Smart Meters Bill

Steve McCabe 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

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

I do not argue with plans for a special administration regime in the event of a failure of the DCC, but I have a number of questions about the programme’s roll-out, extension, monitoring and costs. The current smart meter programme is at stage 2, alternatively referred to as the main roll-out, and that is scheduled to end in 2020.

As we have heard, the vast majority of energy companies are still installing the earlier generation of smart meters rather than the more efficient, cheaper and longer-lasting second generation. The Government have announced that, as of July 2018, SMETS 1 will no longer count towards the 2020 target. As that phase was due to be completed in 2016, what are the reasons for allowing the installation of those less efficient meters until 2018? Has the Minister received any representations from energy companies urging it and, if so, what reasons have they given?

Lord Bourne told the Energy and Climate Change Committee that there were 2 million smart meters in store. Could that have anything to do with the decision? If so, is there a risk that the Minister might be accused of massaging the figures with what is essentially an inferior meter?

I know from information supplied in answer to parliamentary questions that by December 2016 some 330,000 smart meters were operating in dumb mode—not operating as smart meters—and that by March 2017, that figure had risen to 460,000, involving a cost of between £30 million and £50 million. Who is responsible for keeping tabs on the costs of this programme?

I asked in a parliamentary question how much had been spent on the installation of SMETS 1 meters to date, and the answer was

“the Government does not hold data on expenditure on smart meter installations”.

EDF Energy has also questioned the extension proposed in the Bill and argues that

“if these powers are to be extended a clearer rationale should be provided for the need, and length, of any extension.”

The Minister will be aware that the Energy and Climate Change Committee raised questions about the 2020 target, and he will know that both the Institute of Directors and some in the industry have suggested that the purpose of the extension might be to give the Government wriggle room.

The Minister will also be aware that, in May 2015, the Energy and Climate Change Committee warned that problems with smart meters are

“symptomatic of a national programme that the Government has left largely to suppliers and failed to drive forward effectively.”

The Committee also warned that, without significant changes,

“it could prove to be a costly failure.”

Part of the justification for this programme is that it should mean that consumers benefit because they are able to shop around for the best deals, but if a SMETS 1 meter can no longer function as a smart meter when a customer switches, is that not a barrier to switching rather than an encouragement? As this is a voluntary programme, would someone not be well advised to wait until they are offered a SMETS 2 meter, or indeed to demand one? MoneySavingExpert.com, the UK’s biggest consumer website, is advising its readers to do just that.

As we have heard, the Government’s cost-benefit analysis estimates that by 2030 smart meters will have delivered £5.8 billion of net benefits. Those benefits, which are to energy suppliers, networks and consumers, are offset by a cost of £11 billion paid for by consumers. According to answers to parliamentary questions I submitted, the net benefit was reduced by a further £1.5 billion between 2014 and 2016. Can the Minister explain that reduction? Although the Government have said in answer to a parliamentary question that there is no link between this reduction and the issue of the interoperability of SMETS 1 meters, they also say that the 2016 cost-benefit analysis has already made allowance for the plan to enrol and adopt SEMTS 1 into the DCC. I understand that the cost of the DCC has already risen by a further half a billion pounds since it was first proposed. Who is responsible for monitoring and containing these costs?

In September 2016, the House of Commons Science and Technology Committee suggested that the essential aims of the smart meter programme are likely to fail without

“a programme of user engagement before, during and after installation.”

It is becoming clear that there is a lack of consumer trust and confidence in, and understanding of, the smart meter roll-out. As we have heard, the Department for Business, Energy and Industrial Strategy’s most recent public attitudes tracker found that people were less than convinced about smart meters, and a recent article in The Daily Telegraph claimed that only one in five consumers is accepting the offer of a smart meter. I know the Minister is eager to promote customer satisfaction, but without a renewed campaign to increase public awareness and improve perceptions of smart meters, there must be a concern that the benefits will not be realised.

I also want to ask about evidence that has emerged about the behaviour of energy suppliers and those they engage to promote their plans. They are required to take reasonable steps to offer smart meters, so why are people receiving cold calls claiming that accepting one is a legal requirement? I understand that the Minister might have already referred this to Ofgem, but can he confirm that that is the case? If so, will he indicate when we might expect to hear some response? There are also some safety concerns, as highlighted by—

[Caroline Flint]

On that last point about what happens when our constituents hit those sort of buffers—when they are faced with inaccurate information—they say to me that they just do not know who to approach to complain about it. That is a fundamental weakness in the system—where should people go?

[Steve McCabe]

I absolutely agree. I understand that there is a code of practice, but who is making sure that it is being enforced?

I understand that there are also some question marks about the safety of the installations, as was highlighted in a BBC “Watchdog” programme, which showed that some gas and electricity meters have led to safety issues in homes. So what I really want to ask the Minister is: what checks are carried out on the behaviour of energy suppliers to ensure that they are complying with the smart metering installation code of practice? As my right hon. Friend asks, what redress do the public have when they are clearly being misled by people who are supposed to be giving them the best possible information?

--- Later in debate ---

[Alan Brown]

I understand the hon. Gentleman’s point, and I thank him for it. It is a bit like saying that the long-drawn-out introduction of universal credit is good, when the roll-out was a shambles. It is not enough to say, well, this roll-out is a shambles but that is good because better technology is coming further down the line.

[Steve McCabe]

Surely, if the hon. Member for Stirling (Stephen Kerr) was right in his assertion, he was making a perfect argument for not installing any more of these inferior meters.

[Alan Brown]

I thank the hon. Gentleman for his point. I know that that was alluded to in the previous intervention. Yes, if there is better technology, it makes sense to work towards installing that better functionality. There is another consideration when it comes to extending the deadline. If we are going to be honest about things, extending the deadline will actually make the installation process much more efficient. How much will it cost to ramp up and supply the additional labour that is needed to go from 350,000 meters a month to 1.25 million meters a month? It will take extra labour, extra training, a massive recruitment exercise, and then, lo and behold, all these people are out of a job because the installation period has gone by. There is actually some merit in considering doing this over a longer period, as it could work better for consumers in the long run.

Smart Meters Bill (First sitting)

Steve McCabe Excerpts

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

[The Chair]

The deadline for amendments to be considered at the Committee’s first sitting for line-by-line consideration of the Bill was the rise of the House yesterday. The next deadline will be the rise of the House on Thursday, for the Committee’s sitting a week today.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

On a point of order, Mr Gapes. I understand what you have just said, but what happens if something comes up in the evidence-taking sitting that would lend itself to an amendment, given that the sitting is happening after the deadline?

[The Chair]

That, unfortunately, is not a matter for the Chair. Tabling deadlines are set out in Standing Orders. If the hon. Gentleman would like to make a change to the tabling deadlines, I recommend that he writes to the Procedure Committee. It may be helpful if I make it clear that if oral evidence introduces a completely novel idea on the issues in the Bill—something that we did not expect to hear—and Members could not have had the foresight to enable them to table relevant amendments, I would take that into consideration in selection and grouping.

[Steve McCabe]

Thank you, Mr Gapes.

Resolved,

That, subject to the discretion of the Chair, any written evidence received by the Committee shall be reported to the House for publication.—(Richard Harrington.)

[The Chair]

Copies of written evidence that the Committee receives will be made available in the Committee Room.

Resolved,

That, at this and any subsequent meeting at which oral evidence is to be heard, the Committee shall sit in private until the witnesses are admitted.—(Richard Harrington.)

--- Later in debate ---

[Patricia Gibson (North Ayrshire and Arran) (SNP)]

Q Like probably most people in this room, I can see that there are benefits to smart meters, but I wonder whether I could put to you a number of concerns that have been raised specifically with me about the roll-out. Perhaps they might explain the difficulty in penetrating the market as quickly and deeply as we would like at this stage, and indeed by 2020.

Would you like to comment on concerns, raised by trading standards, that not enough of the energy companies are making it clear to consumers that they can refuse a smart meter if they wish? There are real concerns that some energy companies may be guilty of breaching the Consumer Protection from Unfair Trading Regulations 2008.

What do you think about the idea that consumers are being sold the meters—by “sold” I am talking about the idea—as free, when we all know that in fact they are not free? The other thing is that, as far as I am aware, some of the models rely quite heavily on a wi-fi signal, which may or may not be available to all consumers. I may have got that wrong, because I am not terribly technically minded.

One of my concerns is what we do with the information when we have it. If we imagine a future where everybody has a smart meter, will that be used to charge a higher rate for electricity usage during peak times, when families cannot avoid using it? Will the need to use electricity at specific times be used to increase the price in the market?

I realise I am throwing a list at you, and I apologise for that. The idea that you pay for what you use is attractive to consumers, but the fact is that when a smart meter is installed on your property, as I know from my own experience, your direct debit bill stays exactly the same, because they spread it over the year. Yes, you are paying for what you use, but when you reduce your usage, your monthly or quarterly bill does not necessarily go down. What are your thoughts on that, given that it is sold comprehensively as, “You only pay for what you use”? You do, but not necessarily at the time when you use it. You will also know that there are concerns about the security of the data. I know that I have given you a long list, but I would be very interested to hear your thoughts.

Audrey Gallacher: I will run through it as quickly as possible. The questions you have raised are all legitimate ones, which are discussed on an ongoing basis through the programme. There is a lot of scrutiny and oversight of the programme, and everybody is working hard to get it right, so your questions are the right ones.

Loads of stuff has been done on security. This will not be happening over the internet, and GCHQ has been all over it. There are really strict security protocols; you will probably have experts in later today who will know more about it than I do, but if there is anything that we should be worried about in the programme, it is not security. A lot has been done there, for obvious reasons. It is a critical national infrastructure, not to mention the impact on individual consumers in their own home if something goes wrong. I would take some comfort that we have that.

The question of deemed appointments is a tricky one. This is an opt-in programme. The Government’s manifesto commitment is that customers should be offered a smart meter, but suppliers have an obligation to install them by 2020, so it is already quite a complex policy environment. Companies have to go out there and sell the benefits of smart meters and encourage consumers to take them. We are working hard to do that. We have also had some feedback from Ofgem, the regulator, that companies should be taking a much more assertive approach, because we have heard reports that they are really struggling to get people to take a day off work to stay in the house and get the smart meter installed.

We need to sell the benefits and we also have to try to encourage people. Clearly, there is a line there that should not be crossed, because it is not currently a mandatory programme. At some point in the future, we might want to think about the policy framework to ensure that we get as many meters out there as possible, and not just for the individual consumer benefits they would bring—a whole business case around the programme is predicated on as many people as possible having meters. We need to be really careful on communications: sell the benefits and encourage people to get meters, but do not cross that line. That is really important.

Thirdly, you currently pay for metering equipment. It is free at the point of installation, so there should be no charge. Let us be quite clear that nobody will be charged up front, but, like everything else in the energy system, there is an associated cost, whether it is the pipes and wires getting the gas and electricity to users or the metering equipment, right down to the customer service. The key is to make sure that it is done as efficiently as possible. It is a competitive market and it is really important that costs are kept down.

I have a lot of sympathy with the point about direct debits and budgets, but we know from research that people like to spread the cost of their energy over the year. They do not want to see big spikes on their bills—high bills in the winter when they are using loads and nothing in the summer when the gas central heating is off. Smart meters should allow customers to move to an option where they can pay monthly as they go, but for a lot of people direct debit is a budgeting tool and has been very popular.

As for the future, Bill spoke about what he is doing for prepayment meter customers. Some analysis suggests that when everybody has smart meters, up to 50% will not be paying by direct debit, but on a pay-as-you-go basis, as with mobile phones. You will probably see the market and how people engage with their energy supply and pay for it radically changing as we roll this out. That will be good, if there are innovations and benefits. Obviously, we need to make sure that people are adequately protected and know what they are doing from a trading standards perspective.

Finally, on data, a lot of protocols are in place to make sure that we are quite clear that it is customers’ data coming out of the meters. People can opt out of more granular data collection. If you do not want information to be taken daily, you can opt out of that. Right now, it is taken monthly. If the supplier wants to take data from the smart meter every half hour, the customer has to provide consent. A lot of rules have been put in place to ensure that data use and privacy are at the forefront of the programme.

Bill Bullen: A couple of points are relevant to us. First, on customers accepting meters, until the prepay price cap came in we were typically saving customers something like £100 compared with the big six, if they switched to a prepay meter. Whether that counts as being free or not, I do not know, but they were clearly making significant financial savings from switching to smart prepay. That is one of the reasons customers do it, in addition to the other benefits.

Clearly, we are a competitive company. Customers could always refuse to take our product; if they want to stick with a dumb meter, they are entitled to. Something like 80% of the prepay market still has not switched to smart, but 20% has, so more and more are doing so.

Audrey has already answered the point about direct debits. People are going to switch more to pay-as-you-go and be totally in control of the balance. We think that is going to be much more important going forward. Basically, people can take total control over their budget.

[Steve McCabe]

Q I have three quick questions. If I have this right, the programme is behind schedule, the cost is escalating and the Minister now wants to increase the timescale and take extra powers. What needs to be done to ensure that this thing stays on track and within cost and does not become an albatross for the consumer?

Bill Bullen: That is difficult. We are already a long way down the track of delays and cost escalations. Consumers already pay a significant chunk of their bill towards the Government’s smart meter programme.

[Steve McCabe]

Q Do you know how much?

Bill Bullen: It is going to go up to, I think, £13 per customer from 1 April. That is something like £8 higher than it was a year ago. Once you multiply that by 27 million households, it is a lot of money.

The Government have spent something like more than £1 billion—I think £1.3 billion—on the Data and Communications Company. To put that in perspective, I think the competitive suppliers providing similar services for SMETS 1 generation meters have not spent 10% of that money. They are already out there working, and have been since 2013, so I think there are some real issues.

Clearly, consumers have already seen massive delays and are being stopped from getting the benefits of smart meters because of the Government programme. One of my key concerns, as I said earlier on, is how we will be able to carry on in business over the next couple of years, because of some of the intricate rules about what type of meters we can install when.

We desperately need a lot more flexibility to carry on rolling out smart prepayment meters without any kind of significant hiatus. It is not in the consumer’s interest to have a hiatus, and it is certainly not in the interest of the economy generally to have potentially a lot of qualified meter installers, vans, and warehouses, but no ability to install meters. That is a big problem.

Those problems are with us right now and we have to solve them very soon, because the sheer logistics of managing supply chains—not only ours, but the supply chain to the meter manufacturer, all the component purchases and so on, which stretch out a year in advance—mean that we are already right up against the buffers of maintaining a smooth roll-out programme, given that the SMETS 1 end date is currently stated to be in July next year. That is a really big issue. We are heading at the moment for a massive hiatus in the roll-out of smart meters.

Audrey Gallacher: It would be a huge mistake to underestimate the size of the challenge here with the smart meter roll-out. It is a massive logistical infrastructure programme—53 million meters—so it will be tough. As Bill said, we have already seen some issues around delays and costs overrunning. There is an impact assessment out there—a business case that says there is a net benefit to customers of nearly £6 billion. It is critical that we protect that business case, regardless of how difficult it becomes.

It may well be that the Department for Business, Energy and Industrial Strategy should look at a re-run of that against what we are seeing currently—a new impact assessment to ensure that the benefits case is still alive. There is also a lot of engagement with the Government and energy suppliers on the programme, because we are all working on it together to get it done. You could argue, though, that we might want to see a wee bit more of that. Is there more that we could do to understand what constitutes best practice, within competition rules obviously, and make sure that everybody is doing it as best they possibly can?

[Steve McCabe]

Q Are you suggesting a new cost-benefit analysis?

Audrey Gallacher: I am suggesting a re-run of what we have done. One analysis was done in 2014; the most recent one is from 2016. Going into next year, it is important that we understand that that benefits case remains intact. Also, we are here today to discuss whether we have to change the regulatory framework to make sure that those benefits are delivered, around the nature of the programme being opt-in versus opt-out, the cost control over the DCC, and the transparency across the control on those costs. There are many things that we need to keep under tight scrutiny.

Bill Bullen: I do not think it is really feasible to re-run the cost-benefit analysis simply because of time. Everybody understands a lot more about smart meters now—the logistics, the costs and the benefits. I think that businesses are in a much better place to just get on and do the job, rather than have another round of consultations wondering what we are going to do. That would soak up most of the next 12 months if we were not careful—a critical time for delivering this benefit to consumers. I differ with Audrey on that point.

[Steve McCabe]

Q Thanks. May I ask about the interoperability issue again? If I understood correctly, Mr Bullen was saying that part of the problem was that some suppliers choose not to help people who switch have a functional smart meter. Is one of the other problems the role of the smart meter asset providers who, if I understood correctly, are a bit like the energy businesses’ equivalent of a football manager? They are the middle people who provide the meters. It might not be in the interest of energy suppliers that get their meters from one asset provider to switch when a customer switches supplier. Is that how it works?

Bill Bullen: I would not agree with that.

[Steve McCabe]

Q Is that because you have an interest, Mr Bullen?

Bill Bullen: No. There is a set of commercial arrangements around rolling out smart meters. As I say, different suppliers have chosen to engage or not in that. All I can say is that we have built business from scratch that has now got—

[Steve McCabe]

Q Tell me what a smart meter asset provider is. What is the function and role?

Bill Bullen: They are merely providing a funding arrangement to provide the capital, so that suppliers can get meters installed without absorbing that massive hit on their cash flow, or having to charge customers for it. Nobody wants to charge the customer for it, so the meter asset provider will simply provide that capital and then rent that meter to whoever the supplier is over the course of that meter’s life.

[Steve McCabe]

A middle man.

[The Chair]

We are short of time. I am going to take Bill Grant and then we are unlikely to have further time. This will probably be the last question.

--- Later in debate ---

[Richard Harrington]

Q Thanks to both of you for coming this morning. May I ask Ofgem, in particular, what you are doing to ensure energy suppliers deliver their obligations?

Rob Salter-Church: I might first explain the role of Ofgem and the Government in the roll-out, because that sets out the context for answering that question. To be clear, the roll-out of smart metering is Government policy. The Government have powers, and one of the parts of the Bill we are considering today is to extend their power to put in place the licence arrangements around smart metering. Ofgem’s role is to oversee suppliers and DCC compliance with the policy framework that the Government have put in place.

