John Grantchester on putting consumers at the heart of the government’s plans to roll-out smart meters
Tomorrow in the House of Lords, the government’s Smart Meters Bill will have its Report stage. A short and technical piece of legislation, containing just three measures, its progress through Parliament has caused much debate – and raised substantial worries about the programme, its costs and delivery timetable.
Described as a useful tool for consumers, smart meters communicate directly with energy suppliers and allow suppliers to provide accurate bills. They remove the need for manual readings and bring an end to estimated billing; and the government predict £16.7bn for household savings. The Bill also creates new powers for OFGEM to deliver half hourly energy consumption monitoring and billing by capturing smart meter data. That would allow future innovations to be introduced in product and services to benefit consumers in the efficient use of energy.
The costs of the programme however, have spiralled to around £9bn (some estimates are much higher) – with the consumer expected to bear the brunt. The National Audit Office (NAO) is due to report further on this in November 2018.
All being well, this could be a world leading initiative – launched back in 2006, during the last Labour government. But advances in technology, and the sheer scale of the programme have led to delays and several changes in approach. Worries are widespread that the government will fail to get anywhere near the target date of December 2020. By then, energy companies are expected to have installed an estimated 53 million gas and electricity meters at 30 million domestic and smaller non-domestic properties. And to have solved the problem of how they are all going to be able to communicate with energy suppliers.
To confuse matters further, there is no legal obligation on individuals to have a smart meter – the requirement is simply for energy companies to have taken all reasonable steps to make the ‘offer’.
Other European countries are also pursuing projects of this type, but most of them have opted for a system run by their respective owner of their energy grid, which many people think would have been a better approach.
So, is it all going to plan?
The Bill extends the powers of the Energy Secretary to implement and direct the rollout of smart meters through to 2023. This is mainly due to delays in setting up the Data Communications Company (DCC) necessary to establish and manage the network to connect smart meters with energy suppliers; and to ensure there are no data security issues. The DCC system only went live in November 2016, and has yet to be tested in real time with significant numbers of the new generation SMETS 2 meters.
Indeed, many of the meters that have already been installed are SMETS 1, with differing technologies and standards that some commentators believe will lead to limited interoperability when consumers choose to change supplier. Others assure us that it will be possible to connect them to the DCC systems, without the need for an upgrade or replacement.
The legislation also introduces a special administration regime should the DCC run into financial difficulties – now even more important since its parent company, Capita issued a profit warning. Ministers will of course, give reassurances – just as they did over Carillion.
To cap it all, major concerns exist about the government’s steely determination to pursue the 2020 deadline. Along with the increasing costs and risks, this could jeopardise the programme’s increasingly suspect credibility. At Committee stage of the Bill, we suggested delaying the completion date to 2023 – but the Minister said no.
There is no doubt that an effective rollout of smart meters would bring many benefits to consumers and for our economy as a whole. Better management could make a huge contribution to our consumption of energy; and the internet of things may create many new opportunities for efficiency and effectiveness in the home and workplace.
This will only come to pass if the government get it right, and do not destroy consumer interest in the process. Labour wants the plan to work for consumers but the lack of clarity, coherence and co-ordination is troubling. We have been pressing Ministers to reassess the whole programme, revisit the milestones and reset the parameters in a collaborative way with those charged with making smart metering happen.
Our Report stage amendment will ask the BEIS department to publish a National Plan on smart metering. We want Parliament properly updated on progress and credible targets. Consumer bodies, OFGEM and the NAO must be consulted to ensure consumers are at the heart of the programme. Costs must be monitored to bring down household bills and greater advantage taken of technological developments. Anything less than all of this will hinder the surge needed to make smart meters part of everyday life.
Lord John Grantchester is Shadow Energy Minister in the House of Lords
Published 14th May 2018
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