Smart Metering: Electricity and Gas

Tania Mathias Excerpts

Thursday 9th February 2017 Westminster Hall

[Carol Monaghan (Glasgow North West) (SNP)]

It is a pleasure to serve under your chairmanship, Mr Turner. I thank the hon. Member for South Basildon and East Thurrock (Stephen Metcalfe) for securing this debate. I have learned this afternoon that there are two things I need to see: first, the ITV documentary, if I can get it on catch up; and, secondly, Gaz and Leccy, which I have not seen, but then again I do not watch television—that is my excuse and I will stick to it. It is interesting that the documentary said that energy companies have so far been the biggest beneficiaries of smart meters. That fact was reflected in the comments of several hon. Members.

Smart meters were billed as transformational—they were going to revolutionise the way we use and monitor energy—but, a number of years into the smart meter roll-out, it seems that the benefits to consumers are limited and amount to a few pounds a year. The cost of the roll-out—£10.9 billion, or £215 per household—certainly seems far greater than any of the benefits. The hon. Member for Blackley and Broughton (Graham Stringer) talked about the different price in parts of Europe where similar schemes have been rolled out at a much lower cost. We need to look at that.

There are great benefits to using smart meters. Up-to-date billing allows consumers to spread the cost of their energy use, which can be very important in tackling fuel poverty, and the real-time usage information allows consumers to monitor what is going on. One of the things we do with our smart meter at home—these are the great games that we play as we do not have a television—is to see how we can reduce the house’s energy consumption by going round switching things off and seeing what difference it makes. It is incredible to see the difference that switching on a kettle can make. Things such as that can make consumers think more carefully about how they use energy, so it does have benefits. Meter data can be used to smooth demand on the grid, as the hon. Member for South Basildon and East Thurrock spoke about in detail.

There are lots of challenges to the roll-out. The fact that the mobile phone network is being used to relay the information to the energy companies is problematic in some areas, and completely restrictive to the point of not working, as we have heard, in others. We know that that is a problem in rural areas—the hon. Member for St Ives (Derek Thomas) said that he has to take a photograph and send it to the energy company. The roll-out will obviously be more challenging in rural areas—I am thinking about the highlands and islands of Scotland in particular. It is easy to install a lot of meters in an area of high population density, but it is more difficult when people are scattered widely across an area.

The hon. Member for Blackley and Broughton mentioned flats and offices. That is an ongoing issue, which has to be looked at far more seriously than it is at the moment. The lack of qualified installers means it will be a challenge to reach the 2020 target, which the hon. Member for St Ives spoke about. I visited Scottish Gas’s training centre in Hamilton near Glasgow a few months ago. I saw smart meter installers being trained, and I looked at the equipment they use. Scottish Gas has lots of apprentices, and they are being trained not only in installation but in customer service and engagement. I am not sure every consumer gets service as good as those installers are being trained to provide.

A number of hon. Members mentioned the issue of data. Obviously, data can be used by energy companies to monitor consumption, but in our inquiry the Science and Technology Committee looked at the issue of who, other than the energy companies, is able to access the data. We asked whether, for example, somebody would be able to see that a person’s energy consumption had dropped, and therefore infer that they were not at home or on holiday. My hon. Friend the Member for North Ayrshire and Arran (Patricia Gibson) raised the issue of GCHQ’s intervention in smart meter technology.

We know that certain demographics are more reluctant to engage with technology—I am thinking of elderly people in particular. Some of these meters are extremely user-friendly, but that is not always the case. The hon. Member for South Basildon and East Thurrock talked in great detail about the difficulties with SMETS 1 meters—first-generation meters. The problem is not just the incompatibility of those meters. There is also the issue that some of the new meters being installed are of a far lower standard than others. There is great variety in the meters that are being installed. The ones that I saw at Scottish Gas were all-singing, all-dancing, and could probably make a cup of tea as well, but the meter I have got is far less interactive. There is a real danger—we have seen this happen—that after a short time people toss the meter, or at least the display unit, in a drawer or a cupboard somewhere.

[Dr Tania Mathias (Twickenham) (Con)]

I agree with all the hon. Lady’s points. I do not think this issue was covered in our Committee’s report, but is she concerned that the cost of a second meter falls on the customer? The report shows that there is not enough advantage for the customer, compared with the energy companies.

[Carol Monaghan]

Absolutely. As I said at the start of my speech, the energy companies are the biggest beneficiaries of the smart metering programme. If a customer has to pay another £250 for a second meter because they have changed suppliers, it makes changing too costly. The hon. Member for Blackley and Broughton talked about the use of smartphones as a display, instead of using the units. Perhaps that is something for the future.