We are hugely supportive of smart metering, and we think it has real potential to improve consumers’ outcomes. Through regular engagement with suppliers, we are overseeing their compliance with their licence obligations. We do that through regular bilateral engagements, gathering significant information from suppliers and working in partnership with Citizens Advice and the energy ombudsman to gather information about consumers’ experience of smart metering.

We use the data we gather to hold suppliers to account, challenge them and make sure they are doing what they are required to do in terms of installing smart metering—adhering to their roll-out plans and, perhaps more importantly, delivering a good-quality installation, providing energy-efficiency advice to consumers when they do that and making sure consumers are aware of how they can realise the benefits of smart metering.

We have a range of tools in our toolkit that we can use to secure supplier compliance. Ultimately, if we feel that a supplier is not doing what they need to do to stick to the rules and make the programme a success, we can take enforcement action against them—a process that enables us to levy a fine against that organisation if it is failing to meet what is required of them.

[Steve McCabe]

Q I notice that it says in your written evidence that you see a significant benefit for consumers, and you have repeated that. How will the benefit be realised? What are the practicalities? How will it be realised for the most vulnerable customers—the elderly and the most disadvantaged? How will we see that, and what kind of timescale are we talking about?

Rob Salter-Church: There is a whole range of benefits that consumers—including vulnerable consumers and those on prepayment meters—can get. One of the key ways in which consumers can benefit from smart meters is through being in control and having access to real-time information about their energy usage and what it is costing them. Many people, including vulnerable people, are often worried about getting an unexpected bill—having a bill shock that they are unable to meet—and falling into debt. One of the great things about smart meters is that they give real-time information so people are in control and can manage their energy usage to prevent those kinds of issues from arising.

Another benefit that will accrue to all people, but may well have particular relevance for more vulnerable customers, is the end to estimated billing. They will know exactly what they are being billed and will be able to make sure they are not being over-billed by their supplier.

The last thing I will say is about prepayment meters. Smart metering has the potential to absolutely transform the realities of energy for prepayment customers. People will no longer have to go out in the rain to go down to the shop to put credit on their meter; they will be able to very simply and easily top up the meter when they need to. The functionality also enables suppliers to help customers manage their energy usage. For example, rather than running out of credit overnight, the smart meter technology allows the supplier to offer services to customers that enable them to have a small amount of energy to ensure that the heating and lights are still on in the morning. Those kind of quality of service benefits are huge, and they should accrue to customers through the point at which they get a meter installed.

[Steve McCabe]

Q Am I right in thinking that you are responsible for enforcing the code of practice?

Rob Salter-Church: Are you referring to the smart meter installation code of practice?

[Steve McCabe]

Yes.

Rob Salter-Church: That is correct. Suppliers have a licence obligation to have that code of practice.

[Steve McCabe]

Q So how is it that people can receive a cold call telling them that it is a legal obligation to have a smart meter?

Rob Salter-Church: It is very troubling when we hear things like that, because, as the Committee knows, that is not the case. We are clear to suppliers that they need to try very hard to explain the benefits of smart meters. I struggle to see why someone would not want a smart meter, given the benefits that they offer to consumers. Suppliers do need to be clear that if a customer does not want one, they do not have to have one.

[Steve McCabe]

Q But it is wrong for anyone to phone up and say, “You are legally obliged to have one.” That person is clearly breaching the code of practice.

Rob Salter-Church: That is right. We gather data on a regular basis on suppliers’ compliance with the code of practice. If we saw a systematic problem, then we would take action against a supplier.

[Patricia Gibson]

Q I want to probe this a little further; I raised it with the previous witness and I would be interested in your thoughts, given that you are in charge of the code of practice. Trading standards have raised concerns that there are potential offences being committed under the misleading actions provision of the Consumer Protection from Unfair Trading Regulations Act 2008. They have said that these infractions may be being committed because some energy suppliers are giving the impression that smart meter installation is compulsory. What are your thoughts on that? Have you had any contact or dialogue with trading standards on their very serious concerns?

Rob Salter-Church: The first thing I would do is to reiterate what I said earlier: we expect suppliers to be very clear that there is no compulsion on consumers to have a smart meter. We are driving suppliers to be as clear as they can on what the benefits are, so that customers want to have a smart meter.

In answer to your point about trading standards, we engage with a range of organisations, including Citizen’s Advice, and we do from time to time talk to trading standards to gather information about where there are potential licence breaches. We would take action. I do not believe that I have had a discussion with trading standards, but I can check whether there has been one between the organisations and write in, if that is helpful.

Smart Meters Bill (Second sitting)

Steve McCabe Excerpts

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

[Dr Whitehead]

If, as we have heard, SMETS 1 can be made fully interoperable with software upgrades, what is the purpose of SMETS 2 meters?

Derek Lickorish: What is the purpose of SMETS 2 meters if we can make SMETS 1 interoperable? To be able to answer that question, you would need to have a review and some evidence on which to base that decision. At the moment, it is beyond my sphere of full knowledge on everything to give a clear-cut answer to that question.

Richard Wiles: SMETS 1 and SMETS 2 need to run in coexistence. I believe that some clients are in prepayments mode, and prepayment is available in SMETS 1 now. I am talking about some specific instances where SMETS 2 is required: for aspects such as high-rise buildings or dual band comms hubs, when that comes into effect, when greater interoperability is required. Certainly from our position, we believe that we can deploy a larger volume of SMETS 1 meters and still help the Government meet the 2020 deadline.

As to SMETS 2, there are specific advantages around interoperability that have been touched on. While each individual SMETS 1 provider creates mini DCCs, as Derek mentioned earlier on, that will be avoided with SMETS 2. However, with enrolment and adoption, we are working with DCC at the moment, and that will allow the interoperability of our estate to be absorbed into the wider continued operation of the smart meter system through DCC.

Derek Lickorish: Can I add to my answer to Alan’s question and build on a point Richard made about interoperability? Although SMETS 2 has some advantages on the one hand, it is not at the data level. If you take mobile phones, they can keep on being produced because they are data interoperable with the network. SMETS 2 meters have to be identical not only for the meter installed today but for those in 15 years’ time as well. This backwards compatibility requirement is built into what we have. SMETS 1 meters are data interoperable, which is why we can make SMETS 1 interoperable relatively easily from the mini DCC position.

I know that all these things are grindingly complicated. We are trying to explain them in a way that I hope is straightforward.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

Q After this morning’s witnesses, I was left with the impression that the DCC programme is absolutely fine, on target and all is going well. Has the DCC programme been delayed? If so, what have the problems been?

Richard Wiles: There have been publicised delays within the go-live period. The go-live date of November last year was when we had a release of DCC that allowed devices to be installed and to be made interoperable. A statement was made this morning that there are 215 meters on the system. It was envisaged that there would be a considerably higher volume than that now.

[Steve McCabe]

Q What would you have expected? What was the figure meant to be?

Richard Wiles: For the initial programme, by this stage, the figure was meant to be in the millions.

[Steve McCabe]

Q So 215 was the success figure, but it should have been millions. Is that right?

Richard Wiles: Yes.

[Steve McCabe]

Thank you.

[The Chair]

Have you anything to add on that, Mr Lickorish?

Derek Lickorish: Quickly, yes. Do not forget that the go-live date of November 2016 was a year late anyway. If you look at the original plan, as put together in the business plan by the DCC, the idea was that six months after go-live it would be ready at scale and six months after that the system would be stabilised. It went live last year, in November 2016, and as we all now know, clearly, from the horse’s mouth, it has 215 devices on it now.

[Steve McCabe]

Q That is the DCC; it does not sound quite as rosy to me as it perhaps sounded a couple of hours ago, but let me ask about the existing smart meters in operation. To your knowledge, how many of them, and what proportion of those that have been installed, are currently running in dumb or dummy mode?

Derek Lickorish: When they all go in initially, of course they are not in dumb mode. The percentages vary. I am told that at some stages 20% or more of them are being operated in dumb mode. That occurs for a variety of reasons—for commercial and technical reasons. The way in which the market is evolving is that meter asset providers—MAPs, as they are known—fund these assets that are going on the wall and they will also fund SMETS 2 assets. All the time, there is uncertainty about how long these assets are going to endure and whether the market is going to endure. When are SMETS 2 meters going to be ready?

There is an issue called deemed rentals. What does that mean? It means that if the acquiring supplier does not have the same sort of contract that is with the asset coming in, it gets asked to pay a very high deemed rental, which it will not pay because it renders the customer unprofitable. That means that it faces two choices: putting the meter into dumb mode, or going out and taking out that meter, even if it is the same meter, and putting in one of its own, funded by another meter asset provider.

There is quite a complex set of issues, which only we in this room and others—interested observers—understand to any degree. There is the deemed rental issue and then there is the technical issue, as we have heard. I do not criticise anyone, because everyone is breaking their back to get this programme running. Everyone is working hard, so I do not decry what anyone is doing, but the way it is set up—and it is driven by political milestones—is going to cause perverse behaviour from time to time. I will come back to that.

My final point—I need to shut up—is that we need to get to a situation in which the interim interoperability model can be made to work. It can be made to work because most of the big six have a system called instant energy—a number of them—and we could have some interoperability there, whereby they could take over the asset and resolve this commercial issue. That would deal with consumers’ meters going into dumb mode on change of supplier. It would stop all the stories that the Daily Mail keeps printing about all the problems with SMETS 1 meters. It is not a technical issue, and the SMETS 1 meters are not inferior. Sorry, Mrs Gillan.

[The Chair]

Not at all. Mr Wiles, have you anything to add?

Richard Wiles: We have the ability to transmit data into the system that Derek has just referred to, to keep it live. On the point about how many units are kept in dumb mode, or put into dumb mode or non-smart mode, we do not get to see those figures. That is between the energy supply companies; it is not a direct result of the service that we offer, so I cannot give you a definite figure.

However, we can make sure that any unit put in the non-smart mode can be retained live and be reactivated at a later date, and that can be part of the enrolment and adoption figures. Even for smaller suppliers, if they inherit a smart meter system and do not wish to keep it running, or have a separate service until enrolment and adoption goes live, it can be reactivated at a later date.

--- Later in debate ---

[The Chair]

We aim to finish this session at 3.15 pm, and I have two colleagues who want to speak, Mr McCabe and Mr Kerr. I call Mr McCabe.

[Steve McCabe]

Q I have two quick questions for Sacha. First, looking at the funnel, it looks as if you need 10 expressions of interest in order to get one smart meter installed. How does that compare with other products? That bit of information does not tell me anything, but if I knew how many people did that to buy a mobile phone or similar, I could put it in some context. Is there an answer to that?

Sacha Deshmukh: As ever, there is a health warning on an answer—there is no direct comparator between the supply and demand in different sectors—but there is actually a very healthy level of demand for the current level of supply. At the moment, I think it is fair to say that consumer enthusiasm is very strong, but supply has not yet been able to meet that enthusiasm on the timescale on which those consumers would ideally have liked that product.

That is today’s funnel—or, rather, this year’s funnel, as the analysis by the energy suppliers has shown. Looking at next year, you see it at more like 5.5 to one. That is a more normal ratio for a new product, but clearly the goals of this roll-out, and for this country in terms of the benefits brought by it, need us to go much farther than products that are just happy to sell in market, but only reach a small number of consumers who want it. The ambitions clearly have to be comprehensive as well.

[Steve McCabe]

Q Thank you. It is a supply issue, mostly. The other thing I wondered is this. Obviously, your job is to promote smart meters, so your performance management framework is about identifying how to motivate and enthuse people to have them, and that is what your research is about, but have you done any research, or has anyone else, on how people’s enthusiasm and motivation change if they have a smart meter, and then change supplier six months later and discover that they no longer have a smart meter? My guess is that their enthusiasm might decrease. Is there any research to tell us what is really going on?

Sacha Deshmukh: The best research that I am aware of in this area is being conducted by Populus, although there is other research as well. As I said, the context is that the vast majority of smart meter consumers are very content and feel significantly better served than they were in the analogue market, but there is no doubt that for those consumers who are less satisfied, it is linked to a customer service issue. Dhara has talked about some of those issues with the legacy of dumb meters: maybe not getting accurate bills for years, and then getting them.

There has been lots of debate, and indeed some regulation has been put in place, about consumer protections in those situations. Citizens Advice also work carefully on that. Indeed, we funded training for Citizens Advice advisers, because they are a very important port of call for people who find themselves in such situations. No doubt some other areas in which there has not been satisfaction have been linked to those customer service issues.

Dhara Vyas: I just want to expand on the customer service breakdowns of what consumers experience with smart meters. We have been collecting consumer data on smart meters from customers who contact our consumer service since 2011. Since then, we have done monthly analysis of what people are contacting us about. Contacts with us have risen in proportion with the number of meters on walls, as you would expect. It is a bit of a canary in the coalmine, with them pointing out and drawing attention to issues with the Department for Business, Energy and Industrial Strategy and Ofgem—so with the Government and Ofgem—and directly with the suppliers.

We hold bilaterals and try to address issues before they become more widespread, and we talk about systemic issues with the entire industry and industry body. They mostly break down into seven categories, including billing and tariff, as you would expect, and as I have touched on. We get quite a few information and sales calls as well, with people asking, “Are they compulsory? Do I have to have one?” We have seen a spike in those recently, with deemed appointments that Ofgem has recently allowed suppliers to—

[Steve McCabe]

Q Do you think that is because people are getting calls saying, “You’ve got to have one”?

Dhara Vyas: Yes, and some letters from suppliers have been parsimonious with the truth, saying things like, “Your meter is at the end of its life. We are going to come and install a smart meter.” There is a lack of clarity about the fact that it is not mandatory. You do have a choice. When I was looking through the stats, I saw that in one case last month, someone felt very strongly that they were being blackmailed into having one, and they did not want one. They felt like they were being bullied. That has recently become an issue, and I know that trading standards are concerned about that. The communication needs to be more refined.

Other contacts include those relating to faulty metering equipment, and people who cannot top up make up a big proportion of those. There are people who are unable to switch, who have switching-related issues or who just have an issue related to installation. For example, an engineer coming in has meant that their boiler has been condemned because the engineer could not relight it, so there are things to do with appliances in people’s homes.

The issues are wide-ranging, but they have a huge impact on people’s lives and how they use energy in their home—as long as they can continue to use it. It is important to be aware of those things in order to address them and not let them proliferate.

[The Chair]

Three colleagues now wish to ask questions—Mr Kerr, Mr Lewis and Mr Morris—and we are aiming to finish at 3.15 pm.

--- Later in debate ---

[Douglas Ross]

Q So you could accept that as being a reason in some cases to accelerate, if possible, without compromising the other elements?

Dr Sarah Darby: Yes—without compromising the programme as a whole.

[Steve McCabe]

Q Do you know what happens to all the old meters? How are they disposed of when we put in these new smart meters, and what happens to the smart meters when they come to the end of their life? Has BEIS issued any guidance on how those should be recycled? I guess I am wondering whether there is a landfill somewhere full of old smart meters or old non-smart meters.

Dr Sarah Darby: You would have to ask BEIS about that.

Dr Richard Fitton: I remember seeing in the trade press that some consideration is being made of recycling existing meters, but I do not know. Again, it is an excellent sustainability—

[Steve McCabe]

Q So you do not know what will happen to the old ones, or what will happen to smart meters when they come to the end of their lives?

Dr Richard Fitton: Or indeed to some of the smart meters being installed today. I have swapped suppliers and they have taken away new smart meters, four or five months after. I do not know; sorry.

[Stephen Kerr]

Q I was interested in your comment about consumer access devices, following up on your comment that you have never had one that connected to a smart appliance or device. Is that because the SMETS 1 meter does not have adequate functionality to do so? If so, does that mean that we have an estate of some 7 million SMETS 1 meters in this country that are not future-proofed to allow us to take full advantage of the potential of a smart grid/smart economy?

Dr Richard Fitton: I believe, as the Minister has mentioned, that SMETS 1 are to be upgraded to SMETS 2 starting at some point next year. There is no particular technological challenge in connecting consumer access devices to SMETS 1 meters, but you can sympathise with some people who might be waiting for the full SMETS 2 systems to be installed. That seems commercially obvious to me.

Smart Meters Bill (Third sitting)

Steve McCabe Excerpts

Committee Debate: 3rd sitting: House of Commons
Thursday 23rd November 2017 Public Bill Committees

[The Chair]

Good morning, everyone. Before we begin line-by-line consideration I have a few preliminary announcements.

Please switch electronic devices to silent. Tea and coffee are not allowed during sittings, but you may if you wish remove your jackets—[Interruption.] I am delighted that the Whip is first off.

We will now begin our line-by-line consideration. The selection list for today is available in the room and on the Bill web page. It shows how the selected amendments have been grouped together for debate. Grouped amendments are generally on the same or a similar issue.

Amendment 20 has been selected even though it is starred. That is because it was tabled before the deadline but withdrawn and re-tabled due to an administrative error.

A Member who has put their name to the leading amendment in a group is called first. Other Members are then free to catch my eye to speak on all or any of the amendments in that group. A Member may speak more than once in a single debate. At the end of the debate on a group of amendments I shall call the Member who moved the leading amendment again. Before they sit down, they will need to indicate whether they wish to withdraw the amendment or to seek a decision.

If any Member wishes to press any other amendment or new clause in a group to a vote, they need to let me know. I shall work on the assumption that the Minister wishes the Committee to reach a decision on all Government amendments when we reach them.

Please note that decisions on amendments take place not in the order that they are debated, but in the order that they appear on the amendment paper. In other words, debate occurs according to the selection and grouping list, and decisions are taken when we come to the clause that the amendment affects. Decisions on adding new clauses or schedules are taken towards the end of proceedings but may be discussed earlier if grouped with other amendments.

I shall use my discretion to decide whether to allow a separate stand part debate on individual clauses and schedules following the debates on relevant amendments.

I hope that explanation is helpful.

Clause 1

Smart meters: extension of time for exercise of powers

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

I beg to move amendment 1, in clause 1, page 1, line 4, leave out ‘1 November 2023’ and insert ‘31 December 2020’.

This amendment would reduce the proposed extension of powers to align them with the planned completion of the smart meter rollout.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 2, in clause 1, page 1, line 9, leave out ‘1 November 2023’ and insert ‘31 December 2020’.

