Smart Meters Bill

Stephen Kerr Excerpts

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

[Stephen Kerr (Stirling) (Con)]

The hon. Gentleman raises an important point about public confidence. Is there not a danger that when people with SMETS 1 meters switch energy supplier and lose their smart meter’s smartness, they will lose their confidence in the whole programme?

[Dr Whitehead]

Like me, the hon. Gentleman sat through many of the evidence sessions during the Committee stage, so he will know that an advanced programme is in place to ensure that SMETS 1 meters are compatible and interoperable, and indeed can work online, to ensure that that problem does not occur. That is a recent development. I agree that if it turns out that many SMETS 1 meters become completely dumb, that might be a problem for the overall roll-out. Perhaps the Minister will have something to say about that later, because it is important that we get this right.

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[Dr Whitehead]

My hon. Friend gives a very important qualification to that figure of 250. I must admit that when I heard that figure from the head of the DCC, it struck me as being pretty shocking in its own right. It is interesting, to say the least, to hear that the 250 figure is on the optimistic side, and that the number that are actually on the wall and working—in the homes of friends and family, as my hon. Friend says—is only about a third of that figure.

The slippage is reflected in the latest cost-benefit analysis, which is from last year. It shows the cost-benefit gap narrowing, at least in part because of the SMETS 1 and 2 hiatus. The analysis indicated a high spike in proposed installations at the end of 2019, with some 15 million meters needing to be installed at that point. That is a substantial shift in the predicted curve of installations, and an enormous increase in the rate of installations since the time of the 2014 cost-benefit analysis. Sticking by the timetable under these circumstances becomes fairly heroic. Perhaps it can be done, but it is clearly a daunting task.

That is the context in which the change in the date for Government oversight is important—the process of changing the date by which licensable activities will have ceased from 2018 to 2023. Whether or not it was a wholly wise idea, the 2004 and 2008 Energy Acts and subsequent regulations specified a date for licensable activities to end, which means that as things stand at the moment, the Government will have no control over what goes on after 2018. Everybody knows that we will still be at a relatively early stage of the roll-out in 2018, so it is impossible to conceive that it would be wise to continue with the original timetable. We therefore support the idea of specifying a more satisfactory date in the statute book.

The Bill specifies a date of 2023, but that does not appear to coincide with the Government’s publicly stated ambition for the end of the roll-out. I say that with caution, because while their statements about the roll-out have changed over time, they have always revolved around the idea of ending it in 2020, and there has been a lot of talk from the Government about the installation of 53 million smart meters by then. Indeed, the frequently asked questions page of the Smart Energy GB website states:

“By the end of 2020, around 53 million smart meters will be fitted in over 30 million premises (households and businesses) across Wales, Scotland and England.”

That is also the basis on which Ofgem is working in terms of its licence enforcement. However, the Government have changed their position, as they now saying that, by the end of 2020, 53 million customers

“will have been offered a smart meter”.

That is a very different proposition. We could interpret that as 53 million people being offered a smart meter by 2020, but only 10 million having them installed, although I assume that that is not what the Government mean. The statement might be meaningless or meaningful, depending on what happens before the end of 2020 and a variety of issues that will appear along the road. I hope that the Minister will be able to clarify those matters today. We surely cannot mean that the whole obligation for the roll-out would be discharged by doors being knocked on and someone saying something. If the smart meter installation programme is pursued on the basis of just making a desultory offer, the result will be way below the critical mass necessary for the overall aggregate data to work properly and lead to decent decisions. At that point, £11 billion or some such amount would have been wasted on nothing much.

The smart meter installation programme is voluntary. But, at the same time, we need a proportion—not 100%, but getting close to it—of smart meters installed in order to make the programme work by having worthwhile aggregated data. Some people have said that we need 70% of smart meters installed and others have said 80%; we need something to make the overall aggregated data significant. We clearly need to put a lot of effort into ensuring that the benefits of the programme are explained to the public.

