know about this year. I understand that the NAO still plans to undertake a review. It has not confirmed its timetable. Obviously, that is a matter for the NAO. When there is a new cost-benefit analysis, obviously we will look at it—but I cannot go into the NAO’s timetable.

[Lord Teverson]

Perhaps it might be useful if we could meet the NAO and go through this and make sure that the audit is broad enough in scope without it taking longer. I realise that this question is not completely to do with these amendments, but I did ask the Minister about the transferability of SMETS 1 meters, which is different from interoperability—SMETS 1 meters are surprisingly interoperable generally—and the problem of taking one out and replacing it with one that is almost identical but is from a different supplier. Is the Minister aware of that? Do his officials see that as a significant problem? Is there a solution so that we can stop this almost immediately, if it is happening?

[Lord Henley]

I think I had better take advice on that and possibly write to the noble Lord, or deal with it in any meeting that we have. I understand that some SMETS 1 meters can be upgraded. But I do not want to put on the record anything that I might have to make a personal statement about and correct the following day. Perhaps we could leave that to a letter or a discussion with the noble Lord.

[Lord Teverson]

I am very happy with that. I stress that it is an asset and financing issue, rather than an interoperability issue.

--- Later in debate ---

[Lord Grantchester]

I support Amendments 6 and 11 which are also in this group. In Amendment 6, the noble Baroness, Lady Maddock, seeks a review of the code of practice energy suppliers must follow in the installation of smart meters. We agree with that as a necessary and constant reassessment of best practice should become part of any post-rollout review.

Similarly, Amendment 11, also in the names of the noble Baronesses, Lady Maddock and Lady Featherstone, calls for a review of the use of data from the operation of smart meters. I am grateful to them and my noble friend for highlighting some of the problems that could arise if we are not careful in this operation. We agree that it should be kept under constant review by the department to make sure that the risk of errors and non-compliance is kept to a minimum.

[Lord Henley]

Like the noble Lord, Lord Grantchester, I take it that we are dealing with Amendments 3, 6 and 11. The noble Baroness, Lady Maddock, caused me some confusion when she said Amendment 7. However, I am sure she meant Amendment 6 if she did say Amendment 7. I take it she was speaking to Amendment 7, and I will come to it in due course. I will deal with the amendments in the order in which the three leads took them and so I will deal first with Amendment 3, then Amendment 11 and then Amendment 7. If I get confused in my note I hope the noble Lord, Lord Grantchester—who is always quick on these things—will stop me.

I will also take note of the points raised by the noble Lord, Lord Campbell-Savours, and his general remarks about service charges in flats and the consumption of water by himself and others. Obviously that is wide of the Bill. I am sure the noble Lord uses appropriate amounts of water and comes to the House as clean as he always should be. We will read nothing into the amount of water that appears on his service charge. However, he makes a perfectly good and valid point about what people can understand from information about the use of a particular flat or residence by the consumption of gas, electricity or whatever. I hope that can be partly dealt with in what I have to say about security but it might also be helpful if I write to the noble Lord and others about it in due course.

Amendment 3 asks GCHQ to undertake an annual risk assessment of smart metering’s vulnerability to cyberattacks. Considerable effort has been invested by the energy industry as a whole and by government—including the National Cyber Security Centre, which is part of GCHQ—in designing security protection into the end-to-end, trust-based security architecture. Robust security requirements have been developed for smart metering equipment, the DCC and participating organisations, as well as assurance on the implementation of these requirements. These are a fundamental part of the smart metering regulatory framework.

In April 2016, the NCSC technical director published a blog on the security of smart meters in which he stated,

“we’re confident that the Smart Metering System strikes the best balance between security and business needs, whilst meeting broader policy and national security objectives”.

The NCSC continues to be fully engaged on smart metering, providing an annual threat report and practical guidance.

Underpinning the security requirements, assurance and governance arrangements currently in place is a security risk assessment. This has been through a number of iterations on the back of public consultation to ensure emerging and future security threats are appropriately addressed. This is in turn informed by the annual threat assessment that the NCSC provides. Additionally, each organisation must carry out an assessment of its processes for the identification and management of risk at least annually.

The end-to-end security model is also subject to ongoing monitoring and review. Smart metering regulations require that a review of the end-to-end security model is undertaken at least annually. This is undertaken by industry in the form of the Smart Energy Code security sub-committee, which is independent of government and composed of security experts from industry. Industry is also subject to an independent security assessment prior to using systems and annually thereafter. This assessment is set against a security controls framework, which is detailed in regulations. This is the basis for a consistent level of review across all organisations and provides a guide to the types of evidence that should be provided to demonstrate compliance.

Based on the detail I have just outlined, an additional security assessment annually by GCHQ, most likely by the NCSC, is unnecessary given the existing and ongoing risk management and security assessment arrangements and the close engagement GCHQ and the NCSC have had and continue to have in relation to smart metering. I hope that the noble Lord will feel that his amendment is largely dealt with.

