Smart Meters Bill

Lord Teverson Excerpts

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

[Lord Teverson (LD)]

My Lords, last Sunday evening my family were watching “Call the Midwife”. It was raining outside, as it often is in Cornwall. We have a number of outside sockets. The television suddenly stopped, much to my relief, as I am not a great fan of that programme—I am sorry to offend the Minister. Unfortunately, the further downside for me was that I had somehow to fix the electricity. This became my task, so I went out and I had to search for a torch. Then I had to find my way under the stairs, where there is a cupboard. I had to put the torch on. The meter, a dumb meter, is some two or three feet further away. I had to look at all the switches, and finally I managed to get the electricity back on.

How I wish that I had had a smart meter so that I could have got on to my iPhone and knocked a switch so that light was restored to Thornparks House down near Tregony in Cornwall. Alas, this was not the case. However, this underlined to me how important this programme should be. It is supposed to be an £11 billion programme. That is £11 billion of what I see as upgrading of domestic and commercial infrastructure and communications channels in the United Kingdom. That is why it is important.

How is it that in these days, when we use iPads and smartphones and with all the technical ability that we have, we still have so many people with these dumb electricity meters? My meter has, I think, never been read by anybody apart from me in the past 10 years because no one can get access to it from the outside. How is it that we still have this dumb technology when everything else has changed so much? The Minister will gather that I am a fan of this programme, but from now on the supportiveness of my speech goes downhill.

When I first joined this House 12 years ago in 2006, it happened to be the year that the smart meter operational framework was produced. I have always been interested in energy and one of my first visits—on the way up from Cornwall—was to a smart meter manufacturer in Winchester. They were the people who told me how great this technology was, what a fantastic future it should lead to and how obvious it was that it should be adopted, not just in terms of ease but of information and future distributed energy systems. It was quite clear. I became not just a fan, but a strong advocate. However, where are we now?

The noble Lord, Lord Grantchester, has gone through a little bit of the current position. My numbers may not be exactly the same, because they vary by source, but there are some 47 million meters in this country. There are 27 million properties, so a number, particularly commercial properties, have several meters. We have approximately 9 million SMETS 1 meters, which means that we have 39 million still to do. At 1 million a quarter, which roughly ties up with the Minister’s figure, that takes us to 2028. By that time, I suspect that I shall no longer be a Member of this House, but I sincerely hope that we are able to meet that timetable. We also have about 100 SMETS 2 meters, most of which I understand have been installed on close friends and family of the producers as guinea pigs to see how these meters work. Last time I heard, they do not work particularly well. In fact, in the main they are fairly non-functional.

We should, however, give the Government their due. They have put back the final date for SMETS 1 installation from July this year to October and we have a 2020 target. The noble Lord, Lord Grantchester, maybe with his tongue in his cheek, asked the Minister whether it was possible to meet this target. Clearly it is not, so for goodness’ sake let us admit it, get back from la-la land into the real world and allow the industry, consumers and everybody else, including the Government, to plan this sensibly.

As I said, it is an £11 billion programme. That is massive in terms of future charges to electricity consumers. At the centre of this we have DCC, a Capita organisation. I understand that it has recently changed its management quite substantially. I certainly hope so. I looked through a list of just how late it had been, and I think there had been six postponements since 2014. We finally had it go live in November 2016, some years after it originally happened.

One thing I learned when I was very young was that, as a relative said to me, people who put lots of initials after their names are probably the ones you want to avoid, because they are trying to impress you and probably do not have the substance—I am sure noble Lords keep their peerage title in front of their name but have nothing behind. I stretch that example to reports and projects that are full of acronyms. When I went through all the background work to this, I was concerned: SMETS 1, SMETS 2, DCC, PPMID, CAD, IHD, CGI, SMSO, SMDA, SMOF, GCME, ESME, GBCS, SAR and of course MAPs, which are meter asset providers, which I will come back to later on. It seems to me that this process—this structure—is so difficult to understand and has been put together in such a difficult form, with a mixture of public and private, that it is designed to fail.