The evidence suggests that the public overwhelmingly like smart meters when they are introduced and they want to have them in their homes. We therefore need to make a lot of effort over the given period to ensure that the two ends—the voluntary nature of the programme and the need for substantial roll-out—can be reconciled. What do we need to do that has perhaps not yet been done to ensure that the roll-out programme gets its output properly organised and smart meters installed? That is the purpose of new clause 4, which would require the Secretary of State to publish a report to keep us firmly on track. But, of course, much of the progress towards the target at the end of 2020 now depends on how SMETS 2 meters can be rolled out and how the DCC performs.

It was always necessary for the DCC to start its roll-out to enable smart meters that have been installed and those that will be installed to connect with it, and therefore to go live at the earliest possible date. However, the DCC systematically failed to go live when it should have done. It repeatedly announced delays and eventually went live in autumn last year under circumstances in which eyebrows were raised substantially by most of the industry. That was because it went live just before the point at which it would have faced penalties for not going live. It also only went live in part of the country and did not go live with some of its peripheral activities. Indeed, it is still having problems as far as its liveness is concerned. However, the DCC is not a stand-alone company. It was set up in order to run all these things and was then successfully auctioned out to a company that could drive it. And that successful bidder was Capita plc. As far as running the system is concerned, the DCC is effectively a subsidiary of Capita plc. The rest of the smart meter programme now crucially depends on this company. If we look at the timeline of what was supposed to have happened, we see that it presents a really sorry picture.

According to the joint industry level 1 plan, the start of the mass installation of SMETS 2 meters was supposed to be in October 2014, and the DCC was supposed to go live in December 2015. The then Secretary of State approved the DCC re-plan to go live on 1 April 2016, but received a contingency request from the DCC to delay going live until July 2016, and even then to split into core functionality and remaining functionality, which was not supposed to go live on the new date. A further contingency request was made by the DCC for a delay until August 2016, and there were even further contingency requests for delays. The DCC finally went live, in the way I have described, in October 2016. But it was actually only live for central and south England in November 2016 and went live for the north of the country later that month. The remaining functionality eventually went live, but not until 20 July 2017.

I looked at the plans that were put forward when the DCC went live, and they were accompanied by pages and pages of so-called workarounds—that is, things that did not really work. That is still a problem today. A lot of the industry is saying that the DCC is not really live to the extent that it had anticipated, which remains a considerable problem for the end-to-end testing of SMETS 2 meters. That is why, among other reasons, there are currently only 250 or 80 on the wall, depending on whose figures are right.

[Stephen Kerr]

Is it the hon. Gentleman’s understanding that the DCC is operating—not fully live—for only 80 SMETS 2 meter customers? The SMETS 1 meters do not connect to the DCC.

[Dr Whitehead]

That is the unfortunate truth, yes. The total number of SMETS 2 meters to which the DCC is connected is 80—or 250, for those who are a little more optimistic. That means that there is rather a long way to go to connect up the rest of the SMETS 2 meters, assuming that they can be end-to-end tested in order to get the right circumstances in the different parts of the country to allow the testing to take place.

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[Dr Whitehead]

Thank you, Madam Deputy Speaker. I accept that we are dealing with difficult and rather technical issues, and so I thought it was necessary to try to set out for the benefit of the House how these matters might work, but I will of course be very mindful of your guidance to try to make sure, within the restraints of not getting too over-simplified, that I do indeed bring my remarks to a close.

New clause 2, in essence, asks the Minister to consider a specific review to get these arrangements properly under way.

My final question concerns the meters that have been removed as a result of smart meter installation or will be removed because they are SMETS 1 meters replaced by fully interoperable SMETS 2 meters. This problem is not just theoretical; it is happening now. It has several aspects. What about malfunctioning and existing smart meters that are no longer installed and are now redundant? What about the huge number of existing meters that will be removed and need to be disposed of as smart meters are installed? Those meters are not owned by installers but by meter asset providers that finance and ultimately own the meters that are put in. It has been a long-standing arrangement in the industry that meters are not owned by the suppliers but merely read by the suppliers. That means that when a programme is pursued of removing old meters, whether dumb meters or previous generation smart meters, there is a problem in identifying whose meters they are.