I move to Amendment 11, tabled by the noble Baroness, Lady Featherstone, which deals with data privacy. It refers to data obtained by energy suppliers, both as a result of half-hourly settlement and due to smart metering in general. This data has the potential to deliver benefits for consumers, suppliers and the energy system, but we recognise again that appropriate safeguards are required on who has access to data, in which circumstances and for which purposes.

--- Later in debate ---

[Lord Campbell-Savours]

I ask a consumer question: if someone wanted to know now whether it was possible for their meter to be hacked, who would they ask? Who could tell them?

[Lord Henley]

The first people to ask would be the suppliers of that meter, to ask them what evidence they have and to take it from there. The same is true for any IT equipment that the noble Lord buys for any purpose. None of us can give any absolutely cast-iron guarantees as to what can and cannot be done by nefarious people.

[Lord Campbell-Savours]

This is one of the reasons why the amendment asking for this sort of national plan would have been interesting. Those are the kinds of questions that the consumer would expect to find in a report of that nature. I would not ask my supplier; I would ask the manufacturer whether its equipment could be hacked. If it said that it could be, I would want assurances as to how that would be dealt with. I am not altogether convinced that manufacturers have been asked, or whether GCHQ has been asked that question for it to appraise separately. It is on the list; I presume it too has been asked about the system that is being introduced.

[Lord Henley]

The point I am making to the noble Lord is that it would be wrong for anyone to give an absolute cast-iron guarantee of any sort with equipment of this sort. I can think of a whole range of other questions on other subjects. I remember that it used to be said that if you went to a school and asked about its policy on bullying and were told there was no bullying, you should immediately reject that school because quite obviously it had no idea of what was going on. Similarly, if someone offered a cast-iron guarantee that their equipment was unhackable, I would have some doubts about it. They could say that they had done everything possible to make sure it was unhackable, but we have the right processes in place with suppliers and others to make sure that checks can be done—which is what I have set out—to make metering as secure as possible. In response to the noble Baroness, Lady Featherstone, who dealt with privacy, that is why we have also had consultations with the privacy commissioner. I think that we have all the appropriate checks in place—but if I offered the noble Lord the guarantee he is asking for, he would know that I was a charlatan.

[Lord Campbell-Savours]

There is another question that would have been answered in this report. It is the question that the public ask all the time. If I have a supplier and I have a piece of equipment installed, will I be able to change supplier? Most people in this Room probably know the answer about retaining that equipment, but the great public outside do not know the answer, and that is what they worry about. So it is essential to the Government’s case to make it clear when and in what circumstances that problem will no longer arise.

[Lord Henley]

I fully understand what the noble Lord is saying and the need to provide the public with as much reassurance as possible, and clearly to explain the range of steps that the Government have taken with security experts, including GCHQ, which I mentioned earlier, to provide robust security for the smart metering system. We worked in partnership with GCHQ on the blog on smart metering infrastructure. We will continue to support Smart Energy GB, among others, to provide a clear and reassuring message to the public on smart metering security. We will do all we can. Everyone else will do all they can. All I am saying is that one can never get beyond that 99.9% security up to 100%.

[Lord Campbell-Savours]

The noble Lord, Lord Teverson, drew a distinction between transferability and interoperability. The question I am asking is what the public are asking. When will they be given assurances that it will be possible to change supplier and retain their smart meter? It is a very simple question, and I do not think you will find the answer anywhere at the moment as far as the public are concerned.

[Lord Henley]

The noble Lord is moving on to another question.

[Lord Campbell-Savours]

This is one of the amendments.

[Lord Henley]

The noble Lord asked what assurance we can give to the public about security, and I think I have given as much assurance as I can. I acknowledge that it is important for the Government to continue to give as much assurance as possible. That is why we talked to GCHQ and others. With regard to changing supplier—is it changing the meter or changing supplier? They are two different matters.

[Lord Campbell-Savours]

One is the consequence of the other, as I understand it. That is the problem. When you change your supplier, I understand that on occasion you have to change the meter. Am I not correct?

[Lord Teverson]

Unfortunately, probably after the First World War, the Second World War and the Korean War, the phoney war bit during the coalition Government was around the whole process more or less coming to a halt because this whole security issue came up, which was a major delaying factor at the time. I do not want to talk on behalf of the Government of that time, but security was given huge focus. From a personal point of view, I feel that that area has been dealt with enough at the moment. It clearly needs an ongoing security look, but it was one reason why the whole programme pretty much ground to a halt during part of the period of the coalition Government—if that is at all helpful.

[Lord Henley]

We will get on to “helpful” again later on. I do not know whether I can take the noble Lord much further. We have talked about security, and I have made it clear that we must give the public as much assurance as possible. I think that the noble Lord is happy about that and the involvement of GCHQ and others.

