Smart Meters Bill

Matt Western Excerpts

2nd reading: House of Commons & Money resolution: House of Commons & Programme motion: House of Commons & Ways and Means resolution: House of Commons
Tuesday 24th October 2017 Commons Chamber

[Mark Pawsey (Rugby) (Con)]

I welcome the Secretary of State’s speech introducing this Bill. He set out very clearly the benefits of the smart meter programme and what the Bill’s two main provisions will do. First, the Bill will extend the Secretary of State’s powers by five years, from 2018 to 2023. It is interesting that the legislation gives such powers in five-year batches to ensure that the powers are not unlimited. There would be plenty of objections from the Opposition if there were unlimited powers in the Bill, which takes us to 2023. It is entirely appropriate that it should be brought before us, because the very ambitious pace originally set has not been achieved, and the programme is running rather more slowly than we anticipated.

We also heard, secondly, about the introduction of the special administration regime for the body—the data communications company—managing the communication between the smart meters and the energy companies, as well as about the need for resources and facilities to provide protection and rescue given the rare possibility of financial failure. I was very pleased to hear the hon. Member for Salford and Eccles (Rebecca Long Bailey) say that the Opposition will support the Bill and that they welcome and value its measures.

I want to touch on the status of the data communications company, because the programme is running behind schedule and the company is involved in handling rather bigger sums than previously expected. The costs are now expected to run to £900 million, and the project has become more complex than originally anticipated. The energy companies are under pressure from the regulator to increase the rate of installation, which has led to more of the SMETS 1 meters—the first generation meters—being installed. It would be helpful if the Minister clarified when he sums up what will happen when we move to SMETS 2 meters. There is some concern that SMETS 1 meters may need to be replaced. I think the Secretary of State said that there would be an upgrade, but will the Minister talk the House through that process. I will come back to that concern later.

The cost of proofing the technology against cyber-attack has increased. This place has been affected by such an attack, so we all understand the importance of that. We will need to look at the DCC’s cost and revenue. The provisions relating to protection and rescue are very important. Will the Minister comment on the likelihood that those provisions will be needed?

This debate gives us all the opportunity to talk about the aims and objectives of installing smart meters. I am pleased that we have now upped the rate, with 370,000 now being installed per month. The principle of smart meters is fantastic and brilliant: the information about usage is sent to suppliers by the network that is being created. There are real benefits for the utility company. It already knows rates of usage, but this will tell it specifically where the demand is coming from, how much demand there is and at what times of day. All that will enable utility providers to predict demand better, which will in turn give us all the benefit of security of supply.

There are also real benefits for the consumer. By being informed about their energy usage, the consumer can decide to use energy when it is cheaper. They will have a greater awareness of their usage, and they will be able to manage their bills better and reduce their consumption. I am struck by the analogy with the computers we all find in our cars these days.

Our car’s mileage per gallon will vary according to the speed at which we drive on the motorway and how we drive—how much of a hurry we are in. It is possible to modify the mpg. I always find it interesting to note how I might be able to get an extra mile per gallon by modifying my behaviour. I see a real parallel between that and the usefulness of smart meters.

The other principal advantage I see is that of accurate billing. Many people pay for gas and electricity on the basis of what they estimate they may need, so in many instances they pay for more than they use. That is great, because it sometimes allows them to build up a credit and they do not have a debt to the energy provider, but as one person put it to me, that is not great for the family cash flow; so paying their bills on the basis of the amount of energy used rather than an estimate provides a real benefit.

The fourth advantage, which we have not yet seen but is a matter of concern, is that with smart meters, switching between suppliers ought to be easier because anyone looking to switch would have much more accurate data on which to compare suppliers’ tariffs. That should enable them to make a more informed decision. The technology within the meter should enable the switch to be made more easily. There is a real link here—the Secretary of State referred to it—between that ability and the need for some control and management of prices.

