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(c) a condition of a particular licence under section 7 or 7A of the Gas Act 1986 (c. 44) (transporter, supply and shipping licences);
(d) the standard conditions incorporated in licences under those provisions by virtue of section 8 of that Act;
(e) a document maintained in accordance with the conditions of licences under section 6(1) of the Electricity Act 1989 or section 7 or 7A of the Gas Act 1986, or an agreement that gives effect to a document so maintained.
(2) The Secretary of State may exercise the power in subsection (1) for the purpose only of—
(a) requiring the holder of a licence to provide or install, or facilitate the provision, installation or operation of, meters of a particular kind, or
(b) requiring the holder of a licence to make arrangements related to the matters mentioned in paragraph (a).
(3) Modifications made by virtue of subsection (1) may include—
(a) technical specifications for meters (including specifications in respect of matters relevant to the ability to obtain remote access to meters);
(b) a prohibition on the supply of gas or electricity through a meter other than a meter which complies with a technical specification under paragraph (a);
(c) provision about the installation of meters which comply with a technical specification under paragraph (a) (including provision about the replacement of existing meters);
(d) provision about electricity generated by a customer;
(e) provision about the circumstances in which any pre-payment facilities of a meter may be utilised;
(f) provision about the use of a meter remotely to disconnect a customer’s premises;
(g) provision about the protection of consumers;
(h) provision about access to, and the use of, an electricity distribution system or part of an electricity distribution system for communication in connection with a meter;
(i) provision about access to information from meters (including provision enabling a customer, or a person acting on a customer’s behalf, to have access to information about the customer’s consumption of gas or electricity);
(j) provision about communication of information by or to meters (including provision about its onward communication) and about the use of such information;
(k) provision requiring the holder of the licence to enter (or refrain from entering) into an agreement of a specified kind, or with a specified person;
(l) provision specifying, or enabling the determination of, a date from which a modification is to take effect.
(4) The power conferred by subsection (1)—
(a) may be exercised to make different provision in relation to different classes of customer;
(b) may be exercised generally, only in relation to specified cases or subject to exceptions (including provision for a case to be excepted only so long as specified conditions are satisfied);
(c) may be exercised differently in different cases or circumstances;
(d) includes a power to make incidental, supplementary, consequential or transitional modifications.
(5) The power conferred by subsection (1) may not be exercised after the end of the period of 5 years beginning with the day on which that subsection comes into force.
(6) Provision included in a licence by virtue of that power—
(a) need not relate to the activities authorised by the licence;
(b) in the case of a licence under section 7 or 7A of the Gas Act 1986 (c. 44), may do any of the things authorised by section 7B(5) of that Act (which apply to the Gas and Electricity Market Authority’s power with respect to licence conditions under section 7B(4)(a));
(c) in the case of a licence under section 6(1)(c) or (d) of the Electricity Act 1989 (c. 29), may do any of the things authorised by section 7(2) to (4) of that Act (which apply to that Authority’s power with respect to licence conditions under section 7(1)(a)).
(7) In this section a reference to a meter includes a reference to a visual display unit, or any other device, associated with or ancillary to a meter.’.— [Malcolm Wicks.]
Brought up, and read the First time.
Malcolm Wicks: I beg to move, That the clause be read a Second time.
Mr. Deputy Speaker: With this it will be convenient to discuss the following:
Government new clause 9— Power to amend licence conditions: procedure.
Government new clause 10— Smart meters: supplemental.
New clause 1— Implementation of new metering arrangements —
‘(1) The relevant licensees for the purposes of this Part are—
(a) gas suppliers and gas transporters within the meaning of Part 1 of the Gas Act 1986 (c. 44); and
(b) electricity suppliers and electricity distributors within the meaning of Part 1 of the Electricity Act 1989 (c. 29).
(2) The effective date for the purposes of this Part is the date which is 10 years after the date on which section 79 comes into force.
(3) Expressions used in this Part have the same meaning as in the Part 1 of the Gas Act 1986 or Part 1 of the Electricity Act 1989.
(4) As from the effective date, a relevant licensee must not supply gas or electricity to any premises that is not subject to the provisions of this section.
(5) The Secretary of State may exempt any relevant licensee from the prohibition imposed by subsection (4) in relation to such premises, for such period of time, and subject to such conditions as he considers appropriate in all the circumstances of the case.
