Appendix 1: Government Response
Letter to Sir Robert Smith MP
September 2013
RESPONSE TO COMMITTEE RECOMMENDATIONS: 'SMART METER
ROLL-OUT'
I am very grateful to the Energy and Climate Change
Committee (ECC) for their enquiry on 'Smart meter roll-out' and
the recommendations it contains. The Government's response takes
into account the views of DECC.
Since your report was published preferred bidders
have been announced and contracts awarded for the DCC, CSPs and
DSPs. In light of these developments we have been able to provide
some new information since the oral evidence session.
The next 12 months will see a focus on the design,
build and test phases of the smart metering programme. Newly appointed
communications providers will be coming together for the first
time with service users, such as suppliers and network operators.
This will be backed by new governance arrangements as further
powers are brought in through the Smart Energy Code and industry
takes increasing ownership of delivery.
The interests of consumers are at the heart of the
smart metering programme. DECC will be working with the Central
Delivery Body to ensure consumers increasingly understand and
demand the benefits smart meters have to offer in the build-up
to mass roll out. I look forward to updating the Committee at
a later date on further progress.
Baroness Verma
The Government welcomes the Energy and Climate Change
Committee's report on the Smart Meter Roll-out. This response
has been prepared by the Department of Energy and Climate Change
(DECC) with input from the Central Delivery Body, the organisation
set-up and funded by suppliers to undertake consumer engagement.
The Government notes that Ofgem will be responding directly to
the Committee's recommendations where it is directly identified.
The Committee's recommendations are shown in bold
and the paragraph references at the end of each recommendation
correspond with those in the Committee's report. The Government's
response is given beneath each recommendation, or group of recommendations.
The cost-benefit case for roll-out
1. Ofgem must be prepared to strengthen
the requirements on suppliers to provide accurate bills if there
is evidence that consumers are not receiving accurate bills and/or
that they are being back-billed months after smart meters have
been installed. (Paragraph 13)
The Government sees accurate billing as a significant
benefit of smart metering, and research shows that it is valued
by consumers, particularly those who have had difficulties with
over or under paying for estimated bills[1].
Suppliers will be able to take remote meter readings once a smart
meter is installed so there will be no justification for back-billing.
The Government notes that Ofgem will respond directly
to this recommendation.
2. We recommend that suppliers work together
to achieve efficiency savings during roll-out. This would help
to ensure efficiency and the widest possible coverage of the WAN
(Wide Area Network). DECC should draw up a co-operation protocol
and require suppliers to sign up to it. (Paragraph
26)
The Government notes the Committee's recommendation.
Individual energy suppliers are responsible for delivering the
roll-out of smart meters to their customers, while the Data and
Communications Company (DCC) is responsible for providing the
WAN that all suppliers will use.
Because they are in competition with each other,
suppliers are motivated to deliver the roll-out in the most efficient
way. Subject both to energy regulation and wider competition
law, suppliers may however identify opportunities for achieving
efficiency savings and operating in the best interests of customers
through co-operation with some or all other energy suppliers.
Energy suppliers themselves will take a view on the desirability
of co-operation in particular circumstances and its compatibility
with the legal framework governing the competitive energy market.
Our ambition is for all domestic and small business
premises to have smart metering. To support this ambition,
there is a licence obligation on the DCC to strive for 100% WAN
coverage. This requires that the DCC must justify on an annual
basis what steps it is taking to secure 100% WAN coverage in a
manner that is technically practicable and cost proportionate.
The procurement of the DCC communications service providers identified
some areas where, on the basis of current technology and costs,
it would be very difficult to deliver 100% WAN coverage at an
acceptable price by the end of 2020. Nevertheless, all
of the appointed communication service providers have committed
to very high WAN coverage levels - 99.25% of premises by 2020.
3. Smart metering has the potential to bring wide
benefits to our energy infrastructure and to consumers, and we
welcome this investment in the UK's energy system. The development
of a smart grid will be key to meeting future energy challenges,
but the extent to which smart metering will facilitate that is
unclear, and not enough has been done to quantify the benefits
of a smart grid. Greater transparency is needed for the true costs
and benefits of roll-out to be assessed. DECC should clarify
the extent to which smart metering will facilitate the development
of the smart grid and should publish its analysis of the financial
costs and benefits of a smart grid. (Paragraph 34)
The Government welcomes the opportunity to set out
how the smart metering system will support the development of
a smart grid and its assessment of the economic impact. The Government
believes that a smart grid will play an important role in delivering
secure energy supplies in the future, especially given the expected
increase in more intermittent and distributed sources of energy
plus the increase in electricity demand from households through
the take-up of electric vehicles and heat pumps.
