Clause 79

Energy Bill – in a Public Bill Committee at 3:30 pm on 6 March 2008.

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Gas meters

Question proposed, That the clause stand part of the Bill.

Photo of Sir David Amess Sir David Amess Conservative, Southend West

With this it will be convenient to discuss the following: New clause 1—Smart meters —

‘(1) The Secretary of State shall make regulations which require smart meters to be installed for gas and electricity in all homes by the end of a specified period of ten years from the date on which the regulations are made.

(2) In this section a “smart meter” means a gas or electricity meter with two-way communication capabilities including communication capability to a display which illustrates household usage and cost per unit consumed.

(3) Regulations made under this section must be made within a period of 12 months beginning on the date on which this Act is passed.’.

New clause 2—Information on ETS allocations

‘(1) Companies involved in the generation of electricity must publish information in their Annual Reports on the amount and value of any allocation they have received from the EU ETS and the amount that has been paid for such an allocation.

(2) Companies failing to publish the information required under subsection (1) shall be guilty of an offence, and shall be liable on conviction to a fine not exceeding level 5 on the standard scale.’.

New clause 4—Information on contributions towards environmental taxes

‘(1) The Secretary of State shall make regulations requiring energy utilities companies to specify the proportion of those consumers’ energy bills that contribute towards environmental taxes.

(2) In this section “environmental taxes” means—

(a) the Renewables Obligation Certificates,

(b) charges resulting from the EU Emissions Trading Scheme, and

(c) charges resulting from the Carbon Emissions Reduction Targets and future additional environmental charges.’.

New clause 20—Implementation of new metering arrangements

‘(1) The relevant licensees for the purposes of this Part are—

(a) gas suppliers and gas transporters within the meaning of Part 1 of the Gas Act 1986 (c. 44); and

(b) electricity suppliers and electricity distributors within the meaning of Part 1 of the Electricity Act 1989 (c. 29).

(2) The effective date for the purposes of this Part is the date which is 10 years after the date on which section 79 comes into force.

(3) Expressions used in this Part have the same meaning as in Part 1 of the Gas Act 1986 or Part 1 of the Electricity Act 1989.

(4) As from the effective date, a relevant licensee must not supply gas or electricity to any premises that is not subject to the provisions of this section.

(5) The Secretary of State may exempt any relevant licensee from the prohibition imposed by subsection (4) in relation to such premises, for such period of time, and subject to such conditions as he considers appropriate in all the circumstances of the case.

(6) References in this Part to new metering arrangements are to arrangements (including the provision and operation of any necessary communications and data-handling infrastructure) designed to ensure that, by the effective date, all premises supplied with gas or electricity in Great Britain will continue to be so supplied through a meter that conforms to the following three requirements—

(a) that the meter must record and be able to store measured consumption data for multiple time periods;

(b) that the meter, either on its own or with an ancillary device, must facilitate remote access to such data; and

(c) that the meter must meet any specifications that may be set out in any regulations made by the Secretary of State under this Part, pursuant to his duties under Part 1 of the Gas Act 1986 and Part 1 of the Electricity Act 1989, for the purposes of facilitating the introduction of new metering arrangements.

(7) This section may not be brought into force before 1st January 2010.

(8) The Secretary of State may, in accordance with this section, modify—

(a) the conditions of a particular licence held under section 7(1) or 7A(1) or (2) of the Gas Act 1986 or under section 6(1) of the Electricity Act 1989;

(b) the standard conditions of licences of any type mentioned in those subsections if he considers it necessary or expedient to do so for the purpose of securing the implementation of the provisions of this section.

(9) The power to make modifications under paragraph (a) or (b) of subsection (8) includes powers—

(a) to make modifications requiring licence holders, or classes of licence holder, to cooperate together, under arrangements approved by the Authority;

(b) to make modifications requiring any relevant licensee to take or refrain from taking any specified action, whether in relation to premises supplied with gas or electricity or otherwise;

(c) to make modifications relating to the operation of, access to, or use of pipe-line systems and distribution systems; and

(d) to make incidental, consequential, or transitional modifications.