So far, I regret to say, it has been unable to deliver, despite in many ways the context being so simple, in that all you need is a bit of technology in your house—not necessarily under the stairs—which tells a monitor what you are doing in terms of electricity and maybe later allows you to participate in smart energy through a distributive grid as well. All that it then has to do is communicate usage in some way to a data hub, and all that data hub has to do is communicate with the electricity or gas supplier. That is all that is required, and yet 12 years later, where are we? We are a small way through a programme that we desperately need.

The Minister mentioned costs to some degree. I think the whole DCC budget to deliver this between 2013 and 2021, which goes on to consumers’ bills, has gone up from £1.3 billion to £2 billion. Its project management costs have gone up from £107 million to £374 million, and its set-up costs for subcontractors from £131 million to £948 million. DCC may be out of control, but government management of the process has clearly also been quite ineffective. In terms of timing, DCC has been late in going live by some two years, while SMETS 1 has been put back from July to October. At the moment, SMETS 2 meters are not working and have no supply chain, so if we stick to the October 2018 date for stopping the installation of SMETS 1 smart meters, can the Minister explain to me what happens to all the installers between October and when we actually get SMETS 2 meters going? We have thousands of skilled people out there fitting 400,000 of these meters a month, but I cannot see how they are not all going to be out of a job in October. We then lose the skills, so how do we get the rest of the programme in, not just by 2020 but by whenever we manage to do it?

One of the things that has to be core to this whole programme is interoperability. I understand SMETS 1 meters are reasonably interoperable, but as I think the noble Lord, Lord Grantchester, said, if you change supplier—which government, we in Parliament and people interested in energy want people to do—there will be instances when you get stuck with a meter which is either dumb or has to be replaced by the new supplier, at an additional overall cost to the consumer, if not individually. That is not right. What will happen to all the SMETS 1 meters? Are they going to be stranded assets? I do not see how that will work.

Turning to meter asset providers, I am not greatly into the argument about whether they should be licenced or not. Again, the noble Lord, Lord Grantchester, brought this up; I am sure that it is an important issue. To me, the real issues relate to energy prices and meter finance. I may have been fairly naive, but I thought that the energy supply companies would probably finance them themselves. How naive can you get? Of course not: they do not do that; they get them off balance sheet and lease them, yet the lease costs of these machines have been extremely high and are still high. That will reflect, once again, on consumer prices. It is something that needs to be considered and possibly changed.

I have many questions to ask the Minister, but first I congratulate the Government on having the half-hour metering to make sure that we can actually push forward much greater use of smart meters for smart grids, and particularly for demand-side management—all of that area. However, they are going to have to be a lot cleverer in terms of explaining to the public that demand-side management is not compulsory but voluntary, so that we do not have the Daily Mail headlines about people being forced to turn their heating off, or whatever.

I have not yet been told that the Government have solved the problems in relation to multi-occupational buildings. Are they anywhere nearer to solving them? On the compatibility and interoperability issues, the north is on a different communications system from the rest of the country and, as I understand it, it is incompatible with the remainder. Are all the 9 million SMETS 1 meters going to end up being stranded assets, and what do we do with them? Is this system now future-proof? I get the impression that it is not; that to really have an intelligent system, we are going to have to upgrade again. When are we going to have to do that? What policy action can we do centrally to bring down that rental cost of meters that is going to affect energy companies and that will inevitably be passed on to consumers? How will that be changed? For goodness’ sake, how are we going to manage DCC better in the future? This seems to be an organisation that started late, has been complacent with public money, has had hugely overshot budgets and just requires much better management for the future. Lastly, the 2020 target date is just not possible. What is the real target date for that, and do we have a chance of actually meeting it?

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[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.

Smart Meters Bill

Lord Teverson Excerpts

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

[Baroness Featherstone (LD)]

I support Amendment 4. Compared with other noble Lords present, I came late to the smart meters table. They have participated in a number of debates leading up to where we are now and during that process they have obviously met a number of bodies associated with the smart meters programme. I have to say that I have been somewhat shocked at how what should be an energy revolution, welcomed on all sides of this House and beyond, has turned into a shambolic mess. As was mentioned, the cost—much higher than was ever envisaged—will no doubt end up with the consumer. This could and should never have happened.