Smart meters are a key part of the development of
a smart grid. The smart meter programme has therefore been designed
to support smart grid capability in two main ways:
- The minimum specification for
the metering equipment includes the physical functionality required,
e.g. voltage registers, load control capability and time-of-use
tariffs, so the technical capability of smart meters is compatible
with the anticipated demands of a smart grid. This will improve
distribution network companies' understanding of and control over
the use of their networks and help them better target investment
in network infrastructure.
- Flexible and scalable communications services
will provide consumers, energy suppliers and network companies
with data to help enable significant demand-side response capability.
The smart meter Impact Assessment (IA) identifies
two broad categories of smart grid-related benefits:
- Benefits to networks of around
£1 billion, which arise directly from functionality or information
delivered by the smart metering system. These include:
- Projected reductions in electricity
losses and more targeted investment decisions as a result of more
detailed information about consumption and decentralised generation.
- More efficient management of outages arising
from power interruption alerts that will be issued by smart metering
equipment. This will reduce the time during which customers are
without supply and reduce operational costs to fix faults and
handle calls into call centres to report issues.
- Approximately £900 million
of benefits from load shifting, as consumers take up time-of-use
tariffs and change their energy consumption patterns. As consumption
shifts from peak to off-peak periods, the generation sector does
not have to pay the higher cost of operating peak plant. In addition,
investment in generation capacity can be reduced as the absolute
peak load is lower than it otherwise would have been.
In addition to these specific benefits, the Impact
Assessment recognises further potential benefits that a smart
grid could deliver. These are not explicitly quantified in the
assessment as they are dependent on additional investment in the
energy sector or market developments which are outside of the
scope of the smart metering programme. In relation to this, DECC
has worked with Ofgem and industry through the Smart Grid Forum
to evaluate the wider costs and benefits of smart developments
of the electricity distribution system. The outputs of this work
have been published on the Smart Grid Forum website.[2]
The analysis suggests that smart grid technologies can deliver
significant savings over the period to 2050 relative to using
conventional approaches only. The overarching conclusion of this
work is that savings in grid investment in the order of 25-30
per cent of total investment costs[3]
to 2050 are achievable.
4. There is a clear risk that the £6.7 billion
net benefit projected by DECC may not be achieved if costs spiral
or if consumers do not realise the expected energy and bill savings.
There is also a risk that the benefits that accrue to suppliers
as a result of roll-out will not be passed on fully to consumers.
We are not convinced by the argument that competition in the market
will ensure that costs are kept down and benefits are passed on
to consumers. Until Ofgem can provide concrete evidence that competition
has increased—for example by publishing its analysis of
market performance against agreed indicators of competitiveness
or by publishing a review of the impact of its RMR reforms—serious
concerns about competition in the market will remain. The
responsibility for keeping roll-out costs under control and ensuring
that benefits are passed on to customers rests with the Government
and Ofgem. They must demonstrate how reforms to the market will
achieve this and what action they will take if this is not achieved.
(Paragraph 35)
The Government agrees with the Committee that effective
competition in the energy market will be an important driver for
ensuring that costs are incurred efficiently and benefits passed
on to consumers
The smart meter roll-out will enable energy suppliers
to realise a number of operational efficiency savings but they
will also face the costs arising from the installation and operation
of smart meters. We expect suppliers to minimise the costs and
maximise the efficiency savings from the roll-out and to reflect
these costs and savings in their charges to customers.
DECC has been working with Ofgem to improve competition
in the domestic retail energy market. We have reduced barriers
to entry by increasing the customer number threshold at which
small suppliers are required to participate in certain environmental
and social schemes. We are supporting Ofgem's work to address
poor liquidity in the wholesale electricity market and to increase
consumer engagement in the retail market. Ofgem's Retail Market
Review proposals will introduce a clearer simpler tariff framework
and give consumers clear personalised information on their bills
helping them to compare and switch. One of the benefits of the
smart metering roll-out itself is expected to be increased levels
of switching and so enhanced competition; better information about
energy consumption will enable consumers to be more informed customers,
while new systems will enable quicker and easier switching between
suppliers.
