UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 161-ii

HOUSE OF COMMONS

ORAL EVIDENCE

TAKEN BEFORE THE

Energy and Climate Change Committee

Smart Meter Roll-Out

Tuesday 14 May 2013

Paul Spence, Dr Neil Pennington, Andrew Ward and Tony House

Stuart Rolland, Don Leiper and Darren Braham

Evidence heard in Public Questions 98 - 179

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Oral Evidence

Taken before the Energy and Climate Change Committee

on Tuesday 14 May 2013

Members present:

Mr Tim Yeo (Chair)

Ian Lavery

John Robertson

Sir Robert Smith

Dr Alan Whitehead

________________

Examination of Witnesses

Witnesses: Paul Spence, Director of Strategy and Corporate Affairs, EDF, Dr Neil Pennington, Programme Director, Smart, RWE npower, Andrew Ward, Operations Director, ScottishPower, and Tony House, Smart Programme Director, SSE, gave evidence.

Q98 Chair: Good afternoon. Thank you very much for coming in. There is a fair amount of interest in this inquiry and I am grateful to you for giving evidence. We have about an hour for this session, so do not feel obliged to answer every question unless you really want to. That is not to discourage you, but I want to keep proceedings moving along at a reasonable pace. I will begin with a question that I think each of you may want to answer, which is how many smart meters, both gas and electricity, have you installed to date and what smart metering trials have your companies been involved in? We will just work our way across, maybe starting with EDF.

Paul Spence: Thank you very much. We have installed somewhere over 10,500 meters as a part of four trials that we have run. The most significant of those is the Low Carbon London trial focused on the London area. We have chosen to emphasise very much making sure we have the infrastructure in place and the teams ready for the mass roll-out as and when that comes, but, as I say, we have done 10,500 meters.

Dr Pennington: From an npower perspective, in around 2008 we carried out a 5,000-meter trial, which was all geared at understanding customer behaviour as opposed to the technology. We looked at monthly billing, a prepayment trial, simple time-of-use tariff, a web enablement and a microgen trial. We concluded those trials about a year and a half ago. On finishing those trials, we retired the technology because that technology was never going to be an enduring meter or enduring communications technology. We got a lot of insight around customer preferences for those particular products and we have been focusing our effort on investing in the platform and procuring and establishing relationships to begin installing some SMETS 1 meters at the turn of this year.

Andrew Ward: From a ScottishPower perspective, we have installed 35,000 smart meters. In 2010 we installed 30,000 meters, predominantly to help us understand the complexities of installing smart meters in a variety of properties. Last year we installed 5,000 meters, predominantly to help us understand the communications challenges.

Tony House: From an SSE perspective, we were a very active participant in the EDRP trials in which we installed about 6,000 smart meters. Since that point we have undertaken a number of smaller trials, maybe 1,000 meters at a time, and we have recently put together a platform that will enable us to put meters out from a foundation perspective, meters that we would deem to be SMETS 1 compliant. Currently we have about 500 meters on that platform. Our focus has been very much on developing the back office infrastructure to support smart metering. We have invested about £50 million to achieve that so far. During the course of this year we would look to make a similar investment in deployment of meters in the foundation programme moving forward, but keeping volumes relatively low.

Q99 Chair: Is there a risk that some customers who get smart meters during the early roll-out may have a smart meter that is not as good as the SMETS 2 compliant meters that others get later on?

Tony House: From an SSE perspective, we would tend to agree with that. We think that the full and final specification should be the SMETS 2 meter, which ensures interchangeability, full security-all of those key requisites that we think need to be in place for a successful and beneficial experience for the customer through smart metering. It is for those reasons that we are trying to keep deployment volumes to a minimum to enable us to get the learning through foundation, before we get ourselves ready for pushing volumes to the much higher degree that we are going to need to do-8,000 or 9,000 a day when we get into the mass roll-out.

Andrew Ward: I think ultimately the answer is yes. 35,000 meters will effectively have to be removed from customer premises because they are not compliant with the final SMETS 2 specification. Our approach to date has been to understand how we deploy smart meters, the challenges in the UK-there are significant challenges-and to wait for that final infrastructure, the nuts and bolts, for the UK, to be installed and then we can deploy fully once that is established and is working.

Dr Pennington: We are in the same position at npower. We have invested a significant amount of money in putting our platform in place, and at the end of the year we will start to install very small volumes of SMETS 1 meters. We are absolutely concentrating on giving people the right customer experience and getting it right for our customers. We think that means focusing on SMETS 2 meters in the long term such that they are assured, they are compliant and we have interchangeability and there are no barriers to switching.

Paul Spence: Our view is very similar to that of our competitors. Our focus is on doing things once and doing things right. Installing early meters is about learning what it takes to get those meters installed, to make them work and to help consumers benefit from having those meters in place. We have done that learning, but ultimately non-compliant meters will have to be replaced so we do not want too many of them out there that then need replacing at extra cost for consumers.

Q100 Chair: What do you say to people who suggest that the roll-out is too industry led and not focused on the consumer?

Paul Spence: We have been boringly consistent in our view that this needs to make sense from a consumer standpoint. The heart of the smart metering programme is something that is about helping consumers engage in their energy use, understand the profile of their use and act to reduce the amount of energy that they use. That is at the heart of the business case. We need a programme that is consumer focused, that looks at how they want to engage in the roll-out process. Clearly though, the industry has to play its part in doing that. We are talking about an enormous programme for the country as a whole. The scale of the metering roll-out, the timetable for it and the technical complexity of the programme is enormous, and it needs companies like ours to engage in that programme with the Government and with people representing consumers.

Dr Pennington: I think that is right. Ultimately, this is about giving consumers choice and customers choice and helping them change their behaviour and their relationship with energy, but in the early stages of this programme it is about establishing the platform that enables it and reduces costs and complexity. As an industry we have to collaborate and work with the Government in order to establish that platform, with the ultimate goal and ultimate design of this massive change programme that is all focused on that customer experience. For companies like ourselves, the relationship with retailers and our customers and trust is extremely important, so we are very concerned about not undermining that at any stage in this roll-out.

Andrew Ward: From the ScottishPower perspective we view it as we have one opportunity to get this right. That is why we have adopted a view that we want to make sure the infrastructure in the UK is established and we want to focus very heavily on the consumer engagement. We know how important it is that, from an early stage, we engage with consumers right the way through the deployment process after they have actually had the meter installed. That is what we are spending our time focusing on right now. We are actively engaging a group of our own customers now, understanding what they would like to see as part of the deployment process. That is helping inform what we will design as a deployment process.

Tony House: I think we would also look to take the opportunity through partnerships as much as we possibly can. We have been actively involved in partnerships such as Ecoisland on the Isle of Wight, a community-driven environmental programme that seems to be delivering some good benefit. It is a good way of getting acceptance for smart metering and putting it into place in a wider eco-environment. We have done examples of that and also working with networks partners from a low carbon networks perspective for the projects that they are undertaking such as the Thames Valley Vision project.

Q101 Chair: One of the consequences of competition and switching and so on is that you might have six houses next to each other with six different suppliers. It is not difficult to envisage the sort of irritation and confusion it may cause if they are all having their smart meters installed at different times. Will you be able to co-ordinate the roll-out among yourselves so you get street by street rather than individual by individual?

Tony House: There are some areas where we most definitely need to do that very early on, multi-tenanted buildings, blocks of flats for example, where we will require an infrastructure to be able to communicate from the meters to the in-home displays. It is very important that we come up with common solutions, otherwise you have six or more suppliers trying to create a solution within one building. That is an example of an early opportunity where the need for collaborative working is very much identified. I think from that there could be other spin-off benefits as well.

However, we need to recognise and trade that against our opportunity to be able to grow our workforce on a regional basis, to be able to have GB coverage as quickly as we possibly can, to be able to respond to the need and requests from early adopters of smart metering. They will be the advocates of smart metering as we go forward, so we need to make sure that we can encourage them along the way.

Paul Spence: We have looked very carefully at the economic case for smart metering. It is very clear that one of the biggest costs is the cost of the installation, and finding ways to do that in as co-ordinated a fashion as possible that, first of all, allows for targeted communication with consumers in a particular area and then allows for logical installation, not just multi-tenanted buildings but in particular areas, is something that offers an opportunity for cost savings. One of the things we are advocating is that with the change in the timing of the programme it gives time for DECC and the industry to look at the other opportunities to create more co-ordination, to deliver more value and a better customer experience earlier.

Q102 Sir Robert Smith: Are there any barriers to effective co-operation from licensing conditions in trying to keep competition going between the companies?

Paul Spence: Clearly, we have to be conscious all the time about the fact that there is a competition restriction. We are competitors with each other. We have to be careful about the information that we give and the information that we share in any process. However, we believe it is still possible to increase the collaboration, the co-working, in the roll-out of this programme.

Dr Pennington: We are already pretty well set up in terms of our working relationships within the programme. We have meetings centrally. We work very closely with DECC and with each other to discuss the issues as they arise. The challenge is that once we get into the mass roll-out at the end of 2015 and we are into the volume installations that we are doing, there has to be an opportunity to increase that collaboration. From my perspective, when I look at my colleagues in the industry and we are discussing the issues and working hard at jointly solving some of the design and build issues that we are facing, I think the foundations are pretty good there to be able to have those conversations.

Andrew Ward: From a ScottishPower perspective we do not see the driver behind effective installation as something that is of a competitive nature. It is to ensure that the customer receives a good installation, they understand the installation, and it is done at the lowest possible cost. That is a fundamental driver of why we want to co-operate as an industry.

Q103 John Robertson: That was really interesting. We look forward to seeing this competition you are talking about. We have not seen much of it over the years, so carry on. It will be very interesting to see how much it is going to help the consumer. I would be interested in the cost of the installation, the equipment and so on and how much is offset by the fact that you will reduce your workforce of meter readers and things like that. Are you going to take that into consideration for your costs and will you lay out exactly what the savings will be in the future?