The difficulty that we are facing right now—it is not a problem for the future—is that we might see meter mountains arising in this country because the people who are removing the meters do not know who their owners are or who is going to take them away and recycle and dispose of them. I do not want to see, as a result of this roll-out programme, meter mountains, or alps, appearing across the country. We need to be clear about what method of disposal is going to be the most appropriate and workable. If we are not careful, the issue will overwhelm the roll-out, or at least have a significant negative effect on its overall atmosphere. In Committee, the Minister, encouragingly, agreed to set up a roundtable to consider this issue further. New clause 3 now addresses the issue, and I hope that it will be a way of taking it forward.

I have dealt with a number of important questions that have arisen as the smart meter roll-out has progressed. I hope that the roll-out can proceed to a successful and timely conclusion, because that will be important for the future of our energy systems as well as for the future sustainability of people’s electricity and gas supplies, and their ownership of what their bills will look like in future. However, we should not shirk from addressing the real problems that stand in the way of realising that. It is not sufficient to state that all is for the best in the best of possible worlds, and proceed on that assumption. I know that the Minister is working hard to get this right, as are his team in BEIS. The addition of these amendments would give them greater authority and support in making the roll-out work.

[Stephen Kerr]

I compliment the Minister and the Opposition Front Benchers for the way in which I have witnessed, as a relatively new Member of Parliament, how a public Bill is progressed through the legislative process. I have learned from observing the Bill Committee that for legislation to have durability and solidity, it is vital that there is strong collaboration between those on both sides of the House. It is in all our interests to make sure that legislation is well constructed and well meaning.

I support the Bill on the basis of a considered view that the roll-out of smart meters is a vital national infrastructure project that will bring benefits to consumers and businesses and to the whole country. I am not entirely convinced that we have done a good enough job so far in selling the proposition to the whole country, and I have concerns about our readiness to meet the Government’s objective. In fact, in the evidence that we heard in Committee, very few of the people we spoke to seem to believe that at the current rate of progress it is possible to complete the roll-out of smart meters by the perceived target of 2020. I want to come back to the target in relation to new clause 4.

None of this sort of work is ever going to be easy, as was highlighted in the evidence that we heard in Committee, but the trick is not to make it harder for ourselves than it would be otherwise. How do we get the job done—the deployment of these smart meters into nearly 60 million premises—in the most cost-effective way? There are still questions that should be asked and considered. We should not lose sight of the total cost of the programme—northwards of at least £10 billion. I think that £1.3 billion has been spent, or is earmarked to be spent, on the DCC alone. We are talking about 50 million-plus—nearly 60 million—separate installations of smart meters.

I have a lot of sympathy for the amendments tabled by the Opposition, because they do tackle issues that are pertinent and relevant to the purposes of the Bill. However, I will not support them if they are pressed to a vote, because I very much hope that the Minister will be able to provide such reassurance that the issues raised will be covered off in some other way than by making changes to the Bill, so there will be no purpose in calling a vote. I am very confident that that will be the case, because that has been the spirit of the process so far.

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[Steve McCabe]

Both the Government’s and Ofgem’s justification for the smart meter programme is that it is meant to save customers money. If we reach the stage where it is actually costing customers rather than saving them money, will the hon. Gentleman regard that as a failure of the programme?

[Stephen Kerr]

The hon. Gentleman makes a valid point. The purpose of the Bill, in facilitating the roll-out of smart meters, is to create a more energy-efficient economy, which should be reflected in cost savings for families, individuals and businesses. If that was not to be realised through the smart grid, that would be very disappointing.

There is so much in the future in terms of the changes we are seeing in the economy. I think of ultra-low emission vehicles, where there will be a necessity for smart meters and the smart grid for us to cope with the increased load on the grid. In response to the hon. Gentleman, I hope that somewhere in the not-too-distant future is the promise of an energy market that is more competitive and more responsive to its customers’ energy requirements.

Mass usage of ultra-low emission electric vehicles is inevitable. We will get to a tipping point with those vehicles, on account of the cost per unit, improvements in battery technology and the visible availability of the necessary infrastructure for charging at home and recharging away from home. All those things will create new demands on the grid, and all the flexibilities we will need to meet those demands depend on the smart grid and smart meters. Things such as new tariffs, variable tariffs and smart devices that can interact on the basis of the smart grid will all be a feature of the future.