The GB domestic retail energy market has seen an
increasing number of new entrants over the last few years, with
three new companies entering the market last year and a further
two companies entering the market this year. Some of the smaller
suppliers are experiencing strong growth with companies such as
Ovo and Co-op participating in collective switches.
The Government will be monitoring progress in delivering
the roll-out, including in each of the key areas of benefits and
costs identified in the Programme's Impact Assessment. We will
be collecting information directly from energy suppliers throughout
roll-out to allow us to monitor expected efficiency savings in
back office support functions and meter management, and the costs
of delivery. The information we collect on costs and benefits
will allow us to assess impacts on consumer bills. In addition,
we are already conducting surveys about consumer attitudes and
experience of smart metering and measuring the initial consumer
benefits being achieved as a result of Foundation installations
through an early evaluation project, results of which will be
published in 2014.
Should evidence suggest DECC needs to take further
action to enable benefits realisation, this might be done by a
range of means, such as: influencing stakeholders; broad powers
to regulate further in relation to the roll-out; or wider DECC
policy. Other possible courses of action could include enforcement
activity by Ofgem, technical and industry process changes in the
end to end system, and changes in the installation process through
the Smart Meter Installation Code of Practice (SMICoP) to ensure
consumers can receive the full benefits of smart meters.
Whilst recognising that Ofgem and the industry itself
will have important roles, Ministers are therefore able and committed,
if necessary, to take such further action that is needed to deliver
our smart meter objectives.
The Government notes that Ofgem will also respond
to the Committee's recommendation.
5. If consumers do not believe that they are benefiting
significantly from roll-out, they could rightly perceive it as
a costly project that they have paid for but gained little from.
As we outlined in our Consumer Engagement with Energy Markets
report, we are concerned that not enough is being done to make
consumers aware of the need to invest in the UK's energy infrastructure.
DECC has been focusing its consumer messaging on the relatively
small energy and bill savings of around 2.8% that smart meters
may help consumers to achieve. We recommend that messages around
smart metering should place greater emphasis on the wider benefits
it will bring to the UK's energy infrastructure. We reiterate
the call in our Consumer Engagement with Energy Markets report
for greater transparency regarding the "contribution that
consumers are being expected to make to ensuring that we have
safe, secure and affordable energy supplies in future".
(Paragraph 36)
The Government notes the Committee's recommendation.
The roll-out of smart meters will play an important part in Britain's
transition to a low-carbon economy; help us meet some of the long-term
challenges we face in ensuring an affordable, secure and sustainable
energy supply; and pave the way for smart grid capability.
An evidence based approach is being taken to fulfilling
the aims of DECC's Consumer Engagement Strategy. To date, several
studies into consumers' attitudes and awareness commissioned by
DECC have shown that messaging around personal benefits of smart
meters are more motivating than national or environmental considerations[4].
Evidence from the United States[5]
also indicates that successful smart meter deployments engaged
consumers most effectively by focusing messages on installation
and the benefits that are immediately relevant to consumers.
In response to this evidence, the Consumer Engagement
Strategy proposes that messages should primarily focus initially
on energy saving, consumer experience and customer service benefits.
However, it also suggests that in the latter part of the roll-out,
and as the market develops, it may become more appropriate to
include messages about the wider benefits of smart meters. Consequently,
the Central Delivery Body, which plays a lead role in consumer
engagement, will keep evidence under review and adjust their consumer
engagement activities as appropriate in light of emerging evidence.
The Government notes the Committee's call for transparency.
DECC is committed to being open and transparent about the impacts
of all energy and climate change policies. To this end, DECC publishes
estimates of the impact of energy and climate change policies
on energy prices and bills, covering the period to 2030. The last
such assessment was published on 26 March 2013[6].
Putting a price on emissions and providing support
to low-carbon technologies is necessary to decarbonise our economy
and help tackle dangerous climate change. We also have a range
of policies to improve energy efficiency, helping households (and
businesses) reduce energy consumption, and offsetting the costs
of policies. As a result, overall we estimate that by 2020 household
energy bills will be around 11% lower and, in 2030, 3% lower compared
to what a bill would have been in these years without government
policies.
Roll-out stages and timescale
6. We welcome DECC's recent announcement that
the dates for mass roll-out are being pushed back by a year. However
there needs to be some flexibility in the new timetable, which
should be driven by engineering and infrastructure requirements
and the need to avoid artificial deadlines acting to push up programme
costs. DECC should be prepared to amend the timetable further
if more time is needed to address any systemic issues that may
arise, to respond to further delays to technical and infrastructure
requirements for roll-out, or to prevent cost escalations for
other reasons. (Paragraph 45)
The Government agrees with the Committee's recommendation.