Andrew Ward: As part of the planning process, we have already analysed what the potential benefits will be under the original case from DECC. We will be submitting on a quarterly basis to DECC all of the cost and benefit information on a very granular level of detail, so they will be able to see that themselves in terms of where the benefits are coming from, which I would hope from a cost-saving perspective in terms of ScottishPower will then in turn be passed on to the customer.

Q104 John Robertson: I hope you will send us a copy of these documents. Let me move on a bit to talk about key enablers. Mr Spence, you have said that these key enablers are important and they need to be in place before the mass roll-out begins. What kind of key enablers are we talking about?

Paul Spence: One of the things that we have done as an industry is identified 11 key enablers. I would be very happy to write and give you detail, but in essence-

John Robertson: Just tell us the important ones.

Paul Spence: In essence, this is about making sure that we know that we are installing the right meter, so a meter that is to the right specification; that that meter is to an engaged consumer, so we have an appointment and somebody there, in a building that we can communicate with and where the communication is possible around that building between the meter and the display; that the meter then is able to communicate properly with our systems via the DCC so that there is a central point to co-ordinate all the industry information flows that need to happen; and for all of that to happen in a way that then allows consumers to get the information that they need to make the changes they need and for us to have a workforce that is able to deliver the roll-out, answer the queries, offer the products and take the benefits of smart metering, and that is all on both gas and electricity networks.

Q105 John Robertson: I would consider the most important one, of course, to be the communication to the customer and not necessarily your company, because I am sure the first thing that you will get will be the meter reading and you will know exactly how much money these customers will have to pay. The communication to the customer seems to me to be more important. Do you not see that as being the most important thing? To me personally, if I do not get the information, then what the devil would I want a smart meter for?

Paul Spence: Absolutely. I think it is essential that you are given information about your consumption in a way that you can understand that information on a device that you want to use for the information to be presented to you. It may be you want it on paper, on a display, on your smartphone, or on your computer. The range of devices that people use to access information is enormous.

Q106 John Robertson: You obviously sat in on this morning’s evidence session. Are you going to give me an app for my mobile?

Paul Spence: I am sure somebody will give you an app for your mobile if you want one.

Q107 John Robertson: What about the rest of you? You might be getting a chance to get a customer here.

Dr Pennington: It is absolutely about what is appropriate for the particular segment. Some customers who do not have access to the internet or do not use apps will work with the IHD and others will want apps and will be demanding them. The world changes so quickly that we have to encourage and respond to that.

Andrew Ward: I think it is key that when we are installing the meters we give a customer a choice. They can choose to take an IHD; they can choose to have information displayed in any way they desire. Our job is to facilitate that as best we can.

Q108 John Robertson: What are the risks involved? What risks do you think are important that need to be looked at and overcome?

Tony House: I think there is a significant risk of going too soon, and we welcome the extension that we have for the foundation and to the roll-out periods to enable a lot of those risks to be mitigated through landing a stable DCC solution, and particularly a compliant smart meter that we know will be interchangeable. We do not believe that is the case just at the moment and we have concerns about the increasing volumes of meters that are out there that will need to be revisited because they are not compliant to today’s specification, let alone SMETS 2, which we believe is ultimately the right specification to move forward to.

Q109 John Robertson: Should we really be going to second generation meters where we have in-house displays minimum?

Tony House: Our view would be yes, absolutely. We should go with the SMETS 2 meter as the compliant meter and that is the only meter that gets rolled out in volume because you can have certainty around interchangeability, supported with an in-home display or something that is deemed more appropriate to a particular customer. That could be an iPhone app or a tablet app. We think the IHD has its place for some customers, but probably a reducing number of the total population of customers now, given the greater prevalence of smartphones and tablets. We would be very supportive of developing apps that will support and give greater functionality to the customer and make it a more exciting experience for them.

Dr Pennington: That underpins the other major risk, which is not just a technology risk but is that risk that you identified, which is around consumer engagement at all parts of this, so for each group of customer but at each stage of the roll-out. It is very important. We have all signed up to and will be driven by a licence condition that when we turn up to install the equipment, we are not selling, so there is no sale at that visit, but we are educating and explaining and taking time to explain how the meter and the IHD or the app actually work. Then there is the ongoing engagement with them to help them use this stuff and change their behaviour. The risk is that if we go in too much volume with unproven technology, consumer engagement is undermined and that is not going to help anyone. I think that is the other risk.

Paul Spence: Just to shift the view from the consumer, the other thing I would like to highlight is that this is an industrial programme. We are talking about the installation of about 50 million meters in homes with infrastructure of varying quality that the people who do that installation are going to be working with. We have to make sure that that is a safe experience for the installer and for the customers and that we have the arrangements in place to make sure that where there are cases that are not safe, the right action is taken to deal with those. It is a real industrial programme and it needs that attention as well.

Q110 John Robertson: How do you respond to the British Gas suggestion that, "valid, but resolvable, concerns about some elements of the roll-out, including interoperability, security and technical specifications" have been used as "a reason to postpone embracing the roll-out"?

Tony House: I would like to take that one if I may.

John Robertson: You have been practising.

Tony House: We are in a position where we can roll out meters in volume. We have a platform, but we recognise that it has some interim components within it just at the moment. We therefore think it is inappropriate to put those meters out because it will not provide the customer with a positive experience. It will be suboptimal if the meters that we put out are deemed to be non-compliant and we have to go back in short order and replace those meters, which means customers having to be at home yet again, having to have their supplies interrupted again to allow that meter to be exchanged. We very much think that we should create the platform, engineer the right solution rather than market it, and then use the opportunity to deploy the meters, mindful and knowledgeable that we have the ultimate solution for them. We can use that installation process as an extension of our customer services to them rather than an opportunity to up-sell or to acquire customers. It is more about extending the customer service that we already provide.

Q111 John Robertson: Would it be fair to say that basically you guys are just not ready for it today but at some time in the future you will be? Is a year delay enough?

Tony House: From our perspective, that is not the case. We can put out meters in volume but we choose not to because we do not think that we have got to the point where we have the infrastructure in place to assure that those meters will stay on the wall for an enduring period.

Q112 John Robertson: So why would the Government put it back a year? A year does not sound an awful lot, does it?

Dr Pennington: I think the key here is that the period before the DCC is in place, i.e. mass roll-out, from an npower perspective we see as a kind of testing period to prove that our meters, data transfer systems and customer service-the whole customer experience-actually works on a one-to-one basis. We are also very mindful that in doing that early we will be using the SMETS 1 meter, not the final SMETS 2 meter. If you tick a box and say, "Are we able to prove that the pathway works in a limited volume?" then yes, and that is what we will do before the start of mass roll-out. The other conditions then I think from a customer viewpoint are: can I switch easily? Do I have interoperable equipment? Do I have faith that this equipment is going to be interchangeable if we transfer between different suppliers? I think that is when you get the delay, and the welcome delay, which is to make sure that the next generation of meters, the basic generation, are interoperable and that customers do have a good experience of this.

Q113 John Robertson: Call me an old cynic, but it strikes me as if you know already there are going to be some problems and that the idea is to take the problems until after the general election to make sure it does not affect the outcome and that this is absolutely nothing to do with putting it back a year. Chances are it might even be longer. You really do not know, do you?

Andrew Ward: The risks are real. I will give you a live example of ScottishPower’s experience. Of the initial 30,000 meters that we deployed in 2010, we have had to replace 5,000 of the SIM cards that are in those meters. The understanding we had when we installed the meters was that the SIM cards would be sufficient to last the life of the meter, so that has gone wrong. We have had to interrupt the lives of 5,000 customers and reinstall those meters.

I will give you an example from part of our global group in America. They have now installed over 600,000 meters and I believe the common misconception is that software upgrades on the meters can be done electronically from a distance-you don’t need to attend the property. As part of that deployment they rolled out, at the point of 200,000 meters they had to replace 5,000 meters because they could not update the communications over the wire. They had to again attend that property, a physical visit. It is a real example of what could potentially happen in the UK. That is why there is a desire from a ScottishPower point of view to test thoroughly what is actually in there before we mass deploy in the UK.

Paul Spence: As we think about it, it is all about making sure that we give the consumer the best experience and also the best value, and that is about getting it right.

John Robertson: The best experience for the consumer would be to give a cheaper rate of electricity, but somehow I do not think we are going to get that. However, let me know when you get the app on board and I will decide who I am going to go and work with.

Q114 Sir Robert Smith: Just returning to the cost benefits, how robust do you think DECC’s calculation of £6.7 billion is for the net benefit?

Paul Spence: The benefit case is made up of three big chunks. There are the benefits for consumers from better use of energy, lower use of energy, so there is that component. The second component is the savings that we as companies and the industry can make. The third component is the costs of the programme. Where it is about the costs and the cost management, EDF Energy believe that we would have some differences on particular line items but in general we think the case is about right.

The most difficult piece is about achieving the savings-achieving the consumer benefit in terms of the energy efficiency and the savings on gas and electricity. There are some trials that have shown some of that, but we are still at the early stage of our own trials to validate that and to see how you get the right consumer engagement and the right behavioural change sustained over time to deliver those benefits.

Q115 Sir Robert Smith: Do you think the £12 billion side of the equation is broadly in the ballpark?

Paul Spence: Yes.

Q116 Sir Robert Smith: This morning we were hearing evidence that it would escalate madly because it is a big IT project.

Tony House: The continuous review of the impact assessment is clearly very important. The fact that the DECC programme has progressed to a point of procurement now, approaching procurement for DCC, starts to de-risk some of the cost elements associated with that. I think the continuous review of the impact assessment is really important, as is making sure that we absorb and factor in the learnings through the extended foundation period before we really commit to high volumes of meter deployment. We have the opportunity to revisit the impact assessment on a number of occasions.

Q117 Sir Robert Smith: The other benefit you said was that meter reading costs and inaccurate billing will go. How can consumers in the current sort of climate have the confidence that they are going to get the full benefit of that reduced cost base for your operations?

Paul Spence: I heard the views of the panel before but-

Sir Robert Smith: It is a question, not a view.

