Select committee inquiry
Smart meter roll-out
Closed
What the inquiry looked at
“Smart meters are due to be rolled out to homes and businesses across the UK between 2014 and 2019, with the costs of roll-out being passed on to consumers in their bills. DECC estimates that smart metering will bring a net benefit of £6.7 billion. However, concerns have been raised about aspects of roll-out, including cost, timescale, data protection, privacy and the extent to which consumers will really benefit. This inquiry explores DECC’s preparations for roll-out and some of the concerns that have been raised. Evidence session 1, 23 April 2013: transcript (PDF 212 KB) | video Evidence session 2, 14 May 2013: transcript (PDF 169 KB) | video Evidence session 3, 14 May 2013: transcript (PDF 163 KB) | video Evidence session 4, 4 June 2013: transcript (PDF 171 KB) | video”
The committee's words, from the inquiry page on parliament.uk ↗.
What it found
In the committee's words, from the summary of 4th Report - Smart meter roll-out - Volume I (Volume I: Report, together with formal minutes, oral and written evidence) ↗
Smart metering has the potential to bring wide benefits to consumers, energy suppliers and our energy infrastructure, and we welcome this investment in the UK's energy system.
Mass roll-out is due to take place between 2015 and 2020, and will see energy companies install approximately 53 million smart meters in homes and small businesses. DECC estimates that roll-out will cost around £12.1 billion and deliver benefits of £18.8 billion.
Projected benefits include accurate billing, easier switching, energy and bill savings for consumers, and operational savings for energy suppliers. Smart meters could also facilitate the creation of a smart grid that will help to balance peaks and troughs in electricity supply and demand, but the extent to which they will do this is unclear. Not enough has been done to quantify the benefits of a smart grid, and greater transparency is needed for the true costs and benefits of roll-out to be assessed.
The cost of roll-out will ultimately be paid for by consumers in their bills. There is a clear risk that the £6.7 billion net benefit projected by DECC may not be achieved if costs spiral or if consumers do not realise the expected energy and bill savings. DECC, Ofgem and some energy suppliers have suggested that competition in the market will ensure that costs are kept down and that benefits are passed on to consumers through lower energy prices, but we are not convinced that the energy market is sufficiently competitive to ensure this is the case. Until there is strong evidence that it is, DECC and Ofgem must retain responsibility for ensuring that costs do not spiral and that benefits are passed on. Energy companies should co-ordinate installation activity to ensure costs are contained and the benefits of roll-out are maximised.
Consumer acceptance of and engagement with smart metering is crucial to the success of roll-out. The extent to which consumers will benefit directly through energy and bill savings will depend largely on how they engage with smart meters. The provision of accurate, real-time consumption and billing data via the in-home display (IHD) is central to helping consumers to understand, reduce and alter their energy consumption habits. If households and small businesses are to be given the best chance of achieving savings, they should be offered free IHDs, which must provide accurate, real-time data.
It is important that people have a positive experience when they receive a smart meter and that the information they receive when it is installed will help them to get the most out of it.
We welcome the action that DECC and Ofgem have taken to ensure that consumers will receive advice about smart meters and energy efficiency when the meters are installed.
However, the benefits of receiving this information may be lost or significantly reduced if gaps in communications coverage mean that some smart meters have to be operated in “dumb” mode for some time after installation. It would be preferable to wait until communications issues are resolved before installing smart meters so that consumers can access the benefits of smart meters as soon as they are installed. Likewise, suppliers should not be pressed to roll-out earlier versions of smart meters now if they prefer to wait for a version that fully meets the technical specifications in order to give their customers a better experience.
What the government said
4th Report - Smart meter roll-out - Volume II (Volume II: additional written evidence)
No government response is linked to this report.
4th Report - Smart meter roll-out - Volume I (Volume I: Report, together with formal minutes, oral and written evidence)
The government responded on 14 October 2013.
Summary written by Accountability Index from the government's response.
The Government welcomes the Committee's report and responds recommendation by recommendation, agreeing with some, noting others, and declining one amendment to the Installation Code of Practice licence conditions.
- On the roll-out timetable, the Government "agrees with the Committee's recommendation" and says all parties are committed to starting mass roll-out in autumn 2015 and completing it by the end of 2020, with progress "closely monitored".