The noble Lord raised the question about consumers in effect losing functionality when switching supplier. When installing a smart meter, it is necessary for energy suppliers to take reasonable steps to inform the consumer that they may lose some of the functionality when switching supplier—but only some. There is also the question of whether those with SMETS 1 meters can switch supplier. The noble Lord’s question started on one level and moved to quite different levels at different moments, but I think that that was what he was talking about. Consumers with the first generation of SMETS 1 can still switch energy supplier, and they are often in a better position to do so. That is a matter for them, and they can continue to do that.

I shall now move on to the second in this block of amendments—the amendment tabled by the noble Baroness, Lady Maddock, Amendment 6, which suggests that there should be a review of the code of practice by the Secretary of State. Receiving a positive installation experience that leaves consumers satisfied and well informed is vital to ensuring that they can engage with their smart meter and take control of their energy use. Energy suppliers were required by their licence to develop and adhere to an installation code of practice when installing in domestic and microbusiness premises. In developing this code, energy suppliers were required to ensure that it both supported the delivery of overarching objectives and, in a number of key areas, met detailed requirements. Those requirements include providing energy efficiency guidance, not charging consumers up front for the installation, and meeting the needs of vulnerable domestic consumers. Energy suppliers were also required to take into account the views of consumer groups and other interested parties when developing the code.

The code was consulted on in draft in 2013 and subsequently approved by Ofgem in its capacity as the authority in this area. It is overseen by a code governance board composed of representatives from large, small and microbusiness energy suppliers. It also includes representatives from Citizens Advice. Any of those representatives has the ability to propose amendments to the code, which are then presented to Ofgem for consideration. This governance framework ensures that consumer interests are represented on an ongoing basis across all elements of the code’s operation.

Energy supply licence conditions supporting the code of practice also require energy suppliers to put in place monitoring arrangements and procedures for reviewing and updating the code. As part of this activity, energy suppliers are required to obtain views from consumers on the installation process and conduct of their installers. To achieve this, the code requires all energy suppliers installing more than 5,000 smart meters a year to undertake a survey of their customers. These surveys are conducted regularly, the results are anonymised, and reports are provided to the code governance board on a quarterly basis, enabling any areas of concern to be identified and rectified, including through amendment to the code.

As a further backstop, in the event that significant concerns are raised regarding the suitability of the code, Ofgem also has the power to require energy suppliers to review specific features of the code and can direct modifications if necessary. The amendment here would require a one-off review of the code to be undertaken, but I hope that in outlining the governance and monitoring requirements already in place I have demonstrated that the code is already subject to ongoing review and continues to evolve to meet consumer needs.

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[Baroness Maddock]

I made two points about gas. When it is turned off, I certainly do not expect them to allow things that are unsafe. My point was that there is no provision for somebody in poor circumstances—say they are elderly and they have a smart meter put in and it is the middle of winter and they cannot use their boiler—to get a new boiler. I think the Government need to look at this. It is a very small point but there will be several people affected by it.

The Minister has explained how the process works at the moment and how the code of conduct works and how it can be amended. Can he tell us how it has been amended as the process has gone along?

[Lord Henley]

I would prefer to write to the noble Baroness regarding any amendments that have taken place. I, like others involved in this, but not all, am relatively new to the subject—but it has been going for some time, so I imagine that amendments have been taking place.

I think the noble Baroness suggested earlier—just in terms of the travails on the telephone—a degree of aggression.

[Baroness Maddock]

It was the lack of understanding of the person who was trying to persuade to have a meter of how it worked and what the options were and whether they were interoperable.

[Lord Henley]

If the operator could not cope with the noble Baroness, obviously they probably need further training. I think that is probably a matter for that particular supplier. There is guidance for them and they should take every opportunity to treat all domestic customers fairly and to be as transparent and accurate as possible in their communications. I hope that they will continue to do so. I note what the noble Baroness said.

I hope I have dealt with the three amendments in sufficient detail and I hope that the noble Lord will feel able to withdraw Amendment 3.

[Lord Grantchester]

I thank the Minister for his comprehensive reply. Initially I was slightly alarmed when he talked about the national infrastructure having to be a balance between security and business needs. I would have thought that our national infrastructure is critical and must be entirely secure at all times. However, he went on in his reply to further elaborate that energy threats are assessed each year and I was very satisfied that the situation is under constant review, so I am very happy to withdraw my amendment.

--- Later in debate ---

[Lord Teverson]

My Lords, may I correct something I said about Hinkley Point C? EDF’s latest estimate is actually £19 billion to £20 billion. Preventing that sort of capital expenditure on energy generation is what this programme should be about. I apologise to the Committee that it is a rather larger sum than even I thought.

