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Dr. Ladyman:
I will not detain the House long. The hon. Member for Wealden (Charles Hendry) is being a little churlish in offering only one and a half cheers; I
think that my hon. Friend the Minister listened very carefully to our debate in Committee and has responded far more fully than I expected him to, so he should get more than one and a half cheers.
I want to reiterate a point that I made in Committee. A smart meter will certainly allow a person to choose between tariffs by providing them with the information that they need if they are to make that choice, but because of the way in which the electricity and gas retailing industry works, they would be making a choice between the tariffs offered by a particular company. If someone wants to change companies, they have to work out who has the cheapest tariff. They may have to go online to the website of a company such as uSwitch and enter their details and information about their energy usage; uSwitch will then tell them which the cheapest energy supplier would be, and the person could then sign up with that company. I do not want to do that in future; I want a smart meter that does it for me.
I want a smart meter that I can hand over to a company such as uSwitch, so that it could monitor the energy retailing industry for me and change my tariff and supplier every week or month, or whenever appropriate. I do not want to have to do the work any longer. Why should I, when I have a computer built into my energy meter that should be doing that work for me? My question to my hon. Friend is whether the amendments before us go so far as to make that practicable, so that companies such as uSwitch can decide to step into the market and extend their range of products. According to my reading of the amendments, they probably do allow that to happen, but I would like confirmation from my hon. Friend that my reading is accurate, and I would also like confirmation that when the consultation takes place over the next few months, the need for such a service will be taken into account so that energy retailers are not allowed to block the entry into the market of companies that can provide us with such a service.
Steve Webb: I think that the hon. Gentleman’s reading is right; new clause 3, which is in the group of amendments that we are considering, and which I hope the Government will accept, provides that the regulations on smart meters must include a provision allowing a smart meter to be a friend in the cupboard, or on the mantelpiece, that facilitates switching for the consumer. The hon. Gentleman might have heard a lengthy advocacy of that exact principle in Committee, and I am delighted to hear that point reflected in today’s debate; I welcome that.
Along with others who have spoken, we very much welcome the Government’s new clause 8. As the numbering of the new clauses suggests, we had already tabled new clause 1, which tries to do very much the same thing as new clause 8. We are not too worried about the finer points of the drafting differences between the two. As new clause 8 has the Minister’s imprimatur, we are happy to defer to him, and not to pursue new clause 1, with one reservation: as the amendment paper shows, when we tabled new clause 1, we included a time scale. That point has already been touched on. The five-year time scale referred to in Government new clause 8 means that there will be five years before the starting whistle is blown, and before
things might start to happen. The idea that the clock is ticking is important in the context of climate change. If we are shortly to have binding targets for reaching our 2020 and 2050 climate change goals, another year or two, or five, matters. It is the lack of urgency that disturbs us. Let me read a statement of the Government’s policy:
“Following our consultation on billing and metering, the Government intends to roll forward a package of measures in Great Britain which will change the way in which energy use is communicated to customers.”
One might assume that that came out this week, but in fact it was said a year ago in the energy White Paper of May 2007. The consultation on billing and metering referred to is the previous consultation, and not the most recent consultation or the next consultation. We feel that a line has to be drawn.
I accept that the Government have a trial under way, and there is an argument for saying that we should let the trial finish. However, the statement of May 2007 was written when the trial had barely begun, so it is hard to argue that we need extra time for the trial to run when, over a year ago, before the Government had any clues about how the trial was going, they were already giving undertakings. The Minister cannot have it both ways.
As the hon. Member for Wealden (Charles Hendry) said, the document that was circulated today—we appreciate the help given by the Minister’s office in that regard—says that, in summary, the Government’s plan, in response to the consultation, is
“to complete further economic assessment work and consultation to finalise policy position”.
One wonders what the Government are waiting for. What do they think that they will find out after another six or nine months of dithering that they could not find out in the previous 12 months of dithering? What is the delay? The conclusion of the response to the consultation says:
“Given the complexity of the issues and the number of variables involved, the Government wishes to discuss further...We have therefore published...a consultation impact assessment”—
“on a roll out...and invite comments”.
I wonder whether there will be a Government response to the consultation impact assessment, which was the Government’s response to the consultation, which followed another consultation. Perhaps then there will be a period of public engagement, reflection and consideration. Can we not just get on with it?
I have been trying to work out why the Government do not want to get on with it, and whether the Minister has caught the ditheritis that comes from the top of Government. I looked back to our deliberations in Committee on 11 March, which was the last time that I challenged the Minister to get on with it. He intervened on me to ask, apropos of smart meters,
“Does he not recognise that by rushing the process”—
rushing? Chance would be a fine thing—
“there is a danger that we could to install the wrong technology”? ——[Official Report, Energy Public Bill Committee, 11 March 2008; c. 581.]
