Examination of Witnesses

Smart Meters Bill – in a Public Bill Committee at 2:45 pm on 21st November 2017.

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Dhara Vyas and Sacha Deshmukh gave evidence.

Ms Vyas and Mr Deshmukh, wQ elcome to the Committee and thank you very much. It need not be said, but if you want to remove your jacket, feel free, in case it gets a little hot in here.

Can you start by introducing yourselves for the Committee, please? Ms Vyas?

Dhara Vyas:

I am Dhara Vyas and I am the head of smart and sustainable energy at Citizens Advice.

Sacha Deshmukh:

I am Sacha Deshmukh and I am the chief executive at Smart Energy GB.

I think you have seen how the sessions are conducted here. Questions come randomly from the members of the Committee as they catch my eye, and may I ask you to speak as clearly as you can for the Hansard Reporters?

I think we will start with the Minister.

Photo of Richard Harrington Richard Harrington Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

Q Thank you very much, Mrs Gillan.

I will continue from the evidence that I know you heard before, because you were sitting—quite rightly—behind those witnesses. How important do you feel it is that the energy suppliers make a swift and smooth transition to using SMETS 2 meters? I ask that because we have heard from people who have been suppliers of SMETS 1 meters and from others who have taken a broader view, so I would be very interested to hear your view, please.

Dhara Vyas:

From the Citizens Advice point of view, we are quite keen to see that transition happen as soon and as rapidly as possible. As I am sure you are aware, SMETS 1 meters do not really provide the same sort of functionality as SMETS 2 meters, and a big part of that is the continuing benefits of SMETS 2 meters. You have heard about the interoperability and the ability to switch, but there is also the kind of loss of functionality in terms of the dynamic currency conversion-enabled services, or DCC-enabled services, that they have access to, and things like “last gasp, first breath”, whereby a network could see if somebody is off supply and act really quickly. SMETS 1 meters do not have that sort of capability built in. So things that really serve to protect consumers are built in to SMETS 2 in a way that they are not with SMETS 1.

Also, there is confusion as the roll-out progresses at a pace and as suppliers and SEGB are working to promote the roll-out and encourage consumers to take up the offer of a smart meter. With different meters going on the wall, consumers are already confused and will ask questions, such as, “My neighbour can do this, and they switched, and they kept their meter. How come I can’t?” So the increased confusion around having more SMETS 1 meters on the wall will cause a problem.

Sacha Deshmukh:

I agree that the SMETS 2 roll-out is very important. The only extra contextual point that I would add is that people should remember just what a step forward SMETS 1 meters are from previous meters. So the feedback from consumers who have SMETS 1 meters—several million of them now—is overwhelmingly positive.

I remember a story that was told to me recently. A consumer who had previously been on a prepayment dumb meter had slipped and fallen—she was an elderly lady—and broken her hip, while going out to charge up her key late at night on a petrol forecourt that was wet, in the rain, in a month a little bit like this in weather like this. So a SMETS 1 meter and the capability it offers is a huge step forward for consumers, but I agree that SMETS 2 meters are also incredibly important, for the reasons that Dhara just outlined.

Minister, anything further?

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change)

Q Mr Deshmukh, I was very interested to look at your pan-supplier customer funnel, which you set out in your written evidence to the Committee. The November 2018 funnel appears to suggest that getting on for 35 million people will not have a smart meter by that date. Of those, 17 million will be eligible at that point for a smart meter, or will have been persuaded to have a smart meter, but energy suppliers will only plan to book installations for 5 million of them, and 3.8 million will actually get smart meters at that point. I set that against the smart meter roll-out cost-benefit analysis, which came out in August 2016. It shows a concentration of installations at the end of 2018 or 2019 of something like 14 million to 15 million a year at that point. It is not going to happen, is it?

Sacha Deshmukh:

The final analysis to which you are referring was conducted by energy suppliers over the summer. I believe that over 90% of the market share of energy suppliers contributed the data to that exercise. One part of the data that they submitted gives you the number of installations at the bottom of the funnel along with their predictions, or their desired number of installs, for next year. I know they have to discuss those plans with the regulator Ofgem, so I cannot take a view as to whether the regulator thinks that those plans are adequate, or on any of those dialogues. As far as I am aware, the data that went into that analysis is the most up-to-date data.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change)

Q We have two suggestions here. One is that only 4 million people will go on to have a successful installation of a smart meter by November 2018, and yet it is suggested on the smart meter roll-out cost-benefit analysis that something like 14 million will be required to have smart meters installed at that same point in order for the roll-out to be completed by 2020. So in other words, there is to be a bunching of installations at an incredible level between the end of 2018 and the middle of 2019. Do you think it is possible to achieve that over the period, even with some amendments to your pan-supplier customer funnel arrangement?