[Lord Henley]

My Lords, £1 billion here, £1 billion there and pretty soon we are talking real money. I will deal with the amendments in the order they came: that is, Amendments 5, 7, 12 and 13. Amendments 12 and 13 go together. Actually, all three go together, but there was some confusion.

Starting with Amendment 5, which was tabled by the noble Baroness, Lady Maddock, on energy efficiency and fuel poverty, I ought to say in passing that I very much support the spirit behind these amendments but I am concerned that they could undermine the efficient delivery of the rollout and could lead to unintended consequences and costs for consumers. But I will deal with the amendments one by one, starting with Amendment 5.

One of the main objectives of the smart meter rollout in Great Britain—it does not apply to Northern Ireland—is to put consumers in control of their energy use so that they become more informed and efficient, and save themselves money. Smart metering will reduce the costs for prepayment customers and enable remote topping-up, meaning that some of Britain’s hardest-pressed energy consumers will have access to more competitive deals and more convenience in paying for their energy. I was grateful for what the noble Baroness said about people with prepayment meters and the price cap. We will get on to the price cap for others more generally, but it is already in existence for people with prepayment meters and I think that it has been working with some success.

If I heard her aright, the noble Baroness said that she had heard that SMETS 2 meters posed a problem for some prepayment customers. We believe that SMETS 1 meters provide significant smart functionality to consumers, but SMETS 2 will provide them with additional benefits and will allow consumers always to retain smart functionality when they switch suppliers. SMETS 2 meters will also allow consumers, if they choose, to share data with third parties, and those third parties may be able to offer, for example, tailored energy-efficiency advice, which could be of use to certain customers.

Amendment 5 would introduce a new clause requiring the Secretary of State to commission a review to consider how the extended use of powers would impact energy use in the United Kingdom, with a particular focus on the impact on fuel poverty and energy efficiency.

With in-home displays offered to households as part of the installation, low-credit alerts are more visible, giving consumers an early warning. The ability for consumers to set a budget and to see exactly how much they are using, in pounds and pence, is giving prepayment consumers control over their energy use and contributing to greater levels of satisfaction among prepayment consumers. Certainly, the research that we have done shows that 84% of smart prepayment customers are satisfied with their smart meters and 88% are likely to recommend them. Government research shows that eight out of 10 would recommend them to family or friends, and 82% of people with a smart meter have taken at least one step to reduce their energy use. British Gas is reporting that its dual fuel customers with smart meters are making sustained 4% annual energy savings.

To some extent, that brings me on to the question about accessibility of meters raised by the noble Baroness. As she is well aware, the accessibility of existing meters can be pretty difficult, as I discovered in London the other day as I lay down on the floor trying to read a meter. I realised that I did not have my reading glasses with me but then realised that reading glasses would not help as I was wearing my contact lenses. It is a minor problem for someone in a reasonably fit state, but we accept that reading meters can be difficult for certain people, depending on where the meters are put.

The technical specifications for IHDs require them to be designed to enable the information on them to be easily accessed and presented in a form that is clear and easy to understand, including by consumers with impaired sight, memory, learning ability or dexterity. Energy suppliers, led by Energy UK, have been working together to develop a fully accessible IHD, and we expect that device to be available shortly. If it can be made available to those who have problems, the noble Baroness and I will also find it a great deal easier.

[Baroness Maddock]

The thing that surprises me—and I have not really had an answer to it—is why, when the Government planned the programme, it was not part of the plan that everybody with a smart meter should have an in-home display. It would be an obvious enhancement and would not be difficult. I do not know why it was not thought that this should be insisted on from the beginning.

[Lord Henley]

This is going back in history. The past is another country. I do not think I want to go there just for the moment. I do not know the answer to that. If I can find out more, I will certainly let the noble Baroness know.

The noble Baroness also raised the question of smart meters working with solar panels and spoke about the information she had received from one of her noble friends. As I understand it, all SMETS-compliant electricity meters must be capable of both measuring the amount of energy the household consumes or imports from the grid and recording the electricity generated by solar panels or other microgeneration technologies that is fed back or exported to the grid. We are not aware of any technical reasons why smart meters cannot be installed in premises with microgeneration technologies. However, some suppliers may start installing for these customers later in the rollout. If the noble Baroness would like to go back to her unnamed noble friend—perhaps it was not a noble friend, perhaps it was someone misleading the noble Baroness—and get back to me, I will take this up and find out what the real answer is. The initial response is that we feel that this should not be the case, but I will respond when the noble Baroness gives me more information.

Amendment 7 was spoken to by the noble Lord, Lord Teverson, and the noble Baroness, Lady Featherstone. The rollout of smart meters offers an opportunity for consumers to take control of their energy use and realise significant savings as soon as the meter is installed. Like any infrastructure project, the smart metering programme involves some investment, but it will enable a net reduction in consumers’ energy bills over time. Amendment 7 would give the Secretary of State power to modify licence conditions and industry codes so as to require energy suppliers to pass the savings they make from the rollout on to consumers.