We recognise that completing the national roll-out will be an
enormous logistical and technical challenge and we want consumers
to have a good experience of smart metering from day one. Consumer
groups have been clear that getting it right for consumers is
more important than delivering the roll-out quickly. When industry
told us that they needed more time to design, build, test and
deploy smart metering systems, we therefore decided to review
the timetable. There is a wide consensus that the amended timetable
is deliverable and all parties are committed to working towards
commencing mass roll-out in autumn 2015 and completion by the
end of 2020. However, progress will be closely monitored for
the duration of the Programme. We will continue to listen to all
stakeholders and learn from early installation experiences to
allow the necessary time for testing of smart metering systems
before the mass roll-out starts and to ensure successful completion.
Smart meter communications and coverage
7. We note the concerns about the centralised
DCC model proposed by DECC. DECC should, in response to
this report, set out the justification and cost implications of
the DCC model. (Paragraph 51)
The Government welcomes the opportunity to summarise
the rationale and cost implications of the Smart Meter Implementation
Programme's Data Communications Company (DCC) delivery model.
Following extensive consultation and careful consideration
of alternative models, the Government concluded that the most
effective approach to deliver the data and communications services
efficiently, securely and affordably was to establish a single,
central data and communications company. There were a number of
reasons for establishing a single body to perform this role and
support delivery of the Programme's benefits:
·
To protect and promote competition in the retail energy market
by:
· Putting
in place shared infrastructure that facilitates consumers switching
energy supplier without a change of meter or communication equipment
· Streamlining
industry processes to enable faster, more accurate switching
· To
facilitate new and emerging energy service markets, by ensuring
ease of access to data to parties who have permission from consumers;
· To support
the development of a smart grid by ensuring communication service
providers deliver smart energy network requirements across GB
and facilitate access to data for the network operators;
· To deliver
efficiency and maximum coverage through economies of scale;
· To provide
the most robust security architecture for smart metering on a
national scale.
The Government's Impact Assessment quantifies some
of the specific benefits of a centralised approach, where they
can be estimated. In particular, it identifies benefits of £1.7
billion over the period to 2030 relating to an enhanced consumer
switching process.
The Data and Communications Company (DCC) is the
licenced organisation responsible for service development,
service management and contract management of the smart meter
data and communications system. The data and communications services
themselves will be delivered by companies who have a service contract
with the DCC. The estimated value for the DCC itself is £175m
over 12 years, which compares with the estimated service contract
values of over £2bn. It will be regulated by Ofgem, to ensure
compliance with the obligations set out in its licence and provision
of an economic and efficient service.
Since the Committee's inquiry, the licence to operate
as the DCC has been awarded through a competitive licensing process.
The licensee is Smart DCC Ltd, a wholly owned subsidiary of Capita
PLC. The DCC has also signed contracts with three companies for
the delivery of the fundamental data communications services.
These are CGI IT UK Limited, Arqiva Limited and Telefónica
UK Limited.
8. We are concerned about WAN and HAN coverage
in the short to medium term, and these will affect consumers'
experience of smart meters. Communications issues must be resolved
before installing smart meters in order to ensure that consumers
have a good experience and are able to access the benefits of
smart meters as soon as they are installed. DECC must clarify
how progress towards 97.5% coverage will be achieved.
(Paragraph 60)
Consumer concerns and engagement
16. The provision of good-quality information
and support regarding smart meter usage and energy efficiency
will be crucial to consumer benefit from smart meter roll-out.
We applaud the action that DECC and Ofgem have taken to ensure
that consumers receive information and advice about smart meters
and energy efficiency when their smart meter is installed. However,
we are concerned that the benefits of receiving this information
may be lost, or significantly reduced, if smart meters are installed
in areas where communication gaps mean that they will be operated
in "dumb" mode for some time after installation. DECC
should amend the Smart Metering Installation Code of Practice
to ensure that consumers whose smart meters do not have smart
functionality at the point of installation receive appropriate
information and advice when this functionality is enabled.
(Paragraph 112)
The Government agrees with the Committee that a good
customer experience before, during and after the installation
of smart meters is vital to the successful roll-out of smart meters.
