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House of Commons
Session 2007 - 08
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General Committee Debates

Energy Bill

The Committee consisted of the following Members:

Chairmen: Mr. David Amess, Mrs. Joan Humble
Baron, Mr. John (Billericay) (Con)
Binley, Mr. Brian (Northampton, South) (Con)
Hendry, Charles (Wealden) (Con)
Horwood, Martin (Cheltenham) (LD)
Iddon, Dr. Brian (Bolton, South-East) (Lab)
Ladyman, Dr. Stephen (South Thanet) (Lab)
Main, Anne (St. Albans) (Con)
Owen, Albert (Ynys Môn) (Lab)
Palmer, Dr. Nick (Broxtowe) (Lab)
Reed, Mr. Jamie (Copeland) (Lab)
Robertson, John (Glasgow, North-West) (Lab)
Seabeck, Alison (Plymouth, Devonport) (Lab)
Swire, Mr. Hugo (East Devon) (Con)
Tipping, Paddy (Sherwood) (Lab)
Webb, Steve (Northavon) (LD)
Whitehead, Dr. Alan (Southampton, Test) (Lab)
Wicks, Malcolm (Minister for Energy)
Chris Shaw, Committee Clerk
† attended the Committee

Public Bill Committee

Tuesday 11 March 2008


[Mr. David Amess in the Chair]

Energy Bill

Further written evidence reported to the House

EN 14 British Hydropower Association

Clause 79

Gas meters
Question proposed [6 March], That the clause stand part of the Bill.
10.30 am
Question again proposed.
The Chairman: I remind the Committee that with this it will be convenient to discuss the following: New clause 1—Smart meters—
‘(1) The Secretary of State shall make regulations which require smart meters to be installed for gas and electricity in all homes by the end of a specified period of ten years from the date on which the regulations are made.
(2) In this section a “smart meter” means a gas or electricity meter with two-way communication capabilities including communication capability to a display which illustrates household usage and cost per unit consumed.
(3) Regulations made under this section must be made within a period of 12 months beginning on the date on which this Act is passed.’.
New clause 2—Information on ETS allocations—
‘(1) Companies involved in the generation of electricity must publish information in their Annual Reports on the amount and value of any allocation they have received from the EU ETS and the amount that has been paid for such an allocation.
(2) Companies failing to publish the information required under subsection (1) shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding level 5 on the standard scale.’.
New clause 4—Information on contributions towards environmental taxes—
‘(1) The Secretary of State shall make regulations requiring energy utilities companies to specify the proportion of those consumers’ energy bills that contribute towards environmental taxes.
(2) In this section “environmental taxes” means—
(a) the Renewables Obligation Certificates,
(b) charges resulting from the EU Emissions Trading Scheme, and
(c) charges resulting from the Carbon Emissions Reduction Targets and future additional environmental charges.’.
New clause 20—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 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 21—Reports on meters—
‘The Secretary of State shall, in each calendar year following that in which this Act is passed, lay before Parliament a report on—
(a) the number of smart meters that have been installed in that period, including their effect on reducing carbon emissions and fuel bills;
(b) the discussions he has held with energy supply companies about—
(i) pre-payment meters,
(ii) the number of such meters in use, and
(iii) their tariffs;
(c) the progress that has been made in reducing carbon emissions through—
(i) increased use of renewable generation, and
(ii) energy conservation measures in households;
(d) the discussions he has held with energy supply companies about the impact of pre-payment meters and their tariffs.’.
Steve Webb (Northavon) (LD): Good morning to you, Mr. Amess, on our final lap. The distance of 5,000 m is not quite a marathon, but we have had an enjoyable canter around some important issues. I have read the transcript of our discussion on smart meters that began last Thursday afternoon and that we shall continue now, and I very much agree with a lot of what the hon. Member for Wealden said when he introduced his new clauses. I am speaking to new clause 20 tabled in my name and that of my hon. Friend the Member for Cheltenham. It relates to the same issues.
By way of context, it is worth saying that, notwithstanding the evidence that we received about the potential merits of smart meters, they are not a panacea. They are not a silver bullet; they are not the answer to everything. In an intervention in the speech of the hon. Member for Wealden, the Minister talked about a sober cost-benefit analysis. I would never expect anything other than sobriety from him, and I am sure that we shall have plenty of that this morning.
We want to give the industry and the consumers certainty. For example, I had a meeting last night with a representative of a major energy supplier, who told me two things that made me think. I said, “You are replacing meters every day. Are you putting in smart meters?” The answer was, “No, of course, we aren’t.” I said, “Why not? Everyone will have a smart meter sooner or later, so why don’t you start doing it now?” The spokesman said, “Which smart meters would we put in? We could put one sort in. Another company could put another sort in, and then the Government finally legislate and could specify a different standard or set of criteria. We will then have to rip out our smart meters because they are the wrong sort. Until we know what we should be doing, we cannot start. It is not as though the procedure will happen slowly; it needs co-ordination.”
The second thing that the spokesman said startled me. He stated, “We are putting in 10,000 new meters each day.” That is an awfully fast speed to be running in the wrong direction because within 10 years, presumably, they will all have to be ripped out and replaced by smart meters. That is ludicrously wasteful. Meters have to be replaced, so surely we now need decisions from the Government. Matters could largely be market driven. There is an issue about how much the Government should be involved in the process, but surely they should be kicking it off and setting the rules of the game at the very least. Some of the new clauses would achieve that position.
Several members of the Committee, including the hon. Member for Southampton, Test, attended a smart metering breakfast at which such issues were discussed at length. The companies are saying that smart metering makes sense for perhaps a third of their customers, and that they are economically viable and commercially attractive. However, they say that there is no real commercial incentive for a lot of customers. As for the benefits of smart meters, the hon. Member for Wealden talked on Thursday afternoon about how smart meters could assist the scope for microgeneration, but that is of no great interest to the suppliers. We, as policy makers, want that, but the suppliers would not get much out of it.
Suppliers will obviously make savings by not having to send the man with his cloth cap to read the meter, but they reckon that the cost of putting in smart meters would only be half offset by the savings made by not having meter readers or estimated readings. It will be interesting to hear the Minister’s figures because we hear anything from £5 billion to £15 billion, which shows a huge range of uncertainty. Clearly, someone will end up paying the bill. Although we might wish that it will purely be the shareholders of the companies, we sense that somewhere down the track the consumers will end up footing some of the cost. That is another reason why the whole process must be done at minimum cost. Given that is where we think we will end up, it needs to be mandatory, organised and structured.
As for getting from here to there, one of the big questions is whether we let the market do it, which I think is Ofgem’s position. I struggle with that idea, not philosophically, but pragmatically. Given that a street might have six or seven different providers and that an individual household might have different gas and electricity suppliers, dozens of white vans could be coming to that road sequentially or at different points in time. It sounds ludicrously inefficient to have individual companies maintaining their own meters for a household here and a household there. My instinct is to say that we should co-ordinate that.
People have talked about a regional franchise, but it would not have to be exactly that model, as long as there was some notion of co-ordination. There could still be, for example, competitive tendering for the franchise and a competition for who should install the meters in a particular area. There could still be an element of competition, but with some co-ordination, which would make the process far more cost-effective.
The reason that we have tabled new clause 20 is that, once the smart meters start being rolled out, there is a potential gain that has not been mentioned sufficiently. It could be the revolution in the energy market. A major complaint about the energy market is the perceived lack of competition. The Minister, understandably, will be cautious about that assertion, because Ofgem are examining the situation and the Competition Commission may be asked to consider it. However, smart meters could be the answer to competition in the energy market.
One of the current problems is the lack of switching between providers. The Minister and I shared a conference platform last Thursday afternoon at which the chap from the energy company said, “It is great. One in five people a year switch.” In fact, we know that poor households are less likely to switch provider and that half of the people who do switch, do so to the wrong company. That is not perfect market functioning in my view; there is not free and full information and competition.
I find the welter of different tariffs bewildering. I feel that I ought to have another look. I have not changed supplier for several years and it is about time that I did, but I cannot be bothered. I am not entirely sure which bill is relevant, and it is an estimate, anyway. The market is not fierce, vigorous and competitive. How could smart meters feature? Smart meters need to be two-way. They do not only measure consumption, but they feed back information. There is a communications element to them.
What if the smart meter, which knows everything about a household’s fuel consumption, were in a position to surf the net on their behalf and match their pattern of consumption against all the companies’ tariffs, and come back and say in a Stephen Hawking voice, “EDF would be good this month”, for example? It could do that perhaps once a quarter or twice a year—whatever the optimal period was—and say, “Right, I am going to switch you, because for the last three months you have been using tariff X, but company Y has come up with tariff Z, which would be better for you.” That would scare the pants off the fuel companies, which must be a good thing.
As an economist, I used to write essays about perfect markets. Their features were complete information, no transaction costs, and large numbers of suppliers. A smart meter that shops around on someone’s behalf would be the closest thing I have ever come across to a perfect market, because there would be full information that could be tailored to individual circumstances. Once the information was in, there might be no cost to the householder, because the technology of matching a set of consumption data to a set of tariffs—the companies could make their tariffs available in that format—could lead to optimal behaviour by consumers. Instantly, the excess profits of the fuel companies would be taken away. Instead of needing a windfall tax or anything similar, the smart meter could be the agent of making the domestic energy supply market truly competitive for the first time.
Dr. Stephen Ladyman (South Thanet) (Lab): The hon. Gentleman is absolutely right and he suggests an exciting scenario. When we were taking evidence on the subject, my hon. Friend the Member for Southampton, Test, and I were talking about it and the question arose of why the meter would surf the net only every month. Why would it not surf the net every minute or every second for the best available price? The retail electricity market would come to an end as a consequence, because we would all be buying direct from wholesalers.
