That the Bill be now read a second time.
My Lords, the rollout of smart meters is a key enabler for the transformation of our energy system. Smart meters are a critical part of the platform for the development of a smart grid and demand-side measures. Smart meters will facilitate greater flexibility in the production and consumption of energy by providing better information and improving communication between consumers, suppliers and network companies. In particular, they will improve the ability to shift demand to match supply, allowing us to make use of excess renewable electricity when it is available and use less electricity at peak times when it is more expensive. They will also improve distribution network companies’ understanding of and control over the use of their networks, allowing more power to flow through the existing wires without reinforcement, improving reliability and safety as well as reducing costs.
The development of a world-leading smart energy system, which delivers secure, cheaper and cleaner energy, is an important part of our industrial strategy. The vision of a smarter energy system, built on a platform of smart metering, is a prize worth striving for. The smart metering programme is one of the most significant infrastructure projects our country has seen. Over 50 million gas and electricity meters are expected to be installed in over 30 million homes and small businesses. The Government are committed to ensuring that all homes and small businesses are offered smart meters by the end of 2020, and considerable progress has been made. The enduring national data and communications service has been built, tested and launched. The Government have also established much of the regulatory, policy and technical framework necessary for this programme to be a success.
Energy suppliers are now actively installing smart and advanced meters, backed by Smart Energy GB’s national consumer awareness-raising campaigns. By September 2017, over 8.6 million smart and advanced meters were operating in homes and businesses across Great Britain. Rates of installation are also increasing, with around 400,000 being installed each month. Households and small businesses can start saving energy and money as soon as their smart meters are installed. Indeed, smart meters are expected to take £300 million off domestic energy bills in 2020 alone, rising to £1.2 billion a year by 2030. These are not small sums of money, and it is right that the Government continue to oversee and monitor the rollout to ensure that it delivers effectively, bringing benefits to GB consumers.
The costs of the rollout were debated extensively in another place, and the Government have listened to the concerns raised. Along with the regulator Ofgem, we closely monitor progress and costs to ensure that the significant benefit case, estimated at £5.7 billion net benefits, is secured. It is worth highlighting to the House that, following those debates and as part of our broader commitment to transparency, we agreed to publish a further update of the cost-benefit analysis for the programme in 2019. The Bill received broad support at Third Reading in another place, as would be expected for a well-established programme that has its origins in the Energy Act 2008 and was considered further when its powers were amended in the Energy Act 2011. I hope that we can continue the same constructive debate that has characterised the Bill’s passage to date.
Let me turn to the Bill itself, which has three measures. The first measure in the Bill extends by five years the Government’s powers to direct the rollout of smart meters, which are due to expire in November 2018. The most important of these is the power to modify energy licence conditions and industry codes, for the purposes of supporting the smart metering rollout. The Government have used their powers to put in place minimum common technical standards and consumer safeguards, including in relation to data access and privacy. Extending these powers to 1 November 2023 is necessary to maintain coherence in the rollout of smart meters and ensure that relevant activities are co-ordinated. This could include situations where new technical solutions are required to address any residual challenges to full smart meter coverage to ease industry-wide delivery challenges. In addition, the Government will look to take opportunities to maximise benefits from smart meters once installed.
The second measure will enable the establishment of a special administration regime for the smart meter communication licensee—currently the Data Communications Company, or DCC—to ensure the continuity of the smart meter communication service in the unlikely event of the licensee’s insolvency. The DCC is a licensed private sector entity and provides the national communications infrastructure for smart metering. The DCC enables energy suppliers and networks to collect energy consumption data remotely and securely, supporting them in delivering the full benefits of smart metering. Meters operated within the DCC will also be fully interoperable, enabling consumers to switch their energy supplier and keep their smart services. The special administration regime for the smart meter communication licensee is similar to that for energy networks and energy suppliers. The provision of a special administration regime has also been adopted across other sectors, including rail and water. The DCC’s financial arrangements are constructed so as to make the risk of insolvency low. However, the special administration regime is a sensible precaution, with the aim of ensuring continuity of the DCC’s services and so protecting consumers and industry from the impact of any hiatus in service provision.
The third measure relates to the delivery of half-hourly electricity settlement by Ofgem. Half-hourly settlement is a key enabler of the move to a smart energy system and will help deliver benefits to consumers and the energy system by providing incentives on energy suppliers to develop and offer innovations such as time-of-use tariffs, which will enable customers to use energy when it is cheaper, reducing their bills and the costs of the future energy system. This will also help the energy system become more resilient as we move towards an increasingly low-carbon generation mix. Ofgem is currently working with industry and consumer groups to assess the costs, benefits and market design options for market-wide half-hourly settlement. It intends to take a decision on whether and how to implement it, informed by an impact assessment, by the second half of 2019. This third measure will provide Ofgem with new powers that would allow it to deliver these reforms more swiftly and smoothly than under existing processes by allowing it to directly modify relevant industry codes and documents.
In summary, smart meter rollout will deliver a much-needed digital transformation to our energy system, providing the platform for a smarter, more flexible energy system that supports innovation in new, smart products and services. For consumers, smart meters provide the foundation for smarter living, creating opportunities for the emergence of innovative products and services, and taking us to a future where, for example, smart appliances such as dish-washers and fridges use energy when it is cheapest and to help reduce peak demand and energy system costs; energy networks know who has been affected by a power cut; and new tools support assisted living. Access to detailed, accurate energy consumption information will also support the delivery of tangible and immediate benefits to households and small businesses across Great Britain. I beg to move.
My Lords, smart meters are a necessary and vital part of national infrastructure to provide secure energy supplies to consumers in a more efficient, cost-effective way. They will allow households to benefit from innovation in the energy market. The measures in the Bill extend the powers of the Secretary of State to amend regulations to roll out smart meters from 2018 to 2023. The Bill introduces a special administrative regime for the Data Communications Company—the DCC—as a precautionary measure to protect consumers in any event from insolvency in the critical DCC infrastructure. The Bill will enable half-hourly electricity readings via smart meters to be used in energy bills, necessary for rewarding consumers and allowing them to use energy in more cost-effective ways, ensuring a more efficient system.
The Minister is correct in saying that it is largely a technical Bill, limited in its scope to issues in the smart meter programme. I thank him and his Bill team for making so much time available to meet me and other Members of your Lordships’ House: it has been extremely helpful. On these Benches, the Bill remains relatively uncontroversial: Labour agrees with the measures in the Bill, agrees with the importance of smart meters and with the need to roll out their use as judiciously as possible. Nevertheless, there are a few buts and a few wider points to be made about the flaws in the smart meter rollout system, the inadequacy of the communications arrangements and the disruption caused between the introduction of SMETS 1 and SMETS 2 meters.
The first point of contention is: why has the programme taken so long? The powers granted to the Secretary of State to implement and direct the rollout of smart gas and electricity meters go back to the Energy Act 2008. They now need extending from 2018 to 2023. Why did the DCC go live only in November 2016? The Minister may contend that everything is on track, the industry is committed and energy suppliers remain legally obliged to complete the rollout by the end of 2020. He may point to the fact that the smart meter data access and privacy framework was introduced in December 2012, which determines the level of access that energy suppliers, networks and authorised third parties can have to energy consumption data and determines the purposes for which these can be used. The Government have committed to concluding a review of this framework by the end of this year.
