2 Minimising costs
and securing the benefits for all consumers
9.The costs of the smart meter programme will fall
to consumers through increased energy charges. The Department
has estimated that by 2015 the programme will on average add a
net £6 to all dual fuel customers' bills (£14 costs
less £8 assumed savings from the benefits that consumers
will be receiving by then).
The Department estimates that if consumers engage with the programme
in line with its forecasts, households could see a positive net
benefit by 2017.
However, consumers may find it easier instead to compare the estimated
lifetime cost of £240 for a dual fuel meter with the range
of potential benefits that may be achievable.
Transparency in costs are essential if confidence in smart meters
is to be achieved.
10. Suppliers stand to benefit significantly from
the installation of smart metering, for example through the introduction
of automated meter reading.
Of the £18.7 billion total benefits identified by the Department
in its updated detailed benefits analysis £9 billion (48%
of the total) were expected to accrue to suppliers.
The Department argued that competition between suppliers would
ensure that consumers secure the benefits from smart meters. Suppliers
would shop around to get the best deal on the procurement of the
meters and consumers could switch suppliers if they did not consider
they were getting a good price or service. However experience
to date suggests consumers find it very difficult to understand
different tariffs, and the pricing structure and information provided
by suppliers does not encourage competition. The Department was
actively encouraging people to switch and smart meters could help
consumers to see their energy costs and switch sooner.
11.We asked what safeguards were proposed to ensure
that suppliers did not profit unfairly from installing smart meters
in every home, for example by inflating costs or selling additional
We were also concerned about the Department's ability to ensure
that suppliers pass their cost savings on in full to consumers.
Historically, suppliers have been quick to pass on higher charges
to consumers but slow to reduce retail prices when wholesale energy
costs fall. The
Department was confident that suppliers will pass the benefits
of smart meters to consumers but we were not convinced that the
Department had fully developed a strategy to achieve this.
12.The Department told us that it did not expect
the cost of smart meters to be separately disclosed in energy
bills as there are concerns that existing bills are too complex.
Moreover, the cost of smart metering was only expected to account
for around 1% of households' energy bills.
The Department told us it would, however, monitor costs and with
Ofgem look at suppliers' accounts as it would be accountable for
constraining the costs and delivering the benefits.
The Department was not clear, however, on how it proposed to ensure
greater transparency for consumers about the cost of smart meters
and about the way suppliers would pass on cost savings to consumers.
13. Many consumers already take advantage of ways
to reduce their energy bills but there are others who do not.
Participants in many of the trials undertaken have been energy
savvy consumers, who were keen to participate in the programme
and already recognised the scope for benefits from using smart
meters to reduce their energy consumption.
It is by no means certain that the rest of the country will embrace
the programme as willingly or will be able to switch to preferential
tariffs. Some consumers do not have a bank account, precluding
them from taking advantage of potential savings available from
using direct debits.
It would be naïve to expect competition alone to fully protect
these consumers and there is a pressing need for simple, low cost
tariffs, easy to understand.
We were particularly concerned that vulnerable consumers should
be protected from remote disconnection without proper engagement
if they failed to pay their bills.
14.Vulnerable consumers, those on low incomes and
those who use prepayment meters, who are already at a significant
disadvantage when energy costs rise, are also at risk of not being
able to take advantage of the benefits of smart metering, and
the method chosen by the Department to introduce smart metering
by charging every customer for the cost of the meter and its installation
is by its nature regressive.
The Department told us that it has funded dedicated qualitative
research with low-income consumers to identify the impact on them
of smart meters and their particular issues in engaging with the
meters. The Department
assured us it will be tracking
how the benefits and costs affect different groups of users, including
the impact on the vulnerable. 
17 Qq 8, 36-40, 123 -126, 131, 135 Back
Q 40 Back
Qq 131, 137 Back
Q 113 Back
DECC Consultation Document, Smart Metering Implementation Programme,
August 2011, para 2, C&AG's Report, Figure 7 Back
Qq 58-59, 68, 73, 114, 116 Back
Qq 45-46 Back
Qq 113-114 Back
Qq 10, 12, 59 Back
Qq 71, 113-115, 149. Back
Q 87 Back
Qq 86, 92-93 Back
Qq 91-92 Back
Qq 16, 80, 103, 108, 149; Ev 40 Back
Qq 138, 139 Back
Qq 17, 42, 58, 59, 146, 147 Back
Qq 3, 25, 40, 42, 43, 107 and 146 Back