- On in-home displays for small and micro-businesses, the Government concluded it "would not be of overall economic benefit to mandate the offer of IHDs free of charge"; such customers will be able to purchase them.
- On the Installation Code of Practice, it does "not think it is appropriate" to amend the licence conditions, but DECC "will bring the Committee's view to the attention of the Code of Practice Board".
- On consumer engagement, the Central Delivery Body must now produce its first Consumer Engagement Plan, Performance Management Framework and Annual Budget by the end of 2013, rather than March 2014.
Read the government's response ↗ Read the report ↗ Report an error
How the inquiry ran
Each dot is a dated item listed on this page, from the inquiry's opening on 20 December 2012 to 5 November 2013.
- Report 2 reports
- Government response 14 Oct 2013
- Correspondence 4 letters
What it recommended 5 recommendations · 13 conclusions
1Ofgem must be prepared to strengthen the requirements on suppliers to provide accurate bills if...
Concluded (the committee's words)
Ofgem must be prepared to strengthen the requirements on suppliers to provide accurate bills if there is evidence that consumers are not receiving accurate bills and/or that they are being back-billed months after smart meters have been installed.
2We recommend that suppliers work together to achieve efficiency savings during roll- out.
Recommended (the committee's words)
We recommend that suppliers work together to achieve efficiency savings during roll- out. This would help to ensure efficiency and the widest possible coverage of the WAN (Wide Area Network). DECC should draw up a co-operation protocol and require suppliers to sign up to it.
3Smart metering has the potential to bring wide benefits to our energy infrastructure and to...
Recommended (the committee's words)
Smart metering has the potential to bring wide benefits to our energy infrastructure and to consumers, and we welcome this investment in the UK’s energy system. The development of a smart grid will be key to meeting future energy challenges, but the extent to which smart metering will facilitate that is unclear, and not enough has been done to quantify the benefits of a smart grid. Greater transparency is needed for the true costs and benefits of roll-out to be assessed. DECC should clarify the extent to which smart metering will facilitate the development of the smart grid and should publish its analysis of the financial costs and benefits of a smart grid.
4There is a clear risk that the £6.7 billion net benefit projected by DECC may...
Concluded (the committee's words)
There is a clear risk that the £6.7 billion net benefit projected by DECC may not be achieved if costs spiral or if consumers do not realise the expected energy and bill savings. There is also a risk that the benefits that accrue to suppliers as a result of roll- out will not be passed on fully to consumers. We are not convinced by the argument that competition in the market will ensure that costs are kept down and benefits are passed on to consumers. Until Ofgem can provide concrete evidence that competition has increased—for example by publishing its analysis of market performance against agreed indicators of competitiveness or by publishing a review of the impact of its RMR reforms—serious concerns about competition in the market will remain. The responsibility for keeping roll-out costs under control and ensuring that benefits are passed on to customers rests with the Government and Ofgem. They must demonstrate how reforms to the market will achieve this and what action they will take if this is not achieved.
5If consumers do not believe that they are benefiting significantly from roll-out, they could rightly...
Recommended (the committee's words)
If consumers do not believe that they are benefiting significantly from roll-out, they could rightly perceive it as a costly project that they have paid for but gained little from. As we outlined in our Consumer Engagement with Energy Markets report, we are concerned that not enough is being done to make consumers aware of the need to invest in the UK’s energy infrastructure. DECC has been focusing its consumer messaging on the relatively small energy and bill savings of around 2.8% that smart meters may help consumers to achieve. We recommend that messages around smart metering should place greater emphasis on the wider benefits it will bring to the UK’s energy infrastructure. We reiterate the call in our Consumer Engagement with Energy Markets report for greater transparency regarding the “contribution that consumers 56 Smart meter roll-out are being expected to make to ensuring that we have safe, secure and affordable energy supplies in future”.
6We welcome DECC’s recent announcement that the dates for mass roll-out are being pushed back...
Concluded (the committee's words)
We welcome DECC’s recent announcement that the dates for mass roll-out are being pushed back by a year. However there needs to be some flexibility in the new timetable, which should be driven by engineering and infrastructure requirements and the need to avoid artificial deadlines acting to push up programme costs. DECC should be prepared to amend the timetable further if more time is needed to address any systemic issues that may arise, to respond to further delays to technical and infrastructure requirements for roll-out, or to prevent cost escalations for other reasons.