I was a member of the London Assembly when it was formed in 2000 and I was chair of the transport committee. When we introduced in London the biggest civil engineering project since the end of the Second World War—the congestion charge—a great deal of planning and work went into making sure that on the day it went live, it was so well thought through that nothing went wrong, despite the Daily Mail circling the perimeter of the charge to, it hoped, see it go wrong. I do not really understand why the commissioning of such a major infrastructure project has not been treated in that fashion. This is an absolutely huge change and an infrastructure priority, heralding a better future for all when energy is very important to this country. It seems to have involved a kind of piecemeal bun fight over which companies will deliver which meters to which people under what circumstances and for how long, with no co-ordination, no collaboration and nothing bringing it together.

Everyone has made it quite clear that the deadline will be missed. I am afraid that I have not met anyone, other than the Minister, who thinks that this deadline will be reached. That being the case, rather than move the programme to 2023 or whatever, it would be far better to grab hold of it now: otherwise, consumer confidence, which is vital to this project, will be completely undermined. I hope that the Government will grasp hold of this and take up the recommendation of the noble Lord, Lord Grantchester, coming back with a similar suggestion for halting the project and promoting a national plan. Not only does what needs to be done to whom, by whom and at what cost need to be thought through but there is a great need for a new communications programme to market the project. There is possibly also a need to incentivise consumers and to find a way not to put them off but to bring them back into the fold after they have become somewhat disillusioned.

The opportunity to make the project work is there, but at the moment we are in danger of the absolute opposite happening, with diminishing returns and diminishing confidence, shooting ourselves in the foot over what should be a fantastic programme for the future. The project has been piecemeal, inadequate and not thought through. If the Minister will excuse me, I believe that he should bring it together, do the necessary and bring back an amendment on Report.

[Lord Teverson (LD)]

My Lords, I congratulate the noble Lord, Lord Grantchester, on this major amendment in terms of a plan. I have been searching to find a way in which this project can be put right. The difficulty is in making it deliverable and coherent without going back to where we were 12 years ago. This programme started in 2006 and it has taken since then—the time taken for the First World War, the Second World War, the Korean War, plus a bit more—to get to 300 SMETS 2 meters. That is what we have achieved over that period of time. That suggests to me that it has not been good. Obviously, a number of Governments have been involved during that time. We all understand how important this is. This programme is not just about people not having to read the meter any more, as one of my colleagues said over lunch, but about how we manage energy in the whole economy and our nation for decades ahead. We should be leading a cultural, technical and economic change.

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[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.

[Lord Grantchester]

I thank the Minister for his response, and I am grateful for all the comments made around the Committee today. It has been very helpful. I am not trying merely to tease the Government in offering them more time, I thought that the Minister might come forward with evidence to show that all this is going to be achieved well within the 2023 timeframe, and the different steps that are going ahead, such that we could be shown to be completely erroneous in our impression that the Government may need more time. I put it to him that we are trying to be constructive and trying to get the right solutions done in an effective way for smart metering to be well accepted, so that when consumers are offered a smart meter they are only too keen to go ahead because of the state of the technology, the benefits that can be shown to them, and so on, and we can all look forward to an early resolution of all these problems for a successful outcome. So if the Minister is happy to take it in that timeframe and does not see a critical issue in the 2023 deadline, I am very happy to beg leave to withdraw the amendment.

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[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]

My Lords, I rise to move Amendment 5—I hope I have got the right number this time and I apologise if I confused people before.

This is a probing amendment. I have raised issues with the Government before about the interoperability and the joining-up of the different policies that we have. Fuel poverty is an area in which I take an interest and the Bill impacts on fuel poverty strategy and affects those in fuel poverty. It also impacts on energy efficiency, which, as the Government have made clear, is one of the reasons for the programme. However, I am never quite sure how good the Government are at joining everything up. The amendment therefore asks the Government to review how this programme is affecting the fuel poverty and energy efficiency programmes and how it can benefit them.