This amendment would reduce the proposed extension of powers to align them with the planned completion of the smart meter rollout.

Amendment 3, in clause 1, page 1, line 12, leave out ‘1 November 2023’ and insert ‘31 December 2020’.

This amendment would reduce the proposed extension of powers to align them with the planned completion of the smart meter rollout.

Amendment 4, in clause 1, page 1, line 16, leave out ‘1 November 2023’ and insert ‘31 December 2020’.

This amendment would reduce the proposed extension of powers to align them with the planned completion of the smart meter rollout.

Amendment 5, in clause 1, page 1, line 19, leave out ‘1 November 2023’ and insert ‘31 December 2020’.

This amendment would reduce the proposed extension of powers to align them with the planned completion of the smart meter rollout.

[Steve McCabe]

Good morning. It is a pleasure to serve under your chairmanship, Mr Gapes. I should probably confess to you that this morning in the railway station, as I discovered that the 8.30 and 8.50 trains had both been cancelled, I wondered about phoning you to ask whether I could be the first Back Bencher to make it into Hansard by moving the amendment on Skype. I was intrigued to know what your ruling on that might be. However, as I am sure the Minister and his colleagues are relieved to hear, at the 11th hour a train arrived. It was an interesting journey, but I made it here.

The amendment seeks to reduce the period for which the extension of the licence would apply. Amendments 2 to 5 are consequential. To be clear, I am in favour of smart metering. I believe that it is a technological advance with the potential to save energy use and to reduce customer bills, and it may have wider, long-term and beneficial applications. I assure the Minister that these are not wrecking amendments. Rather, the purpose is to probe, to uncover the explanation for what has gone so wrong with the roll-out so far. What assurances can he give the Committee that an extension of the deadline will result in a satisfactory outcome, not simply allow an extension of the delays and spiralling costs, which have been a feature of the programme to date?

It is the Government’s wish that by 2020 more than 50 million new energy smart meters will have been rolled out to 30 million homes and smaller non-domestic sites. The programme is currently in the main roll-out stage, which is due to end in 2020. However, as I said, it has faced persistent delays. As a result, SMETS 1, the early version of meters that we heard about in the oral evidence sessions, is still being rolled out, and that is scheduled to continue until July 2018.

As I have indicated, there are real benefits from the programme. Smart meters coupled with a functioning in-home display—an IHD, as it is referred to in most of the documentation—can make energy usage and cost visible to customers in near real-time, enabling consumers to change their patterns of consumption. That in turn can help with demand management for the energy supply across the country.

The scale of what remains of the smart meter roll-out programme is immense. Only 8 million meters have been installed so far out of a target of approximately 53 million. That is about 15% coverage, with only three years left of the main roll-out stage.

[Stephen Kerr (Stirling) (Con)]

I am not clear about what would be achieved by a move of date. If, as the hon. Gentleman says, and I agree with him, it is a stiff target to install the remaining balance of meters by 2020, why change the date when the purpose of the Bill is to allow the Secretary of State that flexibility?

[Steve McCabe]

As I said at the outset, the purpose of the amendment is to probe the Minister to explain what has happened so far and why he is so confident that in the future he will be able to stick to deadlines that have not been kept to so far. We could simply settle on the date of 2023 as currently specified in the Bill, but it would be remiss of us both as constituency Members of Parliament and legislators to let that go through without being clear about what we have voted for and what the likely implications are. Hence I suggest we look at the date.

[Grahame Morris (Easington) (Lab)]

These are important questions. I have received representations from a number of organisations, including National Energy Action, which points out that part of the rationale behind the original timetable was a cost-benefit analysis. It is concerned that if we were to delay roll-out as suggested, and as the Minister is advocating, the benefits to be enjoyed by consumers—particularly hard-pressed consumers on low incomes—would be delayed. Whatever the arguments on supply, there is a cost to consumers. We need to consider that carefully and, as some of the witnesses argued, whether we need another cost-benefit analysis, or whether that would delay the process even further.

[Steve McCabe]

There is a new clause to be considered later that would provide for a fresh cost-benefit analysis, partly on the basis that with the most recent one there was a significant downward revision of the benefits identified. Clearly, to let the programme trundle on, without any idea of the costs and benefits, might mean that we are doing constituents and customers a severe disservice.

As I was saying, the roll-out has reached the stage of about 15% coverage, with three years to go. The Government are on record as saying, only last month, that nearly 350,000 meters are being installed each month; but to reach 100% coverage by 2020 more than 40,000 meters a day need to be installed. That is a 70% increase in the installation rate.

[Stephen Kerr]

I am a little confused; perhaps the hon. Gentleman can help me. Is the objective to offer smart meters to every one of the 53 million establishments by 2020, or to complete installations? Currently an offer is being made, and there is no mandate on consumers to install a smart meter. I am not sure that it is possible to have a target of 100% completion by 2020 on the basis of an offer to consumers.

--- Later in debate ---

[Steve McCabe]

The Minister may want to help the Committee with that, but my understanding is that he has an installation target. Clearly there will be people who refuse to accept smart meters, and that will inevitably affect any overall figure; but, as far as I understand the matter, the Government have an installation target. My point is that if they need to achieve a 70% increase in the daily rate, that does not seem to be likely or credible; it is not on the cards. However, the Government are adamant that the 2020 target is achievable—a sentiment that the Committee will remember was echoed by some of the witnesses we heard from on Tuesday. I think that we need to hear from the Minister how he will achieve that.

A recently circulated myth-busting document from the Department for Business, Energy and Industrial Strategy says it is a myth that the Bill

“is just a means of extending the roll-out until 2023.”

It states:

“Reality: Energy suppliers remain legally obliged to complete the roll-out by the end of 2020.”

If BEIS is right in its myth-busting, why does the Secretary of State need such an extension of powers to develop, amend and oversee regulations relating to smart meters? If the energy suppliers are legally obliged to complete by 2020 and it is a myth to suggest that the Bill is simply about creating an extension, and BEIS is confident about that, why are we here discussing an extension to 2023?

[Dr Alan Whitehead (Southampton, Test) (Lab)]

Will my hon. Friend consider myth-busting the myth-busting? It is not the case that all suppliers are legally required to install smart meters by 2020: it is those suppliers who are under an obligation, because they have more than 250,000 customers, to pay and take part in green and social tariffs. Suppliers with fewer than 250,000 customers have a target to supply by 2020, but are not legally obliged to do so. That may be of use to my hon. Friend in considering the target itself. The fact that some companies do not have the same obligation may be cause for further thought about whether targets will be reached.

[Steve McCabe]

I am extremely grateful to my hon. Friend for that observation. Unfortunately, I have relied on the wording of the Department for Business, Energy and Industrial Strategy and its myth-busting document. However, it is very helpful to hear what my hon. Friend has just said and it would be extremely helpful if the Minister took that point on board when he seeks to enlighten the Committee on how we will proceed.

What will happen to energy suppliers if they fail to meet the roll-out targets by the end of 2020? So far, the Government have indicated that the reasons for the extension are

“to remove delivery barriers, protect consumers, and help households and small businesses continue to get the most from their smart meters once installed.”

We heard on Tuesday that some customers cannot possibly be getting

“the most from their smart meters”,

because once they are installed and the customer switches provider, they cease to be a functioning smart meter. So I can see why the Minister is keen to address that problem.

Perhaps the Minister would be kind enough to explain to the Committee exactly how an extension to 2023 helps achieve each of those stated aims. If the target for installation is going to be met by 2020, as BEIS asserts, there will be no “delivery barriers” to remove. Also, it is unclear what protection the Government think customers would need in relation to the roll-out, unless it is specifically about this question of the problem that arises when people try to switch providers.

[Dan Carden (Liverpool, Walton) (Lab)]

Surely this delay in the roll-out, potentially to 2023, would also have a significant effect on the Government’s cost analysis. We have heard about the astronomical sums of money that are involved in the roll-out. Has my hon. Friend had any indication of what a delay would mean for the cost of this scheme in the future?

[Steve McCabe]

I hope that before the Committee concludes its business, all of us here will have a much better understanding of exactly what this programme currently costs and what it is likely to cost by the time of completion. I was quite taken aback at the evidence session on Tuesday when one of the witnesses told us that the cost to the customer had already gone up in 12 months from £5 to £13. If we multiply that increase over the period of the extension that is now under discussion, we can see that, far from being a measure designed to cut the energy costs for consumers, the Bill could well load cost after cost on poor people who are already struggling to pay their energy bills.

That is one of the reasons why, in discussing the Bill and deciding whether to give the Minister this extension and these approvals, we need to be absolutely clear what we are committing to. It is on us in this Committee to determine whether we are genuinely standing up for customers, or whether we are considering the implementation of a programme that is primarily designed to provide benefits to suppliers, in the sense that the suppliers are meant to make the savings and then pass them on to the customers. If we were to end up in a situation whereby the benefits to the customer are not realised and the costs to the customer rise exponentially, that would be a disaster and a total dereliction of our responsibilities.

[Dan Carden]

Yesterday, we sat through the Budget and heard very specific sums of money being put here, there and everywhere. Is it my hon. Friend’s understanding that the budget for the roll-out of smart meters is unlimited?

[Steve McCabe]

Again, I defer to the Minister; I genuinely look forward to hearing his explanation of this situation. It is my fear that, although the budget may not be unlimited, the costs are loaded on the consumer and the costs to the consumer could be unlimited. We could find that, instead of protecting people, we are loading them with costs into the foreseeable future.

[The Chair]

Order. There is potential to go into a large number of issues on this amendment. I would be grateful if hon. Members, as far as possible, focused on the terms of the amendment we are debating and others in this group. We will have an opportunity later to discuss some of the wider issues.

--- Later in debate ---

[Steve McCabe]

I am grateful for that guidance, Mr Gapes. Of course, the amendments are about restricting the date.

Interestingly, not one expert witness we heard from gave a clear reason why it is essential to agree a date of 1 November 2023. What I really want to know is, what is so important about that date, given that 2020 is the key year for the project? Is it arbitrary or pragmatic? It just happens to be five years in the future, and it might reasonably be expected that a great many of those currently connected with the delivery of this programme will have moved on to other things after that time—they might not be quite as culpable or responsible as they would be if the date were a bit closer. Can the Minister offer any additional insight about why he chose that specific time?

I am pursuing this matter because it is my contention that the project is littered with set-backs. I am conscious that the Minister inherited this brief recently, and I certainly do not hold him responsible for what has happened to date. None the less, the main national roll-out was initially intended to begin in 2014 and be complete by 2019. In 2013, the then Secretary of State, the right hon. Member for Kingston and Surbiton (Sir Edward Davey), announced that he was putting the start date back to 2015 and the completion date back to 2020. He said:

“The consistent message was that more time was needed if the mass roll-out was to get off to the best possible start and ensure a quality experience for consumers.”

Well, he gave them that extra time, and here we are with a Bill that says, “Give us more time again.” That is the situation we have arrived at.

It is probably fair to say that the industry, especially the suppliers but also the middle men—the asset providers, to whom I am not quite so well disposed—wants certainty, and I am not at all convinced that the 2023 date provides that. It simply extends the completion date. Surely the Minister can see that it makes no sense to insist on a target that nobody believes in and simultaneously create a provision in the Bill that allows it to be extended beyond 2020. It is tantamount to saying, “Don’t worry—we are not really serious.”

[Grahame Morris]

The arguments for extending the roll-out period are contentious. I refer my hon. Friend and the Committee to the evidence that Mr Derek Lickorish from Secure Meters gave when my hon. Friend the Member for Liverpool, Walton asked that question. Mr Lickorish identified two impediments: one technical and one commercial. He argued that the 2020 date was achievable, and said:

“I think that Ofgem ought to be able to bring the people round the table who can solve these”

commercial and technical

“issues. I do not think they are particularly visible at the moment.”––[Official Report, Smart Meters Public Bill Committee, 21 November 2017; c. 37, Q68.]

So there are mixed opinions about the feasibility of the benefits of extending the period. The Committee needs to be convinced of the benefits of allowing a longer roll-out period, because the experts who presented evidence to the Committee were not absolutely clear and of one mind.

[Steve McCabe]

I am grateful for that. That is exactly the point I have been endeavouring to establish. I cannot see how the Minister can reconcile an insistence by his officials, which he is forced to mouth on occasions, that the roll-out will complete by 2020 and at the very same time take powers to extend it to 2023. The point questions exactly what is going on.

I can think of various projects that Governments have insisted would complete on time and within cost over the years—I will not go into them in detail—but of all Governments this one is littered with projects of this kind where the plug is ultimately pulled, particularly on IT projects, and usually after enormous cost to the taxpayer. The main difference here is that the enormous cost, as I said earlier, is to the consumer. We are putting the cost directly on to the consumer.

My fear is that unless the Minister—I am hoping genuinely that he will be able to do this today—can offer a convincing explanation for why he has selected 2023 as the period of his extension, unless he can give an assurance that we have not yet heard of what has changed to make this completion target very likely now, and unless he can offer a convincing explanation for what has gone on before, I do not see how in all conscience we can be confident that we are making the right decision.

[Grahame Morris]

To clarify the point about costs—

--- Later in debate ---

[The Chair]

That is for later. When we discuss other matters it will be in order. I would rather not have a general debate on the amendment. We can have a debate on other clauses as we consider the Bill, but I do not wish us to have a general debate at every point. If interventions can focus on the amendments before us at this time, it will be helpful.

[Steve McCabe]

Thank you, Mr Gapes. As I indicated at the outset, I am not opposed to the smart meter programme. I do not regard these amendments as wrecking amendments. I hope the Minister will accept that they are deliberately probing because they seek to establish, as I was saying, why we should have confidence in the new date and what the justification for the time period is, as well as how we can understand what has happened and how we can be confident that things have been put right so that the process will not continue to repeat itself.

One of the consequences of such repetition would be escalating costs. I suspect that that is the point that my hon. Friend the Member for Easington was referring to. [Interruption.] My hon. Friend has just passed me the evidence from Mr Lickorish, which points out his extreme concern about the way these costs will escalate. However, I think it will be better if I stay with the date.

[The Chair]

Yes, it would.

[Steve McCabe]

I simply say that my fear is that we could end up agreeing a timescale that does not have safeguards or an obvious justification, which in itself is an opportunity for further delay and is perhaps a recipe for failure. I ask the Minister: would it not be sensible, at this point in the roll-out of the programme, to send a clear message to the industry, consumers and everyone that an extension until 2023 is needed and to make it absolutely crystal clear why that date has been chosen and what will happen in that period—or whatever period BEIS picks? It has been interested in other dates in the past, but now it thinks it should be 2023. Would it not be sensible to send a clear message to the industry, so that we can ensure that the benefits of the programme that the Minister intends are actually realised?

If it is not possible in all conscience to do that and to convince the Committee that we are on track for that outcome, would it not be sensible to revert to the 2020 target and to actually develop a sense of common purpose that says to all those people engaged in the programme, “You said you could do this. We are telling you that 2020 is the delivery target. We are absolutely clear that that is where we are heading”? Would it not be sensible to stop the backsliding and to say that what we actually want is to deliver what we are telling the public we are capable of delivering? We simply cannot have it both ways; we cannot be emphatic on both points. There is either an achievable deadline of 2020, and all the statements from the Department are believable, or that deadline is unachievable and the Minister needs to set a new deadline, explain it and justify it and convince us that that one is deliverable.

[Dr Whitehead]

My understanding of my role, with regard to the amendments, is that I am not summing up on behalf of the Opposition but speaking in support of the amendment put very ably by my hon. Friend the Member for Birmingham, Selly Oak just a moment ago. Before I say anything else, I need to emphasise, as my hon. Friend did, what the Opposition think about the Bill as a whole and what we think about smart meters and their roll-out.

We need to be clear from the start that we are certainly not opposed to the Bill overall and we are certainly not opposed to smart meters. We think that smart meters are not only a desirable but a necessary part of the process of smartening up our energy systems as a whole, and that they will have considerable benefits for both consumers and the energy system as a whole when they are rolled out.

We are also anxious to see that that roll-out proceeds in a timely fashion and that we have a substantial coverage of smart meters at the earliest possible stage, so that those benefits can start to be realised. Indeed, as we heard in oral evidence, there are quite a few issues relating to how many smart meters need to be installed in order for those benefits to start rolling out. Getting those numbers in is an important part of the process of realising benefits for the future.

The amendments we are talking about, and indeed clause 1, are about the process of changing the date by which time licensable activities will have ceased from 2020 to 2023. Whether or not it was a wholly wise idea, the 2004 and 2008 Energy Acts and subsequent regulations specified a date for those licensable activities to end, so after 2018 the Government will have no control over what goes on. Everybody knows that in 2018 we will still be at a relatively early stage of the roll-out. It is impossible to conceive that it would be wise to continue with the original timetable, so we support the idea of specifying a more satisfactory date in the statute book.

The date specified in the Bill is 2023, but as my hon. Friend the Member for Birmingham, Selly Oak pointed out, 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 their statements about the roll-out have changed over time, but they have always revolved around the idea of ending it in 2020. There has been a lot of talk from the Government about 53 million smart meters being installed in homes 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.”

However, the Government have changed their position; they are now saying that by the end of 2020, 53 million customers

“will have been offered a smart meter”—

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. That statement may be meaningless or meaningful, depending on what happens before the end of 2020 and on a variety of issues that will appear along the road, many of which the Committee will examine in its consideration of the Bill.

--- Later in debate ---

That relates directly to my third thought about why the 2023 date may be required. There could be such concern in Government about the fact that SMETS 2 meters are not appearing in the way they should that an extension is needed to accommodate the roll-out problem. That is to say that there may well be a hiatus when the SMETS 1 meter installation comes to an end and the SMETS 2 meters, for various reasons that we may go into in greater depth, are not yet fully available, and there may well be a problem of empty vans going around with nothing to install for a period.

[Steve McCabe]

Is the scenario that my hon. Friend depicts not the reason why the Minister has to explain fully the purposes of the timescale he has selected? That is exactly what some of us fear.

--- Later in debate ---

[Richard Harrington]

I repeat that it is absolutely to extend the Secretary of State’s powers. I was going to mention the 2023 issue and the reason for that. In fact, I scribbled myself a note to answer the hon. Gentleman’s comments about it. So as not to repeat my own scrawl—in fact, I will repeat my scrawl later, because I cannot remember where I put the note.

