Which? calls for government smart meter cost action
lucbouchard 7 October 2014
Consumer pressure group Which? has urged the government to curb the costs of rolling out 53 million smart meters across the UK over fears that the levels of financing currently required could spiral out of control.
In a letter written to energy secretary Ed Davey, Which? has called on the government to implement a number of measures such as more coordinated procurement of smart meter technology as part of efforts to limit the cost to the taxpayer of rolling out the strategy nationally.
The government has committed itself to ensuring all homes and small business premises in the UK have installed smart metres by 2020 as part of a strategy to encourage more efficient energy use and monitoring, as well as more accurate billing. The programme, which is expected to cost the taxpayer £10.9bn and provide £17.1bn in efficiency savings, will see energy companies beginning to install smart meters within UK homes from late next year.
While praising the initiative's core aims of providing consumers with greater control over their energy use, Which? said that with the taxpayer footing the overall bill for smart meters, it was imperative that government ensured the best value for money. The calls are part of the advocacy group's wider 'Fix the Big Six' campaign that calls on the government, regulators and major energy companies to introduce "radical reforms" of their services to fix what it claims is a broken market that is against the interests of consumers.
"Without immediate action the cost of the smart meter rollout is in danger of spiralling out of control, while consumers foot the bill. The energy market is undergoing a full scale investigation, so the government cannot expect competition alone will keep costs low," said Which? executive director Richard Lloyd.
"Major reforms are needed to Fix the Big Six and restore trust in this broken market. At a time when energy bills continue to squeeze household budgets, the government must urgently explore ways to ensure consumers get value for money from the smart meter rollout."
In an open letter to Ed Davey ahead of his key speech on energy policy at the Liberal Democrats' annual conference in Glasgow this week, Which? outlined a number of recommendations for the coalition to consider to try and address concerns over public spending on implementing smart metres. These include:
Centralising how smart meters are being procured to drive down costs of technology, while overhauling a current policy where individual energy suppliers choose their preferred devices for installation.
Adopting a more efficient approach to purchasing and installation of infrastructure to support meter rollout in multi-occupancy buildings like flats to reduce implementation costs.
Providing guidance as early as possible on best practices for suppliers charged with installing smart meters to avoid disproportionate costs.
Responding to calls by Which? to curb the cost of smart metering, energy regulator Ofgem said it wanted to ensure customers were realising the potentially significant benefits smart metering offers them. In order to better ensure consumer benefits from the scheme, the regulator said it had asked the Competition and Markets Authority (CMA) to investigate a market it believed was not working well enough.
"The CMA investigation will ensure any barriers to a well-functioning market are identified and addressed. In a well-functioning market if suppliers don't manage the roll out efficiently and try to pass on higher costs to customers, people will vote with their feet and switch," said an Ofgem spokesperson.
"We are not directly regulating the costs suppliers will incur for the roll out. However, the costs of the Data Communications Company, which will provide all the communication services between smart meters, energy suppliers and other energy companies, will be tightly managed closely scrutinised through our price controls.
"Suppliers will soon submit their smart meter roll out plans to us. Large suppliers will have to agree to binding milestones for fitting smart meters and if they miss these targets they will risk enforcement action from us. We meet with suppliers regularly to discuss their roll out plans so we will be well aware of any issues they may face on installation. And we have not ruled out issuing guidance on suppliers taking all reasonable steps to install smart meters as the roll out starts."
Just last month, the public accounts committee (PAC) published a report on the government's smart metering plan, which raised concerns about the overall costs of the strategy to taxpayers. The committee also outlined recommendations to ensure greater transparency about the scheme, its overall costs and the exact benefits anticipated for the general public.
"The costs of installing 53 million smart meters will be borne by consumers through their energy bills. It will cost around £215 per home or small business over the next 5 years to install the meters – an additional cost people can ill afford," said the report.
The PAC report warned that some aspects of the programme design to implement the meters may be too costly, as well as questioning the feasibility of trying to install meters in 100% of UK homes in just over five years.
"Suppliers also need to develop alternatives to the radio systems for the Home Area Network linking smart meters to in-home displays and other devices, which will not work in some 5% of premises," added the findings.
The PAC therefore urged the Department of Energy and Climate Change (DECC) to keep the programme under continual review and – in case of escalating costs – be ready to review the value for money offered by individual components of the smart meter strategy believed to be driving costs and taking "appropriate action" to address concerns that arise.