However, there are things referenced in the new clauses and amendments that concern me. We heard evidence in the Public Bill Committee from Dr Richard Fitton of the University of Salford, who is responsible for a task group for the International Energy Agency on the use of smart meter data for determining the energy efficiency of properties. He made the point that for consumers to be fully engaged with smart meters, they need to be able to log on to the smart meter and connect it to smart devices in and around the home. He described the frustration that he and his team of experts have had in being able to make that connection happen. He said:

“a magic black box called the consumer access device…streams real-time data to things such as smart appliances and smart heating systems for homes.”––[Official Report, Smart Meters Public Bill Committee, 21 November 2017; c. 48, Q94.]

He went on to say that neither he nor any of his colleagues had ever been successful at connecting SMETS 2 meters to those devices. That is a concern, but it is not directly related to the amendments, so I will return to them.

There is evidence about the impact of smart meters on consumer behaviour. The literature produced by the Department talks about how these meters will facilitate switching. In fact, all the evidence that the Business, Energy and Industrial Strategy Committee and the Public Bill Committee received suggests that smart meters probably will not have a direct impact on the rate of switching in the energy market. It should change consumers’ behaviour by piquing natural curiosity. When we first get a smart meter and have an in-home display, we can see how the energy usage in our home is affected by using different appliances around the house. That is very interesting and makes us aware of which appliances are the most energy-greedy, which could lead to a change of behaviour.

I would like to make some other points on energy awareness and my concerns that relate to new clause 4, with which I am broadly sympathetic but will not vote for. Even though I have sat through the Public Bill Committee and all the Bill’s stages, I am still not clear exactly what the Government’s objective ultimately is. They say they will make an offer of a smart meter to every consumer by 2020. That seems a rather fuzzy objective. How do we define what it means to make an offer? We could say that by sending out an email, letter or brochure to every household, every energy retailer has fulfilled its obligation to make the offer. I do not think that is really what the Government intend. Given the importance of smart meter installation to the creation of a smart grid, I would think the Government’s objective is in fact to get smart meters into a very high percentage of the total number of properties by 2020, but that is unstated, as far as I am aware. I would be delighted to be put right by the Minister on that.

I am aware, as a listener of commercial radio and television and a reader of the press, that there is currently a high-intensity programme going on to raise awareness among consumers about the availability of smart meters upon request. However, I question whether the case for the importance of smart meters has been well made.

Despite the fact that this subject could sound quite boring, it is actually very interesting, because this infrastructure is the basis for the fourth industrial revolution that will be seen in the homes of our countrymen and women. Given the current level of roll-out and the state of readiness of installation teams, it is highly likely that the Government can achieve their objective of offering smart meters to everyone, but it is highly unlikely that we will achieve anything like 100% installation of smart meters in all possible premises.

So far, somewhere between 8 million and 10 million SMETS 1 meters have been installed. I mention that estimated range because I am not sure what the recent figure is, and the update we received did not have a specific number. I think that it has been proved beyond any doubt that, as things stand, SMETS 1 meters are not interoperable. In other words, they do not communicate with any other supplier than the one that installed them; nor are they capable of sending data to the DCC at present. That is my understanding.

In the Public Bill Committee, we heard evidence about whether SMETS 1 meters could be made interoperable. The burden of evidence seems to be that without some sort of adjustment or update, SMETS 1 meters are not interoperable. That is my experience, which I have related before in a variety of settings, as someone who installed a smart meter and then tried to switch.

I have questions about SMETS 1 meters. How easy will it be to upgrade them at the appropriate time, so that we have the functionality of the new SMETS 2 meters? If they can be upgraded to the same functionality and interoperability, do we need to have SMETS 2 meters? How will SMETS 1 meters be upgraded and when?

There are many interesting points that have been covered by the hon. Member for Southampton, Test and that I have tried to make in relation to the Bill. There are questions that, if answered by the Minister, will facilitate this programme, which I completely acknowledge is of vital strategic importance to the future economy that the Government are trying to build.

[Mr Deputy Speaker (Sir Lindsay Hoyle)]

I call Steve McCabe.