2 Managing the programme
10. The Department has overall responsibility for
the Programme and has overseen its implementation since 2011.
As the Programme moves towards mass roll-out the Department expects
the transition to enduring industry-led governance to take place
progressively over the next two years or so. Suppliers will be
responsible for roll-out, and Ofgem will oversee suppliers' and
other industry participants' compliance with their licence and
Smart Energy Code obligations.[22]
11. The Department stated that it was ultimately
accountable for the Programme and that it would devolve responsibility
to Ofgem once the transition to industry-led governance was complete.
However, the Department confirmed that there would be no changes
to the accountability framework until it was confident that Programme
risks had been sufficiently reduced.[23]
Ofgem told us that it would deal with complaints relating to smart
meters, where consumers were not satisfied with their supplier's
response.[24]
12. The Department has mandated suppliers to take
"all reasonable steps" to roll out smart meters to 100%
of the market, and the central communications service provider
is contracted to provide a network that will enable smart meters
to be reached in 99.25% of premises. Some suppliers have asked
the Department to reduce the requirement to, say, 80% roll-out
because of the additional expense of achieving the last 20% of
installations. The Department told us it was resisting these requests
very strongly, particularly as it believed that these last 20%
might include a disproportionate number of vulnerable consumers,
and it does not want smart meters to be rolled out at the suppliers'
convenience. It was for Ofgem to determine whether suppliers had
taken all reasonable steps to achieve 100% roll-out. Ofgem has
not provided guidance on what all reasonable steps will mean for
suppliers, but told us it was very likely that it would do so
in due course.[25]
13. Under the Programme, a home area network is required
to allow in-home displays and other devices to connect to consumers'
smart meters. However, the radio system currently in use for the
home area network operates at a frequency of 2.4 GHz which is
not suitable for up to 30% of premises, mainly high rise flats
and buildings with thick walls. Suppliers are developing an alternative
solution using a different radio frequency but this will still
not work in 5% of premises.[26]
Suppliers are working on a range of further solutions for these
remaining premises, which may include wired connections, and these
must be ready to allow roll-out to be completed by the end of
2020.[27]
14. We asked the Department whether it was necessary
to have an in-home display in every home, and whether savings
could be achieved by not providing an in-home display to households
who wanted to use other devices such as smart phones or tablets
to receive data from their smart meters. The Department told us
that in-home displays cost £15 each and noted that all available
evidence showed that in-home displays lead to additional energy
savings of between 2% and 4%, bringing substantial cost savings
for the consumer.[28]
There is also a danger that the Government favours an existing
technology when technologies are changing fast—leading to
consumers paying for investment in a systems which is already
out of date.
15. The Department told us that it had spent £19
million on running the Programme in 2013-14. Of this, around £14
million had been spent on external experts. In 2014-15, it expects
to spend £12 million, of which around half will be spent
on external experts. The Department explained that, during 2013-14,
it ran four major procurement exercises for the data and communications
services, so it had been crucial to have the technical and commercial
expertise necessary to be able to engage effectively with commercial
companies and safeguard consumers' financial interests. The Department
told us its procurements had delivered a reduction of several
hundred million pounds relative to the estimated cost of the central
communication system in the impact assessment.[29]
16. We asked why the Department was relying so heavily
on consultants to progress the Programme rather than developing
its own in-house expertise, given it has a large portfolio of
projects that require an ongoing commercial capability. The Department
said it was building its in-house capability, but that the Programme
required a lot of expertise over a short timeframe, and it would
not be practical to carry this expertise within the Department
in the longer term.[30]
17. We also asked whether the Department had examined
the approach taken by the Ministry of Defence of setting up a
new organisational structure that allowed permanent civil service
staff to be employed and paid outside traditional pay structures.
The Department said it had not looked at the Ministry of Defence's
initiative, but it believed that a degree of pay flexibility was
necessary to enable the Department to bring in the commercial
expertise it needed, because not doing so would mean reliance
on consultants that would cost more, and whose knowledge and experience
would be lost to the Department once their work is completed.[31]
18. The Major Projects Authority reviewed the Programme
in 2011, 2012, and 2013. The Department told us that it had not
published the MPA's assessments as they are designed to facilitate
a frank discussion of the Programme, to review Programme management
and processes, and to provide confidential advice to the Senior
Responsible Officer on the delivery of the Programme. The Department
maintained that it had followed Cabinet Office advice and was
constrained by Cabinet Office rules from placing these reports
in the public domain as the reviews were conducted on a confidential
basis, and expressed the view that publishing the reports would
remove the confidentiality of the process and inhibit frank contributions
to the review.[32]
22 C&AG's report, paras 6 & 7 Back
23
Q 147 Back
24
Qq 148 & 152 Back
25
Qq 114 - 116 Back
26
Q 94 Back
27
Q 94 Back
28
Q 89 Back
29
Qq 33- 157 Back
30
Qq 158 - 161 Back
31
Q 163 Back
32
Q 166 Back
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