On fuel poverty, the ability for people on low incomes to get an accurate bill and save energy is important. We know that shock bills can create a sense of fear in people and quite often that is why they end up going into debt. Inaccurate bills can sometimes have the same effect and we recognise that part of this development is to prevent people receiving inaccurate bills. Any delays in the programme will have a greater adverse effect on those who are in fuel poverty or are vulnerable in some way or another.

The pre-payment meter price cap, to which we will come later, is still closely linked with the smart meter rollout. One area of the rollout concerns me. Smart meters have been of great benefit to people on pre-paid meters but I understand there might be problems later when the SMETS 2 come in. Could the Minister reassure us that the Government have this in hand, because some people are concerned about how it might work out?

I learned today something that neither I nor my colleagues had heard of before. Photovoltaics on roofs is one of the energy efficiency programmes that we have introduced in the past, but when one of my colleagues in the House who has such a system asked for a smart meter she was told that she could not have one. However, she might be able to when SMETS 2 comes in. So there are two questions about the SMETS 2 meters: are people who pre-pay going to suffer and what are we doing about people with solar panels? Do the Government know how many houses have solar panels? That is a whole chunk out at the moment. If that is the case, they should be the first people to get SMETS 2. Somebody should try to target it in that way.

The other issue is one that I have discovered, I think from the briefings we got from Smart Energy GB, which is the fact that not everybody has an in-house display when they have their meter fitted. I was quite shocked by this because I thought that was the whole point. As it said in the briefings I received from it, some people have meters in very strange places—in cupboards under the stairs and all sorts of places. I cannot understand why the programme was not insisting that, when you have a smart meter, you have an in-house display, otherwise many of the benefits that we hope smart meters will bring are somewhat negated if you cannot read it very easily.

I am not going to prolong the Committee much longer, but it is important, whenever the Government review what is going on with the smart meter rollout, that they think carefully about the other areas of policy. As I said, and as I raised before, I am particularly concerned about those in fuel poverty. I know that the smart meter rollout companies are working quite carefully with other people to help those in fuel poverty. I declared an interest at Second Reading because I am a vice-president of a fuel poverty charity, National Energy Action. I would be interested to hear whether the Minister can answer a couple of the questions I have given him. I urge that, whatever reviews we have, we must sometimes refer to how it is impacting on other government policies. I beg to move.

[Lord Teverson]

My Lords, I shall speak to my Amendments 12 and 13. One of the things that has exercised me most about this programme is how, in the transition from SMETS 1 to SMETS 2, we assess that we are sufficiently there to fire the gun to roll out what is an £11 billion programme. That is not an insignificant amount of money. My noble friend Lady Featherstone pointed to the congestion charge. I do not know what it cost to roll out; it was expensive, but I suspect it was not anywhere near £11 billion. That is why it is important, before the rest of this happens, that we make sure we are in the right place.

I understand that we currently have some 300 SMETS meters out there being tested. I also understand that there is still a further software upgrade to happen in September—I would be interested to know whether that is the case—yet we have a deadline of October, which is only some six months away. That is why I am saying in the amendment—it is rather a blunt instrument and probably would not be absolutely correct for the final Bill—that there should be some 500,000 SMETS 2 meters out there to make sure that this market works. That seems like a huge number, but I remind noble Lords that it is 1% of the total number of meters that have to be smart by the end of this programme—some 47 million to 50 million. That is why, in terms of the size of the programme and the length of time we have already taken in getting it right and getting consumer confidence, I am trying to understand from the Government and the Minister what tests they have and what threshold they are expecting to see before they say that the programme is fully fit for purpose, they have confidence and they are going to roll the rest of it out as SMETS 2—SMETS 1 no longer, although we have 10 million of those meters already. What is the threshold that says that they have the confidence to roll out one of the most expensive projects? I am not sure that it is as expensive as Hinkley C, but it probably will be by the end of the Hinkley C programme. It is a huge amount of money and a huge national investment that is really important for the future, so what is the threshold test before we roll it out with confidence?