Licence conditions require the Data Communication
Company (DCC) to achieve the WAN coverage target and endeavour
to go beyond it where it is economical to do so. Ofgem are responsible
for enforcing against the licence conditions. DCC Communication
Service Providers have committed to wide area network coverage
targets of 99.25% of GB premises by 2020 (the end of mass rollout)
and will provide coverage to at least 80% of premises within each
region by the end of 2015 (the start of the DCC's live service).
The contracts with the communications service providers set
binding milestones at the start and end of roll-out for the provision
of WAN coverage, and also include interim indicative milestones
which allow flexibility for the CSPs to work towards the required
coverage in the most cost effective and efficient way. The DCC
will monitor performance and enforce the contract against these
milestones. The provider will give energy suppliers current and
advance information about WAN coverage on a rolling basis, which
can be used to inform installation planning. On current industry
plans, and in light of trials on HAN performance, we expect over
95% of GB housing to have HAN solutions from around DCC go-live.
We continue to consider with industry options for the remaining
households (typically purpose built flats) who will need alternative/wired
HAN solutions.
There may be a small number of cases where a smart
service is not immediately available, or is temporarily unavailable
for technical reasons, where the supplier takes the view that,
to avoid inconvenience to the customer, the meter should be installed,
with further configuration or commissioning taking place shortly
thereafter. It is important that consumers receive appropriate
information and advice from their energy suppliers in such circumstances,
and the Government's Consumer Engagement Strategy sets clear expectations
for a customer's experience before, during and after installation
to ensure smart meter benefits are realised.[7]
The Smart Metering Installation Code of Practice
is an important component of the Consumer Engagement Strategy
and is underpinned by licence conditions that set out the broad
aims for the Code of Practice. The detail of how these aims
will be achieved is then set out in the Code of Practice itself,
which is governed by a Board, with any decisions on change subject
to Ofgem oversight.
We do not think it is appropriate for DECC to amend
the Licence Conditions that set out the requirements for the Smart
Metering Installation Code of Practice to reflect this specific
issue. However, DECC will bring the Committee's view to the attention
of the Code of Practice Board.
Smart meter functionality and interoperability
9. We see a fundamental inconsistency between
DECC's position that there is little difference in functionality
between SMETS 1 and SMETS 2 meters and its assertion that the
new SMETS 2 standards are needed to ensure full interoperability.
Given that some HAN communication issues are still being addressed
as part of the SMETS 2 design process, it is clear that final
SMETS 2-compliant meters should be less susceptible to HAN connectivity
issues than SMETS 1-compliant meters. However, it is unclear how
much difference there will be in functionality between SMETS 1and
SMETS 2 meters, particularly in the longer term in relation to
the smart grid and smart appliances. DECC should outline
clearly what the difference between SMETS 1 and SMETS 2 meters
will be, particularly in relation to longer-term functionality.
(Paragraph 71)
The Government welcomes the opportunity to outline
the difference between SMETS1 and SMETS 2 meters.
The primary difference, as the Committee state, is
around communication standards. SMETS1 allows for any open communication
standard to be used, whereas SMETS2 specifies a particular communication
standard. This will facilitate communications with the DCC systems.
SMETS 1 compliant meters will be capable of communicating with
the DCC, but as they may employ different communication standards,
different arrangements may be required to communicate to the meter.
SMETS 2 also include some additional requirements
including:
· Provision
for registers in electricity meters to record the maximum demand
over a period - this additional functionality can help inform
networks in their grid planning;
· Provision for
variant electricity meters which reflect the non-standard arrangements
currently used by nearly 5m premises (e.g. those with certain
types of storage heating);
· Randomisation
offset capabilities, which allow meter switching times between
tariffs to be randomised over a short period of time (c.f. switching
all at once) to help avoid risks of power surges; and
· A requirement
that meters include role-based access control.
10. SMETS 2 meters are more likely to provide
customers with a satisfactory smart metering experience than pre-SMETS
2 meters. We are also concerned that it may cost more to support
SMETS 1 meters when customers switch and that these costs may
be passed on to consumers. Energy companies that wish to
wait for SMETS 2 meters before engaging more fully in roll-out
should not be pressed to deploy pre-SMETS 2 meters during foundation
stage. (Paragraph 72)
The Government agrees with the recommendation. It
is for suppliers to determine their individual approaches to installing
smart meters, taking account of their broader commercial strategy,
the needs of their customers and the obligation to complete the
roll-out.