Paul Spence: I am getting my retaliation in early on part of the response. The reality we see is we are in a competitive industry. We face a number of costs that are increasing and we work hard to keep our tariffs as low as we possibly can. It will be that pressure that will be the guarantee and the force that causes us to pass on the benefits that we see in terms of lower costs to our consumers. It is that that will be part of trying to win new consumers. My company is a company that wants to grow and to do that by having competitive tariffs. If we can make a cost saving and pass that on to consumers, that helps us in our competitive position.

Dr Pennington: There are a number of controls on this. In the new Smart Energy Code we will have an obligation to report our costs and benefits of roll-out to Ofgem on a regular basis, so they will see those. I suppose the area of uncertainty is the big benefit case around changing consumer behaviour. I think that we are not in control of what individual consumers and customers choose to do with the information that they get, but it is absolutely a fundamental driver for us to make sure that platform is in, and then we are working with them and engaging with them over the period of roll-out and beyond to help them realise that net benefit, which should see a balancing effect. There is a regulatory licence condition to report on costs and benefits.

Q118 Sir Robert Smith: You are actually reporting figures?

Dr Pennington: Yes.

Q119 Sir Robert Smith: The consumer benefit, the actual behavioural benefit, is a big chunk of that £6.7 billion, or not six because you will be taking 12. It is 5.3, I suppose.

Paul Spence: Viewed without that element of the benefit, this programme looks like more cost for less benefit as viewed from the supplier’s perspective at the moment.

Q120 Sir Robert Smith: Back to an earlier question-and probably it is too late to unravel-would there have been efficiencies by having the meters back again with the distribution companies, so that there was one meter at the end of the wire that sat there metering away?

Paul Spence: My company is known for having argued the position that it would be better to have had this as part of the regulated network. That would have allowed a street-by-street approach and that would have allowed a potentially lower cost of capital for the amount of capital that is being deployed. I think the question for us today is how much of those benefits it is possible to deliver and achieve, given the structure that we are faced with where we are given the obligation at the moment to roll out those meters.

Dr Pennington: Before the smart programme started, there was that consultation process within the industry, which was, "What do you think is the most favourable and efficient roll-out model?" The choice was to go with the fully competitive model and, as my colleague Paul said, we are there and our challenge is to really make that work and we are committed to doing that.

I guess what I would say is that ultimately if the benefit case is all driven by fundamentally changing consumer behaviour, then a competitive market with new entrants coming in offering all sorts of apps and all sorts of advice to help people really manage their energy is probably where you want to be when the platform has been established. I think we are fully behind now where we are in driving and working in that market structure.

Andrew Ward: The decision was taken some time ago to make it a supplier-led roll-out. From a supplier’s perspective, we have experience in interacting with our customers on a daily basis in a number of areas. Some of us have our own metering businesses as well, so we have experience in deploying meters. Putting the two together, I feel that ScottishPower are capable of deploying this.

Tony House: I think the success for the smart metering programme overall is around consumer acceptance of smart metering. The supplier owns that relationship with the customer and we will do our utmost to make sure that that is a very positive experience. We can see this is a great opportunity to extend our experience into our customers. We have a once in a lifetime opportunity to have a face-to-face touch-point with each consumer and be able to use that opportunity to best effect and to really sell the benefits of smart metering.

Q121 Ian Lavery: We have discussed the IHDs already, but very little information has come to hand with regard to the cost of the IHDs. How much is the IHDs adding to the cost of the roll-out programme for the smart meters?

Dr Pennington: The IHD is a really interesting question within npower because it is how much do you pay for a basic IHD and that functionality versus where you go with apps for different market segments. I believe the impact assessment said it was somewhere around £23 to £25 an IHD, and I know that that is broadly where the target is for the early basic specification of a mandated IHD. However, then how much you invest in terms of apps and various other things is a matter of marketing strategy, I guess.

Q122 Ian Lavery: Do you think they are worth it?

Tony House: I think for an increasing segment of the population functionality and the benefits are better delivered through something other than an IHD-an app or a web portal where the consumer can log online and then can view their smart metering consumption and do comparisons from the energy that they have used today compared to the same day last week, last month, last year. Those are the kind of things that will drive much more engaging behaviour around smart metering.

Q123 Ian Lavery: Are you serious in thinking that there are alternatives to the IHD such as the web portals and the smartphones and the apps?

Tony House: We have web portals today to support all of our smart meter customers. If you take one of our smart meters, you have a web portal that you can log on to and you can see that detail on a granular basis. We are developing applications to go on smartphones and tablets to enhance that experience further as well.

Andrew Ward: In our original 30,000 deployment, we offered a website for our customers to go and view their consumption historically and even at that point piloted incentives for customers to reduce their consumption through that web portal again.

Dr Pennington: We are all doing that, but again it all depends on the segment. There are some segments of our country, our community, that do not have online access, so you need a balanced way of giving people information and ability to make a choice that is appropriate to their particular set of circumstances.

Q124 Ian Lavery: How would you make sure that the most vulnerable in society would not be jeopardised by using the feedback mechanisms, for example those people who do not have access to the web?

Tony House: We think the IHD has its place and for customers such as that absolutely that would be something we would make available. However, we need to recognise that different segments have different expectations, so our suggestion is that we should be able to offer a multitude of different touch-points rather than just be focused on the IHD.

Q125 Ian Lavery: Do you think the potential feedback mechanisms are as effective as the potential IHDs in respect of helping consumers to reduce consumption?

Paul Spence: One of the things that app trials and pilots have taught us is that we need to work especially hard to help segments of the consumers who are disengaged, either because they are vulnerable or because they do not want to engage, to understand smart meters, to understand what it means for them, to understand whatever device they might use and what it might make possible for them and what it might require of them by way of behavioural change if they want to see the benefits of smart metering. We already know that we have to work particularly hard to make sure that we communicate right with different segments and it is not a one size fits all. That is one of the benefits that we have already seen from the trials at the moment, but how that works and how that is going to continue to work-I suspect when the smart metering programme started very few of this Committee would have been using iPads and smartphones. Today that is the norm. We are already talking about a programme that is going to run until 2020. Over the period between now and 2020 it is very difficult for us to sit here today and say with confidence exactly what the changes will be and what is the best technological choice to allow consumers to engage with this thing called a smart meter.

Q126 Ian Lavery: Do you think these IHDs should be installed to all domestic customers, and indeed all business customers? Should there be a difference?

Andrew Ward: From a domestic point of view, I think it has to be a choice at the point of installation for a consumer. Do they wish to use an IHD or would they wish to use technology that exists in their home such as a tablet or a smartphone? I think in terms of small business customers, again looking at the interaction we have with small business customers at the moment, they deal more on the web by the nature of what they do. They deal more online. They are far more interactive and typically they will be more open to that technology as part of their business process. Therefore, I see more use again, but it is a choice for the business customers through more alternative means.

Dr Pennington: We are actually mandated to offer an IHD to the domestic consumer as part of the roll-out.

Q127 Sir Robert Smith: To offer, but if they refuse, if they do not want it?

Dr Pennington: Sure.

Tony House: They have a 12-month period to choose whether or not they wish to take it.

Q128 Sir Robert Smith: If they move and someone else moves in, does the IHD stay with the meter or move with the-

Andrew Ward: It should stay with the meter.

Dr Pennington: It stays with the meter.

Q129 Sir Robert Smith: What if they have opted out and someone else moves in who needs one?

Andrew Ward: We need to deploy an IHD.

Dr Pennington: That is a change of tenancy process and we will deploy an IHD or offer them an IHD. As Paul said, over time, predicting what 2017 and 2018 and 2019 will be like, the proportion of people that would rather have some other form of engagement will change.

Q130 Ian Lavery: On the form of engagement-we have mentioned the feedback mechanisms of the mobile phones, the smartphones, the tablets, the web-do you think using those as an alternative to using the IHDs, basically a blanket installation, would be cheaper?

Paul Spence: We have not done the analysis of the cost to know if that would be cheaper. Instinctively as somebody who has a smart meter at home-I know I am not a completely typical customer-I would much prefer to have the information provided on the thing I use, which is my iPad, rather than on a separate display. I know I prefer it and I suspect it would be cheaper not to give me a piece of kit that I do not use very often, which is the IHD.

Andrew Ward: We see more and more of our customers communicating through social media, through websites, and we have a growing online presence in terms of ScottishPower customers. It is just evolving more and more.

Q131 Dr Whitehead: The roll-out clearly is going to be very important in terms of necessary consumer engagement. What are you looking to do in terms of your own customers as far as consumer engagement is concerned and on a wider front?

Tony House: The opportunity through foundation, as well as being able to trial and test technical solutions, also gives us the ability to understand how we best engage with the customer. We are investing significantly in making it easy to book an appointment. In the same way that you might order your shopping online from a supermarket, we are developing systems whereby a consumer can log on and select when they would like to take their smart meter at some point in the future. We will then optimise to make sure we get somebody on site on the day. However, we need to develop that and learn through that process as we go through foundation and also how we engage with the customer on the day of the installation. What is the best way that we can educate the customer in how to use the smart meter? Those are the things that we would do independently.

In addition to that, the Central Delivery Body is in the process of being established under the guidance of Energy UK. That will be up and running from July of this year and that body, with a degree of independence, will be strongly promoting the positive aspects of smart metering to get a wider acceptance from the consumer base at large. I think the appetite is to create a pull for smart metering rather than suppliers having to push.

Andrew Ward: To add to what Mr House has said, from a ScottishPower perspective there are two key things that we are doing right now. The first is we are conducting a number of visits to premises, because part of the challenge that we highlighted earlier is the physical installation in the customer’s premises. We need to understand what that challenge actually means across a variety of properties across the UK. We are trying to understand that now so we can engage customers proactively to explain to them the challenges that we face when installing a meter.

Secondly, we are engaging some of our customers now to understand what they want from a deployment perspective. Already we see information coming back that they want to have two weeks to a month’s notice in advance of us coming to install a meter. They have preferred days, they have preferred times, so we are starting to build that up now, we are starting to deploy that, starting to build that into our deployment model.

Dr Pennington: From an npower perspective, we are on roughly the same lines. What I would add to what Tony said about the Central Delivery Body is that that vehicle has a strong remit to reach out to a number of third parties like Age UK and the various trusted bodies and channels that can engage much more widely with different communities and different areas of our country to be able to give that heartbeat, drumbeat about smart metering, a little bit like the Digital UK experience. They are very much going to create a lot of partnerships out there in terms of that wider GB engagement.