While it is understood that the Secretary of State needs time beyond 2018 to implement any conclusions from this review, it is nevertheless likely to be understood that the initial end date slipping beyond 2020 to 2023 is the real reason behind this extension. This view is reinforced when we hear of delays brought about by issues concerning the setting up of the DCC and the hesitancy brought about by the muddle between SMETS 1 and SMETS 2 meters, when the Government had to withdraw their early rollout obligation to install 1,500 SMETS 2 meters, or 0.025% of total meter points, whichever was the lower, by 1 February 2017. I believe that only about 100 SMETS 2 meters have been installed to date. Perhaps the Minister can update us.
SMETS 1 meters do not offer the same consumer benefits as SMETS 2 meters, with significant loss of smart functionality on any change in energy supplier by consumers. It is hard to understand why the Minister’s department has taken insufficient account of the consumer perspective around the importance of interoperability of smart meters. In changing suppliers, the consumer is not thrilled to learn that the SMETS 1 meter goes back to being a conventional meter, especially having paid the cost of implementation.
With the provision in the Bill to bring in half-hourly settlement, Ofgem is considering options for access to consumers’ half-hourly data to develop the data access regime and will be consulting on this, supported by a privacy impact assessment. This brings an added challenge to the understanding of what the offer should be in order for the consumer to agree to accept a smart meter.
The extension of powers in the Bill—a further five years from 2018 to 2023—is an indication that the Government fear that they might not meet the deadline of the end of 2020 to complete the rollout. The figures support this conclusion. As of February 2018, only 8 million SMETS 1 smart meters have been installed at homes and businesses. The target is 53 million gas and electricity meters at 30 million domestic and small non-domestic properties, with only two years to go to the deadline. Which?, the consumer organisation, has calculated that suppliers would need to be fitting 250,000 meters a week, equivalent to 24 every minute, around the clock, every day. The Government must state whether the 2020 target is still realistic and whether offers being accepted will lead to fulfilment within the timeframe. What probability has the programme of meeting this objective?
The next issue these delays give rise to concerns costs. Consumers are reminded that, even though most benefit accrues to the industry—of some £8 billion, rather than to consumers, who will benefit by some £6 billion—overall it must be said that there will be a net benefit of some £11 billion. Consumers are fearful that the potential cost impact of delay will wipe out the forecast net benefit. It is necessary that the National Audit Office updates its reports of 2011 and 2014 and reassesses the current economic case for the rollout of smart meters. Furthermore, it should look at whether the Government are on track to achieve their target to roll out smart meters by 2020 and are maximising the chances that smart meters will achieve their intended long-term benefits and advantages.
The main body of the Bill—nine out of 14 clauses—introduces the special administration regime for the DCC to ensure that the service continues should it get into funding or insolvency difficulties. Anxiety is rightly raised by Clause 7, which includes a provision that charges can be raised to make good any shortfall to meet the expenses of the DCC’s administration. It is not clear from the Bill or the Explanatory Notes why customers and users should foot this bill, especially when they have already borne the cost of the rollout in their energy bills. The DCC is a wholly-owned subsidiary of Capita plc which, it must be borne in mind, has recently issued a profit warning. Members of your Lordships’ House will recall that profit warnings were a precursor to the demise of Carillion. In Committee, we may wish to examine and test whether the safeguards in the Bill are adequate. The ownership of the DCC remains a concern.
Several concerns have also been raised about the smart metering implementation programme. I have already mentioned the smart meter problems between SMETS 1 and SMETS 2. Derek Lickorish, director of Secure Meters Limited, has said that as many as 20% of smart meters are operating in “dumb” mode because they have lost their smart functionality as customers have switched energy suppliers. Will the Minister confirm the steps being taken later this year to enable SMETS 1 meters to operate as SMETS 2 meters without a change of meter and an added cost? Does the Minister agree that this would remove the greatest barrier to the uptake of smart meters and greatly enhance the rollout programme?
There are further issues concerning the need to license meter asset providers—MAPs—and possible supply chain issues in the supply of meters. Issues also extend to the impact of half-hour billing options, which are the subject of three clauses in the Bill, allowing Ofgem to modify industry codes. The Government also need to have an answer to the transparency issues around the amount being raised for the rollout programme through customer bills, the monitoring of savings and the benefits being adequately transmitted to consumers. The Government need to be aware of unintended consequences of switching of demand around the clock and the waste issues around the disposal of obsolete meters.
In highlighting some of the issues around the smart meter rollout programme, we must not allow them to cloud the main objective that must be reached, which is that Britain’s energy efficiency and public interaction to achieve this will be enhanced through smart meters and the development of a flexible energy system supporting innovation in smart products and services. We support the Bill.
My Lords, last Sunday evening my family were watching “Call the Midwife”. It was raining outside, as it often is in Cornwall. We have a number of outside sockets. The television suddenly stopped, much to my relief, as I am not a great fan of that programme—I am sorry to offend the Minister. Unfortunately, the further downside for me was that I had somehow to fix the electricity. This became my task, so I went out and I had to search for a torch. Then I had to find my way under the stairs, where there is a cupboard. I had to put the torch on. The meter, a dumb meter, is some two or three feet further away. I had to look at all the switches, and finally I managed to get the electricity back on.
How I wish that I had had a smart meter so that I could have got on to my iPhone and knocked a switch so that light was restored to Thornparks House down near Tregony in Cornwall. Alas, this was not the case. However, this underlined to me how important this programme should be. It is supposed to be an £11 billion programme. That is £11 billion of what I see as upgrading of domestic and commercial infrastructure and communications channels in the United Kingdom. That is why it is important.
How is it that in these days, when we use iPads and smartphones and with all the technical ability that we have, we still have so many people with these dumb electricity meters? My meter has, I think, never been read by anybody apart from me in the past 10 years because no one can get access to it from the outside. How is it that we still have this dumb technology when everything else has changed so much? The Minister will gather that I am a fan of this programme, but from now on the supportiveness of my speech goes downhill.
When I first joined this House 12 years ago in 2006, it happened to be the year that the smart meter operational framework was produced. I have always been interested in energy and one of my first visits—on the way up from Cornwall—was to a smart meter manufacturer in Winchester. They were the people who told me how great this technology was, what a fantastic future it should lead to and how obvious it was that it should be adopted, not just in terms of ease but of information and future distributed energy systems. It was quite clear. I became not just a fan, but a strong advocate. However, where are we now?
The noble Lord, Lord Grantchester, has gone through a little bit of the current position. My numbers may not be exactly the same, because they vary by source, but there are some 47 million meters in this country. There are 27 million properties, so a number, particularly commercial properties, have several meters. We have approximately 9 million SMETS 1 meters, which means that we have 39 million still to do. At 1 million a quarter, which roughly ties up with the Minister’s figure, that takes us to 2028. By that time, I suspect that I shall no longer be a Member of this House, but I sincerely hope that we are able to meet that timetable. We also have about 100 SMETS 2 meters, most of which I understand have been installed on close friends and family of the producers as guinea pigs to see how these meters work. Last time I heard, they do not work particularly well. In fact, in the main they are fairly non-functional.
We should, however, give the Government their due. They have put back the final date for SMETS 1 installation from July this year to October and we have a 2020 target. The noble Lord, Lord Grantchester, maybe with his tongue in his cheek, asked the Minister whether it was possible to meet this target. Clearly it is not, so for goodness’ sake let us admit it, get back from la-la land into the real world and allow the industry, consumers and everybody else, including the Government, to plan this sensibly.
As I said, it is an £11 billion programme. That is massive in terms of future charges to electricity consumers. At the centre of this we have DCC, a Capita organisation. I understand that it has recently changed its management quite substantially. I certainly hope so. I looked through a list of just how late it had been, and I think there had been six postponements since 2014. We finally had it go live in November 2016, some years after it originally happened.