(10) Before making modifications under this section, the Secretary of State must consult the Authority, the holder of any licence being modified, and such other persons as he considers appropriate.

(11) Subsection (10) may be satisfied by consultation undertaken before, as well as by consultation undertaken after, the commencement of this section.

(12) Any modification under subsection (8)(b) of part of a standard condition of a licence shall not prevent any other part of the condition from continuing to be regarded as a standard condition for the purposes of Part 1 of the Gas Act 1986 or Part 1 of the Electricity Act 1989.

(13) Where the Secretary of State modifies the standard conditions of licences of any type under subsection (8)(b), the Authority must make the same modifications of those standard conditions for the purposes of their incorporation into licences of that type granted after that time.

(14) The Secretary of State must publish any modifications under this section in such manner as he considers appropriate.

(15) The power of the Secretary of State under this section may not be exercised after the end of the period of five years beginning with the passing of this Act.’.

New clause 21—Reports on meters

‘The Secretary of State shall, in each calendar year following that in which this Act is passed, lay before Parliament a report on—

(a) the number of smart meters that have been installed in that period, including their effect on reducing carbon emissions and fuel bills;

(b) the discussions he has held with energy supply companies about—

(i) pre-payment meters,

(ii) the number of such meters in use, and

(iii) their tariffs;

(c) the progress that has been made in reducing carbon emissions through—

(i) increased use of renewable generation, and

(ii) energy conservation measures in households;

(d) the discussions he has held with energy supply companies about the impact of pre-payment meters and their tariffs.’.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

We are moving into an area where there will continue to be issues of difference with the Government and we have now reached the particular issue of smart meters. During our debates on Second Reading, the evidence sessions and in Committee, there has been huge support for smart metering. We are certainly in favour of its introduction. The technology for smart metering is feasible. Industry is ready to begin its installation throughout the country, but it believes that we must have legislation to back it up.

Smart meters are in operation in Sweden, Italy, Australia, the United States and Canada. Italy has almost completed its programme to convert 30 million homes to two-way smart meters. Sweden has plans to introduce 5.2 million meters by 2009 and 5 million homes in Ontario, Canada will have smart meters by 2010. It is widely accepted that it will take about 10 years to roll out smart meters to all 45 million gas and electricity meters in the United Kingdom with two to three years of planning and five to seven years of replacement.

Smart meters will achieve a number of things. They will cover both gas and electricity and help to tackle fuel poverty directly, enabling real-time information to be provided on the amount of gas and electricity being used by any given household. That will bring an end to the estimated bill, which will be widely welcomed by groups campaigning on issues such as fuel poverty. Secondly, smart metering will help to improve energy efficiency, because consumers will have a technology enabling them to reproduce their consumption figures readily—they could see when they were going to be charged most. There will be a whole range of tariffs available, at different times of the day. If people notice that it will be cheaper to put their washing machine on in the middle of the night, rather than at 6 o’clock in the evening, they will be encouraged to do so. They can choose which sort of tariff suits them. That is good for consumption and for helping tackle fuel poverty. Smart metering will also encourage new technologies. Smart meters will support microgeneration technologies, as they will allow individual homes to sell back to the grid when they are in surplus.

There is a significant amount of evidence in favour of smart meters. In briefings to the Committee, there was a lot of backing from industry. Scottish and Southern said:

“We should therefore decide now that smart meters should be rolled out and include broad enabling powers in this Bill to facilitate a mandated roll-out.”

Centrica said that it was disappointed that the Bill contained

“no provisions to mandate the roll-out of smart meters...Without a mandate from Government it is highly unlikely that energy suppliers would be able to facilitate a roll out to 45 million UK households in the timescale envisaged. A mandate would give the industry the ‘green light’ it needs to initiate a coordinated and managed roll out programme.”