Paul Spence: Like our competitors, what we are doing is investing in making sure we have the systems to allow our customers to call or to go online and book the appointments, investing in making sure we have the trained installers who know how to give the information, how to do the installation but also how to deliver the support and training that the customers need during that process. Dealing with that in the different types of locale, the different types of building that we are going to face, is all part of what we are doing to try to make sure that it is as good an experience as possible. Then we need to work individually and collectively to make sure it is an experience the customers want to have, which is the piece about the Central Delivery Body and our own efforts to communicate what smart meters are. I think we all know that at the moment public awareness of smart metering is very, very low. My team gave me the analogy that this is like thinking about the roll-out of Sky being done twice as fast, and at the moment Sky only has about 10 million customers. We are talking about getting everybody in the country signed up, so getting all the infrastructure in place, the sign-up in place for something, and it is not intuitively as obvious that you want smart meters in your house.

Q132 Dr Whitehead: You mentioned the digital TV switchover and the Central Delivery Body could potentially have a similar sort of role-maybe not with the annoying little metallic robot-to the digital TV roll-out. On the one hand, that is the general case-making body and reassurance and pull-through body. I assume that is the sort of process you are looking to develop. Is that right?

Dr Pennington: Yes, the Central Delivery Body giving the context and myth busting and creating the context in which consumers can understand what smart metering is all about, doing it through a number of partnerships as well. We talked extensively to the Digital UK team and they had the outreach relationships as well. Then there are individual companies to target our particular messages and engagement with our consumers on a number of different levels, everything from before we turn up at the door to do the installation and provide the customer experience and the education to make that the right experience for the customer, all the way through to helping them, once the kit is in, to engage with that and change their behaviour and realise those benefits that were talked about on the wider GB business case.

Q133 Dr Whitehead: In addition to that general body, would you have individual trained additional mentors and visitors over and above the actual installation process in order to assist with in-house displays and what have you?

Dr Pennington: Sure.

Q134 Dr Whitehead: Is that right? How would they be trained? What would the process be?

Andrew Ward: There is a variety of training that our staff will go through. One of the main challenges the individuals on the doorstep will find is that there is a different engagement strategy completely. Right now in the UK we will install meters but without the need to convey to the customer how an in-home display might work, how the meters will bind together, how the process of a smart meter will mean differences to their own lifestyle. Individuals in our office-based environment will support that process in terms of the initial engagement to make the appointment, the initial engagement to explain how the meter will work. We are educating our own staff right now. We went through this process to support our initial pilots to make sure that any queries that came back in-so we have learnt from that. We continually learn from what we have done already to refine and make it as efficient as possible.

Tony House: Our estimate is that we are going to need something like 1,700 staff on the road to be able to deploy meters in volume. We are investing heavily in upskilling and recruiting to achieve that capability, both from an operative installing the meters but also providing the consumer education piece. We have established a smart training centre in Wales where we are able to offer that training to our staff and new recruits now, and we are looking to roll that out regionally across the country to create youth opportunity as we move forward.

Q135 Dr Whitehead: Some of those people who you will approach will obviously be coming back to you and raising concerns about privacy or health or a combination of them. To what extent do you have experience of that so far and how might this system that you are describing deal with it or accommodate it or perhaps place it into an exceptions category that you deal with by means of an opt-out or other processes?

Andrew Ward: I think if I maybe draw from our global company and give you a real experience. In deploying the 600,000 meters in America, they had a number of objections from a health perspective-not so much a privacy perspective-and with the support of the local government they engaged third party experts. The third party experts were able to confirm that there were no health risks to the smart meter being installed. As a result of that, it was a third party expert who then communicated that process. From the point of view of the UK, the Central Delivery Body would, therefore, be a vehicle that would help to communicate that message back to the consumers.

Paul Spence: It is very clear that the vast majority of the trials so far have been trials that have been run with volunteers. We have not yet had the equivalent of one of the things we had advocated, which is a programme where essentially we try for real the full scale of all the suppliers, the Government, the Central Delivery Body, all trying to sign up customers in a particular area and how we can find ways to reach the concerned and the unwilling. Our experience when we have tried a geographically focused trial-pick the area, Low Carbon London-it is more difficult than we expected to reach consumers in the first place. There are a lot of those consumers, when we do reach them, who are just genuinely not interested in wanting a smart meter. Even when they do, convenience for the appointment means that we do not fulfil or their building means we can’t fulfil. All of those are things that we need to learn as we go through and to do it we would suggest will take some real scale co-ordinated trialling.

Q136 Dr Whitehead: However, there will be, I guess, a number of customers who will simply want to opt out at the end of the process for various reasons.

Paul Spence: Absolutely.

Dr Whitehead: What sort of protocols might you be developing for the knowledge that those people will simply want to opt out? For example, are you envisaging that if they opted out they would be charged for opting out, or would they just opt out and receive the service that they would have got had they not had a smart meter in the first place?

Tony House: We have a mandated obligation to demonstrate that we have taken all reasonable steps to encourage customers to take smart meters. We are keen to have that determined so that we all know where the bar is, effectively. Once we know that, we can then start to address those concerns and try to work through and maybe adjust the approach through the initiatives that we might have ourselves, and particularly through the Central Delivery Body, to try to break down some of the barriers that hopefully the minority might push forward.

Andrew Ward: I think I would hope anyway that through good examples we can share across the UK consumers will actually see the benefits of smart. The example I gave earlier of the American deployment for our company, we had an 8% opt-out, so we had 8% at that point in time. Through sharing a lot of the experiences, we managed to decrease that opt-out a point, but ultimately, because it was a roll-out that they deemed needed 100%, they introduced a charge that was as a result of still having to read the meter, still having to recover the cost of potentially the bills, the amended bills, the whole process that we are trying to introduce for efficiencies in the UK and savings for the UK consumers. As a result of that-and that was supported by the US regulator-they managed to reduce the opt-out to below 1.5%.

Q137 Dr Whitehead: Are you saying that that would be your preferred route, to use best efforts to get the totals up and then charge those people who did not under any circumstances want a smart meter to cover the costs of somebody going round and reading the dumb meter further?

Andrew Ward: It is one of many options but I think we are not anywhere near that point yet. We need to develop and produce a good communication strategy and just wait and see how that develops.

Q138 Dr Whitehead: Is it the general view that you think this will not be a significant problem and therefore you have not thought about it yet, or it will be a reasonably significant problem and therefore you may need to have strategies in place to either charge or to further encourage or to run parallel systems? It seems a little unclear.

Paul Spence: The first piece about getting clarity about what the level of expectation is as a first step I think is something we absolutely share. We are not clear what reasonable means yet with a definition that we can be confident will allow us to say that we know the bar is there and then here is how large the group is that we are potentially looking at. Once we are in a position to do that, I think we are then in the position to work with DECC and look at the options for what to do with that proportion of the public who really do not want these meters.

Q139 Dr Whitehead: So you have not thought about it yet really? For good reasons, I understand but-

Dr Pennington: As an industry, those mechanisms have not been defined. We have a target to achieve 100%. We are organising to try to achieve 100%. We would like good understanding of what all reasonable endeavours means, because if you have a refuser you have called 14, 15 times that is not a great customer experience. Going to an extreme, that is not a great customer experience. I think it is only as we progress through the roll-out that we will start to understand what that looks like and then have a conversation with the regulators about what we need to do about it.

Q140 Dr Whitehead: You have a separate issue, have you not, between what you might call urban refuseniks and possible rural unreachables? Are you confident that the DECC suggestion that there should be 97.5% coverage on present comms arrangements can really be achieved?

Tony House: That is clearly a concern for SSE particularly, given that we have a significant customer base in the northern reaches of Scotland, which is a likely area where communications might be difficult. We are reliant on the DCC to be able to provide a service and recognise that those bidding for service provision for communications have primary, secondary and maybe even tertiary solutions to drive the level of coverage that we would need to see. It comes back to key enablers that we have talked about previously. One of the very important key enablers is to ensure that we have that wide area network coverage in line with our roll-out projections, otherwise we will have to be selective as to where we go and that leads to a poor customer experience. Alternatively, it may be that we arrive at premises and we have to walk away because we do not have comms. Again, that is not driving a good customer experience. For those reasons, we see that as a strong key enabler.

Q141 Dr Whitehead: Have you between you experienced any problems that you might think are worse than they might otherwise be? For example, on the distinction between a theoretical coverage and an actual coverage relating to where meters are in cellars or what particular barriers there are, not necessarily just in rural areas, to actually getting that level of coverage in real life situations as opposed to those theoretical protocols.

Andrew Ward: The trial we completed last year on the communications was very positive. We saw coverage in the region of about 98%, which was excellent. We were very pleased with that. However, in the deployment of our 35,000 meters we have seen communication challenges down to the property type, so we know we are going to have challenges around high-rise flats for their meters. We know we have challenges in communication in our experience of houses that were built in the 1800s or thereabouts with extremely thick solid walls. We have some challenges with new builds because new build has insulation with foil on the exterior and that impacts on the signal from the meters. It is just some properties. We also have challenges with some properties where you genuinely can’t quite understand why there is, for example, not a telecommunications signal. That is there and part of the survey we are trying to do at the moment is to try to understand what the barriers are. At the moment, I do not know yet what the comms solution is across the UK. Once we know that, we can be far more informed about where the potential gaps are.

Tony House: I think it recognises the fact that any meters that we are deploying at the moment are necessarily on a suboptimal comms solution because the DCC is not in place. We are trying to utilise a platform that is not primarily focused at smart metering. When the DCC is established, then we will be in a different perspective and we will have something that is designed and fit for purpose.

Q142 Chair: I obviously empathise that from West Aberdeenshire and Kincardine with the solid walls in the rural area, with mountains, it is going to be quite a challenge. This morning we had a witness who argued that the Spanish experience of power-line carryovers would have been a cheaper and more effective solution if the Government had taken it. Is that something you have thought about?