One thing I learned when I was very young was that, as a relative said to me, people who put lots of initials after their names are probably the ones you want to avoid, because they are trying to impress you and probably do not have the substance—I am sure noble Lords keep their peerage title in front of their name but have nothing behind. I stretch that example to reports and projects that are full of acronyms. When I went through all the background work to this, I was concerned: SMETS 1, SMETS 2, DCC, PPMID, CAD, IHD, CGI, SMSO, SMDA, SMOF, GCME, ESME, GBCS, SAR and of course MAPs, which are meter asset providers, which I will come back to later on. It seems to me that this process—this structure—is so difficult to understand and has been put together in such a difficult form, with a mixture of public and private, that it is designed to fail.
So far, I regret to say, it has been unable to deliver, despite in many ways the context being so simple, in that all you need is a bit of technology in your house—not necessarily under the stairs—which tells a monitor what you are doing in terms of electricity and maybe later allows you to participate in smart energy through a distributive grid as well. All that it then has to do is communicate usage in some way to a data hub, and all that data hub has to do is communicate with the electricity or gas supplier. That is all that is required, and yet 12 years later, where are we? We are a small way through a programme that we desperately need.
The Minister mentioned costs to some degree. I think the whole DCC budget to deliver this between 2013 and 2021, which goes on to consumers’ bills, has gone up from £1.3 billion to £2 billion. Its project management costs have gone up from £107 million to £374 million, and its set-up costs for subcontractors from £131 million to £948 million. DCC may be out of control, but government management of the process has clearly also been quite ineffective. In terms of timing, DCC has been late in going live by some two years, while SMETS 1 has been put back from July to October. At the moment, SMETS 2 meters are not working and have no supply chain, so if we stick to the October 2018 date for stopping the installation of SMETS 1 smart meters, can the Minister explain to me what happens to all the installers between October and when we actually get SMETS 2 meters going? We have thousands of skilled people out there fitting 400,000 of these meters a month, but I cannot see how they are not all going to be out of a job in October. We then lose the skills, so how do we get the rest of the programme in, not just by 2020 but by whenever we manage to do it?
One of the things that has to be core to this whole programme is interoperability. I understand SMETS 1 meters are reasonably interoperable, but as I think the noble Lord, Lord Grantchester, said, if you change supplier—which government, we in Parliament and people interested in energy want people to do—there will be instances when you get stuck with a meter which is either dumb or has to be replaced by the new supplier, at an additional overall cost to the consumer, if not individually. That is not right. What will happen to all the SMETS 1 meters? Are they going to be stranded assets? I do not see how that will work.
Turning to meter asset providers, I am not greatly into the argument about whether they should be licenced or not. Again, the noble Lord, Lord Grantchester, brought this up; I am sure that it is an important issue. To me, the real issues relate to energy prices and meter finance. I may have been fairly naive, but I thought that the energy supply companies would probably finance them themselves. How naive can you get? Of course not: they do not do that; they get them off balance sheet and lease them, yet the lease costs of these machines have been extremely high and are still high. That will reflect, once again, on consumer prices. It is something that needs to be considered and possibly changed.
I have many questions to ask the Minister, but first I congratulate the Government on having the half-hour metering to make sure that we can actually push forward much greater use of smart meters for smart grids, and particularly for demand-side management—all of that area. However, they are going to have to be a lot cleverer in terms of explaining to the public that demand-side management is not compulsory but voluntary, so that we do not have the Daily Mail headlines about people being forced to turn their heating off, or whatever.
I have not yet been told that the Government have solved the problems in relation to multi-occupational buildings. Are they anywhere nearer to solving them? On the compatibility and interoperability issues, the north is on a different communications system from the rest of the country and, as I understand it, it is incompatible with the remainder. Are all the 9 million SMETS 1 meters going to end up being stranded assets, and what do we do with them? Is this system now future-proof? I get the impression that it is not; that to really have an intelligent system, we are going to have to upgrade again. When are we going to have to do that? What policy action can we do centrally to bring down that rental cost of meters that is going to affect energy companies and that will inevitably be passed on to consumers? How will that be changed? For goodness’ sake, how are we going to manage DCC better in the future? This seems to be an organisation that started late, has been complacent with public money, has had hugely overshot budgets and just requires much better management for the future. Lastly, the 2020 target date is just not possible. What is the real target date for that, and do we have a chance of actually meeting it?
My Lords, I wish to speak only briefly. First, I strongly support the Government’s commitment to offer smart meters to all households and small businesses. I believe that the potential for realising significant reductions in energy use through the use of smart meters will, as claimed by BEIS, be realised. Ultimately, the meters will allow users to monitor how they are using electricity and gas, thereby learning how to minimise their consumption.
Secondly, I urge the Government to press ahead as quickly as possible to ensure the supply of smart meters that are capable of monitoring individual appliances, together with lighting, heating and cooling systems. Batteries and energy sources should, of course, also be included. It should not be necessary to wait for appliances to be fitted with their own transducers to communicate with the smart meters, as they can be connected with existing smart plugs—which are all over the place—that are capable of monitoring the power used by an individual appliance and communicating this to a smart meter. This can be done by using a personal area wireless network such as Zigbee, which is a low-power, low-data-rate proximity wireless network designed especially for small-scale projects such as this. It has been around for a long time.
It will only be after all systems consuming or generating power are monitored that the full benefits of smart meters will be realised, as it will then be possible, for example, to see where power has been used and generated over a month or even a year, and optimise consumers’ own personal situations. I urge the Minister to ensure that meters capable of this extended monitoring are installed as soon as possible, but at the same time recommend that this should not delay the installation of SMETS 1 meters, as these will allow us to realise the gains in efficiency that the ability to monitor consumption on a half-hourly basis allows. In conclusion, I add my support to the noble Lords, Lord Grantchester and Lord Teverson, in calling for the Government to just get on with it, please.
My Lords, I strongly support the Bill and I thank the Minister for so elegantly laying out its three aspects. He will be pleased to hear that I will not restate them, but it is worth restating that the purpose of the Bill is that every household and small business in the UK will be offered a smart meter by 2020—although of course there is no obligation for anyone to accept that offer.
I am viewing the Bill through the prism of a consumer. To that end, I was interested to note that, according to research undertaken by comparethemarket.com, one in five people did not want a smart meter. The Government will therefore have to undertake some more effective ways of communicating to the public what smart meters can and cannot do, particularly if they want to hit their target by 2020. As has already been stated, 53 million meters will need to be rolled out and then rolled on to the new national communications network. As the noble Lord, Lord Grantchester, said, that equates to 24 meters a minute. It is also of concern that some of the largest suppliers of energy say that the rising cost of the smart meter programme is one of the main reasons for the rise in customers’ energy bills.
To ensure transparency in bill costs, energy companies should have a duty to further break down their billing costs to the consumer. Billing costs could show what cost is due to energy generation; what proportion of the bill is due to distribution; what proportion is due to overhead costs such as billing, smart meters and customer services; what proportion is for installation and management costs for smart meters; and what proportion is for any data requests from users. I would like the Bill to incorporate such a duty of transparency, thus enabling customers to make more informed choices, aiding competition and helping to bring energy costs further down. If such a duty is not put in the Bill, will the Minister give consideration to including one in regulations?
Consumers’ perceptions have not been aided by the functional issues experienced with the first generation of smart meters—the SMETS 1s, as has been said—which have left some consumers concerned about having a smart meter installed. Users of SMETS 1s have had problems keeping the benefits of their smart meter when they switch energy suppliers. This is because the SMETS 1 meter became defunct, or dumb, as it could not connect to the new national communications network. This meant that SMETS 1s could not talk to the consumer’s new energy supplier.