Fuel poverty was mentioned by a number of speakers, including my hon. Friend the Member for North Ayrshire and Arran and the hon. Member for St Ives. The hon. Gentleman talked about vulnerable consumers seeing the amount of energy they were using and possibly being unwilling to heat their homes. That is a danger, but the biggest danger in that case is possibly the cost of energy and fuel poverty, rather than the meter.

To finish, I have a few questions for the Minister. First, what support will there be for people who have first-generation meters that could be obsolete even before the 2020 roll-out? Secondly, what will the Government do to increase consumer engagement, to make people more energy savvy and allow them to see how best to use their meter? Thirdly, will the Minister reassure all of us that the 2020 target for smart meter roll-out must not be met at the expense of the consumer?

--- Later in debate ---

[The Minister for Climate Change and Industry (Mr Nick Hurd)]

It is a great pleasure to serve under your chairmanship, Mr Turner. I hope that you have got something out of the debate. At the very least, we have had an introduction to Gaz and Leccy, courtesy of my hon. Friend the Member for St Ives (Derek Thomas).

I congratulate the Chairman of the Science and Technology Committee, my hon. Friend the Member for South Basildon and East Thurrock (Stephen Metcalfe), his Committee and its previous Chairman for an extremely useful report and debate. He described our commitment to ensure that every household and small business is offered a smart meter by the end of 2020 as a “major project”. I think he rather underestimates it, and we need to bear that in mind.

It is absolutely right and a central part of a functional democracy that Select Committees and Opposition parties probe, prod, ask tough questions and even, in our view, tip over the line into spreading alarm. That is how we operate, and it is entirely right, particularly when we are faced with a project on this scale, not least as the past is littered with good intention and bad execution, as the hon. Member for Blackley and Broughton (Graham Stringer) pointed out. I therefore entirely welcome the challenge that we have heard during the debate, but I urge hon. Members not to lose sight of the context.

We are talking about an upgrade of a significant part of our infrastructure—a 100-year-old technology that means that far too many people receive bills on which their consumption is estimated. We do not tolerate that in the supermarket, so why on earth, in 2017, should we tolerate it at home? Our energy system is absolutely functional to a smart and prosperous economy, so why should people continue to be dependent on a technology that is so out of date? That is the context: it is about upgrading out-of-date infrastructure as part of a bigger transformation and transition process in our energy system.

I think there is cross-party agreement about the opportunity and need to move to a smart system that is more flexible and ultimately cheaper, and which our constituents feel they have more control over. I do not think there is any real resistance to the direction of travel, but the debate sits in that important context. Hon. Members have posed tough questions and challenges, which I will do my best to respond to, but those who know anything about system change and consumer behaviour change should recognise that some of the momentum is genuinely encouraging, and we must not lose sight of that. Almost 5 million customers now have smart meters, and the economic analysis continues to suggest that they will have a net benefit of £5.7 billion. We do not obfuscate about that in any way, and that analysis is regularly updated.

[Robert Flello in the Chair]

The Chairman of the Select Committee talked about the benefit to consumers. I know the point he was trying to make, but we are all aware that consumers are concerned about costs. Evidence from British Gas surveys suggests that consumers with smart meters save 3% or so on their energy bills, which, in my experience, is material, and I think he also knows that those savings will grow as we move towards 2030.

One important piece of information that has been missing from this debate is that consumers like smart meters. Surveys suggest that something like eight out of 10 people with smart meters would recommend them to their friends. There are of course big challenges around implementing them—how could there not be?—but we are driving hard a process that our constituents like and which is an important part of upgrading the country’s infrastructure.

I will do my best to address the issues that have been raised, particularly by the Chairman of the Select Committee, whose points were valid. He quite rightly presses us on the need to tackle the technical limitations, which are real. A conscious decision was taken to proceed with SMETS 1, because first-stage smart meters do deliver some benefits and were an essential part of the process of getting a supplier system moving and helping to prepare for installation. Of course, we do not want our constituents to trade off the opportunity to get a better tariff against the opportunity to retain smart functionality. That is clear.

I assure my hon. Friend the Member for South Basildon and East Thurrock that the DCC has begun the project to enrol the SMETS 1 smart meters from 2018 in order to make them usable by all energy suppliers rather than just the one that initially installed them. This is an issue I feel strongly about and the Government will be watching extremely carefully. There has been a consultation. Nothing I have heard gives me cause for alarm at this stage but it is extremely important that we end up at a destination where the early smart meters are usable by all energy suppliers and constituents do not face trade-offs between tariff and functionality.