Andrew Ward: Yes. From the comms perspective we have engaged DECC as a potential solutions power-line carrier and we have offered that as a solution.

Q143 Chair: As a universal comms or just-

Andrew Ward: I think for the UK there is a question, which is will one type of communication be sufficient for the entire UK? I genuinely believe it will not because of the challenges of meters in basements and the different types of properties. I think we will have to deploy a variety of communications. Power-line carrier could potentially be one of those.

Q144 Dr Whitehead: Would you say between you that perhaps you are very politely saying that you think the 97.5% coverage is probably very optimistic?

Tony House: I think it comes back to the point that there is probably not going to be one straightforward solution for this. Any of the comms service providers will have to have a primary, a secondary and maybe a tertiary solution. The power-line carrier point is quite interesting in the way that we have determined that we are going to roll out smart meters here, given that it is a supplier-led roll-out. Power-line carrier is necessarily a change to the networks infrastructure to provide that solution. You then potentially have a dependency on that infrastructure build from the networks businesses to provide the solution that the suppliers then need to be able to communicate with their meters.

Q145 John Robertson: As somebody who worked for BT for 31 years and understands the communications problems that have happened, if you are going to have this sort of communications through power cables who are you going to get to run it? There is a universal obligation here. Does that mean we are going to put that obligation on you to ensure that you get to every part of the country to deliver your electricity? There are some areas that you can’t get to or you have difficulty getting to due to cost, where other companies in years gone by have just had to bite the bullet. Should we make that the same for you?

Dr Pennington: One of the lynchpins of the DECC programme is the procurement of the DCC and the specification of the WAN coverage that we need. We have talked about second order, third order solutions within that to get to both building types and hard to reach properties. That is being run by the Government. We put our requirements in there and everything that we are getting back is telling us that they are going to deliver on their promise about the kind of coverage that we are after from a WAN communications perspective. There are a number of different technologies in there, everything from long-range radio to GPRS in the mix. They are running quite a comprehensive procurement there.

Q146 John Robertson: I do not have a rural problem of course, being in an inner city, but I do have the multi-storey concrete blocks, old housing problems. The communication companies have had that problem for a long time and had to overcome it.

Tony House: I think DECC have recognised that we are ultimately users of the communication systems that will be provided by a separate licensee. We are not communications experts as suppliers, neither are the network operators, neither are any of the authorised users of the DCC ultimately. To place that responsibility with those that are the experts is the right thing to do to create that platform that we can then be users of, rather than us trying to design and develop something that is not our area of specialism.

Q147 John Robertson: What you are doing is putting the onus on the Government to solve this problem for you?

Tony House: I would say what we are looking to do is to get the right organisations together through a competitive procurement process to deliver a solution that is designed and fit for purpose to meet the needs of smart metering for multiple users.

Q148 Dr Whitehead: However, you will have responsibilities about data access and quality of data access once the roll-out is complete.

Tony House: Absolutely.

Dr Whitehead: Are you confident that all consumers will have equal access to energy use data?

Tony House: The data sits on the meter. There is 13 months’ worth of consumption data on the meter that can be downloaded at any time moving forward. While continuous communications to the meter would clearly be preferable, if there are periods when that communication is down for a period of hours, or potentially days at some point maybe, that data will not disappear. It will still be there and can be presented back to the consumer at their request.

Dr Pennington: So the consumer is the final owner of the data.

Q149 Dr Whitehead: A final thought. There have been some suggestions that the design of the home area network as being integral to the smart meter itself may have some security implications in terms not of the extent of data out but the extent of acting as a portal for data in, bearing in mind that that will be linked with all other elements of what increasingly will be comms-driven internal activities as far as homes are concerned. Some suggestions, particularly from the United States, are that a better solution would be to have that home area network not enabled or not in the smart meter and having the processes that that would have undertaken being done effectively via router and the internet. Is that a thought that you have looked at or experienced or are you confident that the way that the design is now evolving will not be subject to any of those problems?

Dr Pennington: In terms of the mandated infrastructure-the home area network, smart gas meter, electricity meter, comms box, that whole pathway-that level of closed-loop security is designed into that network. How a consumer chooses to then use their data, perhaps through an internet connection to another third party, is their choice. In terms of the use of data for regulated purposes, we have security designed into that whole network. The issue around providing access to your own data as an individual consumer to other third parties will be a choice, I guess, for a consumer to decide how they are going to use their data, but we have security designed into ours.

Q150 Dr Whitehead: That is down to the consumer, although that is something that will be an integral part of what will be increasingly integrated home area networks for all sorts of things over and above the question of reading your real-time energy supply and providing information to energy companies. There will be all sorts of computer functions, home-controlled functions, possibly remote vehicle functions, all sorts of things that will be integrated with that system. Is that a concern that you may have?

Tony House: I think we can secure the HAN through end-to-end encryption. From a security of the data perspective, that challenge has been addressed and is being recognised in the subsequent meter specifications. Having a live and real-time HAN does ultimately, moving forward, offer some great opportunity for all of us as consumers. There is a desire to introduce something called a consumer access device, which will create an interface between the data that is flowing within the metering HAN and be able to present that out into other broadband applications. Coming back to the point about how you can make the smart metering experience really much more exciting and interactive with other home management systems, security systems, healthcare systems, all of those kind of things, it will enable us as consumers to be able to stream that data in its raw state but then present it into other applications that can develop that data and turn it into other things that will become much more meaningful in a fully interactive home environment.

Dr Pennington: That is about consumer choice of using that pathway.

Chair: Thank you all very much. That is helpful and interesting for us.

Examination of Witnesses

Witnesses: Stuart Rolland, Head of Smart Metering, British Gas, Don Leiper, Director of New Business, E.ON, and Darren Braham, First Utility, gave evidence.

Q151 Chair: Good afternoon and thank you very much for coming in. You probably heard the previous evidence. We are going to cover pretty much the same sort of ground, if we can. You now have the quality of the Committee rather than the quantity here. I will start by asking, as I did the previous witnesses, how many gas and electricity smart meters you have installed so far and what smart metering trials you have been involved in?

Stuart Rolland: In terms of British Gas, we have installed nearly 1 million meters between both business and residential customers. In residential customers, the number is about 624,000 as at the end of April, and slightly more electricity than gas in that mix as we have done some electricity-only installations. In terms of trials, a large part of our effort has been to get up and running the first SMETS-compliant meter technology. We were successful in doing that during last year, so we are now rolling out SMETS-capable meters. We have now hit about the 50,000 mark in that regard. Those trials have been quite difficult. It has taken probably a couple of years to get there, but we have now got to the point where we are getting very high levels of meter read-through and, very importantly, we are achieving 100% success rate in over-the-air upgrades, which is the essential part of the technology to achieve change of tariffs, change of mode switch, that sort of thing. That is probably the most significant aspect of our trials.

We have also trialled specific customer groups such as prepayment customers to understand what their propensity is to use time-of-use tariffs. We have trialled in social housing environments working with housing associations to determine if there is a difference with social housing tenants. We have also been part of a very significant trial in the northeast of England, the Customer-Led Network Revolution, which is testing effectively the potential for smart grid technology in the future; that is hand in hand with Ofgem. A very interesting part of that trial is to understand whether you can shift consumer behaviour in terms of when they use energy out of the peak period. We have had very good early results indicating that you can shift about 14% of the peak usage, which is very significant actually in terms of the overall objectives of smart metering.

Darren Braham: We have rolled out about 30,000 advanced meters, principally dual fuel. There is a small proportion of electricity only. That includes about 5,000 SME customers, so that represents about just under 20% of our overall customer base. Being a smaller independent supplier, our focus has been to roll out smart metering from the start. We are currently trialling a new technology, so SMETS 1 meters. We have installed about 1,000 electricity only, and so far that is going very well. We have had good success in terms of communicating to those meters, bringing the data back into the back office so that we can pass on the information to our customers. Our next step is to trial the SMETS 1 gas solution, which we are doing over the next month or so.

Don Leiper: From E.ON’s perspective we have rolled out 210,000 meters now, of which 66,000 are gas and the balance are electricity. In trials, our focus is on making sure that we have the roll-out process as smooth as possible for the installation process with our customers and how we interact with them-I am sure we will get on to that in more detail through the course of the afternoon-and for ensuring the back office processes to support the meters, to build them and so on, are as smooth as they can be.

Q152 Chair: Will any of the meters installed by British Gas have to be replaced because they are non-compliant?

Stuart Rolland: The meters that we are currently installing-and there are 50,000 of them already installed-are SMETS 1 capable and will be part of the enduring phase, and therefore there is no question of them coming off the wall. We are now on our fourth meter version and so there are older types of meter on the wall, including what we call the phase 2B of which there are probably 500,000. They are actually smart meters inasmuch as they provide remote meter reading, they have an IHD, they give the customer all the benefits that the customer is looking for in terms of smart metering but technically they are not SMETS compliant. Technically they should be replaced before the end of 2020. In reality they are performing a very good service for customers today.

Q153 Chair: More generally, will customers who had smart meters installed early on have meters that are less smart than the SMETS 2 compliant meters that come later?

Darren Braham: No, I do not think that is the case. I know it goes against some of the messages you heard in the earlier session, but fundamentally this is about delivering the benefits to the customer, so whether it is an advanced meter or a SMETS 1 meter, particularly SMETS 1, that is a specification that has been agreed by the industry. There is no reason why it should not remain there in situ; it delivers the benefits to the customer. This is about providing the information from the asset-at the end of the day it is a communication device-and it is how you communicate it back to the customer so they can realise the benefits. As Stuart was saying, customers we have on advanced meters get the same information, they receive pretty much all the benefits they would receive from a SMETS 1 or potentially a SMETS 2 meter.