I understand that the second generation of smart meters, the SMETS 2s, have overcome this problem, but the issue of operability of SMETS 1 meters still needs to be addressed. Will they be replaced, or can they be upgraded to enable compatibility with the new communications network? What action are the Government taking to inform customers that operability problems have now been resolved—if they have—and that the SMETS 1 meters will not be installed by energy suppliers unless they are fully functional on the new communications network? And who will pay for the upgrade?
The Government estimate that smart metering will deliver net benefits to GB of £5.7 billion, equating to £300 million off domestic energy bills in 2020 and £1.2 billion a year by 2030, and the Minister has restated that. Breaking that down, it is expected that individual households will save on average approximately £11 a year on their energy bills by 2020, rising to £47 in 2030.
Smart meters should also address the imbalance in information between suppliers and their customers, because customers will be able to see the level and cost of the energy that they are using in real time and use that knowledge to change to a different tariff or supplier or better plan when they use their energy, thus enabling budgeting. This is particularly important for low-income households and those who use prepayment meters. The smart meter does not need topping up and these customers will no longer have to leave home to buy top-ups for their meter.
As well as allowing consumers to make informed choices, smart meters should put an end to estimated bills because consumers and the energy suppliers know the uptake of usage down to half-hour intervals. To ensure that this benefit is fully realised, it is important that energy suppliers then do not encourage customers to pay via annual payment plans—otherwise, customers receive estimated bills with potentially large credit balances left at the end of the year.
There have also been stories in the press about a few smart meters malfunctioning by sending out the wrong usage readings to their energy supplier. Can my noble friend the Minister say how likely it is for a smart meter to be dysfunctional, and what happens when the usage reading is inaccurate? What redress does the consumer have? There have also been reports that because the smart meter technology works via the internet—we have already heard this from the noble Lord, Lord Teverson—there are connection problems in places such as high-rise flats or in some rural communities where coverage is poor. Despite this, I understand that the Government expect more than 99.25% of premises and homes to be covered by the national communication network. Can my noble friend confirm that this figure is accurate, and are there any plans to ensure that the communications network gives 100% coverage?
Despite some teething problems, the principle behind smart meters is important. Not only does it allow the companies to assess in real time the energy uptake by the nation and plan accordingly for it but it is likely to aid the future development of innovative smart products, as we heard from the Minister, such as dishwashers, smart kettles, fridges, washing machines and indeed other new services. But with such smart technology comes dangers to security. Can my noble friend say a few words on what safeguards have been implemented to ensure that the new communications network is safe from unintended interference and sabotage? How will DCC keep customers’ data safe, and how long will customers’ records be kept?
To conclude, the benefits and flexibility of smart meter usage can be fully realised only if there is effective training of those who install them, and if customers are trained in how to use these meters and the new technology effectively. Smart meters and such technology are our future and we should fully embrace their benefits. The Government need to ensure that customers can access the cheapest tariffs and ensure that smart meters work for everyone: customers, the energy companies and our environment.
My Lords, like the noble Lord, Lord Teverson, and my noble friend Lord Grantchester, I am a bit schizophrenic about this Bill. On the one hand, I welcome some of its provisions, but on the other I look at the history of the rollout of the smart meters programme with deep depression. It has had mixed results, to put it mildly.
On the other hand again, some of the benefits of smart meters have been realised and a significant proportion of consumers have changed their behaviour as a result, so that gives us some cause for hope. I also have some fairly substantial strands of sorrow and anger about this, some of which goes back to proceedings on the Energy Bill 2008. This, I am afraid, is the “I told you so” bit in my speech. I took quite an active part in those proceedings and told the then Government of my concerns. Some of them have already been mentioned; they relate to the very limited interoperability of the first generation of smart meters, which meant that the ability of consumers to switch was greatly restricted and they were left with stranded assets—and smart meters were pretty dumb in many respects.
I also mentioned the inadequate relationship between this massive £11 billion programme of installing smart meters and actually getting them into every household in the country. That programme should have been accompanied by more general advice, direction and help on installing energy efficiency equipment in the home.
I also was deeply perturbed by the basic premise of the delivery of the smart meters programme: requiring that it be carried out by the supply companies. That led to behaviour based on self-interest and to inefficient delivery. It would have been far better if the state itself—although I could not really have expected this of even the coalition Government, and certainly not this one—or the network companies had proceeded street by street, instead of every building in every area having to have a meter installed by different suppliers.
The way in which different suppliers have done it has varied significantly. I thought at the time that the central strategic decision to give responsibility of delivery to the supply companies was the wrong one, although it is probably too late to change that now. It has also helped to increase consumer distrust in the programme itself, over and above the natural resistance of some consumers to new technology.
I was also perturbed and somewhat baffled by the exact responsibilities and status of DCC. I remember asking the then Minister to explain exactly what this body would be. It was only after we had finished with the Bill that the contract was given to Capita, which alarmed me even more. Following the Carillion collapse, the Bill must ensure that, if Capita similarly collapses, which looked possible a week or two ago—I of course hope it will not—provision is made for dealing with its insolvency. Its performance, as noble Lords have pointed out, has not been that great, but the possibility of its insolvency undermines this whole process. The cost of that is going to fall, once again, on the consumers, who, through their bills, are already paying for the programme as a whole.
That is the end of the “I told you so” part of my speech—but I did tell you so. Some fairly wrong strategic decisions were taken at the beginning of this programme. Partly as a result of that, we are of course behind on the timetable.
On a more positive note, however, we are now moving to the next generation of smart meters. I hope we can do so rapidly, and that there will be no performance problems. The Minister should spell out clearly the timescale. A concomitant point is that we will need at some point to replace the first generation with a second and a third generation. Otherwise, some 8 million to 9 million people will effectively have fairly dumb meters which, although they can induce some change in behaviour, will not do the full job that the cutting-edge technology could deliver. Therefore, we need to speed up the process. I would like the Minister to spell out somewhere in this Bill the process for the retrofitting and replacement of the first generation, as well as the timetable for introducing further metering in the next generation.
More positively, some significant research has shown that even some of the dumber smart meters have enabled people to take a greater interest in their energy consumption and make related decisions on light bulbs, switching off washing machines and changing the time at which they operate appliances, thereby saving energy. So the outcome may well eventually be very positive. The downside, though, is that there has also been some negative reaction to smart meters. I hope we will be able to overcome that.
I very much welcome the move to half-hourly billing. That brings its own problems in terms of privacy and security but I hope that we will find a way to reassure consumers in that respect. Once we move to half-hourly billing, consumers could well get on top of making serious improvements in their energy efficiency behaviour and the energy performance of their homes. I am very much in favour of that so long as the privacy downsides are addressed in the Ofgem regulations.
I still have problems with how this programme is being delivered in premises in multiple occupation that have multiple suppliers, in both the social housing and the private sectors. There has been some progress on the relationship between smart meters and prepayment meters, but the phase we are discussing ought to turn that into something much more positive because some of the most vulnerable consumers are prepayment consumers and smart meters should help them. We have some good examples of that. We need to build on those and make this process more systematic.
I have mentioned the situation with DCC. I recognise that the Government had to move on that. It was a bit of a panic move which did not reflect the original concept of the Bill, but it was probably necessary. However, it underlines what my noble friend Lord Haskel said at Question Time about the reliance on single, near monopolistic outsourcing companies for the delivery of key elements of our infrastructure. I hope that we will address that in broader terms as well as in relation to this specific programme.