Steve Webb: I had not thought of abolishing the retail supply companies, but perhaps that is the logical progression. I have been out-lefted. How about that? I said perhaps once a quarter because there is a clear issue about payment. In other words, to be part of this, do I perhaps have to lodge my bank details with some clearing house, and then one quarter I am with this company and it has the right to take a direct debit from my account and the next quarter another company does? Imagine if that applied every second or every minute. That might be a pragmatic answer to the hon. Gentleman’s question. However, it is certainly an interesting idea that we could do away with the retail supply companies altogether. I will leave it to him to tell them that.
Dr. Alan Whitehead (Southampton, Test) (Lab): My hon. Friend the Member for South Thanet made a powerful point. There is the question of programming a device that looks at what the perfect supplier is. Therefore, in the hon. Gentleman’s scenario, the perfect supplier would be defined by the programme and therefore everyone would switch to it at the same time, creating chaos in the market rather than the simplicity that he suggests. The purpose of having a market at all is that imperfect information means that not everyone does the same thing all the time.
Steve Webb: My suggestion of doing it quarterly for each individual—each individual’s quarter would begin on a different day—overcomes the problem that the hon. Gentleman suggests. On any given day, the vast majority of people might be automatically switched from company A, but company A would be out of business if by the next day it had not done something about it. If it was uncompetitive, it would have to do something about it. That is the power of the free market, he said, uncharacteristically. That is the attraction of the scheme—companies could not persist making super-normal profits without doing something about that.
My other point is that consumers are diverse and the best tariff for you, Mr. Amess, might be different to the best tariff for the hon. Gentleman. You might have different patterns of gas and electricity use, use your power at different times of day and night or be a small user or a big user. The companies will offer diverse tariffs because consumers are diverse, and so the situation will not be quite as dramatic as the hon. Gentleman suggests.
Dr. Whitehead: I want to gently point out the question of computers buying and selling shares and the effect that that has on world depressions and stock markets. The hon. Gentleman appears to be advocating a similar process.
Steve Webb: I think that it was the hon. Member for South Thanet who was advocating precisely that process. I am suggesting something slightly more managed—for example, that once a quarter the meter does that sort of thing, with each person’s quarter starting on a different day to that of three quarters of the population, or whatever. Therefore, on each day presumably only a small percentage of the population would switch and that would send strong supply and demand signals to the companies, which would have to respond. That, to me, is what a competitive market would look like.
Anne Main (St. Albans) (Con): I have been speaking about smart meters for some time. One of the things that concerns me about the scenario that the hon. Gentleman describes is where someone wants to indulge in green tariffs. Often a green tariff is not the cheapest, and if the programme always goes towards the cheapest tariff, it does not necessarily go for the greenest. Would the hon. Gentleman like to explore the possibility, for example, of having some sort of programmable device on the machine? Possibly, having consulted with whoever is supplying the meters, one could decide what sort of tariff one wanted from one’s meter. It might be the greenest tariff or it might be the cheapest one. One would therefore not have constant switching as a result of the machine permanently making the decision.
Steve Webb: I am grateful for that intervention. The hon. Lady makes a perfectly good point. In a sense, the smart meter is as smart as one wants it to be. We need to beware of over-complexity. I can almost envisage that there might be a green button on the front of the machine, which someone who valued a green tariff could press, and the machine would then look for a green tariff. We need to keep it simple, but the principle is good.
The Minister for Energy (Malcolm Wicks): Presumably not a nuclear button.
Steve Webb: If I respond to that intervention it goes on the record, but no, not a nuclear button.
I am taking us down this track—which I admit is probably a few years away— because the potential of the devices has probably been understated. The trouble is that we have not started the journey and it needs to be done in a managed way. The companies want to get on with it, certainly for some of their customers—they are champing at the bit—but the Government are holding them up. Perhaps things will change in a few weeks’ time, but we have not seen that yet.
10.45 am
Dr. Ladyman: I arrive at a conclusion slightly different from the hon. Gentleman’s. The market is so exciting that perhaps we should approach it in an unmanaged way, because that is how markets work. Given the exciting potential futures that we have been discussing, the Government are right not to step in and do something now that would lock us into smart meters today. Perhaps it would be better if somebody said, “I will undertake to provide your electricity through a smart meter. I’ll provide the smart meter and make sure that the infrastructure is in place so that it is bought from the wholesaler at the best price at any particular second.” In other words, it should be left to the market to introduce smart meters, and the Government have got it right by not being prescriptive at this stage.
Steve Webb: That is a thoughtful contribution, as I would expect from the hon. Gentleman, but it is actually profoundly wrong. The market works in certain circumstances, but the issue of interoperability is an example of the problems that can arise. If I got a smart meter from EDF and changed supplier to E.ON, it would be crazy if I then had to get a different smart meter, or if my original smart meter could not talk to different suppliers. That shows that there needs to be some sort of interoperability standard, but I also sense that the Government may be about to do what the hon. Gentleman is defending them for not doing, so I caution him about that.
Dr. Ladyman: The Government do all sorts of things that I defend them for not doing. I was not suggesting that people would get their smart meter from E.ON or any other energy company: rather, I was suggesting that smart meters should be provided by a body that was more like—in other words, one that was not related to the energy companies. Such a body would be responsible for providing the necessary infrastructure, and for dealing with interoperability issues. The customer would simply buy through that intermediary, from the supplier that was the cheapest at any particular second.
Steve Webb: That is an interesting idea. The problem is whether the market that the hon. Gentleman describes would ever exist independently of the energy companies, given what we know about the stickiness with regard to switching. Even though all I need do is switch on my laptop, dig out a bill, type in my name and address and switch company, I cannot be bothered to do so. Also, an independent provider could sell me a smart meter, but what would be the advantage in that—the fact that it would shop around for me? Well, I can do that now, sort of, so I am not convinced that a freestanding market such as he describes would exist independently of the energy companies. Moreover, the questions of interoperability and so on would arise once the market was operated by the companies.
Charles Hendry (Wealden) (Con): The hon. Gentleman makes an interesting case, which I support. Does he agree that one reason why standards must be set by the Government is that smart meters should apply to both electricity and gas, and that that would not necessarily happen if left to the market? Secondly, the meters must allow for two-way flows, so that people can measure how much electricity or gas they are taking out of the system, and how much they are feeding into it, through microgeneration. If those standards are not set by the Government, there is a danger that there will be a massive roll-out of smart meters that are nothing like as smart as they could be.
Steve Webb: I agree. A meter that does not answer back is not smart. There needs to be a two-way flow of communication.
I have gone on for longer than I intended, but I want to make a couple of other brief points. First, I am keen to hear the Minister’s thoughts on the interaction between smart meters and fuel poverty. Smart meters will not provide all the help that fuel-poor people need, and they could cause problems similar to those caused by pre-payment meters, otherwise known as poor-pay-more meters. It will be interesting to hear the Minister’s thoughts on that, given the Government’s lamentable failure on fuel poverty. The other day, I met someone who worked with the Minister in Brent back in the 1980s, and who said that he was a champion at tackling fuel poverty—
Malcolm Wicks: Is.
Steve Webb: Is—that is an interesting one. Does the Minister see smart meters as part of the answer to the Government’s catastrophic failure on fuel poverty? Will that be part of the solution, or will it be a neutral technology?
Albert Owen (Ynys Môn) (Lab): The hon. Gentleman is making an interesting case. He set off by saying that he was trying to simplify the market, presumably to help fuel-poor people, but he has made it sound even more complicated. At present, people find matters difficult because they cannot get online and they do not have the technology. What in his proposal will make that simpler?
Steve Webb: I apologise if I have not made that clear. The point is that people with smart meters will not need their own laptop internet connections and so on, because the meter will do the work for them. Broadly speaking, poor people in particular do not switch often, but the smart meter system would switch them to the best tariff all the time—the machine would do it for them. That would be far better than relying on poor people having computer connections or shopping around. It would be simpler, as they would not actually have to do anything. As long as they consented to allowing the meter to shop around for the best tariff once a quarter, or whatever, they would always get the best price available.
Albert Owen: I understand how the technology would work, but there is more to it than that. People would need a bank account and an arrangement with a company. That is the problem at present: poor people do not have access to the banking system or the internet. I do not understand how the information that they would receive would help them get cheaper fuel.
Steve Webb: The hon. Gentleman makes two separate points, about access to banking and access to the internet. Access to the internet is clearly a problem and a barrier for poorer households, but it would not be an issue in the circumstances that I have set out. Those people who have bank accounts but no internet access, and who currently do not switch, would do so in my scenario. I accept that there is an issue about people who do not have bank accounts, but I suspect that the numbers of people who do not have any type of bank account that could be linked into the sort of system that I have described are relatively small. Also, rather than requiring people to give their bank details to every separate company, I suggest that that could be done through a clearing house.
I fully accept that the problem of people with no bank accounts is a bigger matter, but we should not fail to help some poor people just because we cannot necessarily help them all. My proposal would make progress in the right direction, but I accept its limitations.
The other question that I have not yet addressed is that of the potential environmental benefits of smart meters. As things stand, there is a risk of overstating the issue: the evidence shows that there is a one-hit saving—with people saying, “Oh, gosh!” and then turning a few things down—when meters are first installed. That one-hit saving is well worth having, but whether it leads to recurrent and ongoing savings is less clear, and I should interested to see the evidence on that.
Other countries are well ahead of us in this regard, but smart meters could help the environment if they were used to facilitate tariffs—along the lines of the economy seven idea—so that there was more time shifting of consumption. The grid would need less peak capacity at particular times of day or night and, for those of us who want greater use of renewables, that would be a good thing, as it would help with the integration of renewables into the grid.
