Government must take early action to address consumer smart meter issues, MP says

During an adjournment debate in the House of Commons, John Healey, the Labour MP who secured the debate, said that he "strongly backed" the purported benefits of a universal smart metering system with the right specifications, but said that he was concerned that the Government did not have "a grip on some of the essential elements" of the national programme.

"I am told that those involved in the project have as their mantra 'starting well and finishing early'," he said. "If the Government get this wrong, it could end up starting badly, failing to finish and costing the consumer dearly."

Consumer bodies such as Which and the Office of Fair Trading (OFT) were already picking up mis-selling complaints in "an industry where consumer protection is still too weak and consumer trust in energy companies is at an all-time low", Healey said. Cost, controlled testing and the contract for the data and communications nerve centre central to the project were also of concern, he added.

Smart metering technology is due to be installed across the UK from 2014, with every UK household and business - approximately 55 million meters - expected to have the technology by 2019. Smart metering enables a two-way flow of information that can deliver real-time information about energy consumption and demand for energy to suppliers and network operators. The Government has said smart metering will help to slash unnecessary energy use, reduce emissions and cut consumers' energy bills.

Healey said that a lack of accountability for the cost of the programme, as set out in a report by the Public Accounts Committee (PAC) last year, was central to his concerns. The PAC suggested that although consumers would be paying the installation costs of the meters through a levy on their energy bills, there was no way of ensuring that energy suppliers would pass on any savings. Households that install both electricity and gas meters will likely save an average of £25 a year on their bills, Healey said.

"The cost of the meters in total will be about £12 billion - at least on current estimates. That is more than £100 per smart electricity meter and more than £130 per smart gas meter," he said. "All costs are going directly on to the bills of consumers, yet there is no requirement to report these costs or show these costs in consumer bills.

"At present, the Government are writing a blank cheque for the industry. The Government and Ofgem have some powers under the Energy Act 2011 to obtain information from suppliers on cost and performance, and as a start they should use them directly."

Fellow Labour MP Jim Dowd suggested that "optimal implementation" of the programme could create an opportunity to bring greater competition in an area where consumer confidence was at an all time low. Only 23% of consumers consider energy suppliers to be trustworthy, according to figured cited during the debate.

"Although there are huge dangers, as there have been with many public sector IT projects over the years, we should not lose sight of the fact that this is an opportunity to regain public confidence in the energy sector, which that cartel [the so-called 'Big 6' energy companies] has seriously undermined in recent years," he said.

Energy Minister Charles Hendry said that the Government was "alive to the issues" raised by smart metering. "For us, the interests of the consumer are at the heart of the programme," he said.

According to updated economic impacts assessments (88-page / 720KB PDF) published by the Department for Energy and Climate Change (DECC) earlier this month, the smart metering programme would result in total net benefits of around £7.2bn over the next 20 years, he said. In addition, the meters would also give consumers near real-time information on their energy use - allowing them to control costs.

Smart metering expert Chris Martin of Pinsent Masons, the law firm behind Out-Law.com, said that whilst Hendry was correct to state the plans for the roll-out did take account of the interests of consumers, there are justifiable concerns about how the potential benefits of smart metering can be realised, not just for consumers but also for the 'big six' suppliers who will provide most of the upfront capital investment required for the roll-out.

"The proposals for the roll-out do contain protections and controls to protect the interests of consumers," he said. "For example, there will be a licence-backed smart meter installation Code of Practice, approved by the regulator, which will ban any sales during the installation visit, and require that suppliers obtain consumers' permission in advance if they intend to talk to them about their own products during the visit."

"For me, the bigger issues relate to effective consumer engagement and delivery of the right communications and IT infrastructure," he said. "For example, how will the Government and industry work together to develop and deliver a consumer engagement strategy that provides consumers with the information and incentives needed to facilitate a reduction in energy demand? On infrastructure, will it be possible to deliver the planned central communications hub in a manner that enables the cost and efficiency savings that are key benefits to industry of the planned roll-out?"

"For the time being much of the upfront capital costs of the roll-out will be met by industry and, specifically, the 'big six' suppliers," said Martin. "Yes, ultimately these costs may be passed through to consumers in the form of energy charges, but it is misleading to suggest that the Government is 'writing a blank cheque' for an industry that is, after all, simply implementing a project that has been mandated by Government."

The Government published its response to a consultation on rules governing installation earlier this month. It plans to place licence obligations on installing suppliers to offer customers an in-home display, as well as requiring suppliers to provide efficiency advice as part of the installation visit. Suppliers will also have to identify and meet the needs of vulnerable consumers as part of the installation process, Hendry told the House of Commons.