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[Lord Stevenson of Balmacara]

My Lords, this is a wide-ranging group of amendments and it is a bit hard to find the right balancing point to address it, so I am going to give up at the beginning and just go through them one by one—in a slightly different order, just to confuse everyone.

Amendment 5 is right on the money in trying to make us focus again on why we are doing this and what it is about. It will not be worth doing unless there is an impact on energy efficiency. As we were reminded in the first group by the noble Lord, Lord Teverson, the problem we face and the one that the Government have to open themselves to be honest about is whether this will be worth having in the sense that it will actually change people’s behaviour and therefore save us some of the costs that we have from our expensive use of energy. If that is not part of what we are thinking, we need to make it part of the process and, indeed, the plan, if we go that way.

I was listening hard to what the Minister was saying, but I was expecting him to say a lot about the industrial strategy, since it is seated in his department and it seems to me that this is part of the industrial strategy. Our energy efficiency should have a material effect on our ability as a nation to continue to operate as a net importer of energy and as we gradually try to be more effective and efficient in what energy we can produce and how we use it. Those things seem crucially the bedrock on which any industrial strategy, and therefore any chance of this country surviving in the long term, is placed. I would have thought that it would be important to the Government to put this at the heart of what they were saying about the future stages of this process, because that will be helpful in convincing consumers, both those in fuel poverty and others who are just interested in the overall economics and efficiency of the country. So the requirement to lay a report that focuses on that might help us to win the battle of hearts and minds to get people more to accept it, and we support the amendment.

Amendment 7 is a bit more on the money in real terms, because it says that, if there are economic and other efficiencies in the process, the consumer should benefit from them. Again, we would support that. You do not have to be a conspiracy theorist—well, probably you do, but you do not have to be a genuine conspiracy theorist—to sense that there is something a bit odd going here. In a curious sort of way, the noble Lord, Lord Teverson, said it. Here we have an £11 billion programme. It is not being financed out of general taxation; there is a money tree, and that money tree is consumers who are being asked to pay for this without actually knowing what they are paying for. This is being loaded on to their bills and recouped by the companies. It is not being passed on to those who are benefiting from efficiencies. Nor is it being used for useful purposes for trying to help those who are suffering fuel poverty. Have I got this wrong? If I am right in this, we ought to confess that this is what we are doing and think much more carefully about the £11 billion price tag. The noble Lord, Lord Teverson, put his finger on it in saying that we ought to be certain about the benefits that will flow from this before we push the button, and his amendment, which we are coming on to, focuses on that.

The noble Baroness, Lady Featherstone, talked about real benefits to individuals. If we were interested in the consumer approach and in consumers buying this programme, getting behind it and saying that everybody should have one of these things because not only do they give you pretty pictures about what energy you are using but you get money out of it because it shows you how to reduce your costs and that benefit comes back to you, that would be an advantage to the Government, who might otherwise be struggling to get people behind this.

Amendments 12 and 13—effectively, Amendment 13 —take us back to our discussions on the first group of amendments and Amendment 4, which is tabled in my name and that of my noble friend Lord Grantchester. Amendment 13 sets as a condition of minimum confidence 500,000 SMETS 2 meters—still a very small number—which are so far really untested in operation. Going back to what I said earlier about the need to operate in the wider context of opening up for innovation and bringing in new ideas, new ways of saving money and new ways that consumers could try to do things differently in their home in their use of equipment and the internet of things, we know all these other things are there and should be part of this process and package, but they cannot be until this project goes well. This amendment might look like a simple delaying tactic, but it sets an important pausing point at which everybody who is concerned in this, whether there is a proper plan or not, can say that they have confidence to go ahead with this project because they know it works and that at least at the level of the first 500,000 of these SMETS 2 meters it is a going concern, it is terrific, we can talk it up and we can all get behind it. There is a lot to commend this amendment to the Minister and I look forward to hearing him respond to it.