I do not know whether the Minister has ever bought a computer; I sense that he may never have done so. There is always a danger of buying the wrong technology, and that something better will come round the corner.
Surely there are plenty of examples of working technology out there. It is not staggeringly new. We have a rough idea of how it would all work. The fact that the Government have had a trial of smart meters going for well over a year suggests that it is not cutting edge, alien technology. It is in use in other countries as well, so the technology is not—
Dr. Whitehead: Although I go along with the hon. Gentleman in his suggestion that it is important that rapid progress is made between the consultation and the implementation of smart meter technology, his computer analogy assumes that a choice is made within a common operating system. Does he accept that one of the issues in smart meter roll-out must be to ensure that meters are interoperable and interchangeable, and are not the creature of the company that installed them? It is therefore necessary to get that process right.
2.30 pm
Steve Webb: I agree that we need interoperability and that we need to get the process right, but I do not see why another 12 months, 18 months or any other period of consultation and dithering will make that any more likely. We know that now and we knew it 12 months ago, so let us get on with setting the common standards to which all companies would have to adhere. Why was Ofgem not asked to do that 12 months ago? I agree with the hon. Gentleman on the goal. I do not understand the delay.
Why is it so important that we get on with the task? We have heard some of the advantages of smart meters, but probably not all of them. One that has been understated so far in the debate is the potential for load shifting. If we are thinking about the difficult question of our future energy supply and security, and a structure that will match the peaks of demand that occur, and potentially thinking about a future when we might, for example, be charging up our cars overnight, the importance of load shifting will become greater and greater.
If we can use smart meter technology to ensure that we do not need quite so much total capacity in the system because of a very small number of very high peaks—if we can do something about the peaks—that will have a profound public benefit for the infrastructure that we need. The cost-benefit analysis of smart meters should take that into account. The benefit would not just be private and personal; the entire public infrastructure would benefit from much greater incentives for load shifting. That has not been factored in sufficiently.
We heard mention of fuel poverty. Certainly, we do not want people in fuel poverty to get estimated bills, especially when those are overestimated. The hon. Member for Wealden suggested that smart meters would bring an end to prepayment meters. That is not my understanding. Some consumers choose prepayment because that is the way they prefer to budget and, as I understand it, that method of payment would continue. The meters would
not have slots, like the old fashioned ones had, but charging up a plastic card to obtain credit will still be an option when smart meters are up and running.
The key is to ensure that the tariffs are right. A set of the fuel poor or vulnerable households or a similar category of people could be identified, and smart metering technology could be used to ensure that they were automatically on the best tariff that the given company offered, or the best tariff. That comes back to the point about switching, to which I shall return.
Another aspect of fuel poverty and smart metering that we have not thought about is one of the arguments advanced by the companies. When they are told to target the vulnerable, they do not know who the vulnerable are. The Government know who the vulnerable are, and I have suggested in the past that the Government might once a year send a letter to everyone on pension credit, for example, with a certificate that they could show to their energy supplier to claim entitlement to its best tariff.
In the world of smart metering we could go one better. Central Government could simply issue to the smart meter the eligibility switch. In other words, there could be a mechanism whereby, since the meters can receive data as well as send data, they could receive information that the householder was entitled to the social tariff, whatever it happened to be. It is another way in which the fuel poor could be targeted, which we struggle to do at present.
Dr. Ladyman: Smart meters could go one step further and allocate the fuel poor and the social tariffs among the companies, so that all the companies were paying a fair share of the burden of meeting the needs of vulnerable people.
Steve Webb: The companies are certainly not paying a fair share at present, so that is an interesting suggestion.
We have seen the potential of smart meters for load shifting and for alleviating fuel poverty. The climate change potential through CO2 savings has been mentioned, although it is possible to overstate those savings. There is some evidence that there is a one-off shift, but it is slightly less clear that the effect is ongoing. Whatever sort of smart metering we have, we clearly need a visual display that is compatible with a smart meter, rather than a clip-on device, so that people have the best possible and most accessible information about their consumption and about the CO2 emissions to encourage them to think harder about cutting back.
I have a killer fourth point in my notes, which I cannot read. I shall come back to it.
Malcolm Wicks: Will the hon. Gentleman give way?
Steve Webb: Yes, that would be good.
Malcolm Wicks: I like to be kind. The hon. Gentleman will no doubt think of the fourth point. Whether it turns out to be a killer point or not will be for the House to judge.
