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Energy Bill

My Lords, I pay tribute to my noble friend Lord Campbell-Savours, the noble Baroness, Lady Wilcox, and the noble Lord, Lord Teverson, for the discussions I have been able to have with them over the past few days and indeed hours. The noble Lord and the noble Baroness, and to an extent my noble friend, have taken me to task for what they feel has been the slowness of the Government in reaching a decision, but I want to assure them that the time being taken is not due to a lack of understanding of the potential for smart meters—the speeches have clearly illustrated their potential, a point reflected earlier by my noble friend Lord Dubs—but to some of the practical matters that need to be addressed. What are the benefits? Consumers would be given better information on how to manage their energy use, they would be provided with accurate bills and gain potentially easier access to a wider range of tariffs. It is a bit of a no-brainer when one thinks about it. For suppliers, too, the benefits include reduced costs through remote meter reading, better customer service through more accurate billing, and the potential to switch consumers between tariffs. For that reason, the energy White Paper made clear our ambition to see smart meters rolled out. There is no question about our desire to make progress in this area, but as other noble Lords have said, 47 million meters is a big number on any count. The scale and complexity of that operation have made the Government cautious about making final decisions on the detail of any mandate, taking into account both the benefits and the costs. My noble friend Lord Campbell-Savours referred to the question of what we can learn from international comparisons. It has been suggested that we look to eastern Australia as one example but, alas, I often find it is never easy to make direct comparisons on first reading. The problem with direct comparisons is that roll-outs in other countries have been on different scales within different metering markets—some markets, for instance, may have a monopoly supplier—and have had different objectives. That makes it difficult to make direct comparisons on the costs and benefits of any roll-out, but we are keen to examine other case studies and will continue to do so. I am sorry that my noble friend has not received a copy of a letter sent to other noble Lords. I shall, of course, put that right after today’s debate. Before moving on to the general principle of a timetable, I shall deal with my noble friend’s amendment, which seeks to fix detailed matters in primary legislation. My reservation is that, if we accepted it, we would have to return to primary legislation to change the specification of smart meters every time the Government wanted to reflect technological development or innovation. However, I believe my noble friend’s amendment is more about chivvying the Government to come to a substantive view on the general point. This brings me to the broad thrust of the other amendments. In coming to a conclusion on these matters we have always faced the question of the benefits, the costs and the speed with which meters are to be delivered to customers. The speed of any future smart meter roll-out is a central issue and certainty about it is important for businesses and consumers. However, there are implications in fixing in legislation a timetable for such a complex project without also considering in the round other issues such as EU single market regulations relating to specification of meters or the underpinning of market structures for the roll-out. Setting the number of years in primary legislation could give rise to the problem that if we had subsequently to restrict the more sophisticated functions of future meters in order to maintain a reasonable overall balance in the cost to consumers we would not be able to do so because flexibility on timetable had been removed by an amendment to the Bill. We will have to consult industry and the regulator on the full detailed proposals and licence modifications and then lay them before Parliament, with opportunity for debates in both Houses. We will continue with a wide-ranging and detailed programme of work to look at the overall case for smart metering for domestic customers. My right honourable friend the Secretary of State for Energy and Climate Change is keen to make rapid progress in this area. The Government indisputably share noble Lords’ belief in the potential of smart metering and their wish to see progress in this area. Therefore, in response to the debate, I am pleased to announce that the Government have taken the decision to mandate smart meters for all households. This is a major step forward; no other country in the world has moved to an electricity and gas smart meter roll-out on this scale. The existing powers in the Energy Bill will enable the Government to proceed with a domestic roll-out. As I have said, there are significant issues to be resolved, which have been touched upon in our debate, and I remain of the view that it is not sensible to fix a timetable in legislation. I also recognise that, in order to have a well run roll-out, a timetable is very important. I shall therefore set out today an indicative timetable. Given the scale of these issues, it is our view—and, I understand, the view of industry—that we require a sensible period of preparation. We anticipate a period of around two years to resolve the issues and to design the full detail of a domestic roll-out. Our aim is then to ensure that the subsequent roll-out happens over a period of 10 years. This would see delivery of smart meters by the end of 2020 to align with our renewables targets. We clearly need to get smart meters into homes as efficiently as we can, with minimum disruption and maximum customer engagement. So, before we take our final decision on the detail of a mandate, including meter functionality, we need to complete our impact assessment analysis, which I understand will be ready by the end of the year, when I hope we will have more up-to-date figures in relation to the costs and benefits to which my noble friend referred. I reiterate that, once the details of a roll-out are drafted into licensed modifications, we must lay them before Parliament so that the complete design of the roll-out can be scrutinised in the round. My announcement today is a significant step forward, particularly as I have also outlined our expected timetable. This is the right way forward. It is a response to the informed debates that we have had on this matter in your Lordships’ House. I hope my noble friend and other noble Lords will accept that it is a positive response to the legitimate issues raised in this debate.