We support moves by suppliers to offer smart meters
during the Foundation Stage, both to enable them to learn lessons
ahead of mass roll-out and to enable customers to access early
benefits. To this end we announced a package of measures in the
Government Response to Consultation on the Foundation Smart Market
and Further Consultation (July 2013)[8]
which provide clarity on the arrangements that will apply when
consumers with smart meters wish to change supplier during the
foundation period.
All larger suppliers and some smaller suppliers are
planning some level of SMETS1 installations. We know some suppliers
would prefer to wait for SMETS2 before installing at scale and
we note that a supplier's approach is a commercial decision for
individual companies to make.
Consumer savings
11. The provision of real-time consumption and
billing data is central to consumers' ability to manage their
energy use, but it is unclear just how accurate the billing information
provided on IHDs will be. We accept that many consumers will want
to access their data via smart phones, tablets and other means,
but we are also convinced that in-home displays (IHDs) help many
consumers to gain a basic understanding of their energy consumption
and costs. If the projected consumer savings and other benefits
of smart meters are to be achieved, consumers must be presented
with the best opportunity to gain a fuller understanding of their
energy usage from the moment they receive their smart meter. We
support DECC's position that all households should be offered
an IHD with their smart meter. However, we also recommend
that more should be done to ensure that these devices provide
accurate information so that they can be used most effectively
by consumers. (Paragraph 87)
The Government agrees that accurate consumption and
billing data is central to a consumer's ability to manage their
energy use. Transparency of energy costs in near real-time
through the IHD has been shown to be important in enabling energy
saving by households. Cost of energy consumption information
recorded by smart meters and displayed to consumers on IHDs or
other Consumer Access Devices[9]
will be calculated using the actual tariff held on the meter and
will include any standing charges and support time-of-use tariffs.
In addition, energy suppliers will be required to update
the tariff information when the tariff changes.
The IHD will display information about the cost of
consumption on this basis for the current day, current week and
current month; it will also display the historical cost of consumption
for the past 8 days, the past 5 weeks and the past 13 months.
For pre-payment customers the IHD will show any aggregate debt
(where applicable) and the amount of credit on the meter.
For credit customers, whilst the cost of consumption
information on their IHDs will be indicative of what they will
be billed, it will not necessarily be reflective of their actual
account balance. This is because it will not take into account
any card/cash/direct debit payments and other balance adjustments
(for example, discounts, goodwill payments etc.). Suppliers have
indicated that providing this detailed and specific account information
for all customers would require them to make costly and significant
upgrades to their current systems. Such additional costs could
be passed on to consumers and would not result in significant
additional benefits. At present, there is no evidence to demonstrate
significant additional benefits to credit customers of displaying
the account balance through the IHD. This is particularly the
case where a consumer pays by fixed direct debit; in such cases
a consumer will usually be in credit during the summer months,
which could negate incentives to reduce consumption.
We have therefore not made display of account balance
mandatory. However, all IHDs will have this capability and we
are leaving it to the discretion of energy suppliers to develop
and offer this service. We are gathering further evidence on how
easy consumers find it to use the IHD to estimate what their energy
bills will be.
12. We see a fundamental incongruity in DECC and
Ofgem's position that on the one hand IHDs are integral to domestic
consumers' ability to reduce and manage energy consumption and
should therefore be offered to them, but that on the other they
need not be offered to small and micro-businesses. We question
how the ambitious energy savings that have been projected for
the non-domestic sector can be achieved by small and micro-businesses
if they are not given the same opportunities as domestic consumers
to access their consumption data. It is in all our interests to
engage as many consumers as possible with smart meters in the
short term, as this may increase their ability and willingness
to engage with more sophisticated demand response incentives in
the long term which could bring wider benefits. We recommend
that small and micro-businesses should be given the same offer
of an in home display, free of charge, that domestic consumers
will get upon installation of a smart meter. At the very least,
they should have free access to the consumption and billing data
that IHDs are expected to provide. (Paragraph 91)
The Government shares the Committee's view of the
importance of access to consumption data to non-domestic customers,
including small and micro-businesses, and the importance of ensuring
that these customers obtain substantial benefits from smart metering.