My hon. Friend pressed me on national benefits and the need to make a broader case than the simple proposition, “This will save you money.” That is an interesting debate, and it is the same kind of debate and challenge that I am wrestling with, as Minister for Climate Change, in engaging people with climate change. Do we try to frame it in language that talks simply about things that are closer to home and more relevant to our constituents, or do we try to put it into a bigger picture of public good? Most of the advice suggests that when trying to propose something to a consumer or our constituents, it is better to focus on the issues and concerns most directly relevant to them.

I would draw a distinction between, as it were, a marketing proposition to a consumer and our constituents and the need for this place, with its processes of accountability, transparency and scrutiny, to be clear about what we are trying to do and what the wider benefits are. That is entirely valid. My hon. Friend wanted more information about the system benefits, which are a clear part of the net benefits analysis, and I think they are real. They fit into the broader strategic thrust that the Department is now leading on, in moving towards a smarter system. He may be aware that we put out a call for evidence recently and we are receiving information on that. That information about how smart meters fit into a broader strategic thrust to make the system more smart and flexible will be transparent and open to accountability and scrutiny.

My hon. Friend asked about consumer engagement. He is entirely right about that, because ultimately smart meters must be a fantastic consumer experience; otherwise, these things will sit in drawers and get ignored—everything that the contributors to the debate have rightly pointed to. That is why we mandated the setting up of Smart Energy GB and mandated energy suppliers to engage with their consumers before, during and after installation. Smart Energy GB is working with trusted third parties, including Citizens Advice, National Energy Action, the National Housing Federation and Age UK, among many others, to ensure that customers can access advice about the roll-out. I should add that we are conducting our own research into consumers’ experience about the service they get after installation, which is a point he made specifically.

[Dr Mathias]

I am concerned about the exaggeration of the benefit for customers. In the Select Committee we found that we have one of the smallest variations between peak and standard demand of almost any country in the world. I put it to the Minister that we should be honest with consumers and say, “No, it is the companies and the Government, in policy making, who will benefit from this most.”

[Mr Hurd]

I am not sure that is entirely right. My hon. Friend is right that the benefits are not restricted entirely to consumers, but that has been made public; we have been open about that. Missing from the debate is an acknowledgment that suppliers face costs associated with installing the meters, which need to be recovered. Yes, there are system benefits, but this is not something that does not benefit our constituents and consumers. We want less cost in the system and a smarter system, and if the meters contribute to that, that is good. I come back to—not estimates, but actuals, if we believe it—the large British Gas survey of their customers, who are achieving 3% savings. That is not immaterial, particularly because, as she well knows—she is close to her constituents’ concerns—we are in a climate where people are concerned about rising energy costs, as we saw the other day.

[Dr Mathias]

This is not what we investigated, but, as the Minister knows, the direct debit monthly bills for customers with smart meters still use estimates.

[Mr Hurd]

We need to move on from estimates—that is part of the point. We do not make purchases or pay estimated bills in other areas, so why should we in this area? The whole point is to move to a system where we can pay for what we use. The point I am labouring is that the actual data, not the estimates or predictions, suggest that people are saving money now, and not in an immaterial way. If the projections are right, that will grow.

I want to say something briefly about privacy and reach, which I know from having tackled this in a previous debate is a particular concern for many communities in Scotland. Suppliers must take all reasonable steps to reach all households in Great Britain, islands included. Privacy has been an important issue from the start; in fact, I remember constituents raising it with me. Let me assure the House that a robust privacy framework is in place. The central principle of the framework is that consumers have control over who can access their consumption data and only authorised parties can access consumption data through the Data Communications Company.

I hope that I have addressed some of the principal concerns. Let me address a point made by my hon. Friend the Member for St Ives and others, questioning the ambition and pace. We hear that point, not least from suppliers, and we tend to hear it from those suppliers who are performing less well than others. I think the House is savvy enough to know that some of the motives behind such questioning and challenge may be mixed. Our position is that we recognise that the situation is challenging, but we are driving system change and it needs to be driven hard. We review the situation and will continue to do so and to listen.

I do not see any argument at this stage that the Government should send a signal of weakening ambition. Far from it. Actually, given the prizes attached to this, if we want to get it right—a lot is work in progress in tackling some of the thorny, difficult issues that underlie it—it is not right to send any signal of slipping ambition. For that reason, I come back to my main point, Mr Flello —it is good to see you in the Chair. This is not a trivial issue; it is a fundamental piece in the broader picture of how we upgrade our critical energy infrastructure to deliver a better system for our constituents.