On the 2023 issue, a lot of things in the powers are not about the targets. Richard Milhous Nixon, whose biography I have just been reading, said, “If you’ve got them by the balls, their hearts and minds will follow.” I do not know if that is unparliamentary; if it is, I apologise. We could easily say, “That’s it; we will leave those powers, because then they will do it”, but that is not what is happening. I am not a fan of Richard Milhous Nixon, for those who might think that, but it struck me that that often in life, that is why people do things.

A lot of things in the powers that are needed will be involved in winding up. I will cover them a little bit later. I do not think it would be possible for any organisation to suddenly give a date—31 December or November or whatever—when the powers run out and that is it. A lot of the things involved go beyond the target. The targets are made with the suppliers. It was asked what happens if suppliers do not do this. There are powers to fine; the regulator has powers to fine suppliers, from memory—if I am wrong by a bit, I will correct the record—10% of turnover if they do not comply with the agreed targets.

[Steve McCabe]

Will the Minister give way on that point?

[Richard Harrington]

Go on—I cannot resist the hon. Gentleman.

[Steve McCabe]

It is a very simple question. The Minister says the regulator has those powers, but is there any evidence that they have been exercised?

[Richard Harrington]

They have not needed to be yet, but they are there. The hon. Gentleman does not mention—no one has given any credit for this—the 7 million smart meters that have been installed. That is quite a lot of smart meters. I have seen the programme that has been put out, and having spoken to so many of the companies and organisations involved, I am satisfied that it is a realistic target. I had better make some progress; I will not be able to address his amendment properly unless I do.

For me, this is the most significant thing that has happened in electricity, but also in power supply to homes, since Edison or whoever it was—hon. Members will have to excuse me; it is a long time since I did it at school.

--- Later in debate ---

[Richard Harrington]

I know we have four more days, but I would like to make progress on this particular point, although I will give an example that might be acceptable to the hon. Gentleman. As an example, it may be necessary to create new licensable activities to ensure that all premises can secure a home area network if that cannot currently be achieved. Technology develops, as do apps, different systems and inventions. It is for us to be able to act quickly so that there is flexibility for the consumer to take advantage of all those things.

Our current explanation is that we may know when solutions are appropriate and viable for these premises only towards the end of 2020 or even in early 2021. I must say, clearly, that we would use this power only after going through the normal policy development process, including consulting relevant stakeholders. I feel that I have done my best to make that point. It is for us to show leadership in this matter. The decisions taken up to now have driven this momentum, and whatever has been said on cynicism about the targets, the installation volumes are increasing dramatically and it is important that we can keep a robust regulatory framework that enables the delivery of the benefits.

It is vital that this work can continue and that the Secretary of State retains the powers available to him to direct the efficient delivery of the roll-out. I am sure that hon. Members will take these points into consideration, other than the target itself, which we have discussed. The last thing that hon. Members want is a cliff edge—they argue against cliff edges many times on the Floor of the Chamber—and the last thing that we want in this case is a cliff edge. I hope that the hon. Gentleman will find these arguments reassuring and that he will feel able to withdraw his amendment

[Steve McCabe]

I am conscious of the time, but I want to be dead straight: I did not find that particularly reassuring, if I am honest. If hon. Members look through Hansard, they will find that I raised a number of questions that have not really been answered at all. As I said at the outset, the amendment was intended as a probing amendment, so I do not intend to push it to a vote at this stage. I recognise that the Minister is very sincere in his approach to this matter, but will he reflect on some of the points that have been made during this part of the debate? Perhaps at a later stage in Committee or in the Bill’s progress, he will see whether he can be a bit more persuasive with the quality of the answers that he provides. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Ordered, That further consideration be now adjourned. —(Mike Freer.)

Smart Meters Bill (Fourth sitting)

Steve McCabe Excerpts

Committee Debate: 4th sitting: House of Commons
Thursday 23rd November 2017 Public Bill Committees

[The Chair]

It is a little hot in here. Some Members asked earlier whether they could remove their jackets, and I am minded to allow that in this instance.

Clause 1

Smart meters: extension of time for exercise of powers

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

I beg to move amendment 12, in clause 1, page 1, line 5, after “23”, insert

“, except in relation to SMETS 1 meters”.

This amendment would exclude the rollout of SMETS 1 meters from the extended licence.

It is a pleasure to serve under your chairmanship, Mrs Gillan.

The amendment would exclude the roll-out of SMETS 1 meters from the extended licence. Let me be absolutely clear that this most certainly is not a wrecking amendment. I really hope that we can bring a bit of clarity to some of the issues that the Committee is already dealing with and will labour on for some time to come.

The purpose of the amendment is to try to get to the bottom of the interoperability issue with SMETS 1 meters, which we heard a lot about in our evidence session on Tuesday. I really want to know why the Department for Business, Energy and Industrial Strategy should continue with the roll-out of SMETS 1 meters if they are not interoperable. I asked the Minister’s predecessor, the hon. Member for Hereford and South Herefordshire (Jesse Norman), in a written question to suspend the installation of SMETS 1 meters until the interoperability issue had been resolved. His answer was no. He added that work was

“underway to make SMETS1 smart meters interoperable between energy suppliers, through enrolment in to the DCC’s system.”

Plans for a solution to this technical difficulty are supposed to be published by the end of this year. With just a few weeks of the year remaining, time is obviously short. I wonder whether the Minister can tell us whether his plans will be published before the Committee reports. It seems to me that this issue is likely to have quite a big bearing on the Committee’s thinking as we work our way through the Bill.

The Government currently recognise two types of domestic meters as working towards the smart meter roll-out target. SMETS 1 meters are the first generation of energy smart meters, compliant with the first version of the Government’s smart metering equipment technical specifications, or SMETS—it sounds like some Russian spy organisation. SMETS 1 meters were meant to be rolled out only as part of the foundation stage between 2011 and 2016. However, they are still being rolled out as part of the main roll-out phase because of delays in the SMETS 2 infrastructure.

The Government recently announced that as of 13 July 2018, SMETS 1 meters will no longer count towards the 2020 target, hence the amendment. If SMETS 1 meters will not count towards that target, why are they still being installed and why is an extension of powers relating to SMETS 1 required beyond the Government’s 13 July 2018 date?

SMETS 2 meters are the second generation of energy smart meters, compliant with the second and latest version of SMETS. They were meant to be rolled out as soon as the main roll-out stage was launched in November 2016 and they were supposed to resolve some problems identified in SMETS 1. As a recent parliamentary question revealed and as I think we heard in evidence on Tuesday, we are still at the testing stage for SMETS 2. Only 250 of the meters have been installed so far, instead of the millions required before scaling up the roll-out.

As I understand it, Government policy is to encourage consumers to shop around and switch supplier to get the best energy deal but, as we have heard, there are many examples of SMETS 1 meters not being interoperable, so customers who have such a meter and switch might find themselves without a functional smart meter because it has then been placed in dumb mode. A witness told us that 20% of the 8 million meters already installed are now operating in dumb mode. In passing, I should point out that that is a substantial increase on the BEIS figure of 460,000 that I was given in a recent parliamentary answer.

Does the Minister accept in principle that the issue of interoperability—this problem of people thinking they have a smart meter and discovering that if they switch supplier they no longer have one—is having a detrimental effect on the public’s perception of smart meters and the supposed benefits of the smart meter programme?

The aim, if I understand it correctly, is for smart meters installed by one supplier to be capable of being operated by another supplier, so that consumers may switch supplier and retain the smart benefits. In 2016, however, the Select Committee on Science and Technology found that the issue of interoperability of energy smart meters was one that it described as still “unresolved”.

The Government continue to claim that work is under way to ensure that SMETS 1 meters will be interoperable through enrolment in the DCC system, but a number of industry parties have explored other approaches that enable consumers to retain their smart services when switching at present. We heard on Tuesday that the industry already has a solution to make SMETS 1 meters fully interoperable.

Mr Lickorish of Secure Meters explained that technical interoperability is now available for 95% of installed SMETS 1 meters. He explained—with the benefit of the cups—how technical interoperability can facilitate change of supplier and enable enduring smart functionality, and that that technology has already been demonstrated to BEIS. Instead of having one DCC system, the technology enables communications between people’s smart meters and energy suppliers using a number of mini DCCs. The companies Secure Meters and CGI have made their systems interoperable. Some 36 energy suppliers already use Secure Meters’ mini DCC system and the majority of the big six use the CGI system.

Will the Minister explain why BEIS is resisting that approach? For energy suppliers, there would be no change in their existing business. They would continue to use the mini DCC system to operate SMETS 1 smart meters. They could also gain customers with SMETS 1 smart meters and there would be no need to operate the meters in dumb mode. The consumer would be able to switch retailer and retain smart functionality. The mini DCC system enables a change of supplier while retaining complete SMETS 1 smart meter functionality. I am at a loss to understand why the DCC is spending more and more money on a project that is perhaps unnecessary and at the very least ought to be reviewed, especially when we know that consumers will be picking up the bill.

The industry faces a number of challenges with the proposed July 2018 end date for the installation of SMETS 1 meters, in terms of the Government counting them as part of the programme, and the ramp up of SMETS 2. As previously discussed, there is a lack of certainty in the market generally and a lack of confidence that the targets set for the installation of SMETS 2 meters can be reached. It is also possible that the installation engineers, whose training has been heavily invested in, may be left without smart meters in April 2018. That is the point my hon. Friend the Member for Southampton, Test made this morning when he talked about the risk of people driving around with empty vans: there is a real risk that the money invested in those engineers will end up being wasted.

Two options are available to us at this stage; I genuinely want to know what the Minister’s, and therefore the Government’s, thinking is. The amendment is not intended to be a wrecking amendment, but I am at a loss to understand why we should persist with something that we think might not work and we fear might cost quite a lot of money when there may already be a viable alternative.

It could be that I have missed a perfectly valid explanation, but I do not think I have read that explanation anywhere and I have not heard any Minister propose that explanation so far. I hope that the amendment affords that opportunity to the Minister now.

We should either exclude SMETS 1 from the extension, as the amendment would, and say in no circumstances would it be sensible to allow energy suppliers to install them, or we could allow energy suppliers to install SMETS 1 meters and use the existing interoperable mini DCC systems. That does not mean that we could not move to the SMETS 2 system, but it would avoid the potential period, which my hon. Friend referred to, in which there could be a complete gap. That, it seems to me, would be the best way to protect the customer’s interest. It may also be the best way to safeguard the programme overall. It is almost certainly the best way to provide some assurance that we can contain costs.

If we are left solely reliant on a system that requires the DCC, which is still in test phase—it is about to get an extension through the Bill—to spend more and more money, with those costs eventually rebounding on the customer, we are taking an enormous risk with our constituents’ money without considering the other technical opportunities. That is the reason for the amendment. I want to know why we are going down this route.

--- Later in debate ---

[Richard Harrington]

I want to make the answer very precise, so I would prefer to write to the hon. Gentleman about the consultation, if that is acceptable, rather than give him a vague answer that does not have the precision he deserves.

[Steve McCabe]

As I said at the outset, the amendment’s purpose was to explore this problem and to help Members to get a better understanding of interoperability. A question mark hangs in the air about how successful the SMETS 2 roll-out will be and what the problems will be if we end up with a lot of SMETS 1 meters installed but no longer counted in the Government’s target or, as my hon. Friend the Member for Southampton, Test said, with a hiatus in which there are no meters available. The amendment’s purpose was to explore that point.

The Minister has done his best to explain where he stands. I am not sure that we have reached complete agreement on that, if I am truthful with him, but he has done his best and it would not serve any useful purpose to force the amendment to a Division. That would be a wrecking amendment, which is not my intention, and I am grateful for what he said. I ask him to continue to reflect on this issue, which will be central to the roll-out programme and needs to be considered. However, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Steve McCabe]

I beg to move amendment 6, in clause 1, page 1, line 12, at end insert—

“(c) in section 56FA(3) after ‘including’, insert—

“, the supply of such meters to energy companies, the disposal of old or malfunctioning meters and”.

This amendment would allow the Secretary of State by order to add “the supplying of smart meters to energy companies” and the “disposal of old or malfunctioning smart meters” to the list of licensable activities.

[The Chair]

With this it will be convenient to discuss amendment 7, in clause 1, page 1, line 19, at end insert—

“(c) in section 41HA(3) after ‘including’, insert—

“, the supply of such meters to energy companies, the disposal of old or malfunctioning meters and”.

This amendment would allow the Secretary of State by order to add “the supplying of smart meters to energy companies” and the “disposal of old or malfunctioning smart meters” to the list of licensable activities.

--- Later in debate ---

[Steve McCabe]

The distinction between amendments 6 and 7 is that amendment 6 applies to electricity and amendment 7 applies to gas. Otherwise, they are effectively the same.

I hope that the Minister considers the amendments to be sensible. They grant the Secretary of State the powers to license and regulate meter asset providers and deal with the disposal or recycling of metering equipment. I am conscious that disposal is currently subject to an EU directive—without wanting to get into that debate, which seems to be the only debate we have these days. None of us knows at this stage what will happen to that directive, but we know that a large existing supply of meters has not yet been disposed of in accordance with the directive and that the supply of meters could grow. I am trying to offer the Minister and the Secretary of State an opportunity to take some powers to deal with that, which may become a pressing issue in the near future.

Let me start with the meter asset providers—or MAPs, as I believe they are known in the industry. As we heard from expert witnesses, MAPs are crucial players in the current roll-out programme. I was interested to learn a bit more about what MAPs are. A cursory online search told me that meter asset providers are independent providers of metering equipment, constructing and operating essential utility assets to serve millions of homes in the UK. They provide the following services: funding provision, contract management, asset management, asset tracking, fault management and asset disposal.

As Members will have spotted, there is a connection between the role of MAPs and what happens to redundant and old meters at the end of their life. MAPs are essentially the middlemen, providing, managing and disposing of smart meters. When I was first told about them and was trying to understand them, the best analogy that I could come up with was a football agent—the person who smooths the path to the club, provides the player and helps the player move on when it is in their interest. It seems to me that MAPs do a similar job: they essentially provide a facility for energy suppliers.

As Members may recall, Mr Bullen told us that MAPs play an important funding role. I take this opportunity to mention that Mr Bullen got in contact with me after the evidence session to make it absolutely clear that his company has no role or direct beneficial interest in relation to MAPs; that might not have been the impression given to the Committee during the session, but he was very clear. I wanted to put that on the record so that there is no doubt about it. Mr Bullen told us that MAPs play a beneficial role by providing a funding arrangement to make capital available so that energy suppliers can install smart meters without absorbing the cost from their cash flow. The MAP then rents the smart meter to the energy supplier throughout the course of the meter’s life. That is basically how it works, as I understand it.

However, when a customer switches supplier, it is not necessarily in the supplier’s interest to take on the potentially high rental cost of a SMETS 1 meter, particularly if they have been told that a mass roll-out of SMETS 2 meters is just around the corner. Commercially, it is better simply to turn the installed meter to dumb mode and install a new meter—perhaps an identical meter—using a cheaper contract with a different MAP. That seems to be how we got into the situation that we have been discussing.

In that context, it is a vital message for the Committee that SMETS 1 meters are technically capable of interoperability using the mini DCC systems, but there is often a lack of commercial interoperability when people switch from big six companies to smaller energy suppliers, which is exactly what we are encouraging them to do and what BEIS is telling consumers they should do.

I suggest that that commercial problem is causing the biggest issues with the smart meter roll-out for both consumers and suppliers. Members will recall that one witness described them as deemed rentals within industry circles. Basically, the acquiring energy supplier would not necessarily have the same contract with the same MAP and therefore the customer says, “I am switching from supplier A to B.” The customer already has a smart meter provided in conjunction with their contract with supplier A. When they switch to supplier B the MAP gets involved and says, “There’s a meter in place, but this is what we are going to charge you in order to use it as a smart meter.”

The supplier is not sure what is happening, how long they will be able to maintain this SMETS 1 meter, and how long it will be before the Government’s promised move to SMETS 2—they are told it is just around the corner. Not surprisingly, the MAP tries to take advantage of this situation by offering the rental at an even better rate, to get an even better return over what they assume will be a shorter time. As I understand it, to the best of my ability—I have spent quite a lot of time looking at and discussing this—that is what happens.

The new supplier has two choices. They can either take on an expensive contract, which actually diminishes their profit, or they can put the meter into dumb mode. In some circumstances, they can go to another MAP and put an identical meter into the customer’s property, but they will pay a lower charge for that.

It is an unregulated market. It seems to me to be having a perverse impact on the benefits for customers that the Minister is trying to achieve and his roll-out programme. Citizens Advice has said that that severely damages the credibility of the smart meter programme.

I am not saying that this is a case of bad business or horrible profiteering companies. That is not the point I am trying to make. Rather, the market as it exists has provided for the development of this middleman, who is entitled to try and make the maximum profit available to him in what he judges to be the timeframe available for that product. Naturally, he looks at every opportunity to increase his return. It seems to me that that is exactly what is happening, but the consequence is this situation where we have all these dumb meters. I do not know, but the Department told me in a parliamentary answer that the number in dumb mode is actually 460,000; obviously the witness who told us it is 20% thought it was a considerably higher figure. Whether it is half a million or more, we know that the intention that a person gets a smart meter and can continue to use it when they switch supplier is being thwarted because of the market mechanism that has developed because of the need for the middleman to make money. That is what this is about.

I suggest that it would be in the Minister’s interest to take some powers to regulate that market, to make it part of his licensable activities. I am not saying in this amendment that he has to use them. I am not telling him to do anything, but I am saying that this is where we are and this is what is happening now. It is already having an impact on his programme ambitions and it could continue to thwart them even further. The Bill is designed to deal with events the Minister fears could occur. He keeps telling us that those are not things that will happen and that the roll-out is fine. He tells us that this is a belt-and-braces piece of legislation designed to address things he is anxious about, but we should also be anxious about the role of MAPs. They not only have an adverse impact on consumers but may well be distorting the progress of the very programme the Minister is trying to promote. It would make perfect sense if he took powers that enabled him to step in and act to regulate that element of the market if he reached a stage where he felt it was in the interests of the programme’s long-term viability and of the consumers, for whom he clearly has an overriding concern.