I still think that there is an insufficiently close relationship between the installation of smart meters and other energy efficiency measures. However, we should perhaps look at the totality of energy efficiency interventions as we move away from the ECO, as we have known it, and consider all the current programmes so that we can maximise energy efficiency house by house and company by company.
So far there is a very mixed picture with a lot of downsides. We have the opportunity to move to the next stage in a more positive vein. However, while the Bill introduces some useful provisions, in particular half-hourly billing, they are not sufficient to ensure the full delivery of the programme and the full step-change in our energy efficiency performance which those of us who supported the concept in the first place looked for.
My Lords, the Minister said in his opening comments that this is a small technical Bill and, as is his wont, painted a very rosy picture. As we have heard, some of it is rosy but some of it is not quite so rosy.
It is difficult not to be too repetitive because noble Lords around the House agree that the Bill contains some positive measures and some negative measures. I think that very few people would disagree that smart meters will make a large contribution to our national energy infrastructure. We have heard, and we know, that they can assist consumers and energy suppliers to use energy more efficiently and to reduce costs on both sides. However, as others have said, we somehow fail to carry to fruition many energy and energy efficiency programmes in an efficient, timely and cost-effective way. The smart meters rollout is no exception and that is why we have this Bill before us today.
As others, including the Minister, have said, the Bill extends the Secretary of State’s powers to develop, amend and oversee regulations concerning the licensing of smart meters for gas and electricity usage. Presumably, we are discussing this issue because not everything has gone well in this area. The Bill sets up a new special administrative regime for the national smart meter communications and data service provider—in short, the DCC.
In the event of insolvency, the noble Lord, Lord Whitty, highlighted many moons ago that there was a problem. Was this considered? We now know it was considered in the original discussions in 2008 but, nevertheless, we went along with it. We now have problems, and we have seen recently that dealing with it has been very slow.
The Bill also introduces new powers to modify industry codes and instruments directly to deliver a market-wide, half-hourly settlement that uses the smart meter data. There is agreement around the House that this would be a good thing but only, as my noble friend Lord Teverson said, if the meters work. The clause dealing with this came rather late in the day in another place. Will the Minister explain why? The original plan was that every household and small business in the UK would be offered a smart meter. We have already heard from others that the plan was for 2020; the Government now need proposals in this Bill giving them until 2023, and doubts have been raised this afternoon about whether they can do it by then. We have heard all sorts of statistics about how many meters will have to be put in every week to make this happen. Other concerns raised this afternoon concern data protection and privacy. The noble Lord, Lord Whitty, gave us more detail on that.
We have also heard concerns about the installation and selling of this equipment to consumers. I have a particular gripe—I get rung up about smart meters and I realise that I am also being told we need to switch suppliers. I am not very good at doing this, but my husband has done it. I am concerned that, if I have a smart meter, I might not be able to have SMETS 1 and I may not be able to switch my supplier again; therefore, I am not prepared to say yes to the installation. When you have a conversation about this with someone representing the supplier, trying to persuade you, they do not seem to understand what you are talking about. There is a big issue about how people talk to consumers when they are trying to persuade them to have a smart meter.
We have also heard about costs. We know that around £11 billion will be spent and there have been projections of a net benefit of £5.8 billion. But, as others have highlighted, rollout is happening more slowly, so it is not clear that the cost benefit will work out as projected. The National Audit Office is reviewing the programme and plans to report this summer, looking specifically at whether the programme is on track and whether the economic case is still the same. I will not repeat how many meters have been put into houses; the big issue is that, while SMETS 1 installation has gone ahead, albeit not as fast as we would like, SMETS 2 is very slow. I have not done as much detailed digging as my noble friend Lord Teverson; the figures he put forward this afternoon are pretty frightening.
Good smart meters can play a part in helping those who find it difficult to pay for their energy—as the noble Lord, Lord Whitty, mentioned. I am vice-president of National Energy Action, a charity that campaigns on fuel poverty, and I am grateful for its briefing. It is supportive of the programme, realising that it has good potential for helping people in fuel poverty. One thing it is particularly concerned about is the role of Ofgem in monitoring and enforcing minimum standards under the installation code of practice, because this is fundamental to the successful rollout. At the moment, there is little information about how or when individual suppliers are rolling out this technology or about their approach to engaging with customers, particularly vulnerable customers—I have talked about people like me—to ensure that they capture the benefits of more accurate billing, which the noble Baroness, Lady Manzoor, referred to. Nor is there much information about how they are helping people to get more of a handle on how they use their energy.
NEA would like to see Ofgem publish the annual rollout plans of individual suppliers and details of how many meters are installed annually. This could be broken down between SMETS 1 and SMETS 2 and the number of smart meters operating in pre-payment mode for those who find it really difficult to pay their energy bills. This could be done each quarter in line with other Ofgem E-Serve quarterly reporting. This information is not commercially sensitive and it would enable bodies such as NEA to offer bespoke advice to customers about when they can expect to benefit from their smart meters.
NEA also stresses that data protection should not be a key reason why more geographic-specific information cannot be put in the public domain. There are concerns and questions about data and data protection, which the noble Lord, Lord Whitty, talked about, but we ought to be able to use the information without people’s data being used in the wrong way. If we developed a GIS-based map of where smart meters have been installed, that would be a great help to organisations all around the country—for example, to charities such as NEA. They could follow up the installations, amplifying the benefits and helping people by providing more extensive behaviour-change advice and support. It is clear that not all installers are providing this help—some are but some are not.
There is one acute concern about installations. We need to know that when an engineer leaves after putting in a smart meter, the heating still works. They might have said that a gas appliance was unsafe and turned it off. Obviously we want things to be safe but at the moment no government policy is in place to help people—particularly vulnerable households—to change a boiler, as used to be the case under the ECO. I had an exchange with the Minister about this back in the autumn because people were not able to replace their boilers—a situation that has got even worse during this cold winter. When I asked him about it, the Minister’s answer was, “Well, of course, we really believe in energy conservation now, and that’s where all the money is going”, but that does not help the person whose boiler needs to be replaced in the winter. We need to do both. From a sedentary position my noble friend says that it is more efficient.
NEA spends a lot of time talking to consumers and that is why it is so concerned about some of the issues that are not going as smoothly as they should. There is also an issue around price caps and pre-payment meters. The meter price cap is very closely linked to the smart meter rollout and to SMETS 2, and I hope that the Minister will be able to tell us a little more about that.
We have heard that Clauses 11 to 13 create powers to oversee the smart meter programme, but I have already highlighted that Ofgem is finding this quite difficult. However, it has now been asked to deal also with the half-hourly settlement. As others have said, this is a good thing because not only does it enable suppliers to offer different prices at different times of day—we have heard about other things that can help people to use their electric products more efficiently in the home—but it can assist in developing, nationwide, a more demand-led energy supply system. The noble Lord, Lord Whitty, my noble friend Lord Teverson and I have raised this issue in successive energy Bills in this House. At one time it seemed that the Government did not understand that at all but they have cottoned on to it now and it is a welcome addition to the Bill.
Many people still do not have meters but research has shown that people who have them have changed their behaviour and are quite satisfied. In one survey, 75% of people said that they would recommend the meter to someone else; and 80% claimed that they were saving energy through their behavioural change.
If this is to continue we need to make sure that SMETS 2, the cleverer meter—so called—rolls out properly. People need to be able to change their supplier because we have two government policies working against each other—persuading people to have a meter, persuading them to change—and the two do not go together.