I shall draw all those threads together. I began by saying that smart meters are not a panacea—that they are not a silver bullet, but that they are part of the solution. However, since we are going down the smart meter track, we need a clear Government announcement as soon as possible about what that track will look like. We need co-ordination to avoid waste, because the cost of six vans going down the same road will end up being paid for by the consumer. We need to be more visionary, in the way that I have described: instead of holding inquiries and investigations into an uncompetitive energy market, we should regard smart meter technology as part of the answer, and a way to ensure that we have a competitive market. That would mean that consumers and the environment would benefit, not just the companies.
Dr. Brian Iddon (Bolton, South-East) (Lab): I want to raise another concern about metering. As far as I am concerned, people can come and fit a smart meter for me tomorrow. I shall explain why, using gas as an example.
First, though, I must point out that I live in two places—here in London and up in my constituency—so I have two houses to organise. The other day, the gas meter reader came to my constituency house while I was here in London, and he pushed the card through the door. When I got back home, I looked for the contact number so that I could phone in the meter reading. I read the meter and came back to London with the card. Of course, the wrong reference number had been written on the bottom of the card. The suggestion was that I should leave the card on my doorstep, even though it was a wet and windy day. Now, where would that card have been the next day? It would have been down the road somewhere, so that is one problem with gas meter readers.
My biggest concern, however, has been with the electricity company that supplies my power. I know that the clause under consideration relates to gas meters, but electricity meters are relevant as part of the debate on smart meters, so I hope that you, Mr. Amess, will give me some leeway.
My electricity supplier used to be Norweb, then it was United Utilities and is now Powergen. I was lulled into a false sense of security because, when I was with the first two companies, I had a direct debit that was recalculated every year. The result was that I paid an elevated amount that took into account increased power charges, and inflation in general. However, in the three years that I have been with Powergen, that has never been done, and the consequence was that I found myself £1,000 in debt. My presence in London during the week meant that I might have responded a few days late to the cards asking me to phone in meter readings, but most of the time Powergen took no notice of the readings that I sent by telephone.
John Robertson (Glasgow, North-West) (Lab): I understand the problems that my hon. Friend has had with his energy company and, having seen some programmes on television, I can understand why he has had them, but he is not alone. Scottish and Southern Energy and Scottish Power have been just as bad as any of the other companies.
Dr. Iddon: I realise that my problem is not unique, and that is why I am raising it this morning. I could afford to pay the £1,000 debt because I am working and have a good job, but we should think of all of those people who would not be able to pay it. The trouble is that the power companies—and Powergen is not the only one—no longer read the meters themselves. Instead, they use meter-reading companies that attempt to read them. Several years ago, power companies would insist on reading the meter at least once a year, and customers would make an appointment to ensure that they were in the house when the meter reader came. In that way, they could open the side gate and let the meter reader in, but that does not happen any more.
Also, meter readers make their calls very quickly. I have been in my house when a meter reader has called, only to see him disappearing down the road in the car before I even managed to open the door, greet him and make the meter available for reading. The fact is that meter reading is currently in a state of chaos with some power companies—although not all: I have no complaints about the company that supplies my electricity in London. They are not all the same, but Powergen is particularly bad. I wrote to Powergen, but I have never had a letter back. It is very bad at responding to customers’ letters about serious complaints such as this.
Charles Hendry: Was the hon. Gentleman as surprised as I and others were when Allan Asher from Energywatch said in evidence to the Committee that one third of all bills are wrong because they are based on estimates? He made exactly the same point: that it is the most vulnerable and the poorest people who end up being in the most difficult situations as a result. It is a huge problem that one third of all bills are wrong.
Dr. Iddon: The hon. Gentleman is absolutely right. I was going to point out that incorrect bills will cripple some of those people who have to manage day to day on the money that they receive, probably from benefits in many cases. It would be difficult for many people to find themselves even £20 in arrears, let alone £1,000. Admittedly, that debt arose over a three-year period, and it was partly my fault. I should have realised that the amount was not being updated and then altered the direct debit myself. I accept some of the blame, but I had been lulled into a false sense of security because the two previous power companies had made the necessary updates.
There had been several price increases during that three-year period. I asked Powergen to tell me how it knew, over that period, how much electricity I had used on each side of the price increase. It had no clue, of course. When it estimates its bills, I will bet my bottom dollar that the bill is estimated in its direction rather than mine. A smart meter that would immediately change the tariff when the power company decided to increase the price would have got me out of that problem, and it would do the same for all the poor people suffering the same difficulty. I implore my hon. Friend the Minister, particularly with the fuel poor in mind, to get these smart meters in place so that we do not have this continuing problem with manual metering. I apologise to all the manual meter readers, because they will be out of a job, but—and I shall probably get in trouble for saying this—the way that some of them read meters, they probably deserve it.
11 am
Mr. John Baron (Billericay) (Con): I raised the issue of smart meters in an Adjournment debate with the Minister. I do not wish to add a lot to that; points have been adequately made by both my hon. Friend the Member for Wealden and the hon. Member for Northavon, as well as in other contributions. There is a general desire to have a more meaningful roll-out of smart meters. I support new clause 1. I want to urge on the Minister again the importance of a meaningful timetable for a full national roll-out of smart meters.
We have heard about the advantages of smart meters. They can help us to wage war simultaneously on fuel poverty, energy shortages and climate change. Certainly, there are many figures to suggest the possible extent of savings. Perhaps one of the more reliable ones comes from the Energy Saving Trust, which estimates that UK homes are wasting more than £900 million a year simply by leaving appliances on stand-by—a staggering sum of money—and suggests that almost two thirds of us leave lights on in empty rooms. There are savings to be made, which is where smart meters can come into their own. They show consumers in real time and in some detail—we can debate the extent of detail that is required, but it is certainly enough to do the job—how energy can be used more sparingly. That, in turn, would help us to cut bills and alleviate fuel poverty.
Mr. Hugo Swire (East Devon) (Con): I clearly agree with everything that my hon. Friend is saying. I recognise that the technology is evolving the whole time and that it is far from perfect, but with some smart meters, it will be possible to access the use of power remotely. For instance, appliances that are not being used could be turned off remotely. In a sense, that will engender more economical use of energy.
Mr. Baron: My hon. Friend makes a very good point. There are many advantages to smart meters. The one problem is that the technology is still evolving—the Minister will refer to that—but that should not stop the Government taking a more meaningful approach and showing an element of leadership in the hope that smart meters can be rolled out in a more aggressive manner.
Mr. Swire: The other point about smart metering, which I made last week, is that the technology also allows control over water usage. That is another form of wastage. Smart meters are multi-usage, regardless of whether the technology is quite where it should be yet.
Mr. Baron: I agree. The other aspect, which has been touched on by almost everyone who has spoken in the debate, is the extent to which smart meters could help the fuel-poor. Figures suggest that fuel poverty has risen significantly under this Government. As I pointed out to the Minister in the Westminster Hall debate, the decision to cut the budget for Warm Front by £300 million over the next three years will not help. With energy bills rising again in recent months and with the Government set to miss their own target of eradicating fuel poverty by 2010, such assistance is more important than ever.
I suggest to the Minister that a couple of other advantages to smart meters are worth considering. By providing more accurate information to customers and suppliers, smart meters would also bring an end to estimated bills and hard-working families would no longer be caught out by thinking that they were using less energy than they were. That point was raised by the hon. Member for Bolton, South-East—he developed it well, so I will not do so further.
To touch on another point, raised by my hon. Friend the Member for Wealden, smart meters could allow the introduction of a range of sophisticated tariffs, thus enabling vulnerable and elderly customers to take advantage of cheaper, off-peak rates. Without getting too complex about the method of access, smart meters would help to improve information flow, which can only make for better-informed decisions.
The Committee has discussed whether we ought just to allow the free market to advance the cause. We have an element of sympathy for that. However, looking at what the energy companies have said and, more importantly, done so far, it is clear that they are not prepared to make the massive investment needed to convert 40 million-plus homes across the country—a conversion that compares to decimalisation—without a clear mandate from the Government.
Whether the roll-out model adopted is the franchise model, which would give rise to concerns about allegations of anti-competitiveness, or whether a free market approach is preferred, strong leadership is clearly required from central Government. Such leadership is being shown in other countries; we see it in Sweden, Italy, Australia, the US and Canada, where smart meters are currently in operation. Britain cannot afford to lag behind other countries. Smart meters give energy consumers the benefits of information and choice, which increasingly characterise all aspects of the marketplace, and we cannot ignore that.
I suggest to the Minister another advantage of smart meters. They would combat any cynicism that suggests that individuals cannot make a difference to the overall argument about climate change and carbon emissions. Individuals would have the opportunity to access the information required to adjust their use of energy, which would make a direct difference, taken in total, to carbon emissions and the climate change debate. In effect, that would empower individuals.
All too often, individuals feel that they are on the sidelines, ineffective and unable to help in the overall discussion about energy consumption, carbon emissions and climate change. With this method, we can give them something—a means by which they could make a meaningful contribution. That should not be underestimated. Certainly, all the customers and individuals whom I have spoken to—as probably with other members of the Committee—want smart meters; they think that they would help them tremendously. Smart meters are a splendid idea. However, a national roll-out requires national leadership, which is why I hope that the Committee supports new clause 1.
Paddy Tipping (Sherwood) (Lab): It will not have escaped your notice, Mr. Amess, that new clauses 1, 20 and 21 all relate to smart meters. It will not have escaped the Minister’s notice, because he is as eagle-eyed as ever, that the majority of members of the Committee support smart meters. We will all consider with interest what the Minister says in responding to the debate. The hon. Member for Wealden, last week, and the hon. Member for Northavon have made the case for smart meters in terms of carbon reduction and prices.
My hon. Friend the Member for Bolton, South-East rightly said that one of the major complaints to energy companies and to energywatch relates to the fact that a third of bills are estimated. Tomorrow morning, I shall be confined to my home in London for a four-hour span, because someone has not read my meter for two years. I think that they think that I am fiddling it. I have to be there to let them in or receive a court order. It is an antiquated structure, and we must move to smarter technology.