Smaller non-domestic sites form a market that is
more varied and complex than the household sector. This
market ranges from micro-businesses to the smaller sites of large
public and private sector organisations. These customers
will wish to access different levels of data, and to access it
in different ways. Micro- and small businesses themselves
can vary significantly from one another. A small shop, an
office or light industrial premises are very different, and are
likely to have individual needs in terms of access to, and use
of, consumption data. The Central Delivery Body will have
an important role in engaging this range of smaller businesses,
when it is cost effective for it to do so through extension of
its consumer engagement activities.
The IHD is one means of obtaining information held
by smart meters. The other main approaches are the use of web-based
tools, which are already widely available in the larger non-domestic
market, telephone applications, and consumer devices, which the
Government expects to appear on the market in tandem with the
smart meter roll-out. The evidence from early installations of
smart-type metering is that large suppliers (who supply the great
majority of micro- and small businesses), see competitive advantages
in not charging for access to consumption information.
In 2011, we consulted on the provision of IHDs to
small and micro-businesses. In light of that consultation, we
concluded that, given the variety of customers in the non-domestic
market, and their very different needs, it would not be of overall
economic benefit to mandate the offer of IHDs free of charge.
Non-domestic customers will be able to purchase IHDs if they wish,
and some suppliers may choose to provide them as part of the supply
offer.
Consumer concerns and engagement
13. We welcome the action that DECC is taking
to respond to public concerns about health, data protection and
other issues in relation to smart meters. We also welcome the
fact that it is considering further "how best to respond"
to such issues. We urge DECC to take into account solutions
that have worked in other countries and to outline, before the
commencement of mass roll-out, what further action it will take
to address consumer concerns. DECC must ensure that these issues
are given sufficient and timely attention in consumer engagement
campaigns before and during roll-out. (Paragraph 104)
17. Public engagement should begin before the
start of mass roll-out. We hope that energy suppliers will learn
from the US experience of roll-out and start engagement early.
We welcome the setting up of the CDB and suggest that changes
to the timescale for mass roll-out present a welcome opportunity
to ensure that the consumer engagement programme is well under
way before mass roll-out commences. (Paragraph 117)
18. Energy companies still have a long way to
go in putting right past failures and building trust among consumers.
It is therefore essential that information and support from a
range of messengers, including charities, local authorities and
other trusted third parties, is available to consumers before,
during and after roll-out. (Paragraph 118)
The Government welcomes these recommendations. Consumers'
interests are at the heart of the Smart Metering Implementation
Programme. Consumers must have confidence in smart metering and
understand what actions they can take to maximise the benefits.
DECC has developed a clear strategy and regulatory framework for
consumer protection and engagement to ensure the messages for
consumers align with their interests and concerns, and that consumer
benefits are delivered.
We have looked closely at international learning
as we developed the policy and regulatory framework for smart
metering, and continue to monitor progress in other countries
with smart metering programmes. More than 50 countries are installing
or planning to install smart metering equipment, with individual
states in the US, Canada and Australia having their own roll-out
programmes.
We described in our response to recommendation 5
how learning from the US informed our views on the priorities
for consumer engagement. To take another international example[10],
our decision to put in place a robust regulatory framework on
smart metering data access and privacy was informed by the lessons
learned from consumer concerns in the Netherlands.
The Government is committed to remaining open to
learning, including from international experience and keeping
the regulatory framework under review.
The Central Delivery Body (CDB) will take an evidence-based
view on the consumer engagement that should take place before
and during mass roll-out. It has been designed to put consumers
at the core of its engagement approach and activities; this is
supported by the governance of the body, as its Board of Directors
specifically includes two Directors nominated by the National
Consumer Council and two Directors who represent the interests
of different groups of energy consumers.
In view of the importance of the CDB's activities
in building acceptance and support for smart meters, and the desire
across stakeholders for early action, the Government brought forward
the proposed dates for the publication of the first Consumer Engagement
Plan, Performance Management Framework and Annual Budget. These
must now be produced by the end of 2013, rather than March 2014.
The first Annual Report must be published by the end of March
2014. These will be used to assess the success of the CDB in achieving
its purpose and objectives, including how far its activities,
combined with those of individual suppliers, are meeting the Consumer
Engagement Strategy aims.
Third parties, such as charities, consumer groups,
community organisations, local authorities and housing associations
will also have an important role to play as trusted messengers
in delivering effective consumer engagement. Government has already
begun discussions with these groups and it is anticipated that
the CDB will play an important role in facilitating and coordinating
third party involvement. Co-ordinated outreach action by the CDB
will reduce the burden on third parties from potentially having
to work with a number of suppliers simultaneously, as discussed
in chapter 4 of the Government's Consumer Engagement Strategy.