Don Leiper: I would add a couple of points to that. In our trials with Age UK, we asked the customers who we rolled out meters to what they perceived the most important benefits to be, and they were accurate bills and not having a meter reader coming to the property. Both of those benefits will persist under any scenario until the very tail end of the roll-out when they need to be replaced and they will just be replaced by a SMETS meter. In addition to that, I think the idea that SMETS 2 is the be all and end all and will be the final version of life is probably not accurate. Earlier we referred to the idea of iPads and iPhones and so on not being around a few years ago. I think SMETS 2 will develop into SMETS 3, SMETS 4, possibly SMETS 5, before the end of the five year roll-out. It would not surprise me at all. That is certainly the experience in other countries as they evolve. Yes, there are some features and functional differences but I do not think they are significant. Certainly we will be able to, pre the DCC, communicate to each other about meter readings and inform each other; that is a requirement of us come next year, and so those two critical items will be persistent through the process.

Q154 Sir Robert Smith: I think you have just answered my question. If you have an early smart meter that is not SMETS and you want to switch suppliers, can you just keep the meter?

Don Leiper: You can keep the meter and from next year we will have to communicate with each other to inform each other of the meter reading. There may be some features which are not completely functionally interoperable, but nevertheless the basic features will be okay.

Q155 Chair: How do you respond to criticisms about the roll-out being too industry-led?

Don Leiper: Do you want me to take that one? I think this is a good example of where the industry does not necessarily always agree with each other, from one of the comments the gentleman was making earlier. We would have been happy for this not to have been put further back in time, although we do accept that the DCC needs to be in place properly, without which we will get into long-term difficulties, I think. We do not necessarily always agree about this and from our perspective it is really important that this is about customer benefits at the end of the day, so that is why we are doing some early roll-outs because customers like this. Customers appreciate us, they trust us more, they have a much better customer care score with us if they have smart meters than if they have not. They get the benefits early, so from our perspective it is important that we continue to get those benefits to customers as early as we possibly can. From our perspective, therefore, it is not just about industry, it is about customer and industry.

Darren Braham: I think from our perspective, although it is an industry-led programme, as long as we have flexibility to offer smart services to our customers it achieves the objective, which is delivering what the customer wants and enables them to reduce their consumption. The fact that it is an industry programme should not hold up a supplier’s approach to rolling out smart, and I do not believe it does at this stage.

Stuart Rolland: Just to build on the point of it being a customer-centred roll-out, that was one of the very important reasons why we went for a supplier-led roll-out. Because the supplier has a relationship with the customer, as was said earlier, all of us have a strong interest in really impressing that customer with the installation process and making it a very value-added experience, to get the industry away from just being a commodity supplier to being a more value-added supplier of energy services, effectively. We have just incredibly positive feedback from customers who have had the smart meters. We have customer satisfaction ratings that are about 40% higher from smart meter customers than from standard meter customers. Our retention rates are much higher, so they stay with us longer because they like the service, and our complaints level from smart meter owning customers are about 40% less. The contact that they make with us as a company is significantly less as well, so it is a much more hassle-free energy experience.

Certainly from British Gas’s point of view we have made the customer really very much at the heart of this, which is one reason we brought our installation force in-house. Rather than having 10 contracting forces as previously, we now have a unified British Gas installation force of about 1,200 engineers. We do not call them "engineers", we call them "smart energy experts", and the reason for that is so that they can really give quality advice to customers at the time of installation. We are now developing additional services and products, which are smart enabled, to really retain the customer’s interest and engagement in smart metering beyond the installation stage. We have just rolled out the first smart energy report, which is a web-based document that they can access and it gives them tremendous granularity and insight into where they are using energy in the home and how they can save. The customer is really at the heart of everything in this roll-out for us.

Q156 Chair: Will you be able to co-ordinate your activities, given that you can all have your meters installed in adjacent properties or indeed in fact in some cases in the same property, I dare say, if there is more than one occupant? Is that going to be something where co-ordination is effective?

Stuart Rolland: We have always suggested that co-ordination would be a very difficult approach and we certainly have an understanding that even within our own company it can be difficult to get to the same house at the same time. So if you have gas supplied by one company and electricity supplied by another, the idea of getting two companies to turn up on the same day to make a meter exchange is really not feasible. There are many other reasons why a co-ordinated approach was not advisable, not least of which is the fact that a lot of the assets out there are quite young. The idea of taking a young meter off the wall rather than a meter that is at the end of its life is really not very sensible in terms of achieving the most economic roll-out. It would have added a lot of cost to the programme in terms of stranding costs of younger standard meters and that would have ultimately been a cost to the consumer. Also you are unable, in a street-by-street roll-out, to answer the requests of your customers most interested in smart metering to get them a smart meter when they want it.

For all those reasons we did not feel that that co-ordinated approach was feasible. As I think was remarked earlier, co-ordination around dealing with tall building solutions would be welcome and probably a more efficient approach for that specific customer base.

Darren Braham: Certainly from our perspective we would be against a street-by-street approach, which was one of the methods debated early on in the programme, simply from the perspective that it takes away the control of rolling out from the supplier. As a fairly new entrant wanting to offer these smart services to our customers, that would have been a significant detriment to competition. We approached it slightly differently, so we did not feel it was the right approach.

The other thing to mention is that you gain a lot of benefits by achieving reasonable density. If an engineer can install half a dozen meters in a day, they do not have to be properties next to each other. As long as they are able to have sufficient density in a local area, that should bring down the cost significantly, so I do not think there is necessarily a significant cost disadvantage of not going street by street as well.

Again, echoing what other people have said, when it comes to apartment blocks you definitely need a more co-ordinated approach. It is almost a kind of bespoke approach and that will be a challenge for the industry definitely.

Don Leiper: It sounds very attractive to do what you have described in terms of street-by-street, house-by-house roll-out, but in essence that argument was lost when we chose to have the supplier-led roll-out. There are benefits for doing it on a street-by-street basis to counter some of the benefits we have talked about here, but that argument was lost several years ago and to try to do it within a supplier-led roll-out would be extraordinarily complex.

Q157 Chair: We heard a bit about key enablers-EDF was talking about that. Do you agree that we have to have those in place before we can have a successful roll-out?

Stuart Rolland: Our view at British Gas is that the really key enablers are already in place in as much as DECC required the industry to develop standard solutions and specifications for meters, for concepts, for IHDs, and establish what communications protocol was required to make smart metering work; and indeed in the foundation stage we have used those in order to build an infrastructure that absolutely works today. There are obviously developments that have been referred to by others as the key enablers, which include the establishment of SMETS 2, fully tested end-to-end DCC. We do not regard them as key enablers for starting roll-out. They are the key enablers for finishing the roll-out and making it as effective as possible. I think it is very important they are not regarded as prerequisites for starting roll-out because if we do regard them as prerequisites, it will be 2018 before we really start as an industry. There is a very significant distinction to be made between an enabler and a prerequisite.

Don Leiper: Yes, I would agree with that. The points that are made by EDF and others who talk about the key enablers are valid. They are sensible issues and risks that are faced by a very large programme of this magnitude and scale and they will need to be addressed over the course of time, but they should not stop us moving.

Darren Braham: A couple of points. One of the key things to enable the start of a mass roll-out is having sufficient coverage, so not only the wide area network but also the home network. At the moment we are using ZigBee at a certain frequency, 2.4GHz, that does not necessarily propagate that well. For example, if you have a gas meter on the outside of a property, an electricity meter under the stairs, it may struggle to connect and for that matter also to display. There is a concern that you are going to turn up to a property and leave the customer with smart electricity only and have to come back in the future when we have a more complete set of hand technologies so we can get to that sort of complete connectivity. To enable the start of a mass roll-out for the whole industry we do need other home area solutions.

The other area that might be worth talking about is the whole area of time-of-use tariffing. One of the areas where we can see significant consumer benefit is shifting load and, as British Gas was saying, there is some data there that would evidence the fact that you can save some money by encouraging consumers to move their consumption. However, unless settlement, the way energy suppliers pay for their energy, catches up with this time-of-use tariffing, there is no incentive to deploy the encouragement to consumers to shift their consumption or reduce their consumption, particularly when it comes to gas because you have a settlement system that is fairly archaic. There is an annualised quantity that is set once a year and you are stuck with it for a whole year, so if a customer reduces their consumption we pay the same, irrespective of what the customer actually consumes. That is a real problem that needs to be addressed by the industry in order for us to see the true benefits flowing to the consumer.

Q158 Chair: Last week DECC announced a new timetable, putting back the mass roll-out by a year. What do you think about those new dates?

Stuart Rolland: We were not particularly surprised by the announcement, Mr Yeo. The scale of the programme is very significant. I guess our feeling was that we in British Gas were happy that we could achieve what was required to be done by 2019 but in truth, looking across the industry, there has not been enough progress made in foundation by other suppliers to have made that perhaps a realistic date. Moving to 2020 was a pragmatic decision, in our view. 2015 was also a pragmatic decision, inasmuch as the complexity of setting up the entirety of the DCC in the time allowed was going to be quite challenging, in our view, given the problems that we have seen setting up our own infrastructure in the last few years.

That said, I think our grave concern would be that the moving of the start date might be seen as a reprieve and an opportunity to continue not doing very much in foundation stage. So while the date is moved back to 2015, in terms of the start of so-called mass roll-out, we would very much encourage DECC and the Government to make sure that there are incentives in place to make sure that everybody starts participating in foundation stage. It makes it all the more important, frankly, that people do participate in foundation and start getting some volume into the marketplace; otherwise again 2020 will become unrealistic.

Don Leiper: We support that view completely. Certainly we would not have been unhappy, as I said earlier, if the roll-out date had not gone back but we do need to be pragmatic about the DCC. It is an important part of the long-term solution. Our philosophy had always been that five years after the date the DCC goes live is a reasonable timescale, if you look at how other countries have done this and the pace that they have rolled out, and we stick with that. If the DCC goes back, then we accept that it is reasonable for the end date to go back as well, but we would really encourage people to put their shoulder to the wheel and get on with it. We are learning lessons, and others who are doing more in the foundation stage are learning lessons that others may benefit from over the course of time. Everybody should be putting their shoulder to the wheel and cracking on at the moment.

Darren Braham: I think it is a sensible and pragmatic approach. As I mentioned earlier, it will allow us to have a complete set of home area technologies, allow the DCC and the whole end term process to be fully tested. It makes a lot of sense.

Q159 Sir Robert Smith: If they change the date, are you still confident they will not have to change the estimate of the net benefit of £6.7 billion? Do you think that is a robust figure?

