BEIS to look again at smart meters programme costs amid overspend warnings
Committee chair Rachel Reeves urged the regulator Ofgem to take harsher action against suppliers that don't fulfil their obligations under the programme.
The Department for Business, Energy and Industrial Strategy has said it will look again at how much its smart meters programme will cost, amid warnings that a predicted overspend could rise still further.
BEIS has commissioned an updated cost-benefit analysis of the smart meters programme to report in summer, which will be made public, energy minister Claire Perry told the select committee that scrutinises the work of the department yesterday.
The programme, which began in 2009, originally aimed to install smart energy meters in every home in the UK by the end next year to help consumers save money by giving them a better understanding of their energy usage.
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However, the programme has hit a number of roadblocks including delays in developing some of the technology required, and a problem with smart meters “going dumb” when consumers switch energy suppliers.
Energy suppliers now estimate that 70-75% of households would have a smart meter by the 2020 deadline, the National Audit Office reported last year. The public spending watchdog also said the cost of the programme would rise to an estimated £11.5bn by the end of 2030 – £500m more than BEIS’s last estimate in 2016.
Appearing before the committee ahead of Perry, Dhara Vyas, head of future energy services at the consumer group Citizens Advice, told MPs the cost of rolling out smart meters could be “even greater” than existing estimates.
Vyas said Citizens Advice had pressed BEIS for an updated cost-benefit analysis, adding: “There is a real information gap here and it really impacts upon our ability to do our job as watchdog.”
Speaking to the committee yesterday, Perry said she had “no reason to doubt” the NAO’s spending estimates. However, she agreed a more up to date study was needed, as BEIS last carried out a cost-benefit analysis in 2016.
Some 12.8 million smart meters have now been installed – representing around 25% of households – which will enable a “much better analysis” of the programme than previously, Perry said.
Also appearing before the committee was Darren Walker, senior reporting officer for the programme, who said the actual number of installations was likely to be higher as the 12.8 million figure was correct as of September and did not yet include those installed by small suppliers during 2018, which are counted up at the end of the year.
Responding to some MPs’ scepticism that as many as 75% of households could have smart meters installed by the end of next year, Walker reassured the committee it was “certainly challenging but not out of the question that we can get to those levels”.
Both Perry and Walker acknowledged concerns that only 250,000 meters installed so far were second-generation SMETS-2 devices, which allow people to switch power providers remotely. BEIS had initially only intended to install 5.4 million first-generation SMETS-1 meters, but has already more than doubled that figure to make progress towards its target due to delays to the more sophisticated devices.
Another of the committee’s concerns was that some 2.1 million smart meter users could not recall being given advice on energy saving, which suppliers are required to provide along with installation.
During the session, committee chair Rachel Reeves was visibly irritated that the energy regulator, Ofgem, had not taken any enforcement action against suppliers who had failed to fulfil this obligation.
She had stern words for Rob Salter-Church, Ofgem’s director, retail systems transformation, after he said Ofgem threatened one supplier with enforcement action after it reported a recall rate – the proportion of customers reporting they had received advice upon their smart meter installation – of just 63%.
Salter-Church argued that Ofgem’s approach had been effective in driving the unnamed supplier to increase its recall rate to 83%, saying: “We do have a range of powers as well as enforcement. We think carefully about what is the right outcome to take that will get the quickest and best outcome for consumers.”
However, Reeves said it was “not good enough” that the company had not been penalised for failing to give advice they were committed to providing to 37% of its customers.
“I would just say to you and to Ofgem, you are given important powers by the secretary of state [for business] and by parliament – we would ask you to use those powers, because the whole point of rolling out smart meters is to get benefits to customers. They will not get those benefits if they do not get the advice.”
She added: “Frankly, we would like to see our regulators use the powers they’ve got and use it against the powerful on behalf of the vulnerable. That is what we urge you and ask you to do, because that is your job.”
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