I welcome the Bill, as do many other noble Lords, but I am disappointed because it has highlighted many problems that perhaps could have been avoided. We keep falling into the same trap on several issues: we are bad at cost-benefit analysis and adjusting as time goes along; and we are bad at understanding human behaviour, which I appreciate is difficult. We assume all kinds of things about human behaviour which turn out not to be quite right. We need to be better at handling different scenarios.
I hope the Minister can assure the House that the programme will go forward in a more rosy way—I am sure he will; he usually does—and that he can reassure the House on some of the issues that have been raised today. There is common ground across the House and I look forward to his reply.
My Lords, this has been a good debate and a master class in damning the Government with faint praise.
In the future our energy supply, transmission and storage—everything—will change. The future will be different from the past. The big six will no longer be the big six but, we hope, just six among the many. There will be on-grid and off-grid, feed-in and feed-out. The customer will be at the heart of managing their own usage or contribution, and there will be savings of energy and in the energy cost to customers. This is an energy revolution and smart meters are a vital part of that future.
However, as many have said across this House, before they went downhill, smart energy needs to be smart. That is the lament and sorrow of the Bill because things have not happened in the right way: not the smart meter, because the first one was not interoperable—I will be grateful when I do not have to say “interoperable” too often; not the data collection; not the rollout; not the selling; and not the installation. There were delays to completing the rollout; costs which might result from delays to the system; issues around the financial security of DCC and the financial status of its parent company, Capita. It was helpfully pointed out by the noble Lord, Lord Grantchester, that there has been a recent profit warning. There were concerns over whether appropriate data protection and privacy would be provided; connectivity concerns; issues around installation visits; concerns about doorstep selling; problems with the disconnection and disposal of old meters; and problems around inaccessible homes. Between them, Members across the House have raised all those issues.
On the hoped-for benefits, in the other place the Secretary of State, Greg Clark, said that a third of the savings come from potential reductions in the use of energy, just over 40% come from the suppliers’ costs saving—not having to read meters and so on—and that he expects those savings to be passed on to the customers in their bills. I am concerned that this was put as an expectation rather than an instruction. What will the Government do if this expectation is not met? I do not think we should leave this to expectation. We should be able to assure the customer and the client that these savings will be passed on, particularly since, as many across the House have pointed out, they are paying for the whole system.
Another key issue is the extent to which data will be private. We need absolute clarity over who owns that data and for how long, who may have access to it and how it will be protected—and not just clarity but assurances on how such information might be used and by whom, and how an individual can control, with absolute confidence, access to it. Will the proposed review of data usage be widely drawn and will it be published?
Is the Minister aware that some people with disabilities have concerns about this system? As we know, people with disabilities already pay more because of higher fuel consumption, as they are quite often at home all day. I talked to one of my noble friends only today who was very concerned she would be made to feel guilty if she could not use or calibrate a smart meter to use power at a different time of day because her needs were at critical times. Could the Minister speak to that? The Minister also raised the issue of smart energy awareness. Perhaps some of those campaigns could target those with disabilities and the most vulnerable.
Looking outside of that range of issues still needing attention, the Government want the Bill to have a narrow focus on three key things. The first is the extension of existing powers, which of course they want—and need to rectify all the things that have gone wrong. I shall not reiterate all those issues other than to say that 8.5 million first-generation meters have been installed and the Government are hoping to see the rollout of SMETS 2 meters, which do not have the interoperability problems of the older meters. In a private letter to energy companies, the Government said that systems designed to handle the newer meters were not ready and so they moved back the deadline for rolling them out from July to October. That means that more than 1 million extra first-generation smart meters will be fitted in homes, despite, as others have said, the devices being criticised for going dumb when customers switch. With the deadline moving from July to October, hundreds of thousands of people will receive the older devices. Therefore, SMETS 2 and the DCC are critical, and this sort of delay, along with all the issues to do with dealing with the installation of meters in your own home, with variable fitters and information, is damaging.
One of the challenges, as mentioned by my noble friend Lady Maddock, is that the reputation of smart meters is suffering because of all the problems that have arisen, which is damaging people’s willingness to adopt the new system. The extension of the Government’s powers and the delay to the rollout of SMETS 2 are concerning. It appears the Government are extending the period because of original targets being missed and they are worried there will be further issues for which an extension of powers will be required. Will the Minister confirm that this is the rationale for the extension of powers? Will he also confirm that their extension until 2023 is not connected to a potential overrun of the 2020 deadline for the rollout of the new meters—although a number of noble Lords have put a question mark on that deadline?
The second part of the Bill concerns the introduction of,
“a special administration regime for the national smart meter communication and data service provider … ‘DCC’ … in the event of its insolvency”.
I am unsure whether we have 100 SMETS 2 meters installed or 80—or 250, as was discussed in Committee in the other place. If the number is that small, there has to be a question about how robust and how well tested the function of the DCC is at that level. That does not seem an adequate supply of data to test that system. Coming to the DCC itself and the concerns over Capita’s financial status, what checks are the Government carrying out on Capita? In addition, does the role of the special administration regime exist as of the passage of this Bill or only when there has been trouble, or can it kick in in advance of any collapse in the system? What are the protections for the consumer in this event? If a special administration regime has to be put in place because there has been a failure on the part of DCC or Capita, what can official scrutineers and the public expect in the way of transparency and information about what has happened? Can the Minister give an assurance that we parliamentarians and the public at large will not be kept in the dark about why a special administration regime has been put in place? Obviously, a further concern has to be that the costs will be passed on to the consumer. Can the Minister explain why the consumer should be in any way liable for such a failure? Would any of the costs pertaining to such a failure fall to the consumer? Would it be the whole cost or part of it? In responding, it would be helpful if the Minister could set out the costs and savings to consumers and other players so that we can see who is benefiting and who is paying, and whether we think that is fair.
I turn to the provision of new powers for Ofgem to directly modify industry codes and documents to deliver a market-wide half-hourly settlement which uses smart metering data. Noble Lords across the House have welcomed this because it is the future. The idea is that incentives are placed on suppliers to meet their customers’ demands in each half hour of the day, and smart metering is intended to produce accurate half-hourly reports to get a better settlement and thus drive innovation and the efficient use of energy. However, suppliers can already choose to settle with consumers on a half-hourly basis via an elective half-hourly settlement, but Ofgem believes that it will have to make all suppliers do this to get the best results for customers. That, as I understand it, is a decision that Ofgem will take in the second half of 2019 and will be subject to a cost-benefit analysis, which I was pleased to hear the Minister say will be published.
However, the strange part is that it was introduced in the other place through a government amendment. That is of great concern. Why did the Government know only at the end of the process that such an analysis would be needed? One does kind of expect that, given that this is a complex new system, the Government would have known in advance that an analysis was necessary. Perhaps the Minister can explain its late appearance.
Lastly, I want to reflect on the contribution made by my noble friend Lord Teverson. I am glad he will not have to fix the electricity under the stairs any more. He recognises, as have other noble Lords across the House, how important this programme is. He said that the acronyms were suspicious. Perhaps the Minister can allay our suspicions, although I have to say that the acronyms are not as bad as they were when I was a Minister in DfID. My noble friend Lady Maddock pointed out that some of us think that parts of the Bill are rosy, but then referred to the rest of it as having rosacea, or words to that effect. She spoke for those in fuel poverty and expressed her concern about the role of Ofgem under the code of practice and the approach being taken towards vulnerable people. I would welcome it if the Minister could pay special attention to responding to those and other points raised in the debate.