The Energy Retail Association called on the Government

“to provide a mandate to the energy retail industry to roll out smart meters to all 45 million British households. A change that would end estimated billing and put consumers in full control of their domestic energy use.”

The Energy Networks Association said:

“We believe that a mandate for smart metering rollout is necessary. Any national rollout of gas and electricity smart metering will need to be taken forward on the basis of a clear statutory mandate.”

Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

I am impressed by the number of organisations on whose advice the hon. Gentleman can draw. There are undoubtedly many benefits associated with smart meters, but has he been able to gather any estimates of the other side of the balance sheet—what the costs might be? That would include costs, ultimately, to the consumer.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

That is work being done by Ofgem, which is actively supporting the roll-out of the programme. Some of the costs would be absorbed by industry, some by the consumer. One cannot know how that will work until a decision is taken about what the roll-out programme would involve. Depending on who was going to be doing that, it would result either in a direct cost to the consumer at that point or, otherwise, in the cost being spread over the 10 years, through a small incremental cost to the individual’s energy bill. One cannot answer that question without knowing the preferred method of going forward.

Photo of Martin Horwood Martin Horwood Shadow Minister (Environment, Food and Rural Affairs)

I am following the hon. Gentleman’s argument with great interest. I support much of what he says. Does he agree that any incremental cost to the consumer from the introduction of smart meters might well be largely or even entirely offset by the reduction in energy use, which often seems to result from the introduction of such meters?

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

The hon. Gentleman is absolutely right. That is one of the reasons why energywatch was so supportive of the move towards smart metering.

The National Consumer Council, the champion of the consumer interest, said that it

“supports the wide-spread roll out of two-way smart meters (within the next 10 years) because they offer considerable consumer benefits” including

“Eliminating inaccurate and estimated bills...Removing many of the disadvantages of pre-payment meters...and...Providing clearer information about the costs of current energy consumption”.

Photo of Hugo Swire Hugo Swire Chair, Speaker's Advisory Committee on Works of Art

The Minister asked my hon. Friend about the costs of installation, but is there not another saving here in terms of human life and costs? Smart meters can monitor inactivity with gas and do real-time monitoring of gas leaks and carbon monoxide emissions. I suspect that many lives would be saved on an annual basis by the introduction of smart metering.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

My hon. Friend is right to pick on another aspect. That is one of the reasons for such overwhelming backing, from industry, consumer groups and environmental groups.

The Energy Saving Trust wants the Bill to mandate the introduction of smart metering. Alistair Buchanan, on behalf of Ofgem, talked about the event that he had been to that was hosted by the hon. Member for  Sherwood and about the encouraging feedback he got on that occasion that the Government would introduce smart metering and make an announcement shortly. Allan Asher, from energywatch, said:

“The key for us, though, is that smarter metering allows us to do two hugely important things. First, we will at last be able to get rid of what I think are these dreaded ‘poor pay more’, or PPM, meters; you might know them as pre-payment meters, but we know them as the ‘poor pay more’ meters”.

He also talked about how that would be improved when he added:

“There is also what I consider to be the clearly emerging evidence from around the world that shows that, if consumers get this accurate, timely information about their consumption and their options, they will use less energy.”——[Official Report, Energy Public Bill Committee, 5 February 2008; c. 45-6, Q87.]

That is exactly the point that has been made, which is that consumers would benefit directly.

Photo of Hugo Swire Hugo Swire Chair, Speaker's Advisory Committee on Works of Art 3:45, 6 March 2008

There is, of course, a further saving: the costs of about £150 million per annum of carrying out manual inspections of meters. That would be a saving to the energy supplier, which could well be passed on to the consumer.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

My hon. Friend is absolutely right, smart meters will make it possible for a van to drive down the street and simply take the reading of every single meter for gas and electricity with complete accuracy and without a single person needing to have access to the home or to find somebody at home to be able to do it. That is a modern way of delivering the service and it is unfortunate that the Government are not helping it to move forward as much as we would wish. [Interruption.] I am not sure what the hon. Member for Glasgow, North-West is chuntering from his sedentary position, but I am sure that it would enlighten the Committee to know what it was.