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

I have not done this before. There is a huge amount of sense in everything that the hon. Gentleman is describing, but I was surprised to hear—and maybe he would be—that more deprived households have not been prioritised for the introduction of smart meters. Given what the hon. Gentleman has been saying, it would be a real advantage to their household economy if they were prioritised. Would he welcome that?

[Mark Pawsey]

I thank my constituency neighbour for his remarks. Of course, the issue is the use of the second generation of meters—the SMETS 2 meters—and we need to get them into as many places with prepayment plans as possible, so that those households too can get the benefits of seeing when their electricity is cheapest and using their appliances when they get maximum advantage.

--- Later in debate ---

[Alan Brown]

I agree. There is an issue with connectivity, and a problem with gas meters on external walls. Flats and tenements quite often have banks of meters installed in communal areas, and there is not yet a solution for the installation of smart meters in those cases. Frankly, the 2020 deadline is dead in the water.

As I said, the consumer pays for any increase in labour costs and recruitment to try to hit a deadline, so that is an additional cost that eats into savings and is probably not yet projected. I am a wee bit unsure about the Government’s estimate of the financial benefits of the smart meter roll-out. I am not saying that the roll-out is not a good thing, but I do question some of the figures attributed to it. The only guarantee that consumers have is that they will have to pay for the £11 billion installation costs. As we have already heard, those costs are increasing.

There is an estimated direct consumption saving of £5.3 billion, which is only half the installation cost. There is also an assumption about long-term behaviour—that customers will continue to operate a reduced energy usage. I have a concern about human behaviour. It may be the natural instinct of many customers to modify their behaviour and turn down their electricity usage when they get smart meters, but bad habits may creep in over a long period and the savings might not be realised at the same level.

There are other estimated savings in the Government’s cost-benefit analysis that are, frankly, quite spurious. The Government estimate £8 billion of supplier benefits, but there is absolutely no guarantee that the £8 billion that suppliers are predicted to save will be passed on to consumers. The Secretary of State intervened earlier to suggest that the market will dictate that these savings will rightly be passed on to consumers, but I draw the Minister’s attention to the fact that market failure is the whole reason that we agree on energy price caps. There is no way that we can guarantee that future savings for suppliers will be passed on to consumers.

Other spurious savings estimates include carbon-related benefits of £1.3 billion and £98 million in air quality savings. Now, reducing carbon emissions is a good thing, but I question how we can quantify those reductions as savings that will go direct to the consumer. The Government estimate savings for each household of £11 per annum by 2020 and £47 per annum by 2030, and £16 billion of savings were estimated overall. However, as my colleagues have touched on, the bottom line is that these estimated savings of £16 million are completely dwarfed by the £30 billion project that is called Hinkley Point C. That wipes out any projected savings from this programme.

Other hon. Members have mentioned that all consumers are paying for this programme, so surely the fuel poor and prepayment customers should be targeted first and given assistance. We should ensure that these vulnerable customers get the smart meters they deserve. Smart meters are supposed to end estimated billing, but it is acknowledged in the Government’s own factsheet that accompanied some briefings that if somebody with a first generation meter changes supplier, it is quite possible that they will lose the functionality of the smart meter. Even if they retain some functionality, they will end up back with estimated meter readings. That is counter- productive and the opposite of what the smart meter roll-out is supposed to achieve.

It was said that the second generation roll-out will start in July 2018. Well, we need the Minister to confirm how certain that is. Will the energy suppliers be forced to move on to the second generation meters, or will they be able to use up the backlog of 2 million first generation meters or whatever the number is? What if the initial companies are doing cheap deals on the first generation meters to get them out the door? Are we still going to be stuck with them?

[Matt Western]

I have spoken to a major energy supplier in my constituency, and it is clear that suppliers are seeking clarity from the Government on not only the timescale in which they are supposed to install these meters but what are deemed to be all reasonable attempts to get them installed. So, overall, there seems to be a lack of clarity, even for the suppliers.

[Alan Brown]

Yes, I agree, and I hope we will get more clarity when the Minister sums up.