--- Later in debate ---

[Richard Harrington]

I actively disagree with the hon. Gentleman. I accept the problem—whether it is 4%, 20% or the numbers that have been talked about that do not work—but I do not view that as an aspect of market failure. In my submission, market failure would mean the charge being 400% or 500% of the cost of manufacture. I regard it as a failure, but a technical failure that we hope will be changed within months by the operability technical changes, as I explained. I understand what the hon. Gentleman means, but I do not regard it as market failure. My contention is that the regulation of the supply, or the ability to regulate, as the hon. Member for Birmingham, Selly Oak mentioned, would not have made a difference to the technical failure side of it.

[Steve McCabe]

I just want to clarify what the Minister said, in case I misheard him. I think he said it is not a market failure but a technical failure, which within months we hope to address. As I pointed out earlier, his Department’s position is that it is meant to be addressed by the end of this year. In fact, I asked him if he would produce the plan by the end of the Committee. Is the Minister now revising that timescale? Is that what he is telling us?

[Richard Harrington]

I used the expression “within months” as a figure of speech; I apologise for that.

[Steve McCabe]

I just want to be clear.

[Richard Harrington]

It is a very fair point. I did not do it as a way of pulling back on what I said before, I promise. The point I want to make is that the Government do not believe it necessary to make provision to require MAPs, as asset providers, to be licensed because the competition is working and providing good value to energy consumers.

Away from the Committee, the hon. Gentleman and I had a discussion on meter disposal, and I have given it considerable thought. This is not an excuse, but the responsibility for disposal lies with the Secretary of State for Environment, Food and Rural Affairs. I have not discussed this issue with the Secretary of State, or in fact anything to do with general disposal issues, particularly not gas and electricity meters.

If the hon. Gentleman will bear with me, I suggest that we hold a roundtable with DEFRA and BEIS officials, himself and the shadow Minister, if he is prepared to come—I hope he will—so that we can discuss this. It is not something I can give a short answer to; it is much more complex than I first thought. Having made both those points, I would be delighted if the hon. Gentleman agreed to withdraw his amendment.

--- Later in debate ---

[Steve McCabe]

I am very happy with what the Minister said in his conclusion. An opportunity for people to get around the table and see whether we can agree a situation where people are comfortable with what is likely to happen seems a good and sensible proposition. I can see he was very relieved to discover that the issue is not directly his responsibility.

I have to say that I am not at all convinced by the Minister’s comments about the first part of the amendment. I think there is a failure of the market here. It is having, as I pointed out, a negative impact on both the consumer and his programme. I am tempted to test that with a vote, but given what the Minister said at the end of his remarks, I would prefer to ask him if he will think again about the role of MAPs. There is time before the end of the Committee and the conclusion of the Bill’s passage. There is an issue here, and I would be grateful if he at least went back and discussed it again with his officials.

As I tried to point out, I am not against these businesses or out to put them out of business. I am concerned about the impact of some of their behaviour in this environment and the unintended effect it may have on both consumers and the Minister’s programme. In the circumstances, it would be better to give him a chance to reflect on that. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Ordered, That further consideration be now adjourned. —(Mike Freer.)

Smart Meters Bill (Fifth sitting)

Steve McCabe Excerpts

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

[Dr Whitehead]

We have talked about the extension period; the second part of the Bill is about administration orders. These might be made in the context of the DCC’s failure to operate either because it has gone bankrupt or because its supply of funds dries up or is diluted for any reason and it can no longer continue—it is entirely dependent on the resources it receives from suppliers to operate. A number of clauses in the Bill relate to setting up a procedure to enable the roll-out to continue by recovering the DCC’s procedures, if and when in administration, in such a way that the flow of the roll-out is not interrupted. At this stage of the legislation, therefore, we need to concentrate on whether the things put forward—what can and should be done by Government to make that change while at the same time continuing with the roll-out in the unlikely event of administration—are good enough to ensure the roll-out continues and we achieve the purpose of ensuring a smooth passage.

I want to make two brief points, to which the Minister may want to respond. The first is about provisions in the Bill relating to what are unlikely events that probably will not happen, but conceivably could. It might be prudent to legislate to ensure that we are in a position to do something in the unlikely event of that happening. We had a debate about that recently in this Committee. What we are doing in considering the second part of the legislation is roughly what we were doing in the first part to try and strengthen the Bill. We did not succeed in doing that, but we will not be churlish or childish about that. We will go along with the idea that this is an unlikely event, for which we have to make prudent legislation to ensure that catastrophe does not take place as far as the roll-out is concerned.

The second point is that we are legislating this morning for an event that could occur to an organisation that has been in operation for several years already without this legislation being on the statute book. One might ask, therefore, what was happening in the meantime. Were we operating over a period of time where there was no protection for the smart meter roll-out programme from the possible bankruptcy or administration of the organisation that was essential to the running of the whole operation? That seems to me to be a considerable omission on the Government’s part.

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

We seem to have heard a lot in this Bill about these unlikely events that are never going to happen, but for which we have got to take precautions. I remember being told that banks were too big to fail as well. I wonder whether the point my hon. Friend is making is that we have got to a situation where we have a multibillion pound investment in the DCC—all of it coming out of customers’ pockets—and yet there is no protection at this moment if things were to go pear-shaped?

--- Later in debate ---

[Richard Harrington]

Yes, that is very good. I wondered what the hon. Gentleman did his doctoral thesis on, and now I have discovered it.

It is a judgment call. I hope I made it clear in my previous comments that I do not think his amendment is unreasonable, mad or anything like that; it is just that we have to try to make a judgment, and it is on a different side of the line to his.

The question of why we have not done this before is, like many of the hon. Gentleman’s points, very valid. It is one of the first questions I asked officials when considering this. I have been given a note, which I have not read; I will answer from what I think, rather than what I have been told. I asked that very question. I understand that this was consulted on in 2011 by the Department. The official reason—genuinely—is that there is a lot of competition for parliamentary time, and this is the first opportunity we have had to deal with something that is reasonable, but at the highest level of unlikeliness on the unlikely-o-meter, if there were such a thing. There must be an unlikeliness app to gauge the level of unlikeliness.

I personally think this should have been done before. It was probably less important than it is now and going forward, simply because of the scale of use and the containability of unlikeliness. This was the first opportunity I had to introduce the clause on what to do in the event of these unlikely circumstances, and it is important. It is to stop other interested parties putting in administrators. There are always commercial administrators—for example, companies that have not been paid. There is a normal system to do this that still exists, but it does not have the level of control that the Department or Ofgem would have.

This is important. I could spend 10, 15 or 20 minutes of the Committee’s time going through the reasons why it is important, but those reasons will be debated later on in the Bill’s passage. I hope I have answered the points raised to the best of my ability.

[Steve McCabe]

I do not want to dwell on this, but I am genuinely curious. When the Minister says that the Department consulted on this and decided that there was no need for this sort of protection or safeguard because of parliamentary time, or whatever reason, who did they consult? Presumably not the customers, who would have been the first to say, “Hang on, we don’t like the sound of this.”

[Richard Harrington]

I thank the hon. Gentleman for that comment. Those consulted were stakeholders and so on. I would remind the hon. Gentleman and the shadow Minister that the DCC only went live in 2016. I accept that there would have been a point between 2016 and now that would have been ideal. It is not uncommon to have special administrative regimes in this kind of world—this is the first one for this particular administrator—and it seems obvious for Government or the regulator to have powers basically to override the normal administration system. Given the millions of smart meters around, and given in particular the system whereby they are all electronically talking to each other—which we all want—it would have been negligent for the Government to leave this for another four or five years. It is quite reasonable for this to be the first legislative slot since it went live.

Having said that, I accept that there has been no unreasonable comment in the points made by the hon. Gentleman. There is plenty to discuss in this Bill, and everyone would agree that a special administration regime guards against a risk that the licensee might go into normal insolvency proceedings, which is a standard process within the Companies Act 2006 and something that companies do. The reason that this is a level of unlikeliness that makes it really unlikely is that the income side is more or less guaranteed, as we heard in the evidence from the experts. It is prudent, given that these risks could be there, to have safeguards in place. That is what the clause does. These measures all have precedents in other special administration regimes for energy networks and suppliers. The clause is a sensible measure and I commend that this clause stand part of the Bill.

Question put and agreed to.

Clause 2 accordingly ordered to stand part of the Bill.

Clause 3

Objectives of a smart meter communication licensee administration

[Steve McCabe]

I beg to move amendment 8, in clause 3, page 2, line 34, after “efficiently”, insert “, transparently”.

This amendment would make it an objective of the smart meter communication licensee administration to operate in a way which would allow the general public to be aware of his functions.

It is probably quite fortunate that this debate follows the discussion that just took place, because the purpose of amendment 8 is to make it an objective of the smart meter communication licensee administration to operate in a way that would allow the general public to be aware of its functions.

We are talking about a situation that is clearly about accountability, albeit one that people think is unlikely. This is a situation in which a massive investment goes wrong and the Minister is forced to set up a special administration regime. In those circumstances, it makes sense for people to know what is going on. It is a matter of accountability for the public, who, as I have said a number of times, are paying for this programme through their bills. It is therefore right that if ever a situation arises in which a smart meter communication licensee administration is in place as a result of a failure of the DCC, that administration should operate in a way that is transparent, open and obvious to Members in all parts of the House and, most importantly, obvious and transparent to members of the public.

[Stephen Kerr (Stirling) (Con)]

How does the hon. Gentleman envisage there being such an event without it being transparent to Members of Parliament and to the public? In what scenario would that be possible?

[Steve McCabe]

That is a good question, but unless I have misunderstood its wording, the Bill gives the Minister the power to set up this regime but does not impose any requirement to disclose to the wider public, or indeed to someone like the hon. Gentleman, exactly what the Minister is about. That is the very essence of this amendment. Maybe it will help the hon. Gentleman if I give the wider context to why the public needs, at this stage, a transparently operated smart meter communication licensee administration.

The thing we cannot escape, and should not try to, is the huge cost of this programme. It is enormous. In recent correspondence, the Government are on record as saying that the average household is expected to save £11 a year on its energy bills in 2020, rising to £47 by 2030. If I have the figures right, that equates to £300 million off domestic energy bills in 2020, rising to about £1.2 billion by 2030.

The Minister told us earlier that the cost-benefit analysis is regularly updated. I am not sure that is strictly true. It is probably fair to say that the cost-benefit analysis is modified, but to the best of my knowledge there have been two to date. The figures that I am quoting are based on the cost-benefit analysis conducted in 2016, which some of the expert witnesses called into question, as Members will remember. It is possible that the figures were accurate at the time of publication, and the benefits quoted would be welcome, were it not for the fact that the increasing cost of the roll-out falls to the consumer.

If Members recall, Mr Bullen told us that the cost of the smart meter roll-out per household was £13 a year, up from £5 only the year before, when the cost-benefit analysis was conducted. On that basis, the net benefit to the average household lucky enough to have a functioning smart meter that is not in dumb mode is actually minus £2, while those who have not even had a smart meter installed at this stage are paying £13 for the roll-out without deriving any benefit at all. Centrica—the people who own the gas—claimed last week that the costs of subsidising the £11 billion smart meter roll-out programme are just included in their customer bills. They said that, presently, large suppliers see these rising costs as among the main reasons for customer bills going up.

[Stephen Kerr]

I appreciate the points that the hon. Gentleman is making, but I am not entirely clear how this pertains to his amendment, which concerns an administrative arrangement, should we get into that scenario, which we can hardly envisage, where power companies are failing and so forth. I am not sure I understand the relevance of his comments about those costs to the amendment.

--- Later in debate ---

[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.

[Steve McCabe]

The Public Accounts Committee, the National Audit Office and the Energy and Climate Change Committee have all expressed doubts about the operation of the programme, its transparency and the escalating cost. In such circumstances, if the Minister was forced to use the additional powers because of failure, surely it would be a complete dereliction of duty not to make what had happened obvious.

[The Chair]

Order. Before the shadow Minister responds, I ask Members again to focus their remarks, if possible, specifically on the amendment.

--- Later in debate ---

[Richard Harrington]

I thank the hon. Gentleman for that intervention. I can see that afterwards, but not in the course of an administration, when there are very complex duties for the administrator to learn, be instructed to learn, and so on. I find this proposal quite difficult in practice; I am quite concerned about the effects of it. I am not concerned about the purposes of it, which I think are very noble. Perhaps I will answer the hon. Gentleman’s question in my remarks in a way that is more satisfactory to him; I hope so, anyway. Perhaps it is a victory of hope over logic; I do not know, but we will see.

I confirm for the record that the object in clause 3 is to ensure that the DCC’s functions under its relevant licences are performed efficiently and economically, pending the rescue of the company or transfer of its business. However unlikely that might be, as we know its revenues are guaranteed, we are on the Government’s side, rather than the shadow Minister’s side, of the line on unlikeliness. The intention behind the clause is to ensure the continuity of the smart metering service while minimising the costs incurred. In providing for continuity of services, the benefits of smart meter services are maintained and the costs—financial costs, but also the huge inconvenience that would come from any interruption to smart meter services—are avoided. I do not mean an interruption to the supply of electricity; I am talking about the gauging of how much people are using and, I hope, in the future, more fancy tricks, to allow them to control their costs, supply and everything that we have mentioned before.

Under the Insolvency Act 1986, as modified by this Bill, there is already an obligation for the name of the smart meter communication administrator to be stated on the DCC website; it should also be stated that the affairs, business and property of the company are being managed by that administrator. There are clear provisions setting out the functions of a smart meter communication administrator, including its powers.

As with the energy network operator and energy supplier special administration regimes—the nearest comparable regimes—we would expect the smart meter communication licensee SAR rules to require the smart meter communication administrator to file various documents at Companies House. That would include, for example, a copy of the administrator’s proposals for achieving the objective of the smart meter communication licensee administration, which would contain information about the administration. The administrator has to submit regular progress reports. Once filed at Companies House, those documents would be available to the public and would keep them informed about the administration and its progress in the way that I hope the hon. Member for Norwich South meant in his question.

I hope that hon. Members will recognise that information would already be available to the public and other interested parties through the existing procedures to ensure transparency about the administration. I hope that they will consider the points that I have made, because they are important. This proposal implies that the administration process could be helped dramatically by the public’s having access to information and knowing what is going on all the way through. I think that it is very important that the public experience no interruption whatever and that the administration is carried out quickly and efficiently. We must not forget that the whole reason for the SAR is to reassure consumers and other stakeholders that their smart meter services and the benefits that arise will be protected, and not interrupted in any way.

I state again that the administrator would be under a duty to manage the company efficiently and economically. When companies such as KPMG, PwC and other big companies act as insolvency practitioners, they do so as part of a regulated profession. All normal insolvencies, and not just special administration regimes, are covered by that. I therefore ask the shadow Minister and the hon. Members for Birmingham, Selly Oak and for Warwick and Leamington to consider what I have said and to withdraw this very reasonable amendment. I fully commend the purpose behind the amendment, but I think we are already fulfilling that purpose in this provision and with the existing rules on administration.

[Steve McCabe]

It is a devastating blow to hear that the Minister cannot bring himself to accept the word “transparent”, but in the circumstances I do not think that we would gain very much by pressing this to a vote. I hope that the Minister will seriously reflect on what has been said, because the circumstances in which he would have to exercise this power would be a massive failure and, almost certainly, a massive loss to the public, and I do not think anyone would be comfortable thinking that there had been any attempt to hush that up or push it to one side. I hope that he will reflect very seriously on why it has been raised. I do not wish such a failure to occur at all, but I am very clear that if it did, I would be one of the first at the front of the queue saying, “What on earth went on here?” I do not think there would be any gain in pushing it, so I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Dr Whitehead]

I beg to move amendment 14, in clause 3, page 3, line 32, at end insert “within the context of the full services offered by the DCC”.

This amendment requires that any regulations about prioritisation of activities following the DCC going into administration would have to take into account the context of the full services offered by the DCC.

The amendment refers to clause 3(6), which enables the Secretary of State to make regulations specifying the activities to be undertaken in a smart meter communication licence under administration, subsequent to the DCC having been placed in that administration. The circumstances set out in subsection (6) are essentially about the extent to which the Secretary of State may say to the administrator, “You are now in the position of administrating this failed company. Because of the arrangements necessary for the roll-out of smart meters, you should make sure that, at the very least, the minimum amount of activities are carried out to enable a smooth roll-out of smart meter services.”

As far as I understand it, the reason for the subsection is that as the DCC evolves it will undertake the initial core services provided in respect of the roll-out, but it may also undertake a number of additional elective services to facilitate the roll-out. It is those additional elective services that the Department mentions in the memorandum it placed in front of the regulatory Committee, stating:

“In the unlikely event that the DCC becomes insolvent, it may be necessary to prioritise certain activities of the DCC…We are not yet in a position to set out the prioritisation of the DCC’s services, so soon after the start of live services…and in advance of the development of elective services. We believe that this will be possible ahead of the completion of the rollout when demand from suppliers for DCC to provide other services could be expected to have materialised.”

The Department then states:

“Once we have determined the prioritisation and how it should be done, we would prepare a statutory instrument that would be subject to annulment in pursuance of a resolution of either House of Parliament.”

I will come to that particular point in a moment.

The point of those particular passages, concerning clause 3(6), is that the Department is not clear what the prioritisation of the DCC services might be under administration, because the Department is not yet clear, so close to the start of live services, what range of services it would face under administration—because those services have not yet fully emerged. The Department would therefore want to determine how the prioritisation should be done, and to prepare a further statutory instrument, which would give form to that prioritisation once that is clear.

That is all very reasonable, except that something does not appear in 3(6) as it stands, or within the policy intent section that the Department has put forward as far as the regulatory Committee is concerned: any provision requiring that the services that the administrated DCC carries out at that point be as close as possible to the full range of services that were there before. It is distinctly possible for the Secretary of State to make regulations that would, for example, remove all elective services that had been developed by the DCC and concentrate just on the core services—the minimum that would enable the roll-out to limp home under the terms of administration.