Russell Marsh, who gave evidence to us from the Green Alliance, said:

“It is clear that the current framework is not going to deliver a roll-out of smart meters to every house in the country. We need to see the Government taking a lead and mandating it to happen”——[Official Report, Energy Public Bill Committee, 5 February 2008; c. 75, Q144.]

This Bill is an opportunity to start laying down a timetable to get smart meters out as widely and as quickly as we can. I shall not go through all the quotes that were given to us, but not a single person who gave evidence as we were preparing for the Bill came to any other conclusion than that smart metering was a good idea and that it should be included in the Bill.

Photo of Anne Main Anne Main Conservative, St Albans

The other aspect of smart metering is not just getting rid of the dreaded PPM meter—the poor-pay-more meter—but alleviating fuel poverty, which is a missed Government target. Many people who are most disadvantaged by the current system are those who cannot change tariffs easily, and this proposal would allow people to change tariffs without having to negotiate complex systems on the website and so on, if they are not so technologically aware.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

It gives the consumer absolute transparency, as my hon. Friend has rightly pointed out. It gives them a complete ability to choose when  they want to use electricity and know that they will be offered a different tariff. One can have a whole range of different tariffs at different times of the day and on different days, so weekends would be charged differently from weekdays. There can be no doubt whatsoever that the consumer would benefit significantly from the proposal.

There is a Government proposal for what they call clip-on meters for electricity display devices. People will be expected to clip them on to their own meters, but they will be lethal and advice will have to be provided saying, “You shouldn’t do this without being a trained electrician”; otherwise, there will be lots of old grannies around the country giving themselves rather nasty shocks. That is not the way in which we should look to take forward the debate. What will happen with such devices is that people will use them for a couple of days, and then they will get bored. They will put them away in a cupboard and never use them again, whereas with smart metering they would have an accurate reading and the ability to control their use of energy in a way that they have never had before.

Photo of Hugo Swire Hugo Swire Chair, Speaker's Advisory Committee on Works of Art

There is also a huge missed opportunity here, because the installation of smart metering would herald an entirely new way, as my hon. Friend says, of monitoring people’s consumption. It is thought that it will have the capacity to monitor water consumption, which is another form of energy saving and incredibly useful when we have drought areas, as we have experienced over the last few years.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

My hon. Friend is absolutely right, and that is why the new clause that we have proposed is not prescriptive. It does not say what should or should not be done; it opens up the issue for the Government to be able to say that they want a smart metering programme, and for the technology then to be allowed to develop to its maximum potential.

Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

The hon. Gentleman will agree that we need rigour in this argument. We need some arithmetic and economic analysis about the costs and benefits. We should not be so optimistic that meters can monitor water, carbon monoxide or elderly people. [ Interruption. ] My hon. Friend the Member for Southampton, Test says that perhaps it is the new identity card. I am slightly disappointed. By any measure the roll-out will be expensive, so we need to look at the expenses and the costs, as well as the benefits, if we are to have a sensible discussion.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

Unfortunately, the Government do not appear to have looked at the issue at all. They have 100 people within the Department for Business, Enterprise and Regulatory Reform supporting the Minister on the Bill. They have not carried out those cost-benefit analyses, and we have only two people between us, including the nephew, or whoever, of the hon. Member for Cheltenham doing research.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

My remark goes back to an exchange on an earlier part of the Bill, and it was so good that it was worth reprising. Surely the Minister has the greatest ability to find out what those facts and figures are.

Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

I agree with hon. Gentleman; I do have the greatest ability. When I speak, probably next week, I hope to discuss the issues around cost-benefit analysis, which are central to my debate, if not his.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

I understand that the cost of a smart meter is about £60 or £70. If that is spread over a 10-year period for the consumer, it is not a significant addition to their bill.

Photo of Hugo Swire Hugo Swire Chair, Speaker's Advisory Committee on Works of Art

The Minister scoffs at the Opposition for raising these points and for talking about what smart meters can do. However, a lot of this information is provided by the Parliamentary Office of Science and Technology, which is

“an office of both Houses of Parliament, charged with providing independent and balanced analysis of public policy issues that have a basis in science and technology.”

So, by rubbishing or by scoffing at some of the aspirations that I have expressed on smart metering, he is contradicting an independent report from the Parliamentary Office of Science and Technology.

Malcolm Wicks rose—

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

The Minister cannot intervene on an intervention. He is getting slightly carried away with himself.

There is a paucity of vision. If smart metering is going to be so bad for the consumer, why would energywatch support it? Why would the National Consumer Council support it? These organisations support smart meters because they believe that they are financially better for consumers in the long term.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

I was not intending to intervene, but we should not polarise the debate in Committee as if certain people thought that smart meters were great and others thought that they were terrible, because that is not the case. I think that smart meters are great; they are the answer to many energy problems and to a great deal of fuel poverty. However, how they are rolled out, under what circumstances and arrangements, and at what cost are the real issues. I understand that a great deal of work has been done on that. I, for one, will want to see smart meters rolled out on a basis that ensures that they work as well as they possibly can. Therefore, we should be temperate in the debate and not polarise it in terms of who thinks that they are a good or bad idea. Everybody in the room thinks that they are a good idea. I look forward to their roll-out at an early stage.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

I am grateful to the hon. Gentleman for a constructive and sensible intervention, which I would expect from him. The frustration is because, outside the House, there is overwhelming endorsement for including them in the Bill. If it is going to happen, it needs to be mandated to happen. We have suggested that there should be a roll-out for it to happen within 10 years. There is overwhelming agreement that that is a sensible time scale and it does not make a big difference from where we are now. At the moment 8 per cent. of meters are replaced or installed every year, so one would simply be moving from 8 to 10 per cent. Industry and consumer groups believe that that is achievable. The frustration which people feel is that the  Bill, which is the opportunity to make that happen, could go through without it being included. While the fundamental disagreement is not about whether smart meters can make a good contribution, what we are saying is that the Bill must be used to try to take forward their implementation and roll-out. However, from the Minister’s responses, one sometimes senses that he does not see that they can make a good contribution, or that he has not made up his mind. We do not get a clear view from the Minister.

Photo of Malcolm Wicks Malcolm Wicks Minister of State (Energy), Department for Business, Enterprise & Regulatory Reform

My point is that I support smart meters—they have undoubted potential benefits—but we need some rigour in the debate. I will have an opportunity later to address that. I am afraid, in the real world of both costs and benefits, it is clear that the more functions a smart meter has the more expensive the technology becomes. We need to reflect on both the cost and the benefits.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

I hope that the Minister will also understand the frustration of others. This is the one opportunity that we will get to roll out the programme and mandate it to happen in an Energy Bill. If that opportunity goes by, there will be tremendous frustration.

Photo of Alan Whitehead Alan Whitehead Labour, Southampton, Test

I invite the hon. Gentleman to join in what I suspect will be a collective campaign to oppose the Daily Mail when it comes up with slogans such as “Spy below our stairs—resist it”. I trust that there will be universal support for opposition to that aspect of the debate.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

I am sure that we can rely on the new Daily Mail to lead that campaign. I hope that if industry, consumer groups, energy groups and environmental groups were all saying that that was the right way forward, the Daily Mail might be persuaded that it was a campaign that it should support, or perhaps it would then see it as an even greater conspiracy.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

If the Daily Mail decides to lead the campaign, as the Minister said, the Prime Minister will be backing it by Tuesday and that will be good news.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

As the Minister says, they will not be delivered in plastic bags.