7We note the concerns about the centralised DCC model proposed by DECC.
Concluded (the committee's words)
We note the concerns about the centralised DCC model proposed by DECC. DECC should, in response to this report, set out the justification and cost implications of the DCC model.
8We are concerned about WAN and HAN coverage in the short to medium term, and...
Concluded (the committee's words)
We are concerned about WAN and HAN coverage in the short to medium term, and these will affect consumers’ experience of smart meters. Communications issues must be resolved before installing smart meters in order to ensure that consumers have a good experience and are able to access the benefits of smart meters as soon as they are installed. DECC must clarify how progress towards 97.5% coverage will be achieved.
9We see a fundamental inconsistency between DECC’s position that there is little difference in functionality...
Concluded (the committee's words)
We see a fundamental inconsistency between DECC’s position that there is little difference in functionality between SMETS 1 and SMETS 2 meters and its assertion that the new SMETS 2 standards are needed to ensure full interoperability. Given that some HAN communication issues are still being addressed as part of the SMETS 2 design process, it is clear that final SMETS 2-compliant meters should be less susceptible to HAN connectivity issues than SMETS 1-compliant meters. However, it is unclear how much difference there will be in functionality between SMETS 1 and SMETS 2 meters, particularly in the longer term in relation to the smart grid and smart appliances. DECC should outline clearly what the difference between SMETS 1 and SMETS 2 meters will be, particularly in relation to longer-term functionality.
10SMETS 2 meters are more likely to provide customers with a satisfactory smart metering experience...
Concluded (the committee's words)
SMETS 2 meters are more likely to provide customers with a satisfactory smart metering experience than pre-SMETS 2 meters. We are also concerned that it may cost more to support SMETS 1 meters when customers switch and that these costs may be passed on to consumers. Energy companies that wish to wait for SMETS 2 meters before engaging more fully in roll-out should not be pressed to deploy pre- SMETS 2 meters during foundation stage.
11The provision of real-time consumption and billing data is central to consumers’ ability to manage...
Concluded (the committee's words)
The provision of real-time consumption and billing data is central to consumers’ ability to manage their energy use, but it is unclear just how accurate the billing information provided on IHDs will be. We accept that many consumers will want to access their data via smart phones, tablets and other means, but we are also convinced that in-home displays (IHDs) help many consumers to gain a basic understanding of their energy consumption and costs. If the projected consumer savings and other benefits of smart meters are to be achieved, consumers must be presented with the best opportunity to gain a fuller understanding of their energy usage from the moment they receive their smart meter. We support DECC’s position that all households should be offered an IHD with their smart meter. However, we also recommend that more should be done to ensure that these devices provide accurate information so that they can be used most effectively by consumers.
12We see a fundamental incongruity in DECC and Ofgem’s position that on the one hand...
Recommended (the committee's words)
We see a fundamental incongruity in DECC and Ofgem’s position that on the one hand IHDs are integral to domestic consumers’ ability to reduce and manage energy consumption and should therefore be offered to them, but that on the other they need not be offered to small and micro-businesses. We question how the ambitious energy savings that have been projected for the non-domestic sector can be achieved by small and micro-businesses if they are not given the same opportunities as domestic consumers to access their consumption data. It is in all our interests to engage as many consumers as possible with smart meters in the short term, as this may increase their ability and willingness to engage with more sophisticated demand response incentives in the long term which could bring wider benefits. We recommend that small and micro-businesses should be given the same offer of an in- home display, free of charge, that domestic consumers will get upon installation of a smart meter. At the very least, they should have free access to the consumption and billing data that IHDs are expected to provide.
13We welcome the action that DECC is taking to respond to public concerns about health,...
Recommended (the committee's words)
We welcome the action that DECC is taking to respond to public concerns about health, data protection and other issues in relation to smart meters. We also welcome the fact that it is considering further “how best to respond” to such issues. (Paragraph 104). We urge DECC to take into account solutions that have worked in other countries and to outline, before the commencement of mass roll-out, what further action it will take to address consumer concerns. DECC must ensure that these issues are given sufficient and timely attention in consumer engagement campaigns before and during roll-out.
14We note Ofgem’s reasons for not wanting to give detailed guidance at this stage regarding...