Sacha Deshmukh:

Our organisation’s responsibility lies in consumer demand for the product, so it deals with the top of the funnel, as it were. Consumer demand for the product is very strong. In respect of the consumer demand within that funnel, the top is measured by the number of consumers stating that they want to have smart meters within the next six months, so it is a hard measure of demand. There is demand there. I am not able to comment in much detail on the conditions that might improve the lower parts of the funnel. I apologise if it was not as clear as it could have been in the written evidence, but the figure in the evidence to which you refer related to the six-month period before November, rather than the whole of that year. Those are the latest predictions from energy suppliers, which may be different from the ones to which you referred in the most recent cost-benefit analysis of 2016.

Photo of Alan Whitehead Alan Whitehead Shadow Minister (Department for Business, Energy and Industrial Strategy) (Energy and Climate Change)

Q My point is that it is indeed a slice of the period—3.8 over the six months prior to November 2018—and yet in order to reach the roll-out target, the suggestion is that about 14 million to 15 million ought to be installed over that same period. It seems to be rather a large gap.

Sacha Deshmukh:

The factors taken into account in that particular analysis, when energy suppliers submitted their data, included their predictions. Some of the issues that I heard the Committee discussing with the witnesses today included their predictions of meter asset availability, and of their ability to actually deliver the installs in question to the expected quality standards. They may have changed their predictions of the number of installs that they would be expecting to deliver from a year ago.

Ms Vyas, did you want to add anything to that line of questioning?

Dhara Vyas:

No.

Photo of Dan Carden Dan Carden Labour, Liverpool, Walton

Q We have heard positive stories about prepaid customers and the benefits that they enjoy. I believe that most of the roll-out so far has been to prepaid customers. There is a satisfaction rating of around 80%. Are you less able to be positive about the benefits to other customers? What are those benefits?

Dhara Vyas:

Our research echoes Smart Energy GB’s work, and shows that consumers are really positive about their meters on the whole. That applies to both prepay and credit consumers. Prepay customers stand to gain so much from this. I think it will change the prepay market, the dynamic of the prepay market and assumptions about people who do or do not prepay for their electricity and gas. I agree with you that, yes, prepay customers stand to gain a lot. A lot of customers might choose to have prepay as well because of the flexibility of it.

Early experiences research that we have conducted has shown that all customers like the visibility of their energy use. In the long term, they are quite excited about the ability to have new tariffs linking smart products and services in their homes. It generally does tell a positive story.

Obviously, you will not be surprised to hear that we and Citizens Advice also gain quite a few not-so-positive stories. Early experiences research has found that people do complain about things such as loss of services when they switch. Billing issues are quite a big problem, and that is for credit customers with shock bills or back-billing. There is a lot of anger about “Why am I still getting back-bills?”, or “Why is my bill inaccurate when I was sold this by being told that it was the end of estimates—that I would not get an estimated bill but an accurate, up-to-date bill?”.

There are issues that need to be ironed out as the technology hopefully embeds. I think suppliers have been working quite hard on agreeing back-billing principles and how to work with customers. A big part of that is communication: make sure you send a meter reading before your smart meter is installed, so you do not get a big shock bill when your new meter goes in. So, there are other areas where credit customers have both positive and negative experiences.

Photo of Dan Carden Dan Carden Labour, Liverpool, Walton

Q We have also heard quite a bit of evidence about the difficulty consumers are having transferring. One company puts a smart meter in, then there is an issue moving to another company. As far as I can remember, for years and years, we have been told that the ability to move from one supplier to another is the answer to reducing bills. This seems to fly in the face of that.

Dhara Vyas:

It is the SMETS 1 issue: a SMETS 1 meter is not always interoperable with another supplier’s system. That is where SMETS 2 provides a solution. That echoes back to my earlier point that we should focus on moving more SMETS 2 out there.