(6) References in this Part to new metering arrangements are to arrangements (including the provision and operation of any necessary communications and data-handling infrastructure) designed to ensure that, by the effective date, all premises supplied with gas or electricity in Great Britain will continue to be so supplied through a meter that conforms to the following three requirements—
(a) that the meter must record and be able to store measured consumption data for multiple time periods;
(b) that the meter, either on its own or with an ancillary device, must facilitate remote access to such data; and
(c) that the meter must meet any specifications that may be set out in any regulations made by the Secretary of State under this Part, pursuant to his duties under Part 1 of the Gas Act 1986 and Part 1 of the Electricity Act 1989, for the purposes of facilitating the introduction of new metering arrangements.
(7) This section may not be brought into force before 1st January 2010.
(8) The Secretary of State may, in accordance with this section, modify—
(a) the conditions of a particular licence held under section 7(1) or 7A(1) or (2) of the Gas Act 1986 or under section 6(1) of the Electricity Act 1989;
(b) the standard conditions of licences of any type mentioned in those subsections
if he considers it necessary or expedient to do so for the purpose of securing the implementation of the provisions of this section.
(9) The power to make modifications under paragraph (a) or (b) of subsection (8) includes powers—
(a) to make modifications requiring licence holders, or classes of licence holder, to cooperate together, under arrangements approved by the Authority;
(b) to make modifications requiring any relevant licensee to take or refrain from taking any specified action, whether in relation to premises supplied with gas or electricity or otherwise;
(c) to make modifications relating to the operation of access to, or use of pipe-line systems and distribution systems; and
(d) to make incidental, consequential, or transitional modifications.
(10) Before making modifications under this section, the Secretary of State must consult the Authority, the holder of any licence being modified, and such other persons as he considers appropriate.
(11) Subsection (10) may be satisfied by consultation undertaken before, as well as by consultation undertaken after, the commencement of this section.
(12) Any modification under subsection (8)(b) of part of a standard condition of a licence shall not prevent any other part of the condition from continuing to be regarded as a standard condition for the purposes of Part 1 of the Gas Act 1986 or Part 1 of the Electricity Act 1989.
(13) Where the Secretary of State modifies the standard conditions of licences of any type under subsection (8)(b), the Authority must make the same modifications of those standard conditions for the purposes of their incorporation into licences of that type granted after that time.
(14) The Secretary of State must publish any modifications under this section in such manner as he considers appropriate.
(15) The power of the Secretary of State under this section may not be exercised after the end of the period of five years beginning with the passing of this Act.’.
New clause 3— Regulations on new meters —
‘Where the Secretary of State makes regulations in connection with new metering arrangements under—
(b) Part 1 of the Gas Act 1986; or
(c) Part 1 of the Electricity Act 1989,
such regulations must require that such meters have the facility to use the data that they collect on gas or electricity consumption for the purpose of assisting the householder to select the gas or electricity tariff which is most to the householder’s advantage.’.
New clause 16— Information on carbon dioxide emissions —
‘The Secretary of State shall, within 12 months of the passing of this Act, make regulations requiring companies supplying gas or electricity to specify on consumers’ energy bills the volume of carbon dioxide emitted in generating the energy supplied in the period to which the bill relates.’.
Government amendments Nos. 50, 58 and 59.
Malcolm Wicks: It is good to get on to something smart, namely smart meters. The issue was of significant interest during our discussions in Committee and in the slightly wider world. I know that many Members of the House have a keen interest in it.
During our discussions in Committee, it was clear that both sides of the House were in agreement about the potential benefits of smart meters for both consumers and energy suppliers. The benefits include giving consumers better information to help manage their energy use, providing accurate bills and, potentially, providing easier access to a wider range of tariffs. Smart meters also have the potential to contribute to the future development of the energy services market that many of us hope will be forthcoming.
Of course, smart meters can also facilitate the export of electricity from microgeneration to the grid. For suppliers, the benefits include reduced costs, for example through remote meter reading, accurate billing and the potential to switch consumers between tariffs. All that will in turn translate into an improved level of customer service. However, Members also recognised that a roll-out of smart meters to all energy consumers would be a complex and highly challenging project, which would entail significant costs as well as the significant benefits I have already outlined.
Steve Webb: There is clearly a lot of uncertainty about cost. The figures that the industry comes up with and those that the Government use vary hugely, perhaps by a factor of three. The key source that the Government seem to use is a report by Mott MacDonald. If that has not already been placed in the Library, would the Minister be willing to ensure that it is?
The Government published our response to the billing and metering consultation yesterday. I know that yesterday was only yesterday, but I made efforts to ensure that certain colleagues knew about that publication so that they might be able to glance at the report. Last week, we published detailed economic impact assessments of the costs and benefits of a domestic and small business smart meter roll-out, having previously published an impact assessment for a roll-out to medium-sized businesses.