We expect that competitive pressures will encourage energy suppliers to pass on the cost savings they make from the rollout of smart meters. If energy suppliers do not pass on the savings to their customers, their customers, as we all know, can switch to a better deal among an increasing number of competitors. As noble Lords will be aware, there is an increasing number of competitors and it is quite simple to switch. We recognise that the market is not working for all customers. That is why we have introduced to Parliament the Domestic Gas and Electricity (Tariff Cap) Bill—it is in another place at the moment—which will require Ofgem to set a cap that protects existing and future domestic customers who pay standard variable and default rates. The cap will last until 2020, and it may be extended annually, up until 2023, if it is assessed that the conditions for effective competition are not yet in place. In setting the cap, we expect Ofgem to take into account the benefits that energy suppliers will achieve from the rollout.

Smart meters are themselves an enabler to greater competition in the energy retail market. Smart meters provide near real-time information to consumers on their energy consumption and how much it is costing them, giving consumers greater awareness, which in turn is expected to further increase consumer switching. The signs on this are encouraging. According to a report on consumer engagement in the energy market, published by Ofgem in 2017, 23% of consumers who say they have a smart meter have switched supplier in the past 12 months, compared with 17% of those who say they do not have a smart meter. It is worth pointing out that we would expect the level of engagement from consumers to help inform Ofgem’s review into whether the conditions for effective competition are in place.

I turn now to the final two amendments in the name of the noble Lord, Lord Teverson—Amendments 12 and 13. The Government want consumers to benefit as soon as possible from the advantages of smart meters. That is why we continually review the rollout and take action to remove any barriers to effective delivery. The amendments would require, as a condition of extending powers that the Secretary of State has to amend or introduce new regulation for the purposes of smart metering, one of two conditions are met first before those powers can commence. The noble Lord suggested either 500,000 second generation—SMETS 2—meters must have been installed or a review of the programme, focused on consumer satisfaction and value for money, must be complete. We do not believe that either of those conditions for commencing the extended regulatory powers are warranted or necessary. We are also concerned that the effect of those amendments would be to leave the Government without powers to intervene to unlock delivery barriers and ensure consumer benefits are being realised.

I will take each condition in turn. I shall deal, first, with the noble Lord’s SMETS 2 target of 500,000. Like the noble Lord, we want to see the SMETS 2 meter installation accelerated. It is very small at the moment, but in the near term this should happen only if it is in the best interests of consumers. Setting a target would remove suppliers’ flexibility to plan and manage the rollout efficiently in order to serve their customers effectively in a competitive market and could lead to unintended consequences. We are assured that larger energy suppliers have commercial and financial incentives to drive them to install SMETS 2 meters as soon as is practicable. SMETS 2 meters unlock more of the customer base, supporting more cost-effective marketing approaches. They also include capability for load control and additional support for consumer access devices, thereby supporting service offers in line with energy suppliers’ potential future business strategies. These incentives align with regulatory imperatives to make progress, not least that our current expectations are that from later this year the installation of SMETS 1 meters will no longer count towards an energy supplier’s rollout obligations. We intend to include in future quarterly statistical publications—subject to sufficient supplier anonymisation—information about the number of SMETS 2 meters that have been installed, allowing for progress to be tracked and transparent.

We agree with the noble Lord that the programme should understand its impact during operations, in terms of consumer satisfaction and value for money. As regards consumer satisfaction, the department commissions and receives, including via Smart Energy GB, regular survey updates on smart meter consumer satisfaction. I have referred to some of them, and the satisfaction levels that have been achieved. In terms of value for money, my right honourable friend the Minister for Business and Energy, Claire Perry, has committed, as part of the Bill’s passage in another place, to undertaking and publishing an updated cost-benefit analysis in 2019, which will reflect, among other things, the real benefit for consumers. On this basis, the noble Lord’s condition would be duplicative and risks undermining the powers that the Government need to ensure the rollout is progressed smoothly and in consumers’ best interests.

[Lord Campbell-Savours]

Can I just ask again a rather simple question? I understand that we are not the only country in Europe with a smart meter installation programme. The French claim that they have done it for half the price of the programme in the United Kingdom. They claim it is going to cost them €5.5 billion, whereas we are potentially spending £11 billion. Is there any truth in that? Is our equipment the same as what the French are introducing? Is there some explanation for this suggestion that we are paying rather a lot for our equipment?