My Lords, I should start by making a declaration—or perhaps a confession. I am a smart meter user. I accepted the offer made by the company. It is a SMETS 1, so it is not doing me much good in terms of reducing my consumption or the cost—but at least I have one. That, I think, may be unique among Members of this House, but not so much so among the wider public. I also thought until yesterday that we might be able to have a debate which did not involve the European Union. However, having seen E.ON’s and RWE’s proposals, we are reminded that this is not taking place in a vacuum and that E.ON will now become the major provider for the customers of electricity while RWE is getting back into green research and the provision of electricity—reversing a decision that was taken before our decision to come out of the European Union.
I thank all noble Lords who have taken part in the debate. I share with everyone their support for the Bill—with reservations, and unfortunately it is those reservations which are going to take up most of my time. I thank in particular my noble friend Lord Grantchester for his analysis at the start of the debate. It has saved me a lot of time because he has already done the work. I shall try to avoid any repetition during the course of what I have to say. I also thank the Minister for the meetings and briefings we have had about the proposals prior to this debate. They have been very helpful in our preparations.
The Bill has three stated interrelated purposes. The first is extending the powers of the Secretary of State in regulations for smart meters. The second is introducing a special administrative regime, the SAR, with a Data Communications Company, the DCC, to ensure that service continues in the event of their insolvency. The third is to introduce new powers to allow Ofgem to facilitate half-hourly settlements.
First, the extension of powers that are currently due to expire on 1 November 2018. The Bill seeks a further five-year period, until 2023, during which time the completion of the rollout of the smart meters and their claimed benefits will have become evident. That is the plan. What are the chances of this and what benefits will consumers see? The rollout requires companies to have offered every household and small business, and there are 40 million to 50 million of them, a meter by the end of 2020. The offer of the smart meter 1 has been slowed down, while the smart meter 2 is in some kind of preparatory phase and is being tested for workability and interoperability. So the chances of meeting the 2020 deadline are fast receding, unless the Government announce some huge increase of capacity to achieve their intention. The benefits to consumers are deemed to be so positive that they will take little persuasion—but, in this House and in other places, the consumer seems less trusting of the benefits than the Government seem to think. The record tells a different story.
Thus far, the second-generation SMETS 2 have been installed in only 70, perhaps 100, households out of a total of 50 million. If the SMETS 1s can be upgraded to SMETS 2 capability, it will account for some of the increase—but it will still need three times the current rate of approach, interchange and offer of these meters to achieve the 2020 deadline.
The benefit for the customer is that he or she will be in control of their pattern of energy usage, with real-time information being provided and an end to estimated billing. That is true: the smart meter tells you how much you have spent today. At any point in time, it will give you a scare. You have spent £5, £10 or whatever it is you have spent today. It does not tell you anything about what it is that is consuming that money. The DCC will be provided with a half-hour readout of the overall usage of our electricity consumption in order to benefit its purchasing power and allow it to more accurately purchase electricity to meet our needs, each half-hour of the day, as I understand things.
That should lead to a reduction in the price it pays at certain times in the day. That will then be passed on to the consumer in reduced billing. Someone talked about half-hour billings; I do not know if that is going to come about any time soon, but we will certainly know when it is cheaper to run certain types of electricity consumption. In order to make those changes, the customer has to be sure of the benefits or they are not going to change anything. They are going to carry on doing what they do at the time they prefer to do it. The chances of the lower-end pre-paid customer changing their habits, given the other pressures that there are in their life, are more remote than for those who perhaps have more time on their hands, can study these things and can make adjustments to habits that have been ingrained for some years, as they go through life, with family, children who move away and so on.
How will the Government force the energy companies to pass on savings that they will make to the customers? There was some talk in the energy committee in the other place that the Government will make sure that this happens, but how do they intend to enforce it? The Energy Minister in the other place quoted Richard Nixon, who said:
“If you’ve got them by the balls, their hearts and minds will follow”,—[Official Report, Commons, Smart Meters Bill Committee, 23/11/17; col. 73.]
but if you have not, they are not going to. That is about the size of it. I am not sure that the squeeze is happening quite where it needs to happen. Do the Government anticipate a change of heart among the energy companies towards their customers? That is unlikely. They are private businesses; they are in business to make a profit. That is their right and that is what they are set up to do. Their shareholders are their principal guides and they expect a return. It is hard to see where the customer fits into the squeeze there might be on the price of electricity to suppliers. The Government need to think through how the customer benefits are to be realistically delivered.
Another thing concerning the change in our pattern of usage of night-time electricity for white goods is that there are increased risks that the Government should be aware of. Household fires are more likely with unsupervised white goods. Nuisance neighbour noise disputes will be on the increase as energy powers machines at night, particularly in places where people live one on top of another, in blocks of flats and so on. So the attractions of changing patterns of usage of electricity may not lead to the greenfield nirvana the Government seem to believe in.
One of the things that might have been possible—maybe the Minister will comment on this—was the Government taking responsibility for providing the customer with tariff information. Would it have been possible under SMETS 1? Is it possible under SMETS 2? SMETS 3 could possibly, if it has not been thought of before, inform customers about their best possible energy price sources. It is hard enough right now to know exactly where my best deal is, comparing tariffs within one supplier, let alone across a range of suppliers, with six major companies and a number of other minor providers. It is a complicated matter. Could the Government introduce this into the SMETS system and pass on the information to customers? That would be a real benefit and a real selling point for the meters being accepted by more customers.
I turn to the DCC. The Government intend the regime to take back control should the company go into administration. A special administration regime is to be established. The provocation for this lies somewhere between the recent failure of Carillion, an oversight in the original setting up of the DCC and doubts about the performance of Capita, the current DCC operator. If the DCC fails, the customer will foot the bill. The risk of failure is said to be extremely low. However, the impact would be high. Could the Government provide some analysis or report to reassure us that the DCC’s remote chances of failure are so unlikely that no one can see it happening? What happens if the DCC decides to walk away from the contract? Are there penalties? What are they? Might the Government be left high and dry, not by the failure of the company but by the company no longer wishing to provide the service because it does not believe it will meet the 2020 deadline, let alone those beyond it?
These are some of the questions. We support the Bill. It is deficient in some areas and these will be explored more as we go through Committee and Report, but I would be grateful if the Minister could answer some of the questions raised so far.
My Lords, on the last or second to last point made by the noble Lord, Lord Lennie, he looked forward to a world with a SMETS 3 or 4 that might be able to assist a customer in finding a new supplier and direct him in that way. I think we are already there. I imagine that the noble Lord reads the Guardian more often than I do, but the Guardian of 11 March was talking about one company that is developing some sort of dongle that can be plugged into one’s meter and will automatically switch one to the best supplier according to the programme one puts in. One can put in, “I want the greenest supplier” or “I want the cheapest supplier” and one could find oneself having a different supplier from month to month, possibly two or three times a year. The future is good. I refer the noble Lord to that article to see just what is happening out there and what smart meters, as they are at the moment, could possibly lead to.
I have to say that, listening to the debate, I felt that it was a fairly Eeyoreish performance, even by the standards of this House. The noble Baroness, Lady Featherstone, was politer—she referred to it as a masterclass in faint praise. The noble Baroness, Lady Maddock, was, as always, very kind to me: after making her Eeyoreish speech, along with her colleagues and all other noble Lords, she said that she expected something more optimistic from me, “Because the noble Lord always is very optimistic”. I think there is nothing wrong with being optimistic when one has technical developments that are going to bring great benefits to everyone. They are going to bring benefits to the consumer, as I made clear in my opening speech, but they will also bring benefits in terms of reducing our overall consumption and in many other ways.