I agree that properly functioning smart meters can bring consumer benefits, but it is clear that they are not a silver bullet in reducing bills for energy users. To properly reduce costs, the Government need to look at their wider strategy. Nuclear commitments need to be scrapped. All renewables need to be able to bid in future contract for difference auctions. Much more also needs to be done to manage the smart meter process, and I look for confirmation on that when the Minister sums up. At the moment, the Bill will not achieve that, but it will extend the Government’s powers, and I hope we will hear how those will be used to better implement the roll-out of smart meters.

Finally, the Secretary of State mentioned the smart grid and the use of smart meters for demand management. If we are going to get to that, the future upgrades need to be much more efficient, and I look forward to that happening in due course.

Smart Meters Bill (First sitting)

Matt Western Excerpts

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

[Douglas Ross]

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

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

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

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

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

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

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

[Matt Western]

Q Have you withdrawn the licence from anyone so far on the basis of malpractice?

Rob Salter-Church: We have a range of tools if we see problems with licence compliance, including ultimately running an enforcement action and imposing fines. We have not had to use our enforcement powers in relation to smart metering as yet.

[Laura Smith (Crewe and Nantwich) (Lab)]

Q Matt just asked my question, but I will add to it. I could possibly be the only person in this room who has had to survive on a pay-as-you-go meter, and I have also lived through then being targeted with high tariffs by energy companies—they come to the estate and sell those things, knowing that they are going to make money out of the poorest in society. I struggle with the transparency of this. Data protection and customers’ privacy, in terms of information about how they are using their energy, is a real concern for me. I just do not personally buy the argument that it is all for the consumer, when there is money to be made out of people. So that is an issue.

The roll-out is also an issue. We have touched on the fact that it is obviously delayed. Is it going to happen or is it another initiative that is going to cost an awful lot of money? Who is going to end up paying for that? Will it ultimately be the consumer once again? Those are my two main points, before I get on my high horse.

Rob Salter-Church: You talked about having a traditional prepayment meter and some of the poor quality of service that results from that. One of the most important things that the smart meter roll-out will do is end the prepayment disadvantage, in terms of both cost and quality of service. That is absolutely key and there are real benefits for consumers.

You talked a little bit about privacy. There are very clear rules in place for suppliers; they must obtain customers’ consent if they want to have any data from them.

Smart Meters Bill (Second sitting)

Matt Western Excerpts

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

[Mark Pawsey]

Q Are the Government just being prudent by including this clause in the document?

Derek Lickorish: I think it is a very prudent situation. There must be an anxiety, otherwise why have they done it?

Richard Wiles: Likewise, I am not able to answer as to the exact reasons, but bringing previous Acts together under one is a sound idea. With regards to how DCC would reach that situation, again, I have no absolute definition as to how that could happen now.

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

Q This is not my specialist subject, but I am interested in the asset provider side. I am trying to get my head around this. Could you give me an idea of how many manufacturers are supplying to the industry?

Richard Wiles: There are different manufacturers for SMETS 1 and SMETS 2.

[Matt Western]

Q For SMETS 1, sorry.

Richard Wiles: There are probably about half a dozen different manufacturers that are providing SMETS 1 solutions, and it depends on the scale that they are deploying at. We are the two companies sitting at the top of the table; collectively we have the largest market share of the SMETS 1 devices going out there. We have supplied multi-millions of devices, smart meters, communication hubs and connected devices that hang off that through our communications hub and mini DCC head-end systems. There are other companies out there that have provided a smaller amount, but I cannot give you a definite figure on the volume of that.

[Matt Western]

Q These units are provided to the companies to install, and that is written down essentially over a lifetime. What sort of lifetime are we talking about for one such product?

Derek Lickorish: The old Ferraris disc meter had a lifespan on circuit starting at about 18 years. It came in, you put an airline on it, took the dust off it, and then put it out for another 18. We are now talking about a very sophisticated electronic device, and I do not think we know the long-term answer to that, but it ought to start with 15 years.

