 House of Commons |
Session 2007 - 08 Publications on the internet General Committee Debates Energy |
Energy Bill |
The Committee consisted of the following Members:Chris Shaw, Committee
Clerk
† attended the
Committee
Public Bill CommitteeTuesday 11 March 2008(Morning)[Mr. David Amess in the Chair]Energy BillFurther written evidence reported to the HouseEN 14 British
Hydropower
Association
Clause 79Gas
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.
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 Confused.com—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—
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.
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.
11.15
am
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.
The time
for action is now. As the Prime Minister says, the Government are best
when they are boldest. One of the greatest achievements of the Labour
Government was to introduce a windfall tax. Let us
look at the position of energy supply companies just now. Of course,
they need money for investment. The energy industry is a rapidly
changing scene, but it is clear that when organisations such as
Ofgem—not the most radical body in the world—tell the
Chancellor of the Exchequer that the energy supply companies have
benefited from the £9 billion of carbon credits that they have
not paid for, there is a strong case for firm action on prepayment
meters and on social tariffs. One of the ways of financing that is to
look again at a windfall tax.
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.
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.
11.30
am
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 Confused.com, 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?
11.45
am
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.
I now move on
to smart meters, the issue that has attracted most attention in the
debate. We had some serious contributions from the hon. Member for
Wealden last Thursday and today from many members of the Committee. It
shows the strong interest in this. A number of new clauses have been
tabled and perhaps I can start with a little anecdote. Shortly after I
became Energy Minister for the first time, about two years ago, an
environmental body—I have forgotten which—wrote to a
number of us, including shadow Ministers, to say, “We would like
to install smart meters in your home. If you would accept them, it
would show that you were keen and it would help us.” Some of us
signed up to that; I certainly did. For various reasons, the smart
meter never arrived, but that is beside the point. I do not think that
it was anyone’s fault in
particular.
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.
Mr.
Brian Binley (Northampton, South) (Con): The Minister
talks about the range of abilities that smart meters might have. If he
can find one that prophesies football matches, perhaps he will let me
know where I
can get it. There is an opportunity here for
consumer choice, and I wonder if that was taken into account. The
nation clearly requires certain abilities from smart metering, but
consumer choice could an help to alleviate the costs involved. Is that
within the remit of the Minister’s thinking, and part of what he
intends to do? If not, will he consider it as a
possibility?
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:
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?
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
“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?
Charles
Hendry:
There might be, but some leadership is needed
here, and I know that the Government have been thinking about that for
some
time. When the Energy Bill was coming along, it is a
shame that the Government did not take the chance to conclude those
discussions and thoughts before we got to Committee stage, because we
could have moved further forward. If we want that programme to move
forward and the switch to smart meters to happen, there is no doubt
that there will need to be something in legislation to determine how
that will happen and by what time. Therefore, when the opportunity
arises, we will certainly be inclined to push new clause 1 to a vote.
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?
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.
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.
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