An issue not raised in the debate and on which I think that the Government are weak is microgeneration. Smart meters can contribute in that respect, as they can measure the outflow as well as inflow of electricity. Microgeneration is an area of policy in which we need to make some progress. I look forward to the paper that the Government plan to introduce later this summer.
The discussion is not about the principle, because I understand that the Government are in favour of it. I always read with interest what the Prime Minister has to say, and he has come out strongly in favour in smart meters. A pilot programme is under way as we speak, on which it would be helpful if the Minister could give some specific feedback.
In particular, I should like the Minister to tell the Committee clearly whether legislation is necessary to introduce smart metering, as it is not entirely clear whether it is. Smart meters could be introduced by secondary legislation. As we know, the legislative peg could be made in the Bill. It would be helpful if the Government provided some clarity about the way forward and the leadership that has just been talked about.
I greatly support smart metering, and I think that it will happen. The debate on the principle is won, and we have now moved on to the debate about how to implement it, as has been said by the hon. Member for Billericay and my hon. Friend the Member for South Thanet. Unlike my hon. Friend, I think that there is a strong case for a regional roll-out, rather than a market approach.
Anne Main: I hope I can share the hon. Gentleman’ optimism that smart metering will definitely happen. There is concern within the industry that the focus on electronic display devices that was given in evidence to the Communities and Local Government Committee might take our eye off the ball and prove a distraction to the roll-out of smart metering. It would be quite an expensive distraction if investment goes down that route, as it would mean that smart metering is either delayed or not implemented at all.
The Chairman: I call Dr. Stephen Ladyman—sorry, Mr. Paddy Tipping.
Paddy Tipping: I have lost a few years. I am grateful. Perhaps I have not greyed as much as I thought.
The hon. Lady makes an important point: we must move beyond a debate on visual display units, to one on the real technology. The focus of the argument has changed over the past 12 months, and she is right to say that VDUs could be a distraction. The view within the industry is that we should move to the more sophisticated technology.
Anne Main: I am delighted that the hon. Gentleman decided to reply. However, his time scale of the past 12 months is not mine. Indeed, when the CLG Committee was discussing fuel economy, I asked about smart metering and the answer was, “Our EDDs are progressing beautifully,” and that was only about three months ago. So I am urging a note of caution and saying that I should like to receive a reassurance from the Department that smart metering, rather than EDDs, is the way forward.
Paddy Tipping: Let us see what the Minister has to say when he responds to the debate. I should like him to set out clearly the Government’s position on smart metering and on timetables and signposts for the way forward. I should like us to have a realistic discussion about a market approach to installing smart meters, as opposed to a regional roll-out.
That is enough on smart meters, but before my hon. Friend the Member for South Thanet gets too excited, I want to draw his attention to the fact that clause 21 addresses more than smart metering; it introduces the notion of annual reports on prepayment meters and the discussion that the Minister should have with energy supply companies about social tariffs. That is a really important discussion. It was a live issue on Second Reading, and we should recognise that fuel poverty is an increasing consideration.
Let me be very straightforward: the Government have a good story to tell about the reduction of fuel poverty. They have made gains and changes, but the international market for fuel has worked against them. Put bluntly, the mandatory and statutory targets that the Government have committed themselves to—ending fuel poverty for vulnerable customers by 2010 and in general by 2016—will not be met. Prices are going up. Some people face price rises of 29 per cent. and others of 15 or 13 per cent. The process will continue, and every 1 per cent. increase in fuel prices brings another 40,000 people into fuel poverty. That is a real challenge for the Government.
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From reading the press, I understand that the Government are on message about this issue. If we were discussing it in 26 hours’ time, the Budget might inform our thinking. I do not ask the Minister to comment on that, but he can comment on some of the principles. One of the principles is prepayment meters. I find it astonishing that 1,000 prepayment meters are being installed every day. That is a reflection of fuel poverty and the needs of vulnerable households. Even more staggering is the vast difference between the tariff for a prepayment meter and that for an online direct debit. On average across England, the figure is £225. It is clear that energy supply companies are benefiting from this. I accept that prepayment meters are more expensive and that more costs are involved, but according to my information the extra cost for the energy company is £85, not £225.
Clearly some of the poorest and most vulnerable members of our community are being ripped off. I want the Government to do something about that. That is why new clause 21 asks for an annual account from the Government showing what they are doing about prepayment meters. It goes further than that. Not all people in fuel poverty are on prepayment meters. Again, the estimates are a bit vague on this, but perhaps 25 per cent. of people in fuel poverty are dependent on prepayment meters. A large group of people will benefit from anything that is done about prepayment meters. That is why I invite my hon. Friend the Minister to set down on an annual basis his discussions with the energy supply companies. I understand that he has been meeting them frequently and intensely over the past few days with ministerial colleagues. I want to see some action.
As I said earlier, this Government have a good record and the Minister himself has an excellent record over a long period. If we want to meet our targets, we need to do much, much more. We need to have a discussion with the companies about prepayment meters. We need to keep the discussion going about voluntary social tariffs. Some companies, such as EDF or E.ON, provide excellent social tariffs, but others, such as npower, are very clear that they will only bring forward proposals if there is legislation.
Martin Horwood (Cheltenham) (LD): It is a pleasure to be serving under your stewardship, Mr. Amess, as we head into the final straights, with only a few more furlongs to travel and a few more hurdles to jump before we return to our constituencies. As long as the Government can assure us that we will be able to go back to our constituencies by Friday at 3.15pm, that will be great.
Mr. Swire: Tomorrow at Cheltenham.
Martin Horwood: I was referring to the Gold cup on Friday in particular, but today is the opening of the festival.
I anticipate that the Minister will welcome much of what has been said in favour of smart meters. Indeed, the Government’s White Paper on energy included a pledge to see households have access to the technology as soon as possible and, let us hope, within 10 years
“to enable them to control their emissions.”
However, the problem is not whether we are all in favour of this technology coming on stream and a roll-out taking place, but whether the Bill needs to mandate that. We have heard some visionary stuff, particularly from my hon. Friend the Member for Northavon. My only qualification to his enthusiasm for this perfect market is that I, along with the hon. Member for Bolton, South-East, would certainly want consumers to still be able to judge supplier companies on whether they had good green tariffs, on their ethical and environmental credentials and on how good their customer care was.
The question is whether the Bill needs to mandate the roll-out. As the hon. Member for Wealden said, a lot of the evidence that we heard was from organisations that said that we needed a mandate in the Bill, and that we could not wait for the kind of methodology that the Government have been suggesting until now. That was common ground for energywatch, which said that 70 per cent. of its complaints related to inaccurate billing, estimated readings and failure to bill on time—exactly the kinds of issues that the hon. Member for Bolton, South-East was referring to. With the kind of two-way communication that we are talking about, those problems would be removed at a stroke.
That point is common ground for the Energy Networks Association and the Energy Retail Association, a member of which—Centrica—said:
“Without a mandate from Government, it is highly unlikely that energy suppliers would be able to facilitate a roll out to 45 million UK households in the timescale envisaged.”—
that is, within 10 years—
“A mandate would give the industry the ‘green light’ it needs to initiate a coordinated and managed roll out programme.”
As my hon. Friend the Member for Northavon said, it is extraordinary that, in the meantime, the energy companies are fitting tens of thousands of old-fashioned meters every day. At the moment we are heading firmly in the wrong direction. Without such a mandate there is no specified methodology for the kind of two-way communication technology that would enable energywatch’s issues to be resolved and that would tackle the cost efficiencies that have been talked about with the energy companies, such as the removal of the process of meter reading, which would take them in a direction analogous to a telephone company in getting information from the system.
We should acknowledge the contribution of the Energy Networks Association to the drafting of new clause 20, which is much appreciated. The ENA refers to the recent consultation paper that the Department for Business, Enterprise and Regulatory Reform carried out, which proposed requiring the introduction of smart meters to certain segments of the business market. The methodology that DBERR suggested was to insert modifications into gas and electricity supply licences, using regulations made under section 2(2) of the European Communities Act 1972, pursuant to the provisions of the energy services directive. If that is the kind of model that the Government suggest we use, even if they were going to proactively pursue a roll-out, I fear that that would be inadequate. That is the view of the ENA, which says:
“We think that it would be risky to rely on section 2(2) regulations for a smart metering rollout, because the powers conferred by the Energy Services Directive are too narrow for the complex and demanding project that this entails.”
The directive does not have, for instance, the specific requirement that the technology has a two-way flow of information between supplier and household.
At the moment, the methodologies that the Government are looking at and have at their disposal are too weak. They are not sufficient to force the roll-out that we all want to happen. The Minister must tell us exactly why the matter should not be mandated under the Bill and why primary legislation cannot be used to give full and unambiguous force to our shared ambition.
Dr. Ladyman: I am grateful to my hon. Friend the Member for Sherwood for implying that somehow I am a few years younger than him. I am not sure that that is true.
I am also grateful to my hon. Friend for drawing attention to prepayment meters; I wish to associate myself with his comments. When thinking about such issues, perhaps my hon. Friend the Minister should talk to his colleagues at the Department for Communities and Local Government who are reviewing the private rented sector at the moment. Many prepayment meters are installed in private rented dwellings and those with the least resources to pay the high fees that are often associated with such meters often live in such accommodation. We could do a lot of work in that direction, and replacing prepayment meters with smart meters could be a way forward.
If, after moving into private rented accommodation, people could easily enter their personal reference number to show that they were responsible for the bill racked up by the smart meter, that would be a simple way in which to ensure that people were responsible for their energy consumption. It would reassure landlords that they would not be left with bills and, more importantly, it would mean that people in circumstances of real fuel poverty would receive a little help.
