Preparations for the roll-out of smart meters - Public Accounts Committee Contents

1 Managing this challenging programme

1.Under European Directives, all member states are required to introduce "intelligent metering systems" - smart meters - to at least 80% of domestic electricity consumers by 2020. The UK Government has opted to replace some 53 million existing gas and electricity meters in Great Britain with smart meters by 2019. The new meters will provide consumers with more sophisticated information, enabling households to monitor their energy usage, which the Government hopes will lead them to reduce their energy consumption. The Department of Energy and Climate Change (the Department) accepted that it was accountable for delivering this challenging programme on time and within budget and for realising the consumer benefits.[2]

2.The Department has decided that suppliers are the right people to install smart meters in people's homes.[3] Some suppliers want to get on with installing smart meters quickly, so they can start reducing their costs and attract new customers; while other suppliers are taking a more cautious approach.[4] The Department's view is that competition between energy suppliers is the best way to deliver benefits for consumers. However the track record in this market does not demonstrate that competition between suppliers is working in providing greater choice and driving down prices. We believe that suppliers are likely to see this programme, which requires them to visit every consumer, as an opportunity for them to sell more services.[5]

3.Suppliers will be required to offer smart meters to everyone and to take all reasonable steps to complete the roll-out by 2019. Consumers will not be forced to accept the installation of a smart meter and we think it unrealistic to expect every householder to volunteer for a smart meter over this timescale.[6] Consumer groups told us that, in their view, the consumer engagement part of the smart meter programme was 'nowhere near ready'.[7] The Department estimated that around £100 million will be spent on consumer engagement work over the lifetime of the programme, of which the Government was providing £20 million over the next four years. But the Department had not yet worked out how this money will be used or how suppliers will contribute to this important aspect of the programme. The Department told us that its consumer engagement strategy, due to be published in 2012, would address how to promote widespread take-up and encourage consumers to actively engage with smart meters to reduce their energy consumption. It would also seek to support consumers to indentify lower charges through using the most appropriate tariff offered by their supplier or other suppliers.[8]

4.One of consumers' key concerns is their privacy and the security of their personal information and we understand there is a real threat of cyber attack on the smart metering communication system.[9] The Department assured us that it has learned the lessons from the Netherlands' experience of public rejection of smart meters that privacy requirements need to be addressed seriously. The Department told us it had now undertaken risk mitigation work and had in place a plan to make sure that the smart metering system would not be at risk. [10]

5.One of the suppliers taking part in the roll-out made a strong case for further widespread piloting of smart meter installation before the main programme starts in 2014. Despite earlier trials, the supplier urged caution as there was still uncertainty in a number of areas including consumers' willingness to cooperate with the installation process.[11] While the Department had amassed evidence to support the programme it recognised that there had been weaknesses in the earlier trials and that there were some gaps in the evidence. It expected to gather more evidence during the two years remaining before the planned roll-out begins in 2014. The Department noted that it wanted to strike the right balance between getting enough evidence before proceeding and getting on with the roll-out.[12] Nonetheless, the roll-out of smart meters will be an enormous challenge with significant implementation risks. The sheer scale of the implementation programme will require installers to work at an unprecedented pace, raising concerns about suppliers' capacity to procure and install smart meters quickly and safely in the time available.[13]

6.The Department and suppliers had not yet agreed a specification for the data communications system needed to collect data from smart meters and make it available to suppliers and to support the proposed smart grid programme designed to better match electricity supply and demand. Unless there is joined-up planning for smart metering, the data communications system, and the longer-term proposed smart grid programme, consumers will face further substantial costs to modify or replace the relevant equipment.[14]

7.The data communications service being procured by the Department is a complex IT project in its own right that may cost as much as £3 billion. In response to our concerns about the risks to successful delivery of this project the Department noted that it would: review progress before concluding the procurement of the data communications system in 2012; and that it would be possible to pull the plug on the programme overall should that be necessary before roll-out in 2013.[15]

8.The challenges associated with the roll-out of the smart meter programme to every home in the country are huge. The Department is confident that it has adequately accounted for the risks involved in the complex and ambitious smart metering programme, especially cost escalation. This Committee does not share the Department's optimism and expects the Department to proceed only on the basis of detailed plans underpinned by robust evidence, preferably from further trials.[16]

2   Q48 Back

3   Q58 Back

4   Q70 Back

5   Qq45, 86 Back

6   Q159 Back

7   Q14 Back

8   Qq131, 133, 174-175 Back

9   Q18 Back

10   Q105, Q167-170 Back

11   Qq14, 19 Back

12   Q149 Back

13   Qq4-5, 19 Back

14   Qq150-151, 154 Back

15   Qq52-53 Back

16   Qq155, 159, 177 Back

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© Parliamentary copyright 2012
Prepared 17 January 2012