[Lord Henley]

I do not necessarily take all claims from France as seriously as the noble Lord does. I will certainly have a look at that claim being made by the French, but I believe we are doing reasonably well. Obviously, I will have a look at what they are doing and, if there are things that we can learn from that, we should do so. Just as we will continue to monitor delivery in this country, we will study and look at what is happening abroad. I have received advice about what is happening and whether we are sharing our experience with other countries and whether other countries have shared their experience with us. We have looked not just at what is happening throughout Europe—we have met representatives from Ireland, Sweden, Spain, Malta and, I understand, France—but we have looked further afield to India, Australia and the United States. Lessons we have learned include the importance of consumer engagement. That is why I emphasised earlier what we have done on consumer engagement.

On the actual costs, the advice I have received is that the EU average comes in at £181, compared with our figure of around £155 for a single-fuel electricity installation. So that is somewhat lower. On that front we are doing better. If there is anything further I can add about gas distribution grids in Malta or Italy that might be of use or even of interest to the noble Lord, I will pass it on. Another matter that came up was a concern about privacy, which is something that the noble Lord is concerned about and we discussed earlier.

In conclusion, we will continue to monitor the delivery of the programme and will continue to provide updates in annual reports and an updated cost-benefit analysis. I do not think the amendments add much. They risk duplicating those processes and could result, as I said, in unintended consequences that might delay getting the benefits to the consumer. I hope, therefore, that the noble Baroness, Lady Maddock, will feel able to withdraw her amendment.

[Lord Teverson]

The purpose of my amendment—I accept a lot of what the Minister said about its effects—was to get to understand what the test will be. What criteria will the department use to say, “SMETS 2 meters will work, they will integrate with the systems they have to integrate with, so we will give them the green light”? How will the assessment be made that SMETS 2 works—not just the individual meters but as a system—before we invest the other £8 billion?

[Lord Henley]

My Lords, we have started. The noble Lord gave his figure for how many SMETS 1 meters have been installed—I think it was about 10 million, which I do not dispute. I do not have the precise figure in front of me. We feel it is likely that we will be ready to cease to count the SMETS 1 meters towards the target in about October and therefore the suppliers will move on to SMETS 2, which brings further benefits. Over this year, we will see a growth in the number. I am not going to give a precise figure now for how that will grow, but we are likely to see the benefits from that. There is no point sticking with SMETS 1 when we can move on to SMETS 2.

[Lord Teverson]

I agree entirely with that, but it is not the point I am trying to make. SMETS 2 operates through DCC in a different system. It has different software and capabilities; otherwise, there is no point in doing this. SMETS 1 machines work on different systems. They work through the suppliers in bespoke ways. I understand the difference between the two. We need to stop operating SMETS 1 as soon as possible and we want to roll out SMETS 2. What is the test so that we can be happy that SMETS 2 functions correctly and confident that it is all systems go? I do not understand the test.

[Lord Stevenson of Balmacara]

I suggest that the test has already been passed and we are doing SMETS 2 come what may.

[Lord Henley]

We are going ahead to SMETS 2. The noble Lord is right there. We will see benefits from that, just as we have seen benefits from SMETS 1. That process will continue. I am suggesting to noble Lords and the rest of the Committee that we will provide appropriate reports back as to how that goes in due course, but I cannot provide any figures on exactly how fast that is likely to go, particularly in the initial stage this year.

[Lord Campbell-Savours]

I shall put it another way: what would happen if, having fitted 500,000, we found that there was a problem?

[Lord Henley]

My Lords, I do not believe in crossing bridges until we get to them. When we get to that stage, if there is a problem, I will come back to the noble Lord.

[Lord Stevenson of Balmacara]

Let us put the noble Lord, Lord Teverson, to bed happily. There is no further testing. The Government have accepted this, on the basis of what we understand to be the evidence of 300 SMETS meters placed into the homes of employees of the companies commissioning them. The network is said to be working, and may or may not be, at two different levels in the north—I am not quite sure where—and the south because there are two different arrangements, with an imperfect but satisfactory, to all intents and purposes, gas approach based on the idea that the SMETS 2 meters that go on to the gas equipment have to be shut down for most of the time that they are there because otherwise they will use up the batteries, which they are restricted to using because you cannot use electricity near gas since it might blow up. Therefore, they are battery-driven and the batteries cannot last forever. It would be ridiculous to have a situation where you had to have teams of people coming in right across the country replacing the batteries all the time because that is what we are trying to stop them doing when they have to read all the meters. The Government are going ahead with this—this is the point I still do not quite get—on the basis of very imperfect testing on a scale of £8 billion to be spent over the next few years, which is effectively a voluntary tax paid by people who did not know that they were being asked to pay it. It is bonkers.

[Lord Henley]

I am afraid I do not recognise what the noble Lord has offered. I suggest that we continue discussions on this. What the noble Lord is putting to me is not what has been put in front of me in other places. As I said, we will continue to monitor matters and to provide information. That will be sufficient to deal with the amendments. If the noble Lord would like to continue to make these strange allegations about what is happening, we can continue to do that in the discussions that I offered when dealing with the first amendment.