May I ask the hon. Gentleman, as I asked the hon. Member for Wealden (Charles Hendry), to address the issue of costs? I know that opposition is the art of
rhetoric and eloquence unencumbered by economics, but there are serious cost issues involved. We are talking about a major roll-out to every householder. We want that to happen, but I do not apologise for the fact that the Government must consider the cost issues. Even the Liberal Democrats must consider cost issues.
Steve Webb: I am grateful to the Minister for paying tribute to my eloquence. That is very decent of him. As an economist, I have never been accused of being unencumbered by economics—au contraire.
We heard from the hon. Member for Wealden that for individual smart meters the costs are modest, relative to the potential savings to the consumer. So the consumer gets a benefit, the companies clearly get a substantial benefit on billing and so forth, society gets a benefit in terms of CO2 emissions, load shifting and microgeneration—my crucial fourth point, to which I shall return. Bringing that all together, it is hard to see why the Government’s cost-benefit analysis is so at variance with everybody else’s. Given that Government money is not involved, I do not understand what the agenda is or the internal DBERR politics.
Malcolm Wicks: I assume that if there are net costs, as I believe there will be, they will be passed on to the consumer. It may not be public spending, but at a time of rising energy costs we must have regard to that. I am a supporter of smart meters and I predict that they will be rolled out for householders, but we need to refine the costs and see what the difference is between ourselves and industry on those cost estimates. Many of the advantages are, in a sense, hypotheses. We hope behaviour will follow those, but we must ground it in some estimate of net costs.
Steve Webb: Indeed, we need to be realistic about costs. Climate change and fuel poverty are urgent imperatives, and because of the delay, industry is wasting huge amounts of money and passing that on to consumers. The Minister told my hon. Friend the Member for West Aberdeenshire and Kincardine (Sir Robert Smith) that over 2 million meters—roughly 5 per cent.—are replaced each year. The further delay between now, when we hoped for a decision, and Christmas, when we might get one, means that another 2 million meters will quickly be obsolete. That is waste as well, which has to be paid for by consumers. I doubt whether the Government’s cost-benefit analysis factors that in. There is a net benefit to the companies, the consumer and the wider society, and the sooner we get to that point, the better.
The fourth advantage relates to microgeneration, which we will deal with more fully in the next group of amendments. The ability to measure accurately what has been generated on a micro scale, exported to the grid and so on is integral to some of the issues that will be covered in the next group of amendments. All that is on hold while we dither about smart metering.
New clause 3 deals with what I call “your friend on the mantelpiece”. We know that there are sets of consumers who switch. We know that, on average, they are the IT literate and the better off. The people least likely to switch are the fuel poor, the urban poor, the very elderly and frail—people who do not get on with technology. Now that the Government have accepted
that they will be making regulations about what smart meters must do, new clause 3 proposes that one of those should be to do the shopping around for the consumer. That is what I suggested in Committee and I am delighted that the Minister accepts that principle.
I am happy to discuss the fine detail of how that works, whether it involves switching every second or every quarter, and the way that that is finessed. However, the principle of relying on consumers, even with display units, to take the information to the internet seems one step too many for the most vulnerable. The Minister asked me whether the technology was feasible when we debated this issue in Committee. The technology seems self-evidently integral to smart metering; the meters can receive and send data. Once there is interoperability—an essential prerequisite—that will be done in a standard format. The smart meter should be able to go to the internet and check, on the basis of the person’s individual consumption, for the best package and tariff. That seems to be a win-win situation.
Rather than there being regulators investigating the industry to see whether it is competitive, why do we not just make it competitive? Why do we not put every consumer in charge? What I suggest is the ultimate in putting consumers in charge and making the companies respond. The companies would have to innovate, because those out of line on tariffs would lose custom dramatically. There would be opportunity for niche marketing, because each smart meter would base its choice on the individual consumer’s actual consumption patterns and firms would have an incentive to match tariffs to people’s actual consumption patterns. That could revolutionise the industry.
It is the paucity of vision in new clause 8 that bothers me. We could do this thing in a completely different way, and we are missing that opportunity. Through new clause 3, we are seeking the Minister’s assurances that when specifications for what smart meters have to do are set out, they will include the proposals in our new clause.
“tariff which is most to the householder’s advantage.”
What constitutes an “advantage” might be interpreted in a variety of ways; some might want to use the smart meter to find the best green tariff, for example. However, the point would be that the digital divide in respect of the poor would cease to apply. That is one of the big problems with the whole presumption that one of the answers to fuel poverty is that poor people should switch. We know that, in general, poor people do not switch. They do not have the information. I still find my fuel bills baffling, and I regard myself as moderately sophisticated on such matters. It is unrealistic to expect the fuel poor to tackle fuel poverty by constantly shopping around online or by any other means. The smart meters could do that for them—and the sooner that they are in place, the better.
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