The amendment seeks to give a context for what the Secretary of State may do by regulation, as far as administration is concerned, and it states that that context should be the full services offered by the DCC. Obviously, those would be the full services offered by the DCC at the point it went into administration, including those elective services which we do not fully know about at the moment. Clearly, if the DCC, prior to its administration, had developed a wider palette of services than the very minimum, it would have done so for particular reasons. I imagine that those reasons would be to assist the roll-out. Therefore, as a desideratum, under the terms of the administration, the DCC should operate post-administration as closely as possible to how it operated prior to administration.

The Secretary of State should consider, under those circumstances, what might be impossible or very difficult to achieve under a process of administration, not a wish for various services to be discontinued or downgraded. Obviously, I imagine that the Secretary of State would want to make sure that the future regulation was indeed as close as possible to what the DCC was doing before it went into administration, but I would suggest that is not entirely the point. It is necessary to put in the Bill a framework for what the Secretary of State may do under regulation, and that should be to have serious regard to the services in place prior to administration and not to be tempted, as it were, to put forward regulations or give instructions subject to regulation that did not produce an outcome post-administration that was as good as it had been pre-administration.

Smart Meters Bill (Sixth sitting)

Steve McCabe Excerpts

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

[Dr Whitehead]

There is a new clause that refers effectively to what we are considering here, but I am happy for it to be discussed separately, even though it has a substantial bearing on whether a non-GB company might be a successor to the DCC. As far as this stand part debate is concerned, I have no further comments other than that I will save my fire for later when we discuss the new clause.

Question put and agreed to.

Clause 4 accordingly ordered to stand part of the Bill.

Clause 5 ordered to stand part of the Bill.

Clause 6

Modifications of particular or standard conditions

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

I beg to move amendment 10, in clause 6, page 5, line 20, at end insert—

“(aa) the public; and”

This amendment would require the Secretary of State to consult the public before making a modification to particular or standard conditions of gas or electricity licences when these powers are being used in connection with the smart meter communication licensee administration provisions.

No doubt you have observed, Mrs Gillan, as will have members of the Committee, that there are some similarities between this amendment and amendment 8 to clause 3, which we discussed earlier. They are part of the effort I have been making to ensure that the public have a slightly bigger voice in what happens in the programme, particularly in the event of something going wrong with it. I mentioned earlier the number of groups and organisations that have expressed anxiety, and these include the Public Accounts Committee, the National Audit Office and the Energy and Climate Change Committee. I was particularly struck to see that Centrica itself had reached the stage where it thought the cost of the programme should be met from general taxation, rather than a charge on the customer. That led me to wonder.

As I hope I have indicated throughout, I do not hold the Minister responsible because I appreciate that he was bequeathed the current state of affairs by his predecessor—but I wonder if the Minister believes that, if this were a Treasury programme, it would have been allowed to continue in its present form for this length of time, with the escalating cost. I would be very curious to hear his response —if possible; I am not trying to put him in a difficult position. The Minister did tell us earlier about one of the first questions he asked when he arrived in the Department and he went on to explain that he had some doubts about the information he was being given. I am really curious to know what he felt when he first encountered the programme and whether he was confident that all was well with it, because it seems to me that there are grounds for some doubt. I want to refer to the cost-benefit analysis, on the basis that the 2016 analysis was significantly revised downwards. We have never had an explanation for exactly why that was the case. It is probably reasonable to guess that it is partly about the delay in the roll-out, but the way things are going at the moment, with delays in the roll-out and escalating costs, we could end up in a situation where the benefit for the customer turns into a big fat negative. It seems to me that it would be a bit remiss of us not to pay some attention to that.

I do not know if I have got this wrong, but it looks to me as if, every way we turn, there is only one person footing the bill for any aspect of the programme. The Minister tells us that the energy suppliers can be fined if they do not achieve the roll-out, but presumably that means another cost that gets passed on to the customer. I would be grateful if the Minister could tell us whether he envisages any protections to ensure that, were he to use his powers to fine the supplier for failing to comply with the roll-out deadline, that would simply not be, in effect, yet another charge imposed on the customer. Certainly, as a customer and as someone who represents lots of constituents who are customers, I would like to know if that is the case and if that is what I am being asked to support today. It would be reasonable to know. As far as I understand it, the power to fine is up to 10% of turnover. Perhaps the Minister can give us some clue as to what that works out at per customer—funnily enough, I would expect that it is quite a tidy sum of money.

In the past, the Government have said that they would intervene to make sure the benefits of the roll-out were realised, if they believed the costs were being passed on to the customers to an unacceptable extent. In the context of the amendment, is the Minister happy that the current escalation in the costs is acceptable? At what point does he think his Department might be moved to intervene?

We are repeatedly asked to recognise that the DCC is unlikely to fail and that everything we are being asked to undertake here is simply on the basis of extra protection in the event of failure, but what I am saying is—

[The Chair]

Mr McCabe, I am loth to interrupt you when you are in full flow, but the cost-benefit analysis is in new clause 11, which is going to be debated later. The focus of your speech should be on the text of this amendment. I do not mean to cut you off in full flow, but I think you understand what I mean.

[Steve McCabe]

Perish the thought that you would cut me off in full flow, Mrs Gillan. I was about to conclude by saying that the reason why I have laboured the point about the cost is that that seems to be the essential public interest. The programme has been designed so that the last people to have any say in what happens are the public, who are picking up the tab. The point of the amendment is to give the Minister an opportunity to redress what I assume was an oversight; I cannot think of any other reasonable explanation why the very people who are supposed to be at the centre of the programme have absolutely no say, and are not consulted—or considered, it would appear—in any way at any stage of the process.

[The Chair]

Just to reassure you, Mr McCabe, you will have the opportunity to visit this point briefly when we discuss new clause 11. I think you will find that a good place for it.

--- Later in debate ---

[Richard Harrington]

To continue with the comments of the hon. Member for Birmingham, Selly Oak: if British Gas was fined 10% of its turnover, in theory that would be passed on to its consumers. In practice, of course, that would make it so uncompetitive that all its consumers would move somewhere else. The purpose of these measures is not the fines; it is all the things that happen before the fines to make suppliers comply.

Technically, the hon. Gentleman’s point is correct: in theory, all costs go on to consumers, just as in general Government finances all Government expenditure goes on to the taxpayer. I do not think the point is that relevant, but I cannot disagree with what he said other than to say that the fines are not a tool for compliance; they are the ultimate response.

It is true that Ofgem administers the programme and the legal requirements are on it to take all reasonable steps to ensure that households and small businesses have smart meters. The fine is for Ofgem to decide. I remind the hon. Gentleman, before I move to the substance of the amendment, that we have to consider the net benefits as well as the costs. Every single consumer who has a smart meter is making savings on their bill from day one, so experience shows. The real prizes are for the future: the information the meter gives and the change in behavioural habits that happens surely make this worthwhile.

It is not appropriate or feasible to change the policy to move the cost on to the general taxpayer, but it is for us to monitor the situation carefully. With volume, the cost will go down. Compared with many other costs in the generation and supply of gas and electricity, the smart meter bill is quite small given the price of the physical SMETS 2 meter, which, as we have discussed in previous sessions of the Committee, is lower than the SMETS 1 meter’s, and given the cost of the installation and administration that goes with it, which is the same for SMETS 1 and SMETS 2.

I return to the specifics of the amendment. The Bill allows us to reclaim the administration costs that effectively come from the end user via the companies—that is true. It allows the Secretary of State to make such modifications to the licence conditions, where he considers it appropriate to do so, in connection with the special administration regime. The key point is that the clause requires the Secretary of State to consult affected licensees and such other persons as he considers appropriate prior to making modifications to licences. The licence modifications envisaged under this power have been drafted and a version has already been made available along with the explanatory notes to the Delegated Powers and Regulatory Reform Committee and to the public via the parliament.uk website.

The licence conditions try to allow the administration costs to be recouped from the industry insofar as there is a shortfall in the property available for meeting the costs. I accept that, in any business, recouping something from the industry involves recouping it from the customer in the end, which is the point I conceded to the hon. Member for Birmingham, Selly Oak. In the crudest sense, that is true of purchasing anything: the cost of the manufacturer, importer or distributor in any form of good or service is met in the end price. That is bad unless consumers have the choice and the ability to easily switch to a supplier that does not have that incumbence, as is the case here.

I have always envisaged that when we formally consult on those modifications in due course, the consultation will be published. If it is helpful to the hon. Member for Birmingham, Selly Oak, I am happy to provide him and everyone else with an undertaking that the consultation will be publicly available and addressed to the public, as well as to the other consultees involved. On the basis of that undertaking, I hope the hon. Gentleman will withdraw the amendment.

[Steve McCabe]

The Minister made a very helpful offer at the end. He says that every single consumer is making a saving, but I repeat that that is not true if the smart meter is in dumb mode. People are not making a saving in those circumstances.

[Stephen Kerr]

The consumer with a dumb meter may very possibly make a saving; I give myself as an exhibit. I changed suppliers. My meter is no longer smart—I grant the hon. Gentleman that—but I have made a saving, because I had a smart meter in the first place.

[Steve McCabe]

I congratulate the hon. Gentleman on his wisdom and semantics. Clearly, in those circumstances, the saving he is making is not to do with the smart meter, but with his judgment in switching supplier—that is the saving he has made.

[Stephen Kerr]

It is because I had a smart meter that I was able to make the saving in the first place.

[Steve McCabe]

As I do not live anywhere near Stirling, I concede that up there, the canny wisdom of the inhabitants is such that they almost certainly have found a way of screwing the best possible deal out of the system. Unfortunately, as somebody who represents the humble folk of Selly Oak, I encounter the people who do not do quite as well out of the programme—hence my desire to represent their interests.

The essence of the amendment is to try to shed light and ensure that the public have a greater understanding of what is going on. I feel that that is absent. If the Minister says that he is going to share the information, that is good enough for me. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Steve McCabe]

I beg to move amendment 11, in clause 6, page 6, line 22, at end insert—

‘(15) Prior to making modifications under this section the Secretary of State shall commission an independent evaluation on the potential impact the modifications available to the Secretary of State to secure funding of smcl administration could have on consumer energy prices and shall lay the report of the evaluation before each House of Parliament.”

This amendment would require that, before considering modifications to ensure funding of smcl administration, the Secretary of State must seek independent evaluation of the impact such modifications would have on consumer energy prices.

[Steve McCabe]

Thank you, Mrs Gillan. [Interruption.] If I could find my notes, I would be doing absolutely fine; I will have to call on the assistance of the hon. Member for Stirling at any second now.

[The Chair]

I am sure that the Committee will be perfectly happy to allow you to hunt for the correct notes. I think we have all been there, but there is only so much time.

[Steve McCabe]

The purpose of the amendment is to ensure that any potential modifications are subject to an independent valuation. The reason why I ask the Committee to consider this is relatively simple. The Committee will recall that the Minister told us earlier in the proceedings that he thought some people—may be even some Members—were a little cynical about the DCC. I am not sure that people are necessarily cynical, but I think it is important for a programme in which there are already seven or eight world-first technological developments, including device level interoperability and a separate communication system, to highlight some of the substantial commercial and operational costs in play.

I am sure that the Minister has been doing his homework and I hope that he can provide a bit of insight to the Committee into what he foresees as the risks and difficulties in the months ahead. When I was pursuing the issue of meter asset providers in an earlier sitting, I think the Minister said—I wrote it down at the time—that he regarded the role that these people were playing as “a failure”, but he thought it was a technical failure that he hoped would be changed within months by the technical interoperability changes that he was planning.

I am not sure that I believe that is absolutely accurate. It seems to me that MAPs are an issue affecting not only SMETS 1 meters but the roll-out of SMETS 2. The danger relates to the deemed rental—the charge that the MAP people make to the supplier for the first arrangement. When someone makes the smart move, like the hon. Member for Stirling, to somewhere else, the owner—the MAP—may then say, “We are going to change the basis of rental,” and the deemed rental costs will go up.

--- Later in debate ---

[Steve McCabe]

Again, the Minister has been quite helpful. We need to remember that we are talking about a circumstance where there has been a catastrophic economic failure of the DCC. That is why the Minister would be in that position. It would inevitably be—in part, at least—because of doubts about the system, resulting in escalating costs. It would be against a background of an ongoing dispute about SMETS 1 and SMETS 2 meters and the whole question of interoperability, and it would of course then feed into the question whether the meter asset providers were also adding to the cost because of the new role in which they found themselves. That is why we would be in that situation.

In such a situation, I certainly would not want to be the Minister putting my name to something without having some reasonable evaluation of what exactly had happened; how much the cost was likely to escalate; and whether or not this thing was turning into a white elephant. It seems to me that it would be pretty necessary to do that.

If the Minister is confident that the information he will glean from the consultation and that he will make public will be enough to provide him and his colleagues with the cover they might require if they ever find themselves in that situation, I am happy to accept his judgment. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 6 ordered to stand part of the Bill.

Clause 7 ordered to stand part of the Bill.

Clause 8

Modifications under the Enterprise Act 2002

Question proposed, That the clause stand part of the Bill.

[Dr Whitehead]

We are overrun with Henrys again this afternoon: there are more Henrys in clause 8. I have not tabled an amendment because the question of amendments to Henry VIII clauses has been tested, but the Committee should be aware that clauses 8 and 9 are substantial Henry VIII clauses. Both seek to make regulations by negative procedure. The clause to which I drew attention earlier is therefore not an accident; it is part of a theme that runs right through this Bill and that theme ought to be looked at.

We could have a debate about the justification for the procedure in clauses 8 and 9. Frankly, I think they have been written to make the Government’s life easier. That is not a sufficient reason to justify the enactment of legislation. I hope that I can recruit the Minister on future occasions for what I might call a crusade—

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[Richard Harrington]

I find myself in the rare position, in any Committee, of moving an amendment. I usually spend my time responding to amendments, but I shall do my best because these amendments and new clauses are important. They refer to half-hourly settlement.

Before I set out the detail of each new clause, I will, if I may, set out the broader context in which the proposals apply. Smart meters, as we have explained throughout the Committee stage, are a critical foundation for the development of a smart energy system, and provision of the relevant functionality is a core part of our programme. I explained on Second Reading, and have done so again since, my and the Government’s vision, which I think is commonly held: in time to come, when we consider history, the current roll-out of smart meters will be seen as a small part of that programme, providing individuals in their homes and small businesses with more flexibility and information. Everyone will accept that, in the modern age, the old-fashioned system of meters, which were predominantly read by estimation, with the gas or electricity man—they were men in those days—coming occasionally with their brown overalls and torch to do a reading, is totally unacceptable. Most people I speak to still have that system at home, despite the fact that everything else they have—their televisions and computers and so on—is of a completely different era.

Half-hourly billing will provide the platform for that kind of flexibility. I would not argue that people will suddenly wake up and think, “I’m going to change my electricity and gas all the time by pressing a button”, but I do foresee situations in which people will have that kind of flexibility, through their phones, and where they will subscribe to sophisticated services continually whizzing around the whole of the UK and beyond to find the cheapest point of any particular time of supply. That will allow people to choose when their appliances are switched on or off, when they are used, and whether they are necessary.

Under previous clauses we have talked a lot about the costs of smart meters and the administration—the DCC—which is basically the big software interface, but let us not forget that the idea is to reduce system costs by what I hope will be tens of billions of pounds by 2050. The Government’s smart systems and flexibility plan, published in July 2017, set out a number of actions that will build on the smart meter roll-out and deliver a smarter energy system for consumers. That includes the half-hourly settlement, which will help deliver benefits to both consumers and the energy system, by providing commercial incentives on the suppliers to develop and offer time-of-use tariffs, which they have not really had to face before.

As I have explained, such tariffs enable customers to choose, when energy is cheaper, to reduce their bills and the costs of the future energy system. That will help make the energy system more resilient, because as we move towards an increasingly low-carbon generation mix, people will want to make more of those kinds of choices. Smaller suppliers—I should not mention my supplier by name, but I am sure many of them do this—already enable people to tick a box electronically in order to choose to receive energy from a particular renewable source. That is a tiny part of the total array of options available to people, as is half-hourly billing.

Ofgem has already delivered changes to provide more cost-effective settlement arrangements for suppliers that want to offer those tariffs, but that is only the first step. We believe that moving to market-wide half-hourly settlements will help deliver the full benefits of the smart meter roll-out. A market-wide approach will also ensure that any necessary consumer protection can be implemented effectively.

[Steve McCabe]

This is a genuine inquiry born out of curiosity. The Minister is making a perfectly reasonable case. Why has the amendment been tabled at this stage, and why on earth did we not hear anything about the issue on Second Reading? The Minister is making a very good case—I am not disputing that—but it sounds like an afterthought. Could he explain how we have got into this position?

[The Chair]

Before the Minister responds to the intervention, I have had a request from members of the Committee to allow the gentlemen to remove their jackets if they so wish, and I am minded to allow that. If you wish to remove your jackets, please feel free to do so.

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[Dr Whitehead]

Thank you, Mrs Gillan. I was coming to that precise point.

[Steve McCabe]

I do not have any argument with what the Minister is trying to do, but I am intrigued by whether or not a precedent is being set. Is it my hon. Friend’s understanding that if this can occur in this situation, there is no reason why in the future, on any Bill—Private Member’s Bill, or anything else—a Member could not seek to change the long title of the Bill and therefore introduce additional components to the Bill that were not part of the original intention of the legislation?

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[Dr Whitehead]

Forgive me, Mrs Gillan. It is not about angels dancing on the head of a pin; it is an important issue about the procedures of the House. I can see that the hon. Gentleman is puzzling over whether we would “sacrifice the good” of what is before us because of concern about a procedure. That is not a position that the Opposition have put ourselves in; it is a position that we are all in because these amendments have all been grouped together when they refer to two different things, one of which is a procedure and the other of which is substance.

As far as the substance is concerned, the hon. Gentleman may rest assured that we think the substance is good and we do not wish the Bill to be sabotaged because we have concerns about how those good things came to be, but I think the hon. Gentleman will clearly understand that if that procedure is taken as a usual state of affairs in this House, without anybody drawing attention to it for the future, there may in future be circumstances in which someone wishes to introduce a much worse series of amendments than the one that we have today. We know, because the Minister was clear about it, that another Bill was effectively grafted on to this Bill. I can understand the reasons why the Minister wanted to do that.

[Steve McCabe]

Is it fair to say that my hon. Friend is seeking to guarantee that there is an accurate Hansard record that describes the doubt about the process, because it may well be a process that will be challenged in the future? This is not about the detail of the changes that the Minister is seeking to make, which I think there is broad agreement on and support for, but rather my hon. Friend has the parliamentary opportunity to get a Hansard record of what the anxiety is about the process.