[Matt Western]

Q So where we are hearing about another provider possibly coming in, and this question of interoperability—if you have one supplier and you switch to another supplier, there is this, “We are going to switch the unit at the same time”—why can that other company not take over the asset? Is it simply about communications?

Derek Lickorish: No, there are two issues. There is the technical issue, and we are saying that you can deal with the technical issue.

[Matt Western]

That is what I thought.

Derek Lickorish: Then it comes down to commercial contracts.

[Matt Western]

That is the point I want to get to.

Derek Lickorish: This was an issue raised some time ago—in fact, probably two, but maybe three, years ago—over deemed rentals. You were getting enormous deemed rentals being charged by some meter asset providers to somebody who was going to use their meter, because they had inherited it on change of supplier. Some of those are not regulated businesses and people smell an opportunity on this sort of thing, in particular when it is in the state that it is—it is all relatively new—but then there are forces that will create anxiety about an asset’s longevity in that space, so the deemed rental will be high. It is rational to be high. That is because the framework that sits all around this is uncertain and, as we all know, markets like certainty. These people—they are financiers—want certainty, and if all the time we keep saying, “Well, SMETS 2 are just around the corner, no more SMETS 1 meters” it all creates a fog and a fuzz that will drive what I believe to be irrational behaviour on some of the deemed rentals. Ofgem is aware of it, BEIS is aware of it and this is another issue that the industry needs to galvanise around, because if we are not careful, if we do not get proper interoperability tested, which is in trouble at the moment, a risk premium will be attached to those contracts.

[Matt Western]

So the costs go up.

Derek Lickorish: So the costs go up. Bear in mind, and forgive me for saying, that this is a £12 billion programme. DCC alone has seen its costs go from £1.3 billion to £2.1 billion. Forgive me, but every £1 billion will give you 10 210-bed hospitals. These are huge sums of money and we need to make sure that the framework that sits around them is accurate and fit for purpose.

[Matt Western]

Q There is a massive issue here, isn’t there?

Derek Lickorish: Yes, there is.

[Bill Grant (Ayr, Carrick and Cumnock) (Con)]

Q I am still enthusiastic about the potential for smart meters and there is still will behind it. I am trying to make a comparison and I come back to the 1970s, to the introduction of natural gas. They are two different technologies but a massive task throughout the United Kingdom. We mentioned two dates: 2020 was the desirable date and you wish that to be retained, although there was a fall-back date of 2023. At some time in this journey we are going to have to speed up the process. We are going to have to pull our socks up and get the job done. I have two questions in that regard. Do we have the production capacity for SMETS 2 meters to meet the demand when it is at its peak, and do we have sufficient human resources to install those meters commercially, hopefully to meet the target of 2020, but perhaps more realistically at a date beyond that? How are we for capacity: human resources and production capacity?

Richard Wiles: We manufacture SMETS 1 and SMETS 2 devices. We are prepared to ramp up our production line to make sure that SMETS 1 can run in parallel to ensure that any potential shortfalls in capacity can be overcome by our increased production. We can continue to keep the momentum and supply chain running in that respect. Regarding installers, by the end of SMETS 1, we are probably looking at around 12 million devices. If the current installation rate continues through to July next year, that equates to around 1.3 million smart meters per month that need to be installed.

Whether we need additional installers is something that Trilliant has not supplied services on, other than installation processes, but organisations are geared up to supply the installation requirement for SMETS 1 and SMETS 2 to meet that deadline.

--- Later in debate ---

[The Chair]

Mr Western: 20 seconds.

[Matt Western]

Q The confluence of “prosumer”—producer and consumer: do you think the Bill addresses that, or is there an opportunity to have gone a bit further with it, to change behaviour?

Dr Sarah Darby: The specification is already there to allow for prosumption, for people who are generating—

[The Chair]

Order. I am afraid I have no choice. That brings us to the end of the time allotted for the Committee to ask questions. I am sorry to cut you off in your prime. Perhaps, as the question has been brought in, you will see each other after the Committee. I thank you both for being our witnesses this afternoon and, on behalf of the Committee, for giving us the benefit of your wisdom. Line-by-line consideration of the Bill will begin at 11.30 am on Thursday in Committee Room 12.