[Baroness Maddock]

My Lords, I am grateful to the Minister for his full response to me on Amendment 5. I am still not totally convinced that the Government always look very carefully at how their different policies interact. I am grateful that he has asked for extra information about the photovoltaics. It was new to me and I will come back to him with a bit more detail. Let us hope that it is just a one-off—that the supplier was just not very interested in doing this particular person’s house and that there is nothing more to it than that. I was quite shocked: lots of people have photovoltaics and if that really was the case we really need to do something about it. As I said, it was a probing amendment to try to open up discussion on these issues that I am concerned about. At this stage, I beg leave to withdraw Amendment 5.

--- Later in debate ---

[Lord Henley]

My Lords, as the noble Lord, Lord Teverson, says, there is always a lot to be said for asking questions to which one already knows the answer. In fact, I was told that that was one of the firm rules—that one should only ask questions to which one knows the answer.

My noble friend Lord Young will respond to the UQ on Capita debated today in another place—in time, I hope, for noble Lords to go through and listen to it. We do not believe that any of our strategic partners, including Capita, are in anything like a comparable position to Carillion. The current licensee is wholly owned by Capita but is required to operate at arm’s length from it. There are provisions in its licence to prevent Capita from taking working capital out of the licensee. Together those provisions mean that DCC would continue to operate while Ofgem, as regulator, sought to appoint a new licensee or for a new owner to be secured. I shall not say anything further on that subject at the moment but I hope I have dealt with the points raised by the noble Lord, Lord Teverson, and his noble friend Lady Featherstone. If necessary, I shall write to them in greater detail.

Smart Meters Bill

Lord Henley Excerpts

Report stage (Hansard): House of Lords
Tuesday 15th May 2018 Lords Chamber

[Lord Campbell-Savours (Lab)]

My Lords, subsection (5)(b) of the new clause proposed by my noble friend states:

“an assessment of the future developments thought feasible and desirable for the smart meter programme, including monitoring of customer activity so as to deliver least cost tariff benefits combined with the maximum ability to engage with future appliance applications, inter-operability, compatibility with smart phones and tablets, and the encouragement of self-generated capacity in the home”.

I shall concentrate on the word “interoperability”, which I raised in Committee.

I was with some friends last weekend and we had a discussion about smart meters. The general view was that the problem with them is that you cannot switch suppliers. Although we are assured by Ministers that we can switch suppliers, the public believe that that is impossible without losing some information. My friends said that some suppliers refuse to have anything to do with the meters provided by others.

We need today from the Dispatch Box an undertaking that under whatever arrangements are ultimately in place, there will be absolute interoperability whereby, whoever is the supplier, the meter will work and provide information on the number of units consumed, the price per unit and the total paid to that point for the power consumed. The public need the assurance that if they get a smart meter, they can switch between suppliers quite liberally without losing any of the facilities available from an existing meter. I would like that assurance from the Dispatch Box, because I am sure that it would resolve many of the existing concerns in the country on the failure of the equipment to be interoperable.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, I thank the noble Lord, Lord Grantchester, and other noble Lords for introducing their amendments. I think that it was the noble Baroness, Lady Featherstone, who said that she came late to this debate. That is true of a great many of us—but she is right to say that it has been going on a long time, through a Labour Government, the coalition Government and now under this Government. I believe we are making progress, and I want to correct the noble Lord, Lord Teverson, who implied that only about 300 smart meters had been installed. I hope that was just a slip of the tongue and he was just referring to SMETS 2. As he is aware, some 10 million smart and advanced meters are operating across Great Britain, which are being installed at a rate approaching 500,000 a month—and I hope that figure will go up, as all those first-generation meters are expected to be enrolled within the national infrastructure from later this year.

I also thank the noble Lords, Lord Grantchester and Lord Stevenson, the noble Baroness, Lady Featherstone, and the noble Lord, Lord Teverson, for the way they have co-operated on this Bill, and the constructive approach they have taken to its scrutiny. I hope that, as a result, we will fairly quickly be able to move on to other matters and then, once the legislation is finished with, get on with the programme and meet the aims shared by the noble Lord, Lord Teverson, and I. We have heard concerns about how well the smart metering programme will deliver benefits for consumers. I hope that in due course we will be able to address the point made by the noble Lord, Lord Campbell-Savours.

I am convinced, perhaps because I am one of those eternal optimists, that the programme will be a success. The noble Baroness, Lady Featherstone, smiles at me because she thinks I am too much of an optimist—or too much of a Tigger—in these matters, but it is better to be a Tigger on this occasion than an Eeyore. I shall continue to do so, and I hope the noble Baroness will accept that progress is on the way.