No member of the Committee has opposed the principle of smart meters. Indeed, I have not heard anyone oppose it. As has been pointed out, smart meters have obvious benefits for the consumer. They provide, in particular, information to customers so that they can manage their energy use. However, the hon. Member for Billericay might have overstated the case. Unless someone comes up with a smart meter that can make my daughter turn off the lights, I am not entirely sure that the system will be as helpful as he suggested. Nevertheless, information is power and people can use it to reduce their bills.
Smart meters will deal with the problem identified by my hon. Friend the Member for Bolton, South-East about accurate billing and estimated bills. They might also mean that we can do away with having to pay a standard monthly fee by direct debit, because not only do we end up sometimes with big debts, but the company ends up with a big balance of credit that it does not deserve. There are obvious benefits to the consumer.
The hon. Member for Northavon referred to the benefit of smart meters in driving a new market. If the meters can check the market, whether each minute, second or month, a new market in energy prices will arise without doubt. A smart meter that provides information to a customer and allows smart billing is not only in the interests of the consumer, but the power retailer. A smart meter that allows a customer to change retailer is clearly not in the retailers’ interest so, left to their own devices, I suspect that the smart meters that will be rolled out will be those that provide information for energy efficiency purposes and allow smart billing, but not allow the process of a market-driven opportunity to change power retailers. I appeal to the Minister that, when he makes his announcement about smart meters, he makes sure that that part of the equation is mandated. I want him to insist that all smart meters have such a capacity because I cannot see the current market providing it of its own volition.
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I also ask the Minister to think about the step beyond that I was trying to get at when I intervened on the hon. Member for Northavon. There might come a time when an entrepreneur wants to be able to replace the energy retailing companies completely. That is already happening. We see adverts on the television for companies such as Youswitch. Someone can log on to the internet and provide the details of their household power usage, and Youswitch will tell them which company gives them the best deal at that moment. Youswitch gets its money from those companies. It has an arrangement with them, and the company someone switches to pays Youswitch some money for providing the information.
The information that Youswitch needs is exactly the information that would come out of a smart meter. It seems, therefore, a small step for an entrepreneur such as Youswitch to say, at some point in the future, “We will do this for you. We will connect Youswitch to your smart meter and Youswitch will not only work out which is the cheapest supplier at the moment but we will also do the switch. We will send the information off to that company and say that Steve Ladyman now wants to buy his power from someone else.”
Therefore, in setting down the regulations that will eventually drive forward that market, I ask my hon. Friend the Minister to make sure that he also takes that potential into account, and that nothing he does prevents companies, such as Youswitch and, from coming into the market and kicking out the electricity retailers and the gas retailers, or at least giving them a darned good kick in the pants, which—I am sure we all agree—they need.
Dr. Whitehead: I rise briefly to support new clause 21. I do not wish to add greatly to what was a series of persuasive points about why there should be the kind of reporting that is set out in the new clause. The suggested reporting gathers together a great deal of the discussion that we have had on a variety of issues regarding the future of energy supplies, on how energy supplies will change in the near future and the opportunities that that change presents us with. I have enormous sympathy with my hon. Friend the Minister regarding the number of issues—issues concerning how that change will come about—that are liable to be on the agenda for discussion with the energy companies.
We have discussed, for example, making sure that smart meters enable switching. There is also the issue of the extent to which energy supply companies might develop into energy service companies. An energy company, or even a different kind of company, might develop the idea of taking over the responsibility for the supply of energy to a household, based on the contract to invest in the ability to supply that energy at the best possible price over a period of time. That implies that the energy company would undertake elements of investment in that house, either reactive investment by making the house more energy efficient, or proactive investment by installing, perhaps, microgeneration, which would enable a two-way meter, by exporting energy, to give the household further reductions. However, the proceeds from the export of energy would be shared with the energy supply company, as part of the overall contract. That contract would fit in with the idea of smart meters, so that how the contract was shared could be properly calculated.
I can see a further market developing in terms of how those contracts might roll out. There could be a version of meta-meter reading, measuring what exactly the share is between the customer and the energy service company, as a result of the contract that has been entered into. That would look at how that share relates to the return on the investment that the service company has made and to a reasonable return for the customer over a period of time, compared with what they were previously paying for energy supplies. That makes it doubly important that there is an accurate baseline for what the customer was previously paying. The situation that a number of hon. Members described, in which the majority of energy suppliers probably do not have an accurate picture of what the customer is liable for and what they pay at any one moment, is potentially a severe difficulty with regard to that new energy economy.
I draw attention not only to those developments, but to the role played by social tariffs within that structure, in conjunction with action on energy efficiency and on how energy supply can be permanently reduced in price in an era of rising energy costs. With regard to social tariffs, I have been caused a little chill by recent comments made by precisely those energy companies that perform well on social tariffs, suggesting that the voluntary nature of the social tariff arrangement may cause them to have second thoughts about their own social tariff structures, because they have to report to their boards about what they are doing. As a result of the voluntary arrangement, there could be circumstances in which those companies feel commercially exposed because other companies are not following the same route—it is clear that there is now a broad gap between the performances of the various utility companies as far as social tariffs are concerned.
Because of that, some companies suggest that they may reduce or—in some recent comments that I have seen—even remove their voluntary social tariff arrangements, if the level playing field, which it was anticipated would develop as a result of actions on social tariff, does not emerge. In an era of substantially rising energy costs, there must be a great temptation to duck out of a voluntary arrangement on social tariffs in order to maximise the return to the company. It is therefore important to have a level playing field on social tariffs, and there should be regular reports on how that is coming about and what progress is being made. I appreciate that those discussions may not be easy, and that it may require some form of legislation to ensure that we have such a level playing field.
It would be welcome if the Minister could clarify for us the circumstances under which smart meters might be introduced, and those under which a genuine level playing field, with the reporting as suggested in the clause, could be achieved. Perhaps he could also tell us whether that would be done through primary legislation, secondary legislation or other measures, and, whether a combination of social tariffs and a single tariff for those people who use prepaid meters could be achieved on the basis of present legislation as it stands.
Malcolm Wicks: This has been a genuinely interesting and useful debate. I am relieved because—contrary to what the public might think; that a politician loves nothing more than the sound of his own voice—almost inevitably, I have spoken for rather too long during the Committee proceedings and it has been nice to hear other voices on such an interesting topic. The hon. Member for Northavon has always suffered a certain fate in the House because, as one of the genuine intellectuals with a distinguished academic background, he has occasionally been called “an anorak”. I have always thought that to be grossly unfair and indeed offensive. Now that we have learned that he has a rich social life, a hinterland, far away from his portfolio, and that he attends smart meter breakfasts, I hope that his reputation is restored.
Before the Committee, at an unearthly hour, I had to speak to an American-European conference on electricity. They were all piling out of a “burnt-toast breakfast” which, as I was partly speaking about the importance of energy efficiency, did not go terribly well. I was not clear why one would want burnt toast.
The debate is not just about smart meters. There are other issues to address, although I will come to smart meters later in my speech. I will remind the Committee what the clause is about—I can do that briefly—before dealing with the new clauses. The clause transfers existing statutory responsibility for the technical aspects of gas meters from the Office of the Gas and Electricity Markets, known as Ofgem, to the Secretary of State.
By way of explanation to the Committee, I will set up a background to the transfer. Ofgem is the independent, economic regulator of Great Britain’s gas and electricity market, whereas the National Weights and Measures Laboratory—the NWML—is an agency of the Department for Innovation, Universities and Skills, exercising a range of statutory functions relating to technical matters on behalf of its Secretary of State. The NWML has a remit to ensure that UK measurements are accurate, fair and legal. In support of that role, the laboratory has responsibility for the standards and accuracy of a wide range of measuring instruments used by businesses for trade purposes, including weighing machines, petrol pumps and water meters.
The functions transferred under the clause are about the technical specification of meters, rather than the economic regulation of energy markets. As such, those functions are not a natural fit with Ofgem’s core role of economic regulator, but fit well with the laboratory’s functions relating to other measuring instruments used for trade purposes. The clause is a necessary part of transferring the legal metrology, part of Ofgem’s gas and electricity metering functions, to the laboratory. Specifically, it transfers to the Secretary of State functions that govern the approval and stamping of gas meters.
The proposed statutory transfer follows a successful administrative transfer of functions and staff from Ofgem to the laboratory back in April 2006. That transfer received support from stakeholders, with agreement that the administrative transfer would be made permanent through the first available legislative vehicle—this is the first available vehicle. At the appropriate stage, I will move that the clause stands part of the Bill.
We will resist new clause 2 for the following reasons. The hon. Member for Wealden has suggested a new clause pertaining to the EU emissions trading scheme. I assume that the new clause is drafted to identify the so-called windfall profits of the companies participating in the scheme, so let me talk briefly about the EU ETS before addressing the draft new clause specifically.
The ETS was launched in 2005. In its first phase, which ended last year, companies were allocated carbon credits, which could be traded, establishing a market for carbon. It was a very ambitious, perhaps revolutionary, scheme, which undoubtedly faced some problems in that first phase, most of which were widely publicised. For example, we recognise that generators have profited from the emissions trading scheme. However, we in the UK and the EU learned from those problems and have used the experience to improve the scheme. Phase 2, which began in January, reduced the overall allocation of carbon credits and raised the expected price for carbon for 2008 to 2012 to around €20 per tonne. The UK has put all the burden of emissions reductions on the generators, and required them to buy many of their allowances.
We are in discussions with the Commission about the EU ETS post-2012, which will be phase 3 of the scheme. The current proposals have an EU-wide central cap, with a clear and predictable downward trajectory to 2020 and beyond. There will be a move towards higher levels of auctioning, addressing the issue of windfall profits. This will maintain the price of carbon and reduce emissions well into the future.
Steve Webb: Just on a factual point, because I think I have misunderstood. Did the Minister say that we have required generators to buy most of their permits? My understanding is that they have been given virtually all of them. Did I mishear what he said a few moments ago about generators and permits?
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Malcolm Wicks: I will clarify that later if anything is still unclear. I was talking about phase 2, but I shall return to it. The improvements to the EU ETS should themselves address the problem of windfall profits.