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[Richard Harrington]

I fully accept the hon. Gentleman’s right to discuss the matter, and I did not suggest for a moment that he was doing wrong in bringing this forward, or placing it on the record—far from it. I am just saying that, from my point of view, this was acting upon advice, that it was perfectly proper to get something that I felt was very important. I believe that it has the support of—I hope—most Members in the House generally, because we all think that it is a very good thing. I am sorry that the hon. Gentleman feels as he does, but I thank him for accepting that it was done for the right reason. I believe, as he does, that parliamentary procedure is important.

These rules have evolved over centuries for reasons, and—quite rightly—neither I nor anyone else on behalf of the Government can get things in round the side, or bring in things that should never be. When we decided to introduce the amendment, I did have a meeting with the hon. Gentleman to explain it to him, I suppose in an official capacity but obviously not within a Bill Committee capacity, and he did explain his support generally for it. His points have been noted on the record. I hope that my response—which I do not think he found satisfactory—is also on the record.

The amendments support the move to a smarter, more flexible energy system. Half-hourly settlement billed directly on a smart metering platform is a central aspect of the smart systems and flexibility plan that was published in July. The proposals will allow Ofgem to take forward the reforms in a more streamlined way, and I thank the shadow Minister for his support for the substance of the amendments.

Amendment 17 agreed to.

Clause 11, as amended, ordered to stand part of the Bill.

New Clause 8

MODIFICATION OF ELECTRICITY CODES ETC: SETTLEMENT USING SMART METER INFORMATION

“‘(1) The Gas and Electricity Markets Authority (“the Authority”) may—

(a) modify a document maintained in accordance with an electricity licence, and

(b) modify an agreement that gives effect to such a document,

if the condition in subsection (2) is satisfied.

(2) The condition is that the Authority considers the modification necessary or desirable for the purposes of enabling or requiring half-hourly electricity imbalances to be calculated using information about customers’ actual consumption of electricity on a half-hourly basis.

(3) The power to make modifications under this section includes—

(a) power to make provision about the determination of amounts payable in connection with half-hourly electricity imbalances;

(b) power to remove or replace all of the provisions of a document or agreement;

(c) power to make different provision for different purposes;

(d) power to make incidental, supplementary, consequential or transitional modifications.

(4) A modification may not be made under this section after the end of the period of 5 years beginning with the day on which this section comes into force.

(5) In this section—

“balancing arrangements” means arrangements made by the transmission system operator for the purposes of balancing the national transmission system for Great Britain;

“electricity licence” means a licence under section 6(1) of the Electricity Act 1989;

“half-hourly electricity imbalance” means the difference between the amount of electricity consumed by an electricity supplier’s customers during a half-hour period and the amount of electricity purchased by the electricity supplier for delivery during that period, after taking into account any adjustments in connection with the supplier’s participation in balancing arrangements;

“supply”, in relation to electricity, has the same meaning as in Part 1 of the Electricity Act 1989 (see section 4(4) of that Act);

“transmission system” has the same meaning as in Part 1 of the Electricity Act 1989 (see section 4(4) of that Act);

“transmission system operator” means the person operating the national transmission system for Great Britain.”—(Richard Harrington.)

This new clause gives Ofgem power to modify documents maintained in accordance with an electricity licence, or agreements giving effect to such documents, so as to enable half-hourly electricity imbalances to be calculated using information obtained from smart meters.

Brought up, read the First and Second time, and added to the Bill.

New Clause 9

Modification under section(Modification of electricity codes etc: settlement using smart meter information)

“(1) Before making a modification under section(Modification of electricity codes etc: settlement using smart meter information), the Gas and Electricity Markets Authority (“the Authority”) must—

(a) publish a notice about the proposed modification,

(b) send a copy of the notice to the persons listed in subsection (2), and

(c) consider any representations made within the period specified in the notice about the proposed modification or the date from which it would take effect.

(2) The persons mentioned in subsection (1)(b) are—

(a) each relevant licence holder,

(b) the Secretary of State,

(c) Citizens Advice,

(d) Citizens Advice Scotland, and

(e) such other persons as the Authority considers appropriate.

(3) The period specified under subsection (1)(c) must be a period of not less than 28 days beginning with the day on which the notice is published.

(4) A notice under subsection (1) must—

(a) state that the Authority proposes to make a modification,

(b) set out the proposed modification and its effect,

(c) specify the date from which the Authority proposes that the modification will have effect, and

(d) state the reasons why the Authority proposes to make the modification.

(5) If, after complying with subsections (1) to (4) in relation to a modification, the Authority decides to make a modification, it must publish a notice about the decision.

(6) A notice under subsection (5) must—

(a) state that the Authority has decided to make the modification,

(b) set out the modification and its effect,

(c) specify the date from which the modification has effect,

(d) state how the Authority has taken account of any representations made in the period specified in the notice under subsection (1), and

(e) state the reason for any differences between the modification set out in the notice and the proposed modification.

(7) A notice under this section about a modification or decision must be published in such manner as the Authority considers appropriate for bringing it to the attention of those likely to be affected by the making of the modification or decision.

(8) Sections 3A to 3D of the Electricity Act 1989 (principal objective and general duties) apply in relation to the functions of the Authority under section (Modification of electricity codes etc: settlement using smart meter information) and this section with respect to modifications of documents maintained in accordance with electricity licences, and agreements giving effect to such documents, as they apply in relation to functions of the Authority under Part 1 of that Act.

(9) For the purposes of subsections (1) to (10) of section 5A of the Utilities Act 2000 (duty of Authority to carry out impact assessment), a function exercisable by the Authority under section (Modification of electricity codes etc: settlement using smart meter information) is to be treated as if it were a function exercisable by it under or by virtue of Part 1 of the Electricity Act 1989.

(10) The reference in subsection (8) to the functions of the Authority under section(Modification of electricity codes etc: settlement using smart meter information) includes a reference to the Authority’s functions under subsections (1) to (10) of section 5A of the Utilities Act 2000 as applied by subsection (9).

(11) In this section—

“electricity licence” has the meaning given in section (Modification of electricity codes etc: settlement using smart meter information);

“relevant licence holder” means, in relation to the modification of a document maintained under an electricity licence or an agreement that gives effect to such a document, the holder of a licence under which the document is maintained.”—(Richard Harrington.)

This new clause sets out the procedural requirements that apply to the exercise of the power under NC8.

Brought up, read the First and Second time, and added to the Bill.

New Clause 10

Date from which modifications of electricity licence conditions may have effect

“(1) The Electricity Act 1989 is amended in accordance with this section.

(2) In section 11A(9) (modifications of electricity licence conditions not to have effect less than 56 days from publication of decision to modify), at the end insert “, except as provided in section 11AA”.

(3) After that section insert—

“11AA Modification of conditions under section 11A: early effective date

(1) The date specified by virtue of section 11A(8) in relation to a modification under that section may be less than 56 days from the publication of the decision to proceed with the making of the modification if—

(a) the Authority considers it necessary or expedient for the modification to have effect before the 56 days expire,

(b) the purpose condition is satisfied,

(c) the consultation condition is satisfied, and

(d) the time limit condition is satisfied.

(2) The purpose condition is that the Authority considers the modification necessary or desirable for purposes described in section (Modification of electricity codes etc: settlement using smart meter information)(2) of the Smart Meters Act 2017 (enabling or requiring half-hourly electricity imbalances to be calculated using information about customers’ actual consumption of electricity on a half-hourly basis).

(3) The consultation condition is that the notice under section 11A(2) relating to the modification—

(a) stated the date from which the Authority proposed that the modification should have effect,

(b) stated the Authority’s reasons for proposing that the modification should have effect from a date less than 56 days from the publication of the decision to modify, and

(c) explained why, in the Authority’s view, that would not have a material adverse effect on any licence holder.

(4) The time limit condition is that the specified date mentioned in subsection (1) falls within the period of 5 years beginning on the day on which section (Modification of electricity codes etc: settlement using smart meter information) of the Smart Meters Act 2017 comes into force.”

(4) In paragraph 2 of Schedule 5A (procedure for appeals under section 11C: suspension of decision), after sub-paragraph (1) insert—

‘(1A) In the case of an appeal against a decision of the Authority which already has effect by virtue of section 11AA, the CMA may direct that the modification that is the subject of the decision—

(a) ceases to have effect entirely or to such extent as may be specified in the direction, and

(b) does not have effect, or does not have effect to the specified extent, pending the determination of the appeal.’”—(Richard Harrington.)

This new clause allows licence modifications under NC8 to become effective before 56 days have elapsed.

Brought up, read the First and Second time, and added to the Bill.

New Clause 1

Review of smart meter rollout targets

“(1) Within 3 months of this Act coming in to force, the Secretary of State must prepare and publish a report on the progress of the smart meter rollout and lay a copy of the report before Parliament.

(2) The report under subsection (1) shall consider—

(a) progress towards the 2020 completion target;

(b) smart meter installation cost;

(c) the number of meters operating in dummy mode;

(d) the overall cost to date of the DCC;

(e) the projected cost of the DCC; and

(f) such other matters as the Secretary of State considers appropriate.” —(Steve McCabe.)

This new clause would require the Secretary of State to publish details about the cost and progress of the smart meter roll out, with reference to the 2020 deadline.

Brought up, and read the First time.

[Steve McCabe]

I beg to move, That the clause be read a Second time.

[The Chair]

With this it will be convenient to discuss the following:

New clause 7—Review: smart meter installation rates—

“(1) The Secretary of State shall commission an annual review of attainment rates of smart meter installation, this review must include—

(a) information on the total number of functioning smart meters at the end of each attainment period,

(b) analysis of any discrepancy between attainment numbers and total functioning numbers.

(2) The Secretary of State shall lay the report of the review in subsection (1) before each House of Parliament.”

This new clause requires the Secretary of State to review attainment rates annually.

New clause 11—Smart meter roll out cost benefit analysis—

“(1) Within one year of this Act coming into force, the Secretary of State shall lay a report on the costs and benefits of the smart meter rollout before each House of Parliament.

(2) The report under subsection (1) must include an independent cost benefit analysis of the smart meter rollout programme.”

[Steve McCabe]

I am not sure this need necessarily take long. As we have heard, it is a legal obligation on the energy suppliers to take all reasonable steps to meet the 2020 target of every household being offered a smart meter. Both new clause 1 and new clause 11 outline some steps that the Secretary of State could take to ensure timely completion of the roll-out while protecting consumers and ensuring the benefits of the roll-out are fully realised.

New clause 1 is fairly specific in the information it asks the Secretary of State to publish, and includes the progress toward the 2020 target as well as information on the costs and projected costs of DCC and the installation of meters more generally. I listened to the Minister earlier making a commitment to publish an annual report on the progress of the roll-out. Most people, certainly on this side, thought that was a helpful and reasonable offer.

It is important to point out to the Committee that the Government’s commitment to annual progress reports has fallen by the wayside. What we actually heard today was an offer from the Minister to reinstate them, as far as I can see. In December 2012 the Government published their first annual progress report on the roll-out, which gave an overview of the programme and the progress to date. They subsequently published two further progress reports in 2013 and 2014, but since then there have been none. Obviously, we know that from 2014 the progress was not quite so good to report on; I do not know whether that is the reason, but my point is that we stopped getting the reports.

That is why I thought it would be helpful to have on the face of the Bill a commitment for a regular progress report. I was pleased to hear the Minister say earlier that it is his intention to provide it anyway, and that is good enough for me, but I cannot guarantee that the Minister will be in his post even for the duration of the Bill, can I? I have no way of knowing what a successor might do. Goodness, I wish the Minister well and I hope he is in post much longer than the duration of the Bill, but I am simply recognising that, if I look around the present Government, quite a few people who were in post a few weeks ago are no longer there. These things happen, and they happen quickly in politics. We can never tell what is around the corner.

I am simply observing that the Minister’s word in itself is not sufficient for the purpose, because what the Government have previously done was publish reports and then stop publishing them when the information became less convenient. I thought it would make sense to make a request to have it on the face of the Bill, and that is what new clause 1 seeks to do.

New clause 11 requires the Secretary of State to commission an updated, independent cost-benefit analysis of the roll-out. Mrs Gillan, you will not want me to go over all this again, but we know that the cost-benefit analysis from 2016 showed a downward trend. Although I hear the Minister and I know his intentions are good, my concern throughout has been that we could reach a stage where those benefits turn negative. That is why I raise this matter.

We heard from Audrey Gallacher of Energy UK. She said that she thought it was time for a new impact assessment to ensure that the benefits case is still alive. The value of the assessment that I am calling for—an independently led assessment, as mentioned in new clause 11—is that it would bring confidence to all stakeholders. They would have a chance to consider independent information, so it would be good for the suppliers. It would be good for the Department and for the DCC and customers. If it were to show that the benefits case is no longer as strong as it was, it would give us the opportunity to look at other approaches that the Government might choose to pursue. It would take us back to the question of whether there is a different model—with the SMETS 1 and the mini DCC we heard the evidence about—as opposed to the elaborate DCC model that has taken up so much of the consideration of this Committee.

In the situation of uncertainty surrounding the roll-out, an updated cost-benefit analysis would be a sensible commitment to include on the face of the Bill. It would provide stakeholders with certainty and transparency and improve the credibility of the smart meter roll-out. For those reasons I suggest that the Committee considers adopting both new clauses 1 and 11.

[Dr Whitehead]

I want to speak in favour of new clause 7 and to support what my hon. Friend the Member for Birmingham, Selly Oak says about the merits of new clauses 1 and 11, and taking into account the fact that the Minister has already indicated that he is prepared to produce publicly available annual reviews on aspects of the smart meter roll-out. [Interruption.]

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The new clause therefore suggests that there should be information in an annual review on the total number of functioning smart meters at the end of each attainment period so that companies cannot simply report that they are reaching their 95% attainment target, or whatever it is, but actually walk away at the end of each attainment period and leave the position much worse than it appears. That is an important element of the roll-out, not only in terms of those attainment periods being an accurate depiction of what has actually happened so far as installation is concerned, but in giving the public confidence that the roll-out is actually a roll-out and not an exercise in trying to get numbers up regardless of what they report on the objective circumstances they find themselves in once the meters have been installed.

[Steve McCabe]

My hon. Friend says he is offering protection for the public, which is true, but is he not actually offering a bit of protection for the Minister? As I said before, if this goes wrong, only one person will carry the can. My hon. Friend proposes a way of guaranteeing that the information provided—or filtered through BEIS—to the Minister is actually real information about what is happening, in terms of functional meters, as opposed to this fantasy information about cold calls or visits that have not resulted in any activity.

[Dr Whitehead]

Indeed; my hon. Friend makes an important point. As we have discussed, there remains a little bit of a discrepancy, one might say, between the ambition of those responsible for it for what the roll-out looks like and the Government’s claim that the target really is that everyone will have been offered a smart meter by 2020. It seems important to me that we reconcile those two positions as the roll-out progresses. In a way, Ofgem is actually reconciling those positions in terms of getting a picture of what is actually happening so far as the roll-out is concerned on the actual number of meters installed in homes after the end of the visits, but it is not quite yet getting to the position of whether the meters are operating as they should.

My hon. Friend is also right that I am anxious to make sure the Minister is as well protected as possible; I always am. It is a personal ambition of mine that the Minister should be properly protected under all circumstances, and the new clause will help him in that respect. It will give us, I hope—among other things in the Minister’s annual reports—an accurate depiction of the real picture, so that the defence of that picture can be undertaken by the Minister on the basis of accurate information that will not come back to whack him around the head.

I can think of no better protection for the Minister than being assured that he will not be whacked around the head by statistics at a later date. I am therefore sure that he will take the substance of the new clause on board in his response, if not the whole new clause, particularly in terms of what may well be in the report he has promised us for the future.

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[Richard Harrington]

They should be, and I will do everything to make sure that they are. Suppliers have to treat their customers fairly, and that means being transparent and accurate in their communications. Ofgem has been in touch with energy suppliers to remind them of their obligations. It has written to all suppliers about deemed appointments—one of the points she made—to make clear that they have to consider whether deemed appointments are appropriate. Ofgem have marked their card on that because they have to take into account the consumers’ circumstances, for example ability to communicate, whether they may have not got the letter, and more. While I know that the hon. Lady is speaking entirely in good faith and that there have been examples of that, Ofgem is on it, and I shall monitor it carefully, as well as the other points she raised.

There is a conflict between us all wanting smart meters to be installed, because we think it is of long-term benefit to everyone, and protecting people’s right not to have one if they do not want one, for whatever reason, and to be informed of that right. We are putting pressure on the energy companies to install more, in keeping with the targets; the hon. Lady is right about that. However, we do not want any of the mis-selling cases that were well publicised some years ago, of people knocking on doors and getting householders to change supplier on false pretences. While the intentions are much more noble in this case, and however much we might think it is a good thing to have smart meters, we certainly do not want any form of pressure or inappropriate behaviour to mislead people. I tell everyone that it is brilliant to have a smart meter, and hopefully most of us will, but it is not for everybody. People should not feel under any pressure, and they should only want to have one for the best reasons.

I can be accused of many things, but lack of enthusiasm is not one of them. This is a really important element of the modernisation of the country’s energy infrastructure. Supplier switching is good, and I have done it myself, but it is not the answer. It is a right and a good thing to do, but the answer lies in what the smart meters will produce. I keep coming back to that in my head. I will not go through the reasons for it again, because hon. Members have been patient all day and on other days.

I understand and welcome the appetite for information on progress. It is right for us, as parliamentarians, to want that, and it is right for the Government and the Department to want to give that. It is right that customers generally should know, from the general public to what one paper calls the chattering classes—in other words, people who write on it, comment on it and study it. The more knowledge they have, the more it is part of the smart meter revolution, and the more people who have smart meters do not think they are alone and do not listen to the stories I have been sent by constituents—scare stories from the United States, conspiracy theories that MI5 is listening through smart meters and that sort of thing.

[Steve McCabe]

What?!

[Richard Harrington]

I have my own protection officer, so I am not bothered about that kind of thing, but other people are.