One last thing I will say is that all consumers, whether on prepay or credit, stand to gain a lot from the energy savings and energy-efficiency advice that will be provided on installation of the smart meter. I think that is quite key. Regardless of meter mode, the experience of having a supplier in your home fitting a smart meter, talking you through the in-home display, talking you through energy-efficiency advice, which is tailored to you and your home, is a once-in-a-lifetime experience. It is really important that suppliers get that right.

Q Mr Deshmukh, anything to add?

Sacha Deshmukh:

I would just add that I think the research Mr Carden refers to is the most recent research by Populus. You are absolutely right that prepayment customers reported 89% recommendation—so, very high. The pattern of the very high recommendation continues to all low-income customers, or customers with a vulnerability in the household, so low-income credit customers are also strongly recommending the product.

Even among households that are not low-income, the levels of recommendation are significantly higher than in other areas of technology. It would be fair if you were then to say that the experience of buying energy through an analogue technology has been particularly poor—and it has. Clearly, those levels of satisfaction are also linked to the fact that this was the last area of pretty much any of our daily lives where people had been reliant on such old-fashioned technology, even in the credit mode.

Photo of Mark Pawsey Mark Pawsey Conservative, Rugby

Q May I ask once again about the special administration regime? The previous witnesses were not able to help us tremendously on that. Ms Vyas, you have come out in great support of the special administration regime. You have described the DCC as key national infrastructure. Can you explain why this is such an important part of the Bill?

Dhara Vyas:

A big part of it is to do with data privacy. The creation of the DCC means that your supplier has access to your information, but via the DCC. Consumers retain control of their information and allow their supplier to access their information on a daily, half-hourly or monthly—as a minimum—basis.

Photo of Mark Pawsey Mark Pawsey Conservative, Rugby

Q This is the provision in respect of the very unlikely possibility of the DCC becoming insolvent.

Dhara Vyas:

I am so sorry; I thought you meant a comment on the DCC in general, not the actual provision in the Bill.

Photo of Mark Pawsey Mark Pawsey Conservative, Rugby

Q No, I am particularly interested in why you think that the special administration regime is such an important part of the Bill.

Dhara Vyas:

As a backstop, because the DCC should not be in a position where it could fail.

Photo of Mark Pawsey Mark Pawsey Conservative, Rugby

Q Under what circumstances could it possibly fail?

Dhara Vyas:

My understanding of the provision in the Bill is that it is to ensure that financially it is kept afloat.

Photo of Mark Pawsey Mark Pawsey Conservative, Rugby

Q Why should it not remain afloat? That is the question I am asking. What is the likelihood of that ever happening? How could the need for it ever arise?

Dhara Vyas:

If suppliers are not able to keep on—I think the DCC is funded by suppliers?

Sacha Deshmukh:

I am not an expert in special administration regimes either, but my understanding is that however unlikely this is, this form of regime structure is relatively common in large infrastructure suppliers in the country, whether in the water sector, the rail sector or, in this case, the energy sector with this new infrastructure provider. But I am afraid that beyond that, I am not an expert in special administration regimes.

Photo of Mark Pawsey Mark Pawsey Conservative, Rugby

All right, we will save it for the next witness.

Dhara Vyas:

The rationale behind our response is very much that it is crucial that it should not fail.

We aim to finish this session at 3.15 pm, and I have two colleagues who want to speak, Mr McCabe and Mr Kerr. I call Mr McCabe.

Photo of Steve McCabe Steve McCabe Labour, Birmingham, Selly Oak

Q I have two quick questions for Sacha. First, looking at the funnel, it looks as if you need 10 expressions of interest in order to get one smart meter installed. How does that compare with other products? That bit of information does not tell me anything, but if I knew how many people did that to buy a mobile phone or similar, I could put it in some context. Is there an answer to that?

Sacha Deshmukh:

As ever, there is a health warning on an answer—there is no direct comparator between the supply and demand in different sectors—but there is actually a very healthy level of demand for the current level of supply. At the moment, I think it is fair to say that consumer enthusiasm is very strong, but supply has not yet been able to meet that enthusiasm on the timescale on which those consumers would ideally have liked that product.

That is today’s funnel—or, rather, this year’s funnel, as the analysis by the energy suppliers has shown. Looking at next year, you see it at more like 5.5 to one. That is a more normal ratio for a new product, but clearly the goals of this roll-out, and for this country in terms of the benefits brought by it, need us to go much farther than products that are just happy to sell in market, but only reach a small number of consumers who want it. The ambitions clearly have to be comprehensive as well.