The Government have a rather uncomfortable choice. It would be very sensible for them to accept either this amendment or Amendment 4 because without some sort of overall bringing together of the consumer interest, the supplier interest, the regulator interest, Parliament, which needs to have a role in this, and the Government we will not get this working properly. That will be suboptimal for the country and for everyone in the long term.

[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.

--- Later in debate ---

[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.

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[Lord Stevenson of Balmacara]

My Lords, in this group we have Amendment 10, which I think takes the debate a little further forward. The noble Baroness, Lady Featherstone, made the case very well about the immediacy of the problem that now faces the Government and how they make progress with a company which has given a profits warning and has had to raise funding. Although it says that it might have access to many billions of pounds in borrowings and other things, it obviously raises questions of an order similar to those in the Carillion episode of a few months ago. I look forward to the Minister’s response on that, which I hope will cover the question of whether the Crown’s official involved in checking out companies that have major contracts with the Government has considered its longer-term prospects, making sure that any contracts placed with that company are satisfactorily secured in terms of delivery.

Our amendment fits in very neatly with this, at least in the sense that the reality of an administration is that it is a failure not only of the operations but of the possible costs. Like the noble Baroness, Lady Featherstone, and the noble Lord, Lord Teverson, we do not wish to see those costs passed on to the consumer. However, it also raises wider questions about what is going on here. In a sense, this is relatively familiar territory in that the Government are achieving a social objective using private sector activities. As was said in the other place only this afternoon, this is not new to Governments; Governments of all shapes have for the last 20 years or so increasingly used the private sector. Indeed, it is a long and distinguished history: Governments do not do very much on the ground in terms of buildings or roads. They may well carry responsibility for them and pay for them but the physical work is done by others. Outsourcing can deliver benefits. However, at a time when margins are being decreased and there is a bit more concern about whether these companies will be able to survive, we have to be very careful in what we do.

The thinking behind Amendment 10 concerns not just the mechanics of what happens in a default but whether the Government can think a bit more widely about how the company operates. Obviously, the new company, the DCC, is crucial to the delivery of the SMETS 2 programme. It is wholly owned by Capita; it has a ring-fenced arrangement with Capita but is nevertheless entirely under the control of that company. Although there are independents on the board, and everything else, do the Government really feel that that is sufficient at a time when so much is riding on it? We are talking about £8 billion worth of investment and work going forward, and everything that we have said this afternoon in relation to the future of our energy policies and initiatives and to consumer interests is certainly part of the whole operation.

When we were considering the green bank—I am waiting for the head of the noble Lord, Lord Teverson, to snap up at this point—we came across a similar problem, which was trying to make sure that the body that was being set up in the private sector, which we knew at that time was to be sold, had imposed within its structures a set of conditions under which the Government retained a golden share, to make sure that its original purposes, and green purposes in particular, were not polluted or changed by subsequent changes in the operational management of the company when it was set up or in its eventual sale. It turned out to be a very complicated issue, and I pay due credit to the noble Lord, Lord Teverson, for pursuing it to the point where we found a solution, which was not one that the Government ever thought we would come up with. But it was possible to come up with something that met the requirements that the Treasury set, unrealistic though they were, that the arrangements should not leave the Government in a direct power relationship to the company, because that would require any costs and everything else to go on to the balance sheet, but still retained the ability of the company to operate so that the green objectives were retained and operated. I am simplifying to make the point.

Does not this arise also with DCC? Is there not a worry here that we are talking about an organisation, a structure, a delivery function and an operation which suggests that we really ought to be thinking harder about the overall structure here? If the narrow question about what happens in an insolvency is insufficient to probe it, should not the wider concerns about all the companies that are going through difficulties with their delivery of public service obligations? The newspapers will be full of questions about what is happening to recruitment to the Army, because Capita is not performing very well on that, and what happens to other areas of activity. We may find that, £3 billion into the programme, the main structural body responsible for organising the network for our safety and data and all the operations that will lead to customer buy-in to this is unable to fulfil its objectives because of other financial constraints, and we do not have the right regulatory structures in place to ensure that it carries on the way it does. This amendment gives the Government at least some incentive to look at that, and I hope that they will respond positively to it.