I will now speak about the proposed new clauses more specifically. As I am sure the hon. Member for Northavon already knows, the amount of carbon allocations that companies receive is already published on the website of the Department for Environment, Food and Rural Affairs. Likewise, the market price for the allocations is already published. Requiring the generators to publish that information would therefore create duplication and an unnecessary administrative burden. The amount paid for the carbon allowances that the generators buy from other EU ETS participants is not published as it is commercially sensitive information. The generators are not, for example, expected to publish the price that they pay for other things, such as coal, gas, oil and the rates that they pay their contractors.
I hope that I have explained why I do not think that the new clauses would be helpful and why the steps being taken in the UK and in the EU more widely will help to tackle the issue of windfall profits, maintain a robust carbon price and reduce our carbon emissions by 2020 and beyond, so I hope that hon. Members will not seek to press their new clauses.
I am also resisting new clause 4, although I am grateful to the hon. Member for Wealden for tabling it, because it relates to the transparency of environmental measures on energy bills for domestic consumers, which is an interesting issue. Certainly, empowering individuals and helping them to make informed choices about their use of energy is a key part of the Government’s strategy to drive energy efficiency in the home. Indeed, the hon. Gentleman will be well aware that those issues were a central theme of the saving energy chapter in the Government’s 2007 White Paper.
Committee members will want to be assured that we have already taken action, and I am thinking especially of DEFRA’s Act on CO2 campaign and the information and assistance offered by organisations such as Warm Front and the Energy Saving Trust. In the White Paper, we also pledged to help consumers to monitor and reduce their energy consumption through the inclusion of historical information on their energy bills or statements. As part of taking that important work forward, my Department recently concluded a consultation on metering and billing, and our response will be published shortly. It is worth pointing out, however, that responses to the consultation did not indicate a strong appetite for including additional information of consumers’ bills.
The new clause proposes that energy suppliers should be required to report on the proportion of a consumer’s bills that contributes towards environmental taxes, highlighting in particular the renewables obligation, the ETS and the carbon emissions reduction targets. I am sure that Members will appreciate that each of those environmental support measures are not taxes in the traditional sense. Moreover, companies have a number of different ways to meet their obligations under the three schemes to which I have referred. They include making energy efficiency savings in the home, generating renewable electricity, paying a buy-out penalty and trading variable priced instruments.
Therefore, to break down specifically the proportion of a consumer’s bill that is attributed to those mechanisms would impose additional and potentially significant administrative and cost burdens on energy suppliers, especially given the complexity involved and the range of different routes to compliance. In addition, how suppliers cover the costs of their activities, including the cost of any environmental obligations, is a commercial matter that is not disclosed to Government, or indeed to Ofgem.
Since the hon. Member for Wealden, I hope, is not suggesting that we lower or remove the environmental support measures—I am sure that he is not—it is not clear how the additional information proposed in the new clause would bring significant benefits to customers. Moreover, I do not believe that any additional benefits that might emerge from the new clause would outweigh the potential administrative and cost burdens that it would impose on the energy suppliers.
Although I agree with the overall sentiment of the new clause, particularly with regard to increasing transparency for consumers, I believe that our current focus on working with energy suppliers to improve the quality and accuracy of billing information is the right one. Improved billing information, combined with the other information and support available from Government, energy suppliers and organisations such as the Energy Saving Trust, should help consumers to make more informed choices about their energy use. In turn, that should encourage them to take steps to save energy, for example, by improving the energy efficiency of their homes or by turning appliances off, rather than leaving them on standby. I hope that hon. Members will not press these new clauses.
Charles Hendry: The Minister has been doing his best to respond to the points that I have raised here. There are some aspects of a bill that consumers, through their own actions and by using energy more wisely and more efficiently, will be able to reduce, but they will be surprised to discover that their bills do not necessarily go down as they might have hoped. Other aspects of their bill will be increased because of the environmental charges and levies that are imposed on the energy companies. Is it not reasonable that the consumer should understand the ebbs and flows in this situation and what is driving bills up as well as down? Is it not their right to understand what contribution they are making towards the environmental charges?
Malcolm Wicks: Two things are true. As I have been arguing, doing it very precisely per customer is quite a complex task. That is the advice I have received. However, alongside the major reasons why energy costs are rising, which are global, environmental policies such as the ETS and the renewables obligation, which we more or less all support in the House, are adding to costs. Indeed that could well increase proportionately in the future.
We are about to report on this, but if, as part of any future billing, there is some broader brush way to indicate to customers what these costs now amount to—I am not talking about the specific figure per customer—we should be prepared to look at it. Looking at each company and each customer would be too complex and too administratively difficult to consider, but the broad point is one on which I am happy to agree with the hon. Gentleman.
Mr. Swire: We hear a lot about eco-towns and eco-home targets in terms of new house building, but do the Government have any plans to include smart metering in any new build from any date? Would that be a standard requirement?
Malcolm Wicks: I am coming to smart meters in a moment. Certainly, it seems inevitable and right that smart meter technology will be part of the development of eco-towns and zero carbon dwellings. The principle has to be right.
The Member for Northavon asked me about the ETS. I will look at the record again, in case I have confused him. Under phase 2, we are able to auction some of the EU ETS allowances. Within the limits or that ability, we have imposed the burden that this implies in terms of the total number of allowances we can auction on the electricity generators, rather than on the industrial installations, such as cement factories, which more directly face global competition on their business. Perhaps I should talk to him outside the room. If he would like more information about where we are on ETS, I should be happy to provide it.
Steve Webb: I think the Minister is saying that in the second round 10 per cent. can be auctioned and the Government are going for 7 or 8 per cent. In the Government’s mind, they have charged the companies for most of what they could have done. The point surely is that the other 90 per cent. has been given away. That is the distinction between what he said and what is really going on.
Malcolm Wicks: Certainly in phase 3 we will move towards far greater auctioning and therefore avoid some of the serious difficulties with windfalls that have arisen and have concerned many in the House.
The anecdote relates to the story from the hon. Member for Northavon, because, meanwhile, the supply companies were replacing the old technology. My supply company, which did not know about the smart meter, wrote to me as an ordinary customer to say, “We need to come and replace your meter.” I phoned them up and said, “Actually, that would be a waste of money”—I am making the hon. Gentleman’s case to some extent—“because I am about to have a smart meter.” I said it rather smartly, but I hope not too smugly.
I thought that the company had taken that on board, but, sure enough, they wrote to me a few weeks later saying, “We haven’t heard from you. We need to come and replace your meter.” I tried ringing them again. That went on for several letters; I kept saying, “No, no, I am going to have a smart meter.” They then wrote to me saying, “Please, you have not responded to us; we need to replace your meter. Mr. Wicks, we have to tell you that under section XX of the Electricity Act XXXX, if you do not co-operate, we will have to take you to court.” I thought that it would not be terribly smart for the Energy Minister to be taken to court under one of the sections that I had been reading out endlessly in the Committee, so I had to let them come and put in the meter. In a way, I make the point for the hon. Member for Northavon. I will return to those matters a little later.
I hope that the Committee will be aware that, in the energy White Paper, we highlighted the potential benefits of smart meters for both consumers and energy suppliers. Many Committee members have reminded us of those benefits. The hon. Member for Northavon has waxed lyrical about all sorts of potential benefits. They certainly include giving consumers better information to help manage their energy use; providing accurate bills, which will please my hon. Friend the Member for Bolton, South-East, who is clearly frustrated by what happens at the moment; and potentially providing easier access to a wider range of tariffs.
On my hon. Friend’s point, it is a legal requirement for energy suppliers to inspect meters and to ensure that consumers have an accurate meter reading at least once every two years. That is a licence obligation enforced by Ofgem. I agree that smart meters could help in that context. That is one of the benefits we are considering in our impact assessment. That legal right may help my hon. Friend when he is discussing the matter with his energy company. I will not follow him in commenting on that honourable group of meter men and women. We must keep him away from the topic of hospitals in case he starts commenting on other professionals.
Dr. Iddon: To be fair to Powergen, it is now ensuring that my meter reading is accepted. It rings me up if the meter reader cannot gain access, so I think that it has taken the message on board now.
Malcolm Wicks: It is excellent to hear a good outcome. Part of this discussion reminds me of my advice surgeries on a Friday evening. I am glad that my hon. Friend is now happy.
For suppliers, the benefits include reduced costs, which is a significant benefit to them, through remote meter reading, for example; better customer service, through accurate billing; and the potential to switch consumers between tariffs. For all those reasons, the energy White Paper made clear our ambition for smart meters to be rolled out.
Dr. Ladyman: I just noticed my hon. Friend’s careful wording. I cannot remember whether it is the same wording that was in the White Paper, but he is talking about the ability to switch between tariffs, rather than companies.
Malcolm Wicks: Let me come back to that. I will just express a few words of caution, however. I agree with the hon. Member for Northavon, who said that smart meters were not a panacea. At one stage, he was in danger of talking the thing up—if I can paraphrase by way of understatement his lecture on the matter. Most of our judgments about such meters, including that of the hon. Gentleman, is that we need a wide range of matters in respect of energy efficiency and to move towards the concept of energy services companies and so on to tackle the problem. I sometimes think that people see the process of smart meters as a panacea, whereas it is one among 10 or 12 things that we probably need to do.
12 noon
I also wonder whether our enthusiasm about smart meters is occasionally a little ahead of their technological capability. We can all add potential benefits to the smart meter, but I would need to take more advice about what is technically feasible. I do not think that anyone has ever said that the smart meter could monitor our blood pressure and predict football results or the outcome of the next general election, but there is a danger of moving towards a science fiction world. [ Interruption. ] I can advise the hon. Member for Wealden about one of those later. Let us try to keep the matter in context.