14. We note Ofgem's reasons for not wanting to
give detailed guidance at this stage regarding the obligation
on suppliers to install smart meters in all homes, and we agree
that it is important that suppliers should aim to install smart
meters in as many homes as possible. However, we also believe
that suppliers would benefit from having a clearer understanding
of what is expected of them in cases where customers refuse a
smart meter so that they can plan how to respond. We therefore
recommend that DECC and Ofgem should provide some guidance in
this regard. (Paragraph 108)
15. We agree with Ofgem that it may be reasonable,
once roll-out is complete, to charge consumers who opt out of
having a smart meter. This would help to protect other consumers
from picking up the increased costs of reading "dumb"
meters, but any such charge would have to be reasonable. We do
not believe it would be appropriate to impose a similar charge
on consumers who are prevented from receiving a smart meter by
HAN or WAN communications issues. Ofgem and DECC should
provide guidance on the circumstances in which it may be appropriate
to charge consumers for opting out of having a smart meter. If
charging does occur, Ofgem should monitor the charges and be prepared
to set a cap if charges appear to be excessive. (Paragraph
109)
The Government notes the Committee's recommendations
with regard to customers who refuse or who are unable to have
a smart meter. Current evidence suggests that the numbers of
consumers who have concerns that would lead them to refuse smart
metering are very small. However, for customers who refuse to
have a smart meter, there is no legal obligation to have one.
DECC noted the interest of some suppliers in receiving guidance
on what "all reasonable steps" might constitute in our
response to the 2011 consultation on the roll-out.[11]
We took the view that it would not be helpful to provide guidance
on what "all reasonable steps" might constitute because
both the range of issues that might arise during the roll-out,
and the solutions that might be developed, were unclear. Once
licence conditions are in place, responsibility for interpretation
and ensuring compliance lies with Ofgem.
Ofgem will be monitoring suppliers throughout roll
out and will expect to engage with them where suppliers have plans
to introduce differential charging for consumers with traditional
meters. It will keep issues surrounding the fair treatment of
these consumers under review, especially those who have traditional
meters because they were not able to obtain smart meters and consider
whether additional regulatory protections are needed to ensure
that any such charges are reasonable, if and when plans for different
charges arise.
Industries, including suppliers, the communications
service provider and the Data and Communications Company, have
the opportunity to find technical and commercial solutions in
areas that are currently predicted to be without WAN coverage
after 2020. The Government notes that Ofgem will also respond
to the Committee's recommendation.
1 DECC Smart meters: research into public attitudes,
May 2012 Back
2
www.ofgem.gov.uk/ofgem-publications/56816/ws3-phase-3-84170-complete-issue-1.1.pdf
Back
3
Discounted at 3.5%. Back
4
'Big picture benefits to the environment and security of supply
were largely dismissed as out of step with current pre-occupations
around surviving financially in the short term.' Page 6, DECC
Smart meters: research into public attitudes, May 2012. Back
5
US Smart Grid Consumer Collaborative (2011) Collaborative: Excellence
in Consumer Engagement 2011 http://smartgridcc.org/wp-content/uploads/2011/10/SGCC-Excellence-in-Consumer-Engagement.pdf
Back
6
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/172923/130326_-_Price_and_Bill_Impacts_Report_Final.pdf
Back
7
'Sustained supplier engagement post-installation will be key to
ensuring that consumers accept smart meters and make lasting positive
changes in the way they manage their energy consumption.' Page
28, https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/43042/7224-gov-resp-sm-consumer-engagement.pdf
Back
8
https://www.gov.uk/government/consultations/smart-metering-implementation-programme-foundation-smart-market
Back
9
A device which locally retrieves and uses the consumption and
tariff information available from the smart metering system to
provide energy-related data and services to the consumer. Back
10
For more examples of how we have learnt from international experience,
see First Annual Progress Report on the Roll-out of Smart Meters,
December 2012, Annex 2, page 27: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/68973/7348-first-ann-prog-rpt-rollout-smart-meters.pdf
Back
11
3.6, Page 18, http://webarchive.nationalarchives.gov.uk/20121217150421/http://decc.gov.uk/assets/decc/11/consultation/smart-metering-imp-prog/4965-gov-resp-cons-tech-spec-smart-meters.pdf
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