Like the noble Baroness, Lady Featherstone, I was very amused by the picture of her noble friend Lord Teverson under the floorboards or somewhere—I am not quite sure where he was; it was rather a confusing picture, but he was in the rain with a torch. All I can do is refer the noble Lord to Hilaire Belloc’s “Lord Finchley”. The noble Lord will remember that Lord Finchley came to an untimely end because he tried to do these things himself. In future, the noble Lord can get someone else to look at these things, but smart meters will solve the problem for him.
Others, such as the noble Lord, Lord Whitty, and me, took us back to 2008. I was very grateful to him for doing that and for saying that back in 2008 he was giving warnings, in his Cassandra-like way, and now he could say, “I told you so”. The great thing is that he can say “I told you so” to everyone here, in that the 2008 Act, as the noble Lord and others on the Benches opposite will remember, was passed under a Labour Government. The 2011 Act that I referred to was passed under the coalition Government. I think that we had a Liberal Democrat in both the business department and the energy department during that time, so their fingers must have touched this at some point. Now, in 2018 we have a Conservative Government, so perhaps, like Peter Simple’s Dr Heinz Kiosk, I can just say, “We are all guilty!”, if something has gone wrong. I think, from the degrees of optimism I have listened to in the course of the debate, that there is a general acceptance that smart meters are going to be able to do something that has not been available before and that, as I said, that will bring great advantages to us.
A very large number of questions of a fairly detailed sort have been raised and I will try to address a number of them. However, I think that what a debate of this sort also shows is that even a Bill such as this—a Bill that is broadly welcomed on all sides, that has been through pre-legislative scrutiny, that has had a very useful trip through another place since that pre-legislative scrutiny and that is now here—will benefit from what your Lordships can do in Committee. I look forward to that Committee and hope that we can tease out just where the problems are so that I can give appropriate assurances on matters that are relevant to noble Lords and, if necessary, make amendments, but I do not think that that will be necessary. As the noble Lord, Lord Grantchester, put it, this is a largely technical Bill dealing with three small matters, but its title allows us to discuss the generality of smart meters, smart metering and how we get the rollout completed. I hope that in the course of this debate, Committee and further stages we can continue that process and provide the proper assurances.
This afternoon, I propose to answer a few of the questions to the best of my ability. I think it would be useful if I write another letter to all noble Lords who have taken part in this debate and place a copy in the Library, setting out a more detailed answer of the sort that one cannot properly give to some of the more detailed questions and very sensible suggestions made by my noble friend Lady Manzoor. I give that assurance that I will send that detailed response to all noble Lords.
In the meantime, I shall answer a few of the questions that have been asked. The first, and most important, is to give some sort of assurance that we believe that it is still possible, despite the numbers which the noble Lord, Lord Grantchester, quoted from Which?. The numbers probably appeared in the Daily Mail as well, for all I know—that was another publication that was mentioned. We believe that we will be able to get there in due course. The rollout to date has been growing. Around 400,000 smart meters are being installed every month. That has to get up to a bigger figure if we are going to get to the end in the three years that are available. I do not think that is representative of the next phase of the programme when most suppliers will be installing smart meters with greater numbers of installers and more types of customers across Britain. We will certainly continue to collect data—this was something that the noble Baroness, Lady Maddock, asked about—on the rollout, getting independent, official, quarterly statistics on progress by the large suppliers, and we will make sure that they are published quarterly, as I think they have been since September 2013. In addition, a summary of the annual rollout progress for the calendar year is published every March, so we should have that in due course. I do not know whether it will be before Committee, as no one has yet given me a suggested date for the next stage of the Bill.
As I said, I think it is impossible to get to that. Can I just be clear about the commitment? It is to offer everybody a smart meter. Are the Government clear with the suppliers about what “offer” means and that it is not just an email saying, “Do you want a smart meter”? Are we clear about the target? Not everybody wants one. Is that a potential get-out clause in this target?
The noble Lord knows that we are not going down the route of saying that everyone will have one, but we hope everyone will see the benefits of them and that everyone will be offered one, and I hope that offer will be more than just the email that the noble Lord suggests. It is difficult to persuade people to change. Some months ago we discussed the ease with which one can change one’s electricity supplier. However, because of inertia, few people do. The easier that it becomes and the more benefits that there are, the more people will switch supplier. The same applies to smart meters: people will adopt them as they see the benefit. We shall continue to push suppliers to do what they can, because of the benefits. That is not only those benefits to consumers that we all recognise, but those to the country through reducing our overall electricity consumption by evening it out and those other benefits identified.
I thank the Minister for giving way. It is the responsibility of Ofgem to report on the companies’ taking all reasonable steps to offer consumers a smart meter.
The noble Lord is absolutely correct. I apologise for not making that clear. There will be information available from Ofgem.
On rollout, I agree with points made that there is more that we can do to engage with customers in moving to smart metering. This is important and we shall certainly do more. As noble Lords will know, we have required the establishment of Smart Energy GB. This is an independent not-for-profit organisation leading the centralised programme to raise national awareness alongside activities to drive behaviour change and help consumers to benefit from smart working. The situation is changing. I think that the noble Baroness, Lady Maddock, quoted figures about satisfaction rates, but on awareness of smart metering, this has increased from some 40% to over 80% in three years and has driven demand for millions. Research shows—I believe that this is a figure that the noble Baroness quoted—that some 80% of consumers who have smart meters would recommend them to friends and family.
The question of safeguards, safety of data and related issues, is a concern of my noble friend Lady Manzoor, the noble Lord, Lord Whitty, the noble Baroness, Lady Maddock, and others and it is something to which we shall come back in due course. National smart meter infrastructure has been developed from the outset in consultation with experts from industry and government including the National Cyber Security Centre, which is part of GCHQ. The smart meter security model establishes physical, regulatory and operational security controls backed by independent security assurance arrangements. For instance, critical commands will only be accepted by the smart meter if they are issued by the responsible energy supplier and authenticated through strong encryption. Moreover, they have to be countersigned independently by the DCC.
The Government have also put in place a strict data access framework that protects consumers’ privacy. This is important. I think that this was at the heart of some remarks of the noble Baroness, Lady Featherstone. Households will have control over who can access their detailed energy consumption data and for what purposes, except where this is required for regulated purposes—that includes billing.
I am beginning to run out of time. I shall write in greater detail. The final point that I shall address now is that of the noble Lord, Lord Broers. He highlighted the importance of more work to ensure that a promise of a connected home was delivered. The noble Lord will be aware of a joint BEIS-Ofgem smart systems and flexibility plan that was published in July 2017. That reaffirmed that smart meters are the foundation of a smart meter energy system. It included a commitment to work with industry to develop standards for smart appliances that will allow consumers to provide flexibility and benefit from demand-side response.
I appreciate that I was asked many more questions and that there is much detail that will need to be gone into. What I hope to do is to write a letter as soon as possible to all those who took part in the debate detailing all those points that need to be covered. The important point is that we can then sit down—or stand up—and discuss these matters in detail in Committee, make sure we have the Bill right when we send it back to the Commons and make sure that we can look forward to broad, sunlit, happy uplands. As I said, I will continue to be the optimist rather than one of the series of Eeyores I have heard speaking on this occasion. I look forward to a bright future for smart meters, whether that is SMETS 1, SMETS 2 or even SMETS 3 as mentioned by the noble Lord, Lord Lennie.
Bill read a second time and committed to a Grand Committee.