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.The Department has decided that suppliers are the
right people to install smart meters in people's homes.
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.
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.
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.
Consumer groups told us that, in their view, the consumer engagement
part of the smart meter programme was 'nowhere near ready'.
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.
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. 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.
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.
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.
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
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
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.
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.
2 Q48 Back
Qq45, 86 Back
Qq131, 133, 174-175 Back
Q105, Q167-170 Back
Qq14, 19 Back
Qq4-5, 19 Back
Qq150-151, 154 Back
Qq155, 159, 177 Back