I recognise the spirit in which the amendments have been proposed. While I cannot accept them, I want to set out several commitments that the Government are making, which I hope will address noble Lords’ concerns.

I turn, first, to the amendment moved by the noble Lord, Lord Grantchester, which would require the Secretary of State to establish and put into regulations a national plan for smart meters with associated implementation requirements. We believe we have the right strategy in place for ensuring that the smart metering programme is delivered cost-effectively and that consumer benefits are optimised. The Bill, in seeking an extension to the duration of the Secretary of State’s regulatory powers, recognises that the Government are accountable for delivering the benefits of smart metering and that we need to maintain close oversight of implementation.

There are various aspects of what is proposed that duplicate work that the Government already have in place, which we do not believe would ultimately work in the best interests of consumers. However, we have reflected closely on the concerns that the noble Lord, Lord Grantchester, has expressed regarding the programme, and have concluded that there is more we can do to address his concerns to help the programme succeed. We have identified three actions we are prepared to commit to as a result.

I recognise that there is an appetite for the Government to do more to ensure that we are transparent with consumers and Parliament in monitoring and tracking delivery. The programme already publishes quarterly rollout statistics, and we have committed in the other place to publish more substantial reports on programme delivery. I can further commit to publishing, by the end of 2018, as part of our annual report on progress, a forward plan of activity. This will show that the Government have a clear plan for resolving the remaining technical and operational challenges to delivering the programme. The report will be placed in the Library of the House.

I sympathise with noble Lords’ desire for further assurance that the Government have a firm hand on the tiller on all aspects of the programme. I therefore commit to publishing, by spring 2019, a report that will provide a stocktake of progress towards delivering the consumer benefits of the programme. We will take evidence from consumer representative bodies and Ofgem in preparing the progress report. The planned National Audit Office inquiry on the smart metering programme, which we currently expect to report by the end of this year, will be another important strand of evidence. It is right that Parliament should have an opportunity to scrutinise the report. The Government will therefore bring forward a ministerial Statement on the final report, allowing some sort of debate in both Houses of Parliament.

We believe that smart meters will be game-changing for how consumers engage with their energy use and the market. The amendment seeks an assessment of how well the programme is future-proofed and we recognise that there are merits in undertaking an assessment of the smart meter platform in support of this. I therefore commit to publishing a paper by the end of this year that will draw out and promote the potential of the data offered by smart meters for future innovative consumer technologies and services.

The noble Lord, Lord Campbell-Savours, raised interoperability and claimed that it is difficult to switch between suppliers. It will be important for suppliers to communicate to consumers that they can switch supplier without risk of losing services. From later this year, the enrolment of SMETS 1 meters is expected to take about a year. All SMETS 2 meters will be fully interoperable from the outset. If the noble Lord requires anything further, I am more than happy to write to him.

[Lord Campbell-Savours]

My Lords, in the event that a second supplier takes over, will the information on the meter provided by the first supplier be equally made available by the second?

[Lord Henley]

I think the noble Lord is correct, but if not I will write to him on that matter.

Amendment 2, in the name of the noble Lord, Lord Teverson, relates to SMETS 2 testing. I recognise that at the heart of the amendment is a concern that the Government are pushing ahead with transition to SMETS 2 meters without adequate checks and balances. We want to transition to SMETS 2 meters as they are better for energy consumers. As I made clear, they offer full interoperability from the outset, cost advantages and support for energy network planning and investment decisions, from which efficiencies and consumer energy cost savings can flow. This is why we will put in place a SMETS 1 end date to drive the transition to SMETS 2 meters.

I reassure the noble Lord that we are not driving this transition blindly. We have thorough and mature industry-wide monitoring and governance that allows us actively to scrutinise this transition. We closely monitor energy supplier and DCC operational capability, meter availability and reliability and supply chain maturity. That is underpinned by a robust testing regime across the end-to-end system set out in the regulatory framework via the Smart Energy Code. It requires, and provides assurance, that the DCC’s systems and services meet requirements; that suppliers and other DCC users are capable of using the services that are provided by the DCC; and that the metering equipment which suppliers enrol with the DCC is interoperable with the DCC’s systems and compliant with the relevant technical specifications. This is backed by device certification via the National Cyber Security Centre’s commercial product assurance scheme.

After undertaking their own thorough testing, leading energy suppliers are now rolling out SMETS 2 meters to real customers at low volumes, demonstrating their confidence in the preceding testing. We think it is right to continue to press other energy suppliers to make the same transition, on the back of their own testing. We are in close dialogue with the DCC and suppliers, and if it was shown not to be in the interests of energy consumers, we would provide further time for the transition.

In light of those assurances, and given the substantive commitments to further government action and information that will be made available to both Houses, I hope the concerns of the noble Lord and all other noble Lords who took part in the debate have been dealt with, and I hope the noble Lord will feel able to withdraw his amendment.