Before I turn to the Government amendments on smart metering, it would be helpful if I reiterated the Government’s policy intentions as set out in our response to the consultation. Our policy is most easily explained by examining our proposed approach in each of the three customer segments that we have identified: medium-sized business, small business and domestic consumers. Hon. Members who have had the opportunity to study the impact assessments that we published will be aware that there is a positive cost-benefit analysis for proceeding with smart metering for the medium-sized business sector and that the Government have therefore already announced in the 2008 Budget our intention to mandate a roll-out of smart meters to the sector over the next five years. That decision will see about 170,000 electricity and 40,000 gas meters being updated with more advanced technology, delivering carbon savings of around 140,000 tonnes of carbon per annum by 2020—a small contribution to our carbon targets.
Based on our analysis to date, I believe there is also a good case for a roll-out of smart meters to small businesses. However, that analysis needs further testing to ensure that our assumptions fully reflect the complexities of the small business sector. As such, we will be undertaking further work with stakeholders to ensure that our initial positive findings are accurate before making final policy decisions on a small business roll-out.
A roll-out of smart meters to the domestic sector is, of course, a far larger and much more complex project. It would involve replacing some 47 million electricity and gas meters in every home in Great Britain. Current estimated costs to the economy are potentially between £8 billion and £14 billion over 20 years.
Sir Robert Smith: Does the Minister have the figure for the number of meters that are replaced on a renewals cycle when they come to the end of their natural life?
Malcolm Wicks: I will seek to give the hon. Gentleman an accurate answer. If it does not arrive today, I shall write to him.
Malcolm Wicks: I might cover some of these points in due course, but I am happy to give way to the hon. Gentleman.
Mr. Weir: The domestic roll-out is important. Smart meters must be compatible with different suppliers, so a roll-out should perhaps be done all at one time to make sure that we do not get an issue with different types of smart meters that prevent switching between suppliers.
Malcolm Wicks: I understand those points. Of course, when it comes to the roll-out of smart meters there are a lot of important issues of that kind to determine.
In answer to the hon. Member for West Aberdeenshire and Kincardine (Sir Robert Smith), I am advised that approximately 5 per cent. of total meter stock per annum is replaced. I can see where the hon. Gentleman was coming from—there is an ongoing investment and we clearly need to factor that in to any cost-benefit analysis.
Charles Hendry: I think Ofgem estimates that 8 per cent. of the meter stock is changed every year, and that is not far from the 10 per cent. that is being recommended. In Committee, the Minister said that the costs could be between £10 billion and £20 billion, and he has now brought that down to between £8 billion and £14 billion. That shows great progress. Ofgem also estimates that the meters would cost between £70 and £90 each, so 47 million would cost about £4.5 billion. Does the Minister think that he might be able to get his costs down a little further on that point, too?
Malcolm Wicks:
Well, costs can go up as well as down, as the advertisements say. We are trying to refine the analysis and we need to go further, as all sorts of factors are in play. I said that our current estimates put
the costs at between £8 billion and £14 billion, and I have conceded that we need to do more work to refine those figures. That is something that we need to discuss with industry, but our present analysis does not suggest that there is a net positive business case for proceeding. However, the figures are the result of our initial analysis, and are by no means our final word on the subject. Many of the estimated future costs carry a high degree of uncertainty, and some of the anticipated benefits are challenging to quantify in monetary terms.
2 pm
Lembit Öpik: Will the Minister give way?
Malcolm Wicks: I wonder whether I might make some progress. Just occasionally, I answer a question in advance. It happened once, 10 years ago, but it could just happen again.
As I was saying, the figures are based on our initial analysis, and we need to do more work. For example, we anticipate potential benefits to households as a result of better information, leading to reduced energy usage and, as such, lower energy bills and related carbon savings. We also anticipate benefits for energy suppliers and, in the longer term, for distribution networks. However, analysing in detail the full extent of those benefits and quantifying them is extremely difficult and depends on a number of variables that require further investigation. I suppose that shows that we need more than the back of an envelope to do the calculations on—
Charles Hendry: Is that what they did at Ofgem?
Malcolm Wicks: They have very large envelopes at Ofgem; I have seen them.
The first stage of impact assessment work has been valuable in demonstrating the range of complex issues involved in a domestic smart meter roll-out, and some of them will need further in-depth analysis over the coming months. We therefore intend to take forward a further phase of work in consultation with stakeholders. Our aim will be to ensure that we have the best possible assessment of costs and benefits before taking any final policy decisions on a small business and domestic roll-out.
Before I give way to the hon. Member for Montgomeryshire (Lembit Öpik), I should say that our intention is to report our work on these analyses to the House by the end of the year.
Lembit Öpik: May I report to the House that, for the second time in 10 years, the Minister has answered a question in advance? He anticipated my question, and caused me to convert my intervention into a brief word of praise for him.
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