Photo of Steve McCabe Steve McCabe Labour, Birmingham, Selly Oak

Q Thank you. It is a supply issue, mostly. The other thing I wondered is this. Obviously, your job is to promote smart meters, so your performance management framework is about identifying how to motivate and enthuse people to have them, and that is what your research is about, but have you done any research, or has anyone else, on how people’s enthusiasm and motivation change if they have a smart meter, and then change supplier six months later and discover that they no longer have a smart meter? My guess is that their enthusiasm might decrease. Is there any research to tell us what is really going on?

Sacha Deshmukh:

The best research that I am aware of in this area is being conducted by Populus, although there is other research as well. As I said, the context is that the vast majority of smart meter consumers are very content and feel significantly better served than they were in the analogue market, but there is no doubt that for those consumers who are less satisfied, it is linked to a customer service issue. Dhara has talked about some of those issues with the legacy of dumb meters: maybe not getting accurate bills for years, and then getting them.

There has been lots of debate, and indeed some regulation has been put in place, about consumer protections in those situations. Citizens Advice also work carefully on that. Indeed, we funded training for Citizens Advice advisers, because they are a very important port of call for people who find themselves in such situations. No doubt some other areas in which there has not been satisfaction have been linked to those customer service issues.

Dhara Vyas:

I just want to expand on the customer service breakdowns of what consumers experience with smart meters. We have been collecting consumer data on smart meters from customers who contact our consumer service since 2011. Since then, we have done monthly analysis of what people are contacting us about. Contacts with us have risen in proportion with the number of meters on walls, as you would expect. It is a bit of a canary in the coalmine, with them pointing out and drawing attention to issues with the Department for Business, Energy and Industrial Strategy and Ofgem—so with the Government and Ofgem—and directly with the suppliers.

We hold bilaterals and try to address issues before they become more widespread, and we talk about systemic issues with the entire industry and industry body. They mostly break down into seven categories, including billing and tariff, as you would expect, and as I have touched on. We get quite a few information and sales calls as well, with people asking, “Are they compulsory? Do I have to have one?” We have seen a spike in those recently, with deemed appointments that Ofgem has recently allowed suppliers to—

Photo of Steve McCabe Steve McCabe Labour, Birmingham, Selly Oak

Q Do you think that is because people are getting calls saying, “You’ve got to have one”?

Dhara Vyas:

Yes, and some letters from suppliers have been parsimonious with the truth, saying things like, “Your meter is at the end of its life. We are going to come and install a smart meter.” There is a lack of clarity about the fact that it is not mandatory. You do have a choice. When I was looking through the stats, I saw that in one case last month, someone felt very strongly that they were being blackmailed into having one, and they did not want one. They felt like they were being bullied. That has recently become an issue, and I know that trading standards are concerned about that. The communication needs to be more refined.

Other contacts include those relating to faulty metering equipment, and people who cannot top up make up a big proportion of those. There are people who are unable to switch, who have switching-related issues or who just have an issue related to installation. For example, an engineer coming in has meant that their boiler has been condemned because the engineer could not relight it, so there are things to do with appliances in people’s homes.

The issues are wide-ranging, but they have a huge impact on people’s lives and how they use energy in their home—as long as they can continue to use it. It is important to be aware of those things in order to address them and not let them proliferate.

Three colleagues now wish to ask questions—Mr Kerr, Mr Lewis and Mr Morris—and we are aiming to finish at 3.15 pm.

Photo of Stephen Kerr Stephen Kerr Conservative, Stirling

Q I will be brief. My question is about engagement and awareness. We are talking about this smart meter roll-out in the context of the fourth industrial revolution and about what should be a centrepiece of national infrastructure renewal in that revolution. My concern is that there is not a lot of public awareness of the total picture of smart meters in the context of the smart grid and the smart economy. I do not think that there is a lot, but what is your experience? Is enough being done to raise awareness? What more can be done?