Smart Meters Bill (Fifth sitting)

Matt Western Excerpts

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

[Steve McCabe]

I am grateful for your guidance, Mr Gapes, but I was stressing the point that we would not need to know were it not for the fact that this is going to cost so much. If something that costs so much goes wrong—especially when that cost is borne by the consumer—we should fear a situation in which those who were instrumental in making all the decisions up to that point can be absolved of all responsibility, because the Minister steps in to offer a new regime to protect and safeguard the failed organisation without you, Mr Gapes, or me, or anyone in this room having any idea what happened, what will happen, who will pay for it, and what it will cost. That is the object of the exercise.

I am grateful to you, Mr Gapes, for your guidance about not dwelling too much on the figures, but those figures are considerable and I will certainly seek an opportunity to share some of them with you later in our proceedings, if at all possible. I believe that the public have every right to know those figures, but I am grateful for your guidance on that point.

For the purposes of the amendment, I simply stress that it would be wrong to have a situation where the Minister was forced to take such an action, especially if there is any suggestion that that action could be taken behind closed doors and would not be visible, transparent and available to everyone. It should be open to the kind of scrutiny that I think all members of the Committee would believe essential were an operation of this size to go wrong, land the consumer with an enormous bill and require a special administration intervention.

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

I rise in support of what I think is a simple and honest amendment that seeks only to underline the need for transparency—that is something we should be stressing throughout the Bill. We could ask whether the words “efficiently” and “economically” really need to be included in the Bill, and of course they do, but likewise we also need the word “transparently”.

If I understood correctly, this process started some years ago and we are now legislating for it. A moment ago it was asked why we are doing this only now. That seems a little incredible to someone who walked into this place a few months ago, but be that as it may, we are where we are. What we are picking up from consumers is not necessarily distrust, but there is some confusion out there. Any means by which we can improve the transparency of the programme and provide clarity for consumer and suppliers is surely vital. I support the amendment.

[Dr Whitehead]

In supporting this amendment, will hon. Members cast their eyes across clauses 2 and 3 that set up the smart meter communication licensee administration, and the special administrative regime—the SAR? We must emphasise what a special circumstance this is. This would be where the body that had been charged with the whole roll-out of smart meters, which had millions of pounds under its guidance, had gone into administration—for whatever reason. As the Minister points out, traditional methods are available for dealing with a company that has gone into administration.

A special administration regime would, among other things, ensure that the special nature of the DCC and its complete centrality to the roll-out was not subsumed under that traditional method of administration, which might cause damage given what the administrator might decide to do with the company if there were not a regime that was carefully worded and sorted out. The administrator might decide that a number of functions that otherwise would have been carried out by the DCC would not be—indeed, we may debate some of those additional functions later. There would be the whole question of the administration of that company being brushed under the carpet, being put in the hands of the administrator and set aside from the public gaze.

A lot of company administrations take place in circumstances of some opacity—that is, it is difficult to ascertain exactly why the company went into administration, the intentions of the administrator or even where the appointment of the administrator came from. It is difficult to find out what the administrator thinks they are going to do with the company concerned. There are whole series of things that, in terms of general company law, ought to be a little more transparent but generally are not; that is how it works as far as company law is concerned.

However, this is a very different circumstance: the entity is an essential public function as well as a company, which might be placed into administration. It is therefore right that, in clauses 2 and 3, we do more than say that we want to make sure that the administration is in the right hands and that nothing happens with the administration that will cause damage to the passage of the DCC as the organiser of the smart meter roll-out. That is what all the paragraphs in clause 3, and some of those in clause 2, are about. They are concerned with the smooth transfer and running of the system. There is not one word about any light that should be shone on what would have happened to that company previously, and what is the public good of the company subsequently, once it comes out of administration.

Smart Meters Bill (Sixth sitting)

Matt Western Excerpts

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

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

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

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

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

[Richard Harrington]

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

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