Concluded (the committee's words)
We note Ofgem’s reasons for not wanting to give detailed guidance at this stage regarding the obligation on suppliers to install smart meters in all homes, and we agree that it is important that suppliers should aim to install smart meters in as many homes as possible. However, we also believe that suppliers would benefit from having a clearer understanding of what is expected of them in cases where customers 58 Smart meter roll-out refuse a smart meter so that they can plan how to respond. We therefore recommend that DECC and Ofgem should provide some guidance in this regard.
15We agree with Ofgem that it may be reasonable, once roll-out is complete, to charge...
Concluded (the committee's words)
We agree with Ofgem that it may be reasonable, once roll-out is complete, to charge consumers who opt out of having a smart meter. This would help to protect other consumers from picking up the increased costs of reading “dumb” meters, but any such charge would have to be reasonable. We do not believe it would be appropriate to impose a similar charge on consumers who are prevented from receiving a smart meter by HAN or WAN communications issues. Ofgem and DECC should provide guidance on the circumstances in which it may be appropriate to charge consumers for opting out of having a smart meter. If charging does occur, Ofgem should monitor the charges and be prepared to set a cap if charges appear to be excessive.
16The provision of good-quality information and support regarding smart meter usage and energy efficiency will...
Concluded (the committee's words)
The provision of good-quality information and support regarding smart meter usage and energy efficiency will be crucial to consumer benefit from smart meter roll-out. We applaud the action that DECC and Ofgem have taken to ensure that consumers receive information and advice about smart meters and energy efficiency when their smart meter is installed. However, we are concerned that the benefits of receiving this information may be lost, or significantly reduced, if smart meters are installed in areas where communication gaps mean that they will be operated in “dumb” mode for some time after installation. DECC should amend the Smart Metering Installation Code of Practice to ensure that consumers whose smart meters do not have smart functionality at the point of installation receive appropriate information and advice when this functionality is enabled.
17Public engagement should begin before the start of mass roll-out.
Concluded (the committee's words)
Public engagement should begin before the start of mass roll-out. We hope that energy suppliers will learn from the US experience of roll-out and start engagement early. We welcome the setting up of the CDB and suggest that changes to the timescale for mass roll-out present a welcome opportunity to ensure that the consumer engagement programme is well under way before mass roll-out commences.
18Energy companies still have a long way to go in putting right past failures and...
Concluded (the committee's words)
Energy companies still have a long way to go in putting right past failures and building trust among consumers. It is therefore essential that information and support from a range of messengers, including charities, local authorities and other trusted third parties, is available to consumers before, during and after roll-out. (Paragraph 118) Smart meter roll-out 59 9 Annex– Summary notes from committee visit Summary note of the working dinner hosted by PG&E Tuesday 19 March Members present: Mr Tim Yeo (Chair) Dr Phillip Lee Albert Owen John Robertson Sir Robert Smith Dr Alan Whitehead PG&E representatives present: Cliff Gleicher, Senior Director, smart meter programme Brian Rich, Vice President PG&E James Meadows, Director, smart meter programme Introduction Mr Tim Yeo made an opening speech regarding the Committee’s inquiry into a smart meter roll-out in the UK and the possibility of learning from the experience in California. Some of the differences between the UK and California were noted—for example that PG&E does not have pre-pay meters. Committee members enquired about policies focused on the use of gas and PG&E stated that there is no advance pricing on gas meters; instead, a reading is given every hour so that computers can calculate the billing. PG&E roll-out and barriers to roll-out PG&E outlined that California’s policy discussions about a smart meter roll-out started approximately 10 years ago. Approximately six years ago (from November 2006), PG&E had begun installing smart meters, and roll-out was now 96% complete. With opt-outs (initiated in 2012), the number of meters accounted for was 50,000 higher as of March
Correspondence 4 letters
- 5 Nov 2013Letter from Baroness Verma to the Chair of the Committee, 29 October 2013To committee
- 5 Nov 2013Letter from Baroness Verma to the Chair of the Committee, 29 October 2013To committee
- 14 Oct 2013Letter from the Chair of the Committee to Baroness Verma, 11 October 2013To committee
- 14 Oct 2013Letter from the Chair of the Committee to Baroness Verma, 11 October 2013To committee