Since the White Paper, the Government have consulted on the policy options for a smart meter roll-out, and we are in the process of considering the responses that we received. We are also nearing completion of a detailed economic impact assessment of the benefits and costs of a domestic smart meter roll-out. I remember asking the hon. Member for Wealden for his estimates of the cost because it is obvious that we need to look at both sides of the balance sheet.
A domestic roll-out of smart meters will involve the replacement of 45 million electricity and gas meters in each home in Great Britain. Well, not every home has 45 million meters, but the Committee will catch the tenor of my remarks. It will be a major undertaking, with estimated costs in the range of £10 billion to £20 billion—there is room for debate about that—over whatever the roll-out period will be. Yes, there are major benefits, including economic savings; nevertheless the costs, by any measure, will be quite considerable. A range of highly complex technical, legal and policy variables will also need to be considered and resolved before final decisions can be taken.
Anne Main: I thank the Minister for that information. What per-unit cost does he have in mind for smart meters? Given that we have ones that can predict general elections and take blood pressure, and others that are more simple, on what unit cost is the hon. Gentleman basing his figures?
Malcolm Wicks: Let me make a little progress, and then I will be able to see where we are on such matters.
Having said that we could be talking in the region of £10 billion to £20 billion, we are analysing and understanding the issues involved, including the further testing of some estimates and assumptions with industry and others. Our aim is to establish an approach to smart meters that will deliver the maximum range of benefits as cost effectively as possible. The scale and complexity of such challenges must not be underestimated, and so it is right that we take appropriate time to do the work before making a final decision about the way forward. We are nearing completion of the process and I can inform the Committee that we expect to publish the Government’s consultation response and the impact assessment later this month.
I wish to underline the complexities. In answer to the hon. Member for St. Albans, the unit costs will depend on what we want the thing to do. Although I jested slightly about the monitoring of blood pressure, some ideas involve a very smart, highly IQ’d meter and the costs will therefore vary. I am advised that the responses to our consultation indicated a broad range of costs, ranging from £17 for an electricity meter at one end of the continuum to £80 at the other. The equivalent guesstimate for gas meters was a range of £28 to £100.
However, the cost of each smart meter is only one aspect of the total roll-out cost. As a comparison, I am advised that what is described here as a “dumb” electricity meter—it will rise up in protest at that description—costs around £7, and a dumb gas meter some £18. That is just an example, but I hope that we will be able to give more information in due course.
In what was a genuinely interesting speech, I thought that the hon. Member for Northavon was making my case for me when he talked about the complexities and the possibilities going forward. Although it would be nice to introduce smart meters now, we have to get to grips with the issues. What do we want the things to do? The more ambitious one gets, and the more that technology allows one to do some of those upmarket fantasy things that the hon. Gentleman suggests, the more expensive the meters become and the more important it is to get such an expensive roll-out right.
Malcolm Wicks: Yes, I will. The fact that meter men and women do not need to call will bring undoubted benefits to the industry. I hope that those people will be redeployed—perhaps they could install the smart meters. Empowering the consumer must be at the heart of the smart meter roll-out.
I wish to clarify a point on which my hon. Friend the Member for South Thanet picked me up earlier. He said that there was no mention that switching between suppliers was a benefit, but I can reassure him that that is a potential benefit of smart metering. We are considering it alongside the costs and benefits and the logistics of the project, and I hope to be able to say more about that.
I hope that the Committee will understand that resisting the new clauses is not a sign of the Government stepping away from our ambitions for smart meters. We will say more about that later in the month. It is a signal of how seriously we take the issue and of our determination to take the time to do everything necessary to ensure that we get the policy right from the outset.
Charles Hendry: Does the Minister have a view as to whether a national roll-out of smart meters would require legislation? If so, the Bill would seem to be the appropriate vehicle to facilitate that, as at some subsequent stage he could use it to put in place the necessary secondary legislation. The consultation process will begin at pretty much the same time as discussion of the Bill is ending. It would be unfortunate if its conclusion that there should be a national roll-out came too late for the necessary provisions to be included in the Bill.
Malcolm Wicks: I understand that argument, and we will be reporting soon on exactly what we want to do. However, I am advised that the difficulty is that, until we can make a proper judgment about that, we will not be able to determine the sort of enabling power that we will need.
I suppose that that is logical, and it depends on what we want to do. An existing European directive might give us all the legislative cover that we need but, if we want to be more ambitious about the technology, we might need more than that. That is something that we are looking at.
Martin Horwood: That was the precise issue that I addressed in my remarks. For instance, the directive in question does not give sufficient power to ensure that the two-way technology that we have all spoken about and which is regarded as an essential part of the specification will be included. We had consultations on the White Paper as well as pre-legislative evidence sessions before the Committee began its consideration of the Bill, so how much more consultation do we need? It is pretty clear where the consensus lies, and that we need the roll-out of smart meters to be mandated in legislation.
Malcolm Wicks: It is pretty clear that the consensus is that we would all like to see the roll-out of smart meters. I hope that people will now factor into consideration the large cost, which has not—understandably—been a feature of the debate. We need to recognise that cost, as it will inevitably fall on the customer. Yes, we are looking at the legislative issues, and the results of our consultation will be published later this month. I cannot say more.
The hon. Member for St. Albans asked about display devices. We are considering the best way forward, taking into account views from the consultation and the economics involved. Obviously, it is important that we ensure that our policies on the display devices for smart meters represent a coherent package for the long term. The hon. Lady will hear about that soon.
Anne Main rose—
Malcolm Wicks: She is understandably impatient. I am happy to hear from her now.
Anne Main: I am delighted that I will get further information. Since the Minister mentioned cost, does he have at his fingertips a per-unit cost for an electricity display device? Perhaps I need to wait for that.
Malcolm Wicks: It is possible that I will have that cost at my fingertips very soon. EDDs are important things, and someone sent me one the other day. I took it home, looked at the back of the package and put it in a cupboard. That is terribly bad, and I should not have said that. The instructions were simple but not quite simple enough. I promise to fit the thing this weekend.
Would £15 be all right?
Anne Main: Each?
Malcolm Wicks: That is the unit cost. The idea is that we install them ourselves, which is why I failed in my attempt to do so. For reasons of safety, I am advised that a person who does not feel confident about installation should get someone in to do it. On Report, I will bring the House up to date on my endeavours.
I turn now to new clause 21. I intend to resist it, but for a good reason. Clearly, once final decisions have been taken on implementing the roll-out of smart metering, we will need to consider the most appropriate ways to report on its progress and effect. Therefore, I do not feel that it would be appropriate to support the new clause, as it may not end up being the most relevant reporting regime for the policy on smart meters that will be brought forward in due course.
On the proposal for reporting discussions held with industry on prepayment meters, Ministers and officials regularly have meetings with companies as part of the process of policy development and delivery. As was the case with previous Administrations, it is not the Government’s practice to provide details to Parliament of all such meetings. I take the issue of prepayment meters seriously, however, as does the regulator. Ofgem is already looking at tariffs for prepayment customers and those who do not pay their bill by direct debit. It will update the findings at the forthcoming fuel poverty summit in April.
I hear very clearly the parliamentary voice on prepayment meters. The evidence base needs to be understood, as it is not as clear as some contributors suggest. I do not have the evidence at my fingertips, but I do not need it because, essentially, most prepayment customers are not fuel poor and because most of the poor—certainly the vast majority of elderly people—are not on prepayment meters. However, a rough summary of the evidence is that there is an association between being on a prepayment meter and being on a low income, so we need to be a little mindful about cost impacts on poorer but non-prepayment-meter customers.
I am mindful of that, but I hear the voice of Parliament and I share the concern that there seems to be an injustice, certainly in terms of the differential between how most of us pay for our electricity and gas and how customers on prepayment meters pay for those utilities. Some people suggest that that differential has widened, but that is something that Ofgem is looking at.
12.15 pm
Charles Hendry: When this was raised in the evidence-taking session, the Minister said:
“In particular, it is up to the companies, not the Government, to look at the problem of prepayment meters,”——[Official Report, Energy Public Bill Committee, 19 February 2008; c. 122, Q247.]
Is it still his view that it is not for the Government to address this issue?
Malcolm Wicks: Clearly, the installation and administration of prepayment meters is up to the company but Parliament will have a view. Inevitably, a dialogue takes place on this, and many other matters, between the supply companies, Ofgem and the Government. I also say—and the Committee will be pleased to know that I am reaching a conclusion—that Ofgem has announced that through its recently announced probe into the market, it will look at whether the market delivers a good deal for all customers. When markets are responsible for delivering goods, it is important that we do our utmost to ensure that they operate well, not just generally, but for all their customers.
Mr. Baron: I thank the Minister for giving way, he has been very generous in allowing interventions. He appears to be turning his face against all, or most, of the new clauses, but, given that the review on smart meters is due to report at the end of the month, will he explain why he does not at least leave the option open in the Bill to come back to it? The review might conclude, without predetermining the time scale, that there is a requirement for a national roll-out of smart meters, which would require legislation.
Malcolm Wicks: That is a perfectly reasonable question. All I can say is that when we publish our report later this month, the Government will consider a range of implications including whether there is a need for legislation. I had better leave the matter there.
It is worth noting that some of the information referred to in the new clause is already available. In its monitoring reports on supplies, Ofgem already publishes information about the number of gas and electricity prepayment meters in use, as well as the number installed annually. I am advised that there are approximately 3.5 million prepayment meter customers for electricity, and some 2.2 million for gas.
Paddy Tipping: Before my hon. Friend sits down, can he bring the Committee up to date with his thinking on social tariffs and the nature of the discussions that he has had with energy supply companies? With regard to the voluntary approach could he explain whether companies could do more, and if they do not do more, whether a legislative or mandatory approach would be necessary?
The Chairman: Order. I ask the Minister not to respond to that point as it goes rather wide of the discussion.
Malcolm Wicks: Obviously, I was about to give a full and detailed response to the Committee, but as ever, Sir, I obey your ruling, with thanks.