Stuart Rolland: If I can comment on the figure as it stood when the date was 2019, we think that the benefit could be significantly greater. There was a report produced by Oxford Economics, which is a respected consultancy, at the end of last year that indicates that the net benefit could be considerably higher, based principally on getting greater consumption savings. The original impact assessment assumed that consumers would achieve around about 1% to 2% of consumption saving. The Oxford Economics report indicates that that should be expected to be nearer 5%. Our view is that we are pretty comfortable with the cost benefit analysis of impact assessment. There are obviously line items that will go up and down, in our view, but broadly speaking it is readily achievable and we would hope that consumers would see even greater benefit.

In terms of the impact on the cost benefit of moving the date out by a year, it does not make an enormous difference because there were inefficiencies in having to build up a very substantial engineer force, for example, for installation for use over a very short period of time. In fact there are some efficiencies and savings made by being able to smooth that curve. Instead of building up what for us would be about a 3,000 or 4,000 engineer force to achieve the 2019 deadline, we can probably build up an engineer force that has 500 or 1,000 people fewer in it and then fewer to find new opportunities for thereafter.

Q160 Sir Robert Smith: Do the other two witnesses share that confidence?

Darren Braham: I think in terms of benefits at 1% or 2%, the impact assessment is very conservative. We are working with a company called Opower, a US software business. It is part of our analytic platform so it allows us to do comparisons between similar types of homes. That has been deployed in the US to about 15 million users, and across a very large sample. Simply by providing a simple comparison of how you are performing against similar demographic homes, that has reduced consumption by 3%. So a very straight forward comparison on a bit of paper led to very significant savings and, as I say, we are using that as part of our data analytic programme, part of the information we share with consumers. Our experience would indicate that the impact assessment approach is pretty conservative.

Don Leiper: I would add that I think there are other benefits that are not featured in the impact assessment at all. There will be two additional benefits particularly. One is that network reinforcement activity will be reduced in cost if we get the smart metering information rolled out appropriately across the network businesses, and therefore we should see a lower cost coming through from the network businesses to consumers. I also think that if we get this right over the course of time, what the DCC will do is it will allow us to massively simplify our industry. There are huge amounts of complexity behind the scenes that customers do not see except in the form of problems that we potentially create for them with poor data quality. This should enable us to radically simplify the industry over the course of the next five to 10 years, which should in turn see lower costs to us as energy suppliers, which will be passed through to customers in due course.

I think the benefits are potentially understated for reasons other than the energy savings that customers should see for themselves and I do not think the costs are overstated. That kind of cost per installation and unit cost of meters should arrive in due course.

Q161 Sir Robert Smith: How do you convince the customers that you have passed through the benefits?

Don Leiper: That is really a functioning of the competitive market in reality. As it is constructed at the moment, the business case for the impact assessment says energy companies will save a certain amount of money but they will spend more money than that in putting smart meters in, so the unit price of a unit of power or gas will actually rise on the back of this but the savings to consumers then dwarf that or overcome that, and as such they end up with a lower overall net bill. Usage is lower but the net cost is higher, so the competitive market has to function in order for the customers to see the benefits.

Darren Braham: Yes, I think that is right. The key message is about helping the customer bring down consumption. The reality is we are in an environment where energy prices are on the increase, not just because of this particular programme but because of various other costs in the whole value chain, and the only way to alleviate that is to help the customer bring down the consumption and smart metering has the capability to do that.

Stuart Rolland: I would support those comments

Don Leiper: One other point I would raise as well is that the more you learn, the earlier you learn, the more the chances you have of having a lower cost, higher quality implementation. That is the reason why we are choosing to adopt the approach that we are adopting to get significant experience prior to the DCC going live, because we think that gives it the potential to have a lower cost roll-out.

Q162 Sir Robert Smith: One of the other things we pursued with the previous set of witnesses is the debate over the timescale of the feedback to the consumer. It started out as in-home devices but rapidly people are saying they are a limited technology and we would be better off not spending the money on an in-home device and using other smarter means of communication.

Stuart Rolland: I was in a consumer focus group two weeks ago and in that group we had about 15 smart meter users and about 15 non-users, and there were some tremendous insights that came out of it. What we found is that the level of engagement at the time of installation and individually thereafter with in-home display was very strong but it does not remain the centre of attention in the home for a very long time. It is very important to build engagement through richer insight into energy usage than just having an in-home display. I myself have a SMETS 1 meter and an in-home display and initially you get a lot of insight from it just by switching on and off various appliances around the house. You find out that the television on stand-by, for example, uses just as much as when it is full on and you have some learnings in that initial period of a month or two when you really do condition your behaviours differently. However, the key, frankly, is retaining engagement thereafter, and I think that requires probably an interface through internet offered options such as a webpage, such as the personal energy report that we are already rolling out.

In that context, I would agree with some of the comments made earlier, which is that most consumers will probably want to use what we would call a virtual in-home display, which could be on a smartphone, on a tablet, on a webpage on a computer. We believe that should be probably an option instead of giving an IHD. IHDs will have a role to play-certainly those customers who do not have access to smartphones and tablets should be offered an IHD-but there should be greater optionality and it should not be an absolute requirement to provide an IHD.

Darren Braham: I totally agree. In our experience, our customers do not necessarily want a display. Where we have deployed displays, they are a limited use. There is an initial kind of interaction and usage and then what quite often happens is they are left alone and end up in a kitchen drawer. We think the enduring benefits do come from providing the information through a web interface or providing the sort of comparison data to similar homes that drives enduring behavioural changes and not through a display that primarily will show instantaneous changes in consumption. They have a role to play for sure, but in terms of driving enduring changes and also perhaps more social engagement I do not think they are necessarily that effective.

Don Leiper: I am not completely sure. I think you are doing them a disservice actually. Our research from our customers suggests that after 12 months 94% of customers are still engaging with their in-home displays on a regular basis and 78% believe that they have changed their behaviour because of them. I do accept that they should not be the only method. I completely agree with all those aspects in that individual customers will want to do things in different ways, and also over the course of time energy efficiency is not the most sexy topic in the world. Frankly, we need to find creative ways of engaging customers about this very important subject on an ongoing basis and that will require us to do different things over the course of time, as you have just described. What you have said are the ones we can see at the moment and I am sure there will be more and different ones over the course of the decades to come. However, I would not sell them short too much. I think they are effective, in the early days certainly, and our research suggests that they have an ongoing effect beyond the "everyone just puts them in the kitchen drawer" view of life.

Q163 Sir Robert Smith: If you switch suppliers, do you just keep the in-home device you got with the original?

Don Leiper: Yes, you would keep the in-home device and it would still communicate with the meter. It may not currently be updateable for tariff and those kind of things that would exist over the DCC, but it will still give you information about what you are using.

Q164 Sir Robert Smith: If it is going to be optional and someone moves house, the next occupant may be someone who does not have internet skills.

Darren Braham: However, they can still ask their supplier for a display and under the licence conditions the supplier would have to provide a display.

Sir Robert Smith: So there would be no cost?

Darren Braham: Yes, at no cost.

Q165 Dr Whitehead: Perhaps we could return to the question of consumer engagement. I think you heard some of the discussion earlier concerning how that might take place and certainly the general issue of how smart meters might work being taken on board, perhaps jointly through an implementation and deployment body similar to that employed by the digital switchover. Is that something your company is looking at?

Don Leiper: Certainly, the CDB. Yes, we are very supportive of that. We have always been very supportive of the CDB being in place. I think it is really important that it is as independent as it can be from the industry and that it gets its information from further independent parties as well so it can be out in the press and the media confirming the benefits of smart metering, debunking myths and engaging with real issues where there are real issues to be engaged with. There are many of all three of those categories, I would say, and that sits alongside our own needs. From our perspective, a lot of the work we are doing at the moment is working out how to engage with individual customers at the point of installation, before it, during it and after it, developing what we call customer journeys for different classes of customer. We have a different journey for our vulnerable customers who, once identified, we treat differently throughout the process end to end and we have numerous different customer journeys to try to tailor the journey as best as possible. However, if you have the macro CDB view of life, trying to engage the whole public and give a good story around smart metering, and ourselves as individual companies then doing the same, I think those two things need to come together.

Stuart Rolland: We are going to be major funders of the CDB and we are major supporters of it, and I would echo the comments that it needs to be seen as a credible independent body with full Government support. However, it needs to play that essential role of increasing awareness, and indeed not just awareness but excitement around what smart metering can offer. The observation we would make is that in the digital TV switchover, the above the line advertising campaign commenced about three years prior to the switchover. We are a little bit late in the day in setting this up, so we are very keen to see it very active as soon as possible. There are a lot of myths out there to be debunked, as was said earlier, so that is going to be an important part, addressing concerns around privacy and health, which really should not be major issues, and also getting people excited about engaging with energy.

There is a great appetite out there because, as we all know, energy costs are rising and customers are regarding this particular cost in the household as now worthy of serious attention. I do not think it will take a lot to get customers switched on to the significant benefits from getting better visibility and control of energy through smart metering, and the CDB will play that role.

Q166 Dr Whitehead: Right, but bear in mind that, as you said, in this particular instance you are rather late in starting that particular part of the process. When the mass roll-out starts it will not be, as was digital TV, everything rolls out in one place and then everything rolls out two years later in another place and everything rolls out a year later in another place. It will start across the country from the beginning, and therefore I imagine that body will need to be in place and working well at a very early stage. Are you confident that can happen in time, or do you think that will be a bit of an intermittent process?

Don Leiper: We had an interview with the chief executive today and certainly the initial funding is being put in place for this year to get it up and running, with a view to it being fully operational from January next year. There is no reason to believe that timetable will be missed.

Stuart Rolland: We are going to be a little bit pre-emptive. We are going to do a little bit of advertising ourselves this year around smart metering to help raise awareness, because it is absolutely critical to make the roll-out efficient. What we have found is that probably fewer than half of customers contacted to make an appointment to put a smart meter in their home actually will say yes, and that is simply through ignorance, an assumption that this is something for the company’s benefit rather than for their own. That really needs to be addressed as quickly as possible. We will do a bit of advertising this year and we expect CDB to be quite active from 2014.