[Lord Teverson]

My Lords, I support the amendment moved by my noble friend Lady Featherstone. Indeed, I agreed with many of the points that the noble Lord, Lord Stevenson, mentioned. The structure of the company in terms of green shares or golden shares is an interesting point that may be well worth pursuing.

Perhaps I should know this, as it is a factual question, but how long is the contract with Capita for DCC? What are the arrangements at the end of that contract? However long the smart metering programme goes on for—and one hopes that smart meters will be there for many decades before the next technology comes along—what are the arrangements for selecting the next incumbent? Does the DCC remain, or does it transfer to the new contractor, or is there a new corporate structure at that time? I am just trying to understand the length of commitment that we have with DCC at the moment. I am sure that, if I had done that research, I would already know, but perhaps the Minister could enlighten me.

Smart Meters Bill

Lord Teverson Excerpts

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

[Baroness Featherstone (LD)]

My Lords, I support this proposed new clause on the national plan for smart metering, to which I have added my name. As I said in Committee, I came to the smart meter table relatively late, far more recently than most of your Lordships, who seem to have been debating it in one form or another for some years. I was shocked at the seemingly piecemeal way it has evolved, as if it were not one of the major infrastructure projects of this century, which it is. As a consequence of this approach, I have seen a lack of vision, scale and form, which is why this project has been so poorly executed. I was astounded to find that the suppliers were to be the agents of change; I did not understand why it was not the distributors.

However, we are where we are, as they say, so this new clause is proposed to give the opportunity for the rest of the scheme to be conducted in a far more responsible and farsighted way. It would allow the Government and all the players to ensure the best way forward and to deliver certainty and security for consumers, who have been expected to change—we know how difficult change is—but then have heard conflicting and different advice at different times from different people.

The proposed new clause would make sure that all parties are involved; it puts in metrics, targets and incentives to maximise take-up. It makes tracking progress on those tasked with delivering the objectives of smart meters and details what that will require. It would make sure that everything is properly reported, measured and documented. At last, we might actually have a critical path and a critical path analysis from which to work.

The proposed new clause would put this massive civil infrastructure project on a certain basis; it provides certainty for the consumer and a more sure and stable critical path for providers and all those participating in the rollout and beyond. As the noble Lord, Lord Grantchester, said, that is central to all our commitments on energy and energy efficiency in the future.

I very much hope that the Government will take a deep breath and graciously accept that they need help, and that the national plan would be a sensible and professional way forward.

[Lord Teverson (LD)]

My Lords, I support Amendment 1 in the names of the noble Lord, Lord Grantchester, and my noble friend Lady Featherstone, and I should also like to speak to my Amendment 2.

It is important to remind the House that this is an £11 billion programme; it is one of our major national infrastructure programmes, started in concept when I joined the House in 2006. It is now 2018—12 years later—and all of 300 meters have been installed, but we are not sure whether they work. There are another 10,000 which do not comply with the final regulations that we are trying to achieve—that is another potential problem for the future.

The one person I have really missed in this debate is Lord Patrick Jenkin on the Government Benches. He was one of the great analysts who brought together the real facts of a case, and we miss his presence.

One concern I had in Committee was prompted by my noble friend Lady Featherstone, who spoke very cogently of how, when the congestion scheme in London was rolled out, huge testing was carried out to make sure that the system worked when it was launched and that it was effective from day one. Yet when I asked the Government about their tests for SMETS 2 meters and their systems to ensure that the machines were ready for the massive rollout of 50 million meters by 2020—it is almost amusing to say that date—I got no response. The Minister looked at me as if to say, “What are you talking about?” It seems that there is no bar that has to be crossed—there is no test before we roll out these additional 40 million meters, supposedly over the next couple of years.