The new clauses would require the Government to publish information on programme costs and benefits, as well as details of installation activity and whether meters are operating in smart mode. I would like to address those in turn, to the satisfaction of all hon. Members, and particularly the hon. Member for Birmingham, Selly Oak and the shadow Minister—I always refer to him by his official title, but he is the hon. Member for Southampton, Test.

The programme costs and benefits are dealt with in new clauses 1 and 11. The Government published their initial assessment in 2008. Since then, the Government have updated and published their cost-benefit analysis a number of times, including in 2014 and 2016. Those publications included quite detailed breakdowns of the costs and benefits of the programme, including the DCC cost, which has been discussed before, and the installation of smart meters.

While there have been changes in the estimated costs and benefits over the years as our evidence base has developed, the business case for smart meters has remained good value for money. The benefit-to-cost ratio has remained stable since 2011, at around £1.50 of benefit for every £1 invested. Our latest cost-benefit analysis, published in November 2016, outlines net benefits of the smart meter roll-out of £5.7 billion. It is easy to talk in billions, but that is quite a lot of money, whichever way we look at it.

Our approach on the smart metering programme has been to update the cost-benefit analysis when substantive new evidence on costs and benefits for the programme comes to light through our monitoring and tracking. For example, the most recent update in November 2016 replaced estimates in a number of areas, including meter asset costs and financing and installation costs, with actuals based on information obtained from industry. It is right that estimates are replaced with actuals as soon as we have the information for it.

The hon. Member for Birmingham, Selly Oak asked why costs increased between the 2014 and 2016 assessments. The difference was about 0.5%, which is £500 million. Again, lots of zeroes; not a number to make light of. The increase is roughly equivalent to changes in the cost of fossil fuels, which impacts the value of the energy savings in our assessment. That was really his point; he asked that question before and I found out the answer for him. It is a reasonable question to ask.

It is important to know that it is not common practice for Government policies and programmes to update their cost-benefit analysis regularly in this way, and certainly not beyond the assessment made to inform the panel’s policy decision. With smart meters, we have done so in order to provide the additional public information and transparency. This is such a major upgrade of our energy infrastructure and will be transformational for people when the programme evolves further.

We have no immediate plans to publish an upgraded cost-benefit analysis, but we are regularly monitoring costs and benefits and would certainly update our analysis if there were new or substantive evidence or changes in policy design. I would like to make it clear that if there were substantive changes in the evidence, of course we would. I hope we have a track record that demonstrates that, if and when such evidence emerges, we will update our assessment. We would be negligent if we did not, and I am sure we would be held to account. In addition, the Data Communications Company regularly publishes budgets and cost projections on its website.

In relation to the installation activity mentioned in new clauses 1 and 7, the Government regularly publish statistics on the progress of the smart metering roll-out. Independent official quarterly statistics on the progress of the smart meter roll-out by the large energy suppliers are published every quarter and have been since September 2013. They are a report on the number of smart and advanced meters installed, as well as the number of meters in operation at the end of a reporting quarter. In addition, a summary of annual roll-out progress for the calendar year of the roll-out is published every March. This captures performance of both small and large suppliers for the preceding calendar year. The number of smart meters operating in traditional mode can be determined from these reports, but I am happy to look at ways to express that more clearly, because I think, as my protection officer has requested, clear and accurate information is important for people. There is no reason to provide clouds of vagueness on this. It is in everybody’s interest to be clear.

[Steve McCabe]

The Minister is giving the Committee helpful information. Why, after 2014, did the Department abandon the progress reports that he is now proposing to reinstate? Was there an obvious explanation for that?

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[Steve McCabe]

In view of the Minister’s words, I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 2

Review of public awareness levels and satisfaction with smart meter rollout

“(1) Within 3 months of this Act coming into force, the Secretary of State shall commission an independent review of current public awareness of smart meter rollout and public satisfaction with the rollout.

(2) The report under subsection (1) shall consider—

(a) the effectiveness of consultation between industry and the public about the rollout process;

(b) the awareness among vulnerable groups of smart meter rollout;

(c) the satisfaction of the public, in particular vulnerable groups and people living in rural areas, with the information available on smart meter rollout.

(3) The Secretary of State must lay a copy of the report before Parliament and arrange for an opportunity for the report to be debated within 6 weeks of the report being laid.”—(Steve McCabe.)

This new clause would require the Secretary of State to commission an independent review of public awareness and satisfaction of smart meter rollout and for the review to be debated in the House of Commons.

Brought up, and read the First time.

[Steve McCabe]

I beg to move, That the clause be read a Second time.

I shall be brief. This is almost where my interest in this subject started. When I first came across smart meters, I thought “Hey, that is a really clever idea”. Then, like the hon. Member for North Ayrshire and Arran, I started to attend to stories of people saying that they were being pressed to have these meters and that they were being treated in a fairly cavalier fashion. As I have said at various stages, I felt that public certainty, public satisfaction and, indeed, basic public knowledge was a problem.

New clause 2 is self-explanatory: it calls for a review of public awareness levels and satisfaction with the roll-out. I want to know in particular about the effectiveness of the consultation between the industry and the public. I know that this was not particularly about satisfaction levels—it was more about roll-out procedures—but I found the funnel evidence pretty bamboozling. It did not do anything for my confidence as I listened to that. We need to know how effective that consultation is.

I am particularly concerned that awareness is raised among those people whom we might call vulnerable groups or vulnerable users. It should be a central concern of the Minister that they benefit.

We heard from the hon. Member for Moray during the evidence session that he was particularly concerned, and rightly so, about satisfaction and roll-out in rural areas. It would do no good at all were we to embark on a multi-billion pound project and then discover that consumers in certain parts of the country were getting a poorer deal.

[Douglas Ross]

Does the hon. Gentleman accept, however, that my concerns are about the availability of smart-meter installation—rural constituencies such as my own in Moray seem to be at the back end—rather than about the overall perception of smart meters and their success or otherwise?

[Steve McCabe]

I accept that, although I interpret “satisfaction” to also mean satisfaction with the delivery and benefit of the meter.

What I am asking for is self-explanatory. It will not do us any good if I keep going on about it. I have made the point to the Minister, so he knows why I think it is important.

[Patricia Gibson]

I shall be brief. I agree with everything that the hon. Member for Birmingham, Selly Oak said—I fear that this is turning into a bit of a mutual admiration society. I will say no more, except that, alongside the public awareness for which the new clause calls, we would expect public confidence and transparency. The Minister has talked a great deal today about transparency. What I would like, but suspect I will not get, is an assurance from the Minister on public awareness and the confidence we would expect to come with it. Customers have raised the issue with me, and I know that it has also been raised in other arenas. They fear that when their energy usage is known in such detail, it will be used, at some point in the future, as a lever to smooth out demand by having different price bands.

Peak times such as 4 o’clock to 7 o’clock are a real worry for families who are already struggling with energy bills—indeed, with all their bills. We have talked about nudging, and people are concerned that this might be used as a way of nudging their behaviour and when they use their energy, and about what they should do during peak times to avoid using energy as much as they possibly can—that is not entirely possible for everybody. The fear is that this measure may be used to raise charges.

--- Later in debate ---

[Richard Harrington]

As per the practice that I started in discussing the previous group of amendments, before addressing the substantive point perhaps I could try to answer the hon. Lady’s questions. The sentiments expressed by my hon. Friend the Member for Stirling are right—this issue is a double-edged sword. The very people that the hon. Lady described, who have children coming home and need to get the tea on, might also have a choice about when to do their washing and such things. The smart meter and the information that comes from it, can help as well as hinder people in those circumstances.

The choice of which tariffs to accept, even with the smartest of smart meters, will remain entirely with the customer. Smart meters facilitate time-of-use tariffs, which can influence demand and help to shift consumption away from peak times—that is a good thing—but they will also give people a choice that they do not have now. At the moment, if someone does not have the meter to give them the information, they cannot take an informed decision. Based on conversations I have had, I expect that suppliers will develop and offer new, smart, time-of-use tariffs that will be attractive to most consumers and help them to realise their benefits.

I accept the hon. Lady’s core point—people must be aware of the choices available, and they must be the type of customer that can take advantage of that choice. If their only function, apart from basic lighting and heating, is to hugely increase their use of electricity at a certain time because of cooking and children coming home, I accept that such a tariff would not be suitable for them. People must have the information to take that decision. I think I have laboured the point, but the hon. Lady raises an interesting issue that is not at all unreasonable —that is what I would expect, given her other consumer-based questions.

I shall try to deal briefly with the new clause in the spirit in which it was meant. Should the Secretary of State commission an independent review of public awareness and satisfaction of the roll-out? That is what is being asked. In answering, perhaps I should outline our approach to smart meter and consumer engagement in our programme up until now. It is set out formally in the programme’s consumer engagement strategy, which was published in December 2012, and it was based on extensive consultation and evidence gathering, as well as polling and market research. Although energy suppliers are at the forefront of installing smart meters, it was recognised that their consumer engagement would benefit from support by a central body that was independent of them and Government. We heard evidence from a representative of that body—Smart Energy GB—which enables consumers throughout the country to get consistent messages from a single simple campaign, rather than from multiple suppliers who are jumping over one another to get customers.

Both Smart Energy GB and the energy suppliers therefore have a role. The energy suppliers have the primary consumer engagement role, because they have the main contact with customers—they are who customers get their bills from and have their contracts with. Smart Energy GB, which is an independent, not-for-profit organisation, leads a national awareness and advertising programme to drive the behavioural change that the hon. Member for Birmingham, Selly Oak mentioned and to help consumers to benefit from smart metering.

The energy supply licence conditions require that Smart Energy GB assists consumers on low incomes or with prepayment meters. Bill Bullen explained in our evidence session that that is his main market. That is really good—it is to those consumers’ advantage and I hope it is to his commercial advantage, too. From what he said, he seems to have done a good job of it.

That two-pronged approach has increased awareness of smart metering from 40% to 80% of consumers in three years, and it has driven a lot of demand. A recent survey of 10,000 people from all demographics and all parts of Great Britain showed that 49% of people would like to get a smart meter in six months. The campaign is resonating with people all over the country. Independent audits of Smart Energy GB show that two in three people recall its campaign. That is actually quite a lot in advertising. Findings from the latest “Smart energy outlook”, the independent barometer of national public opinion, show that detailed knowledge of smart metering is high—in some cases higher than in the general population—among groups that we might consider to have vulnerabilities, such as elderly people.

But nobody underestimates the challenge—I absolutely do not. We get a lot of information from Smart Energy GB. Suppliers share their information with it and with us, because it is in everyone’s interests to do so. They are transparent about their activities, both because it is in their interests and because they are required by law to publish an annual report outlining their performance against targets, alongside an updated consumer engagement plan. All that is available to the public via the internet and the usual channels.

As recently as August, the Government published the findings of external research that we commissioned on consumer experience of smart metering. We will produce further findings from ongoing fieldwork in the next few months. Our evidence to date shows that consumer satisfaction with smart meters is high. Some 80% of consumers are satisfied with them and 7% are dissatisfied. That information is all publicly available. Interestingly—I know that vulnerability is of interest to every Committee member, but particularly to the hon. Member for North Ayrshire and Arran—there was higher satisfaction among prepayment respondents, who are much more likely to be vulnerable consumers.

I support the positive intention behind the new clause. The Government really have to consider how consumer engagement can be better reflected in annual reports, which have to be consumer-facing as well as Parliament-facing. I am not quite sure about the answer, but that needs to be considered in detail. On balance, though, I consider that the requirements of the new clause are well met by existing arrangements. I promise that I do not say that through complacency. I have explained about external research agencies, and Smart Energy GB, which is independent, continually reviews consumer engagement. A review is therefore not needed at this stage—not because we do not intend to do that or because it does not need to be done, but because it would duplicate existing activities and would not represent good value for money. I hope that the hon. Member for Birmingham, Selly Oak will withdraw the motion.

[Steve McCabe]

The Minister has persuaded me. I am happy to beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

New Clause 3

Ownership restrictions to successor licensees

“(1) The Secretary of State may impose conditions on to the future DCC successor licensee as appropriate.

(2) Conditions in subsection (1) may include restrictions to British owned companies subject to the expiry of any contrary obligations under EU or retained EU law, as defined in the EU (Withdrawal) Act 2018.”—(Dr Whitehead.)

This new clause allows the Secretary of State to restrict future DCC successor licensees to British owned companies.

Brought up, and read the First time.

Smart Meters Bill

Steve McCabe Excerpts

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

[Steve McCabe (Birmingham, Selly Oak) (Lab)]

As I recall, that figure of 250 was given to the Committee by the DCC’s chief executive. My hon. Friend will be aware that the Department initially announced last week that it did not know the figure, but then admitted that it was 80, and that most of those meters actually belonged to company officers, not members of the public. Does that not suggest that this programme is woefully off track compared with what was planned?

[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.

--- Later in debate ---

The most obvious and immediate advantage, which the hon. Member for Southampton, Test (Dr Whitehead) referred to, is the end of estimated bills for those who have smart meters, with accurate meter readings that reflect real-time energy usage. I hope that that will mean there is more accuracy in the adjustments that should be made to monthly direct debits. While I appreciate the importance of spreading the cost of a year’s supply of energy across 12 monthly payments, there should be scope for greater accuracy, with more valid and true information available. The total cost of energy used will, I hope, then be more closely monitored, which should allow direct debits to reflect the true cost of the energy used in a person’s home.

[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.

[Steve McCabe]

rose—

[Mr Deputy Speaker]

Order. I am sorry. I had not realised that the SNP spokesperson wanted to come in. It has been so long, we got lost somewhere along the way.

[Maggie Throup (Erewash) (Con)]

I want to specifically oppose new clause 5. Although I have some sympathy with its intentions, I am concerned that, by including the cost of the smart meter implementation programme in billing, there is a danger of misleading consumers about the cost-benefits of the roll-out, as well as of detracting from the overwhelmingly positive impact that the programme will have on consumers’ ability both to monitor their energy use and to manage the cost of their bills in the long term. The programme is clearly in the best interests of the consumer, yielding £1.50 of savings for every £1 invested. Furthermore, I am satisfied that the cost of the overall project is already available to consumers, and has been scrutinised both by Parliament and in the detailed impact assessment carried out by the Department.

I firmly believe that what consumers such as those in my constituency really care about is the savings that can be achieved by having a smart meter installed. By having near real-time information about energy consumption displayed in the home, consumers will for the first time be able to manage their usage properly. If done correctly, that will result in a pounds, shillings and pence saving on their energy bills. I apologise for using pounds, shillings and pence, but it has a big impact. On reflection, the new clause does little to improve the quality of the Bill and I am unable to support it.

In summary, it is clear that smart metering is central to the wider energy revolution currently taking place in Britain, and I commend the Government for the action they have already taken to ensure that we have a cleaner, cheaper and more secure energy future. I am pleased to support the Bill tonight in its unamended form, and I congratulate the Minister and his team on piloting it to this stage.

[Steve McCabe]

As they say, Mr Deputy Speaker, I will try that again.

Amendments 2 and 3 would give the Secretary of State the power to license and regulate meter asset providers—or MAPs, as they are more commonly known. They are independent companies that secure funding and provide asset management and meter disposal on behalf of the energy companies. They are the middlemen who have come to play a very dominant role in the development of the Government’s smart meter strategy. We might think of them as being to smart meters what football agents are to the world of football.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Richard Harrington)]

May I say what a pleasure it is to see you in the Chair, Mr Deputy Speaker, even though it obviously means a higher level of behaviour from all of us, as well as our obeying your edicts on timekeeping and so on? I thank all Members who have contributed to the debate, particularly the shadow Minister, the hon. Member for Southampton, Test (Dr Whitehead); the hon. Member for Birmingham, Selly Oak (Steve McCabe); the hon. Member for North Ayrshire and Arran (Patricia Gibson)—I always forget the second bit—and my hon. Friends the Members for Stirling (Stephen Kerr) and for Chippenham (Michelle Donelan).

We have covered a number of areas in our debate, which has built on the consideration given to the Bill on Second Reading and in Committee. The main point about the Bill and the roll-out of smart meters—I am not making light of any of the comments made by Opposition Members, or indeed Conservative Members—is that the prize is a great one: everyone, in their own household, controlling a smart grid that will give them independence, flexibility and consumer choice. In the long run, I hope that that will lead to very significant savings for them. I felt that I should put that into perspective.

[Steve McCabe]

I recognise that that is the Minister’s genuine view, but how much should consumers pay for the privilege, and at what point will he feel that they are not getting the benefits they have been promised?

[Richard Harrington]

As the hon. Gentleman said, I am convinced that consumers will get the benefit from smart meters. In this day and age, it is absurd that people—I include myself—have to read their meters on their hands and knees, with a torch and a duster to remove the cobwebs and everything else. I think that the hon. Gentleman would agree that that is an intolerable situation and that smart meters are the cure.

Let me respond to the shadow Minister’s comments about progress to date. There are now over 8.6 million smart and advanced meters operating across homes and small businesses across Great Britain. Nearly 400,000 smart meters—obviously they affect a lot more people, because of the number of people per household—are installed every month as suppliers ramp up their delivery, and that figure is increasing significantly every quarter. The Government are committed to ensuring that all homes and small businesses are offered smart meters by the end of 2020.

Let me turn to new clause 1. Future smart meter communication licensees will need to demonstrate that they are a “fit and proper person” to carry out relevant functions. That will include factors such as the ownership of the proposed licensee, but it is not appropriate to judge suitability solely on that basis, nor to exclude non-GB companies by default. Doing so would risk failing to deliver value for money for consumers, which could undermine the effectiveness of the smart meter system. I also emphasise that the Government take the national security implications of foreign control and ownership seriously. We have powers under the Enterprise Act 2002 to intervene in mergers and takeovers that give rise to public interest concerns, including about national security.

New clause 2 is about the technical development of smart meters. Overall, we expect that more than 99.25% of premises will be covered by the national communications network. In homes, the standard wireless network will serve the majority of premises successfully. We want 100% of energy consumers to be able to benefit from smart meters, but it is true—this was raised by the Opposition—that the physical characteristics or location of a consumer’s home can affect connectivity. Challenges for systems include a diverse range of building types, including those in which meters can be a long way from the living space. We are working with the industry to identify innovative solutions and extend regulatory powers, because it is very important to have that flexibility.