Finally, the proposed new clause suggests a further requirement on the Government to report on what progress has been made to reduce carbon emissions through increased use of renewables generation and in respect of energy conservation in households. Hon. Members will know that we already have a duty to report on progress towards cutting carbon emissions as one of our four energy goals. I reiterate that we already report on energy efficiency and renewable generation and I therefore feel that the new clause would duplicate those requirements. We will continue to adhere to our existing obligations and to report on other energy-related issues to keep Parliament informed of our progress. I hope that hon. Members will not seek to press the new clause to a vote. On the essential issues we are at one about the importance of smart meters. I have talked about their benefits—although not as enthusiastically and ecstatically as the hon. Member for Northavon—and others too, have made important speeches. We need to look at the costs and the benefits. We will report on this soon and I hope, therefore, that my colleagues might consider withdrawing their amendments.
Charles Hendry: I am very grateful to the Minister for the helpful responses that he has given in our discussions. Looking at the three new clauses that have been tabled in my name and that of my hon. Friend, three particular issues come through. First, on the requirement for companies to report on ETS allocations in their annual report, as the Minister said, that is an issue that time should resolve. As each round of the EU ETS becomes more rigorous, it is likely that that information will become more available. The issue of companies getting free allocations will be removed as they move towards full auctioning of certificates.
Secondly, the Minister quite rightly made the point that one does not want to impose extra burdens on business, such as the time and money to be spent on reporting requirements, if that is not absolutely necessary. We shall therefore not press that particular new clause to a vote.
Thirdly, the Minister discussed new clause 4, relating to environmental taxes. He indicated that he thought it would be difficult to identify how much money had been allocated to an individual’s bill from the different environmental charges. That was not the view of Ofgem when it gave evidence. Alistair Buchanan said:
“Some £80 of roughly £1,000 dual fuel average household bill is now a combination of ROC, which is about £10, your energy efficiency, which is about £35 to £36, and your European Union Greenhouse Gas Emission Trading Scheme (EU ETS), which is around £30.”——[Official Report, Energy Public Bill Committee, 5 February 2008; c. 47, Q90.]
Ofgem seems to believe that those figures and that information are available in a straightforward way. Given the approach that it is taking on the matter, I am keen that we explore it further.
It is right that consumers should know how much of their bill is actually going on environmental and green charges, compared with the amount of fuel that they are using or standing charges. The Minister talked about the White Paper, saying that the Government want consumers to monitor and reduce energy consumption. If we want them to monitor energy consumption, surely we also want them to monitor the environmental charges that are coming through? They are charges that they are having to pay, which have been imposed in their name—rightly. We do not dispute the charges in any way, but if we want people to be informed consumers, they should have such information at their fingertips. Some elements of their bill will be going down as they use energy more efficiently, but there are other elements that will increase over time and the consumers ought to know the balance of those issues. We will, therefore, press that particular new clause to a vote when the opportunity arises.
Malcolm Wicks: The burden of my argument was that to provide information in a detailed way for each consumer, given that consumers might be on different tariffs—some might be on green tariffs and they will vary from company to company—would be technically difficult, which is the advice that I have been given. However, I agreed that if we could find a way in the Bill of indicating the broad range of these charges, like the ones that the hon. Gentleman has just mentioned from Ofgem, I would be willing to look at that in relation to future billing arrangements.
Charles Hendry: I am grateful to the Minister for that, but will he clarify what he means? Is he suggesting that on Report or when the Bill moves to another place he would look at tabling an amendment that would require some information in the Bill regarding the environmental charges, even if that was not specific to the last pound and penny, so that there would be greater clarity on bills, or is he looking at something more vague than that? If he is prepared to come forward with a commitment that he will have an amendment of his own, it would not be worthwhile pressing the new clause to a vote.
Malcolm Wicks: I cannot commit to that as I genuinely do not know whether we need a legislative cover for that, but I have said that when we report on smart meters and billing, I will see what can be done to indicate to the customer what the charges are in broad terms.
Charles Hendry: The Minister is clearly trying to find some common ground and I am grateful to him for that. However, I am keen that we put down a marker that we think that this issue is important and it is my inclination that we press the new clause to a vote when the opportunity arises. We have had a good and valuable debate on smart meters, and there is no doubt that everyone in the Committee and those who are watching from outside genuinely believe that we all desire to move towards smart metering.
I am surprised by the costs that the Minister mentioned. He gave a very wide range for meters that combine electricity and gas, from around £45 to £180. However, the £20 billion upper limit that he put on the cost of a national roll-out equates to almost £1,000 per house. That appears to suggest that it could cost £800 to fit them, or that there must be other charges somewhere in the system, and that simply does not seem plausible to me. If that is the case, I might decide to resign my seat and apply for the Chiltern hundreds so that I can become a meter installer. The costs are peculiar and do not seem to stack up, so hopefully the Minister can give us more information.
A fundamental issue in that regard is that there is a widespread belief across industry and in the consumer and environmental groups that a legislative mandate will be required for that to happen. We asked all those groups whether they thought that there was a European directive that could enable that to happen, but none of them believes that that is the case. They think that there is a need for Government legislation on the matter because a number of issues need to be addressed. Who will install the meters? Will the supplier install them, in which case someone will go to Nos. 1 and 4 Acacia avenue and someone else will go to Nos. 2, 3 and 7, so that it becomes a difficult operation to manage and will not roll out in the way that people believe is necessary, or would there be a more structured approach? If the Government do not set the standards and the approach to that, it will be much more difficult for that to happen on a voluntary basis.
Equally, if the Government do not set the standards on the basic requirements of meters, as the hon. Member for Bolton, South-East said earlier, people might only be able to switch between different tariffs with their existing supplier, rather than being able to switch supplier. Also, meters might not be rolled out in a way that allows them to deal with two-way flows of power or do all of the things that we think they should be able to do, particularly the ability to deal with electricity and gas.
Mr. Swire: Does my hon. Friend think that there might be something within the Government’s plans for digital switchover, which is being rolled out on a region-by-region basis, that could be emulated for switching over to smart meters?
New clause 1 is non-prescriptive and does not say how the switch needs to happen. It leaves that approach to the Government to decide in due course, but states that Government legislation is needed to make it happen. We are grateful for how the Minister has tried to reassure us, but I am afraid that he has not been successful on this occasion and we will need to address those issues again in further considerations of the Bill.
Steve Webb: I certainly will not attempt to reprise my earlier remarks. I understand that the Minister is saying that the Government will publish their view and reflections on all those important issues in a couple of weeks, but if it turns out that legislative coverage is required, as we believe it will, how will the Government do that? Unless they do it very quickly in the Lords, we could face a good deal of delay. I have just done a quick bit of mental arithmetic, and unless I have got my zeros wrong, three months delay is a million dumb meters installed—10,000 per day, times by 90 days. We are talking about that kind of scale, which just seems crazy.
Malcolm Wicks: The hon. Gentleman mentioned the complexities, but also the possibilities and challenges around that. Does he not recognise that by rushing the process, there is a danger that we could start to install the wrong technology, which would be a very heavy investment gone wrong?
Steve Webb: That is interesting language. I do not think that anyone could accuse the Government of being in a rush with their energy policy. At any point in time, there is always a chance that better technology is just around the corner, or that we could come up with a better alternative if we thought about it a bit longer. I hesitate to say it, but government is about making decisions. On balance, I think that the Committee’s view is that it is time to make a decision on the matter.
12.30 pm
Malcolm Wicks: Given the great passion with which the hon. Gentleman spoke about the possibility that people could switch suppliers almost on a daily basis, has he been able to ask during his breakfasts with the industry whether the current technology would enable that to happen? That is a genuine question. I do not know the answer.
Steve Webb: Yes, I have. It seems to me that, once we have the concept of the smart meter, which is available around the world and is already happening, the idea of a set of data being sent to a database and an answer being sent back borders on the trivial. We are not talking about carbon capture and storage, we are talking only about sending some data off to a website and receiving an answer. It does not seem that great.
Mr. Baron: Is there not a danger with the Government’s argument that, if they keep waiting for the latest development in technology before making a decision—given that technology is ever evolving—they will never actually make a decision?
Steve Webb: I absolutely agree with that point. It is very much the content of my argument.
As to which of the amendments best deliver the goals, obviously I think that our amendment is better, but I will not be partisan about it. If we have the opportunity to divide on the Conservative new clause on smart meters, we will be happy to support it. On that basis, and assuming that we will have that opportunity, I will not seek to pursue new clause 20.
I am pleased to see that the Minister’s review considers switching between suppliers, which has to be a good thing. I will just sow a final seed with him on the potential for value added in this roll-out. If officials are to be authorised to go into the home of every person in the country to sort out their electricity meters, please can we consider whether that procedure can be used to piggyback fuel efficiency measures, such as loft insulation.
The Minister may want to roll his eyes and say that that will make the process more complicated, but there is a huge opportunity there. People will be considering their electricity supplies and their power consumption. Sending officials out to every household in the land, presents perhaps a once-in-a-lifetime opportunity to tackle some of those valuable considerations, and I hope that we will piggyback some of them on top.
Malcolm Wicks: I was listening intently to the hon. Gentleman, but I was not rolling my eyes, or only over whether I need to move the next clause formally. I was thinking ahead and that was why I was rolling my eyes.
Steve Webb: Sorry, I mistook multi-tasking for the rolling of eyes.
I think that the Committee’s view is that it is time for decisions to be made. We want to give the Minister powers, and he seems to be fighting us off. We trust him, we want him to have the powers, and I hope that he will not resist us.
Question put and agreed to.
Clause 79 ordered to stand part of the Bill.
Clause 80 ordered to stand part of the Bill.
Malcolm Wicks: On a point of order, Mr. Amess—can I speak to the clause?
The Chairman: We have disposed of the clause.
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