Q167 Sir Robert Smith: In comparison, what were people’s responses over the years to being contacted to say, "You need to swap your meter because it needs an upgrade"?

Stuart Rolland: The typical response that we get today is that we probably have to contact 10 people to get four appointments.

Q168 Sir Robert Smith: What if you are just putting a dumb meter in?

Stuart Rolland: Putting a dumb meter in is a little different, because at that point we are contacting people whose meter is totally at the end of its life and there is a recognition on their part that the meter has to be changed, so it is less-

Sir Robert Smith: So they are willing to accept that?

Stuart Rolland: It is an easier sell and that is really purely down to maybe ignorance and a little bit of suspicion around what smart metering constitutes.

Q169 Dr Whitehead: What dealings have you had with people who have come to you citing privacy concerns or health concerns or, in some instances, claims that bills appear to be much higher once a smart meter is installed, possibly because the dumb meter previously was not very accurate whereas the smart meter is a bit more accurate? Are those the sort of issues that have been raised and how have you responded to them?

Stuart Rolland: With regard specifically to concerns around privacy and health, there are customers who have concerns around them but we find it to be a very small minority, a very small percentage. Most of the reluctance to have a smart meter put in their home is just through ignorance of what it entails and the inconvenience of staying in for a day. You have to convince a customer that it is worth that trouble in order to have them make an appointment. However, the incidence of real concern around data and privacy is a very small number of people.

Darren Braham: As far as I am aware, we have not had any issues from customers as regards privacy or health concerns. I would say that there is a very large education process that we need to go through to really explain the benefits of smart to consumers. We did a bit of work a year ago in terms of engaging with consumers on the doorstep, dare I say, and trying to explain to them the benefits, so selling a smart proposition. It was very challenging to fundamentally explain what they were receiving with a smart meter, how it differed from an in-home display and those sort of things. It resulted in a sales process that was probably three times as lengthy as ordinarily would have been the case in terms of just saying, "Well, we can save you money."

Don Leiper: I would just echo that it is a tiny minority of customers who are concerned about these issues, but they are nevertheless real concerns and we are ready to deal with them as and when. As an example, I think there was a headline in a daily paper about "spy in your home" or "privacy issues", those kind of things, and the following day, of all the installations we were planning to do, we had five customers ring up to say, "We don’t want to do that any more, we have seen this." That was a small percentage even the day after that kind of story, so it is not a concern that is deep in the public consciousness at the moment certainly, and nor should it be.

Q170 Dr Whitehead: That was the same newspaper, I think, that ran stories about "spy in your dustbin" when local authorities were suggesting they might measure the amount of waste that people were putting out, but I merely offer that for information.

Nevertheless, there will be a certain percentage of customers who simply will, for whatever reason, not accept a smart meter in their homes. What are your strategies and thoughts on dealing with that particular cohort of customers? We know from the United States, for example, that there have been different approaches. In some instances they have been charged substantial additional sums of money, in some instances the state troopers have gone around to their homes to install them; various ways of doing things.

Don Leiper: I think in the early days we just marshal all the arguments for ourselves and do our best to persuade customers of what we believe the right thing to do is and why smart meters are valuable, and we believe that they genuinely are. The question you ask about state troopers is potentially for the very tail end of the roll-out. The previous group also talked about what the definition of "reasonableness" is around completion. That is a genuine question. I do not think it needs to be answered immediately but it would be good to get it answered in the not too distant future so that we can be clear about frequency of contact or what that means about being reasonable and so on. However, in the meantime I think we just do our best to persuade customers and if they absolutely refuse then they absolutely refuse and we move on.

Q171 Dr Whitehead: However, from your point of view as companies, how reasonable do you regard it, at the other end, of having to keep perhaps a disproportionately expensive meter reading team in place perhaps to read a very patchy group of meters?

Darren Braham: Invariably what will happen is the cost of meter reading will go up as there are fewer people’s meters to be read, so that is definitely an issue that we will need to deal with. We do encourage those customers who do not have a smart meter to submit reads themselves on almost a monthly basis and we get roughly 60% of our customers without smart who do that, so a very high engaged proportion of customers. However, it is a problem that we are going to have to address.

Don Leiper: One example you cited from the US is that customers who choose not to do that are asked to pay an extra cost, which I think is $10 a month or something like that, as well as a one-off charge for whatever reason. That may be where we end up in this country-it may not be-but it does not seem disproportionate to what the cost of a meter reading would be on a monthly or quarterly basis.

Q172 Dr Whitehead: Then we have, as I also mentioned earlier, the question of the extent of the 97.5% estimated coverage after all reasonable goes at coverage have been undertaken on the present comms basis. It has been suggested that that may be rather an optimistic suggested outcome, not just in rural areas but, as we have heard, in terms of problems of certain urban areas, basements and high rise flats and awkward buildings and so on. What is your view of that target and how far short do you think you will find yourself at the end of the roll-out period, in reality?

Don Leiper: I do not think we know at this point. I do not think we can give a sensible answer to your very reasonable question because we do not yet know what technologies are going to be employed by the communication companies, and the key thing is they are communication companies. They are being tasked with 97.5%. They will come up with strategies for executing that and they may have multiple strategies for doing that, and if they do not they will no doubt be held to account. However, in reality we are not communication companies and the experts are being asked to do the job. We will obviously work with them to do what we can, and work with Government and them to try to get the optimal solution, but until we know exactly what they are going to do it is really hard to answer your question. All the points about difficult properties we understand.

Darren Braham: I think they will have to deploy a number of technologies to get close to 100% but I am also concerned about the within home, the home area network, in terms of the success rate of binding the display to the electricity meter and the gas meter as well. I think that could be more of an acute issue actually.

Stuart Rolland: Our concern on the 97.5% is how quickly it can be got up and running. If you look at other networks, mesh-based networks, radio-based networks, they will get to that level of coverage but how long does it take to achieve that because mesh needs a sort of critical mass in a given region to achieve that. By the time the DCC goes live, we will have an engineer population of 2,000 or 3,000 engineers who we do not want sitting on their hands because they can’t commission a smart meter in that particular region. For that reason we are very much of the view that the technology that we are currently installing, which is GPRS based and is very successful and being installed today, should continue to be installed if necessary as the enduring phase of the mass roll-out phase commences so that you do not have a cliff edge between one technology and the next.

There needs to be some accommodation as a contingency plan, in case the 97.5% is not achieved from day one, that we can continue to use GPRS. In any event, I suspect, as others have said, there will continue to be a mix of technologies to reach as many properties as possible.

Q173 Dr Whitehead: When you say you do not know, I appreciate you are not comms companies and it is a comms issue, but you will be left with the properties that will not have smart meters at that point for whatever reason, and therefore they will be the same in principle as what I have called the urban refuseniks.

Don Leiper: Yes, but I also think that in the first year or two of the roll-out the likelihood is that the coverage will be quite extensive and we do not have to do everybody in the first 12 months. I imagine where we will get to is a constructive dialogue with the successful comms companies as to where their network strength is best and therefore where we will probably target our early engagement customers and roll-outs. It will not necessarily be a critical issue that it is not 97.5% on day one, although it might be a frustrating issue.

Q174 Dr Whitehead: Will there be a temptation to do the happy, the willing and the easy first and then, as 2020 approaches, increasing scratching of heads and resort to-

Darren Braham: I think we have a slightly different perspective insofar as we are bringing on customers. Part of our sales message is smart and we pick up customers where we can. The point about technology is critical to us so we want a situation where we can carry on using GPRS, so if they do use some wireless technology that does not have the same coverage at the point of launch that would be a big problem for us because we do not have the luxury of saying, "Right, we will pick and choose you guys because we have coverage in that particular area." From a competition point of view and independent supplier perspective, that is an issue.

Q175 Dr Whitehead: Do you want to say anything more on your brief comment about your concerns about the ability of linking in a home area network to the process that you mentioned a little earlier? I mentioned earlier the question of whether the home area network could easily sit with all other networks in the home.

Darren Braham: That is a secure network. Obviously once you have connectivity between the various parts of the metering system, that is secure. What DECC are talking about is a kind of bridge device, a consumer access device, that will talk to the home area network. There will be a mechanism for binding that in and having access to the data, but then it is really down to the customer. If they download the data on to their PC then it is really down to them in terms of how they secure their general information.

Q176 Dr Whitehead: Are you collectively saying, therefore, that the extent to which the customer may be insecure as a result is down to any sort of actions they may take otherwise, as in running a computer system without a virus checker or whatever?

Darren Braham: I think it is incumbent upon us to make them aware of these issues, so if they do have access to the data or they download it, we need to make them aware that if their whole system is not protected then it could be accessed.

Q177 Dr Whitehead: If you had, for example, read systems that you are using to reach customers, which send data between users, is that then a potential problem in terms of the relative insecurity of certain users who may be receiving and passing on data through their systems? Would everyone have to be really secure? Presumably they would be

Stuart Rolland: Our understanding is that that kind of mesh system has been used in the States now for quite a few years without any issues around data interference, so it is regarded as a secure system.

Q178 Dr Whitehead: So it isolates itself. If you have half a dozen homes that are effectively computer driven in terms of their internal services and two of those have been bot captured, presumably that is a potential serious security risk for everyone who is coming into that system-for example if two persons’ homes have computers that have been used to crash the Latvian national computer service by remote command or whatever.

Darren Braham: It is part of the communication service provider’s infrastructure, so it would be their responsibility to ensure it is appropriately secure. It is sitting on that side of the fence rather than on the consumer side.

Q179 Dr Whitehead: So when you can isolate what you are doing as far as smart meters are concerned from other concerns. Is that something you are confident on?

Don Leiper: I believe that to be the case. I am not a security expert but I do understand that the security standards that have been set are pretty tight and have been set by security experts employed by the UK Government. We have our own security experts who have confirmed their view that that is a safe and secure approach and if those standards are met by the providers then we will be fine for data. I believe the issue you have described of hopping would be fine.

Chair: Thank you very much indeed.

Prepared 24th May 2013