Photo of Anne Main Anne Main Conservative, St Albans

I would like to ask my hon. Friend to reflect on the Minister’s remark that smart meters, because they may be complex, would be expensive. Electricity display devices are simple and might be a cheaper option, but they do not deliver the complex benefits of the smart meters. They will prove a distraction, will cost in their roll-out, and will be nothing other than an electricity pedometer.

Photo of Charles Hendry Charles Hendry Shadow Minister (Business, Enterprise and Regulatory Reform)

As the situation stands, the electricity companies will be required to make them available to everybody who wants one. That cost has somewhere to be passed on to consumers as well. One therefore ends up with consumers paying for something that is of no benefit to people whatsoever. I hope that the Minister will be able to give us some encouragement in his response.

There are three new clauses on smart meters. We have gone for a non-prescriptive one, but we have said that implementation should be within 10 years because all the evidence that we have heard and the advice that we have been given suggests that that is a possible time scale.

I understand that although we want to have a debate about smart meters, it is right that I should also introduce at this point the other two new clauses that stand in my name. The Minister and the Committee will be glad to know that I shall do that with great brevity.

Regarding new clause 2, there has been a great deal of debate about whether the energy companies should be required to do more to tackle fuel poverty, and there are indications that the Chancellor might be planning to make an announcement on that soon. In particular, Ofgem has suggested looking at the benefits that the companies receive from the European Union emission trading scheme. In his evidence to us, Alistair Buchanan said that that should be considered. At the moment, there is considerable mystery surrounding what allocations companies receive and what the financial benefit is to them. It is ironic, perhaps, that at the moment the greatest benefits from the EU ETS go to the greatest polluters because they get the largest number of allocations. The new clause would give us a much better understanding of the issue. It would mean that the level and value of allocations received by companies from the EU ETS would be shown and would have to be published in their annual report. That would enable us to see what they have been allocated for free, what they have had to pay for and how much they have had to pay. The issue may go away as we move towards full auctioning, and if the Minister felt that it was appropriate to build in a sunset clause saying that the measures would expire over time unless re-enacted by Parliament, we would certainly be happy to agree to that. I hope that he is willing to agree to it in principle, although I suspect that that is a vain aspiration.

New clause 4 was stimulated by what Allan Asher and Alistair Buchanan told us in the evidence sessions. People should know how much of their bill is going towards supporting the Government’s environmental aims. Alistair Buchanan commented particularly on that issue in his contribution, saying that he did not necessarily advocate it but certainly felt that it should be considered. He said:

“Some £80 of roughly £1,000 dual fuel average household bill is now a combination of ROC, which is about £10, your energy efficiency, which is about £35 to £36, and your European Union Greenhouse Gas Emission Trading Scheme (EU ETS), which is around £30. So, it is very much part of your bill, and there is only one way that that is going, and that is up. The ROC will go from £10...I am not saying whether it is a good or bad thing. This is Government policy. I believe that consumers are starting to address what they are paying for. Allan raises a very reasonable  issue, which is whether the companies start to put that on the bill...Maybe its time has come”.——[Official Report, Energy Public Bill Committee, 5 February 2008; c. 47.]

New clause 4 would build on those comments, as it would provide for electricity bills to show what elements of the bill would go to ROCs, to the ETS and to carbon emissions reduction targets, so that people could understand how their money was being used. The issue is part of the debate about openness. I think that we all desire that consumers should be better  informed and able to make informed choices, and the new clause is a way for us to help them achieve that. I cannot see a good argument against it, unless the Government do not want people to realise what portion of their bill relates to environmental issues and charges. I hope that the Minister will have a chance to respond to those points in due course.

Debate adjourned.—[Alison Seabeck.]

Adjourned accordingly at one minute past Four o’clock until Tuesday 11 March at half-past Ten o’clock.