Sacha Deshmukh:

You raise a good point. I am very enthusiastic about the smart British future. Consumer experience in terms of public engagement, particularly with nationally led projects, always teaches you to be very balanced and clear about the benefits available now, what they are building towards, when they will be available and the reality of that. It is about wanting to ensure that people can continue to trust the promise. Not least, all our communications through different channels are regulated by the Advertising Standards Authority, the Committee of Advertising Practice, the broadcast codes and so on. We need to be accurate in the promise to consumers today and give accurate expectations, but I very much take on board what you say.

For a number of our areas of activity, talking about why this matters for the bigger picture will be increasingly important. A consumer spoke to me recently in a focus group. Apropos of nothing, without any information, they essentially summed up an entire sustainable, reliable energy vision that really was a 60 to 100-page BEIS document. They got it and summed it up instantly, so you are right that the consumer appetite is strong. We just need to balance that with the accuracy of the promise to the consumer in the immediate term as well.

Dhara Vyas:

I agree with Sacha. The only thing I would add is that I think we have to remember that not all consumers will either want, or be able to, engage. Customers and consumers need varying levels of support to engage with the benefit of not just smart meters but, as you say, the whole wider agenda. Smart meters may be the first internet-enabled thing in the home and it is really important that all consumers are supported to interact with it as much as they want to, or might not want to. There are always going to be some consumers who don’t want to and they should not be penalised for that.

Photo of Clive Lewis Clive Lewis Labour, Norwich South

My question follows on from that. In terms of your own organisation, when does your contract run out for what you are doing?Q

Sacha Deshmukh:

Our organisation exists to support the roll-out, so our lifespan will be that of the roll-out.

Photo of Clive Lewis Clive Lewis Labour, Norwich South

Q Okay. Obviously, there are provisions in the Bill to extend the Secretary of State’s powers until 2023. Do you feel there is enough provision in the Bill beyond initial roll-out? It is very possible that many people will have this box on their wall at some point in the near future. There are 250 SMETS 2 and more SMETS 1. What is to stop those from being just boxes on a large number of people’s walls that bleep at them every so often? Where is the process for people to be able to engage past 2020, 2023, to be able to get the most from these boxes? No doubt the technology will develop; at the moment it is simply that a little figure will tell you how much energy you are using at the right time, and that will be swapped between you and the energy supplier. What about when people want to engage in some complicated manoeuvring on their SMETS 2 box—where will they get the support for that? It feels to me at the moment that you get a very complex box on your wall that can do lots of magical things, but who is going to explain that to you—who is going to support you in that process?

Sacha Deshmukh:

During the lifespan of the roll-out, clearly supporter behaviour changes; that is an important part of our responsibilities. I am very excited that our organisation’s targets for next year have been set so that we will really be pushing in this area; there are enough consumers who now have the product for us to really help their behaviour, and it makes sense to do so. Looking forward—though you might say that I am speaking against my own interests and my own organisation—it is always important not to replicate bodies when other bodies exist that already serve consumers in different ways. It was absolutely right, given the scale and intensity of the roll-out, for there to be a body to engage around the roll-out. However, there are other organisations, such as the Energy Saving Trust, Citizens Advice and others. Liverpool John Moores University is looking into what could be done to support people with dementia using this technology. The Energy Saving Trust is looking into how the data could be used. I think that a plethora of organisations could best support consumers, alongside greater automation in the future. It may be counter to my interests not to argue intensively that it must be us; but I think that as this roll-out reaches its conclusions and you have the whole country taking that step forward, people should be looking at which organisations are most relevant to people’s lives. They should support the use of this service and create new services for consumers provided by the organisations that they recognise, rather than necessarily having a different body for all time to come.

Dhara Vyas:

I agree with Sacha. The SMETS 2 meter is not the key thing here; it is about what it enables and what access to information via the DCC enables. Whether it is healthcare, peer-to-peer selling or generating of energy, there will be a market around it. We are beginning to think through the regulatory impacts of that and the consumer journey as well. How messy will it be to unpick who to go to for what support and help? Will that fall under the auspices of Ofgem, or a different consumer protection body? It is a really exciting future. Potentially it could be messy—if something were to go wrong for a consumer, how would we unpick those problems? The governance and regulation of these future disruptive technologies also needs to be thought through quite carefully.

I am afraid that is all the time we have; there are literally 8 seconds left of this session. Thank you again for giving up your valuable time to the Committee and for coming here as witnesses this afternoon. While our next witnesses are taking their places, I apologise to Mr Morris. I have you first on my list for this session, if you wish to catch my eye.