The Government has been warned to stop the ambitious roll-out of smart meters in every UK home after a new Which? report found consumers will lose out and energy companies will cash in.
Energy Ministers want every home in Britain to have a smart meter by 2020 and the cost of
the nationwide roll-out is estimated to be £11.7 billion.
But consumer champions Which? say households may end up paying millions of pounds more than necessary through rising energy bills and has called on the Government to order a halt to the programme and re-work the costs.
The independent research organisation says it believes smart meters can deliver many benefits for consumers, such as an end to estimated energy bills and the opportunity for people to better understand their energy use and take steps to reduce it.
However, over the last 12 months, serious concerns have been raised about the roll-out by consumers and official agencies. This included the National Audit Office’s report in summer 2011 which highlighted problems with the current strategy.
Meanwhile Ofgem’s review of the energy retail market found that there are a number of features that serve to reduce the effectiveness of competition - a central tenet of the Government’s strategy for controlling the cost of the smart meter roll-out.
Which? commissioned the Centre for Sustainable Energy (CSE) to review the current plans from a consumer perspective. A central part of this review was to assess whether the costs of the roll-out are realistic, proportionate and controlled.
Having scrutinised the CSE report, Which? now believes that the current government strategy for the smart meter roll-out is flawed. It has the potential to damage consumer confidence and to cost consumers millions of pounds more than necessary, a significant problem at a time when people say the cost of energy is their number one financial concern.
Richard Lloyd, executive director at Which?, said: “Smart meters can bring many benefits, but consumers won't accept them at any cost, or from suppliers they don't trust. It's naïve to hope that competition in the energy market will keep under control the cost of installing smart meters in every home in the country.
"The Government must not write a blank cheque on behalf of every energy customer, especially at a time when millions of people are struggling to pay their bills. The Energy Department should stop and review the smart meter roll-out before it becomes an £11 billion fiasco.”
Responding to Energy Minister Charles Hendry, Lloyd said: "Smart meters should benefit consumers, but ministers have not convinced Which? that they have a credible plan to keep the cost of the roll-out tightly under control.
“To get this mammoth project done right, a delay is far more sensible than blundering on in the hope that competition will keep down the price paid by consumers. When will the Government show it is serious about turning ministerial words into action and put the affordability of household bills first?
"The Energy Department must stop and review the roll-out to make sure it doesn't become an unacceptable burden on the millions of households already struggling to pay their bills."
Lead author of the report, CSE’s Chief Executive Simon Roberts, added: “Without the support and involvement of consumers, the programme will not succeed. It is therefore imperative that the needs and interests of consumers are fully understood by those developing the programme and effectively embedded in its design and delivery.”
CSE’s review for Which? examined the current plans for the roll-out and operation of smart meters to take account of how they measured up against clear consumer-oriented objectives. These objectives include keeping costs as low as possible, a trustworthy and confidence-inspiring roll-out process, and a fair share of the benefits of smart meters.
“It’s clear from our review that the interests of consumers are neither well understood by Government nor well protected by the Government’s current plans,” said Simon Roberts.
The review concludes that, without remedy, the programme may run into deployment problems as a result of increasing consumer resistance – as experienced in other countries. Alternatively, without remedy the programme may fail to deliver a full share of its benefits to consumers, instead enabling energy suppliers and others in the energy market to gain at the expense of consumers.
A number of key issues emerge:
* The reliance on “competitive pressures in the energy supply market” to control programme costs and to ensure the cost saving benefits accruing to energy suppliers are passed through to consumers appears naïve given official recognition of the currently limited nature of such pressures
* The approach being taken to data privacy may conflict with the system’s need for data to optimise performance, thus undermining the full realisation of the anticipated benefits
* The choice of energy suppliers as lead delivery agents for the programme builds in consumer distrust from the beginning and limits the potential for area-based programmes which are likely to be (a) more cost-effective and (b) more likely to enable social and community interventions which can involve consumers in the roll-out and establish positive social norms regarding reactions to smart meters
*DECC’s understanding of consumer concerns is developing but it still appears to have a limited perspective on: (a) how these concerns might play out within the media and society more widely during the roll-out process and thus create delivery risks, and (b) what types of interventions (and by whom) might be required to mitigate these risks
“While the current plans aren’t right for consumers, there’s plenty the Government can do to improve them. Our report outlines 15 remedies which put the consumer at the heart of the smart meter programme and make it much more likely to be a success,” said Roberts.
Why the report claims the Government strategy on smart meters is flawed and should be stopped:
* There is no effective mechanism to control costs. In the current plans there will be no scrutiny of the costs and how they are passed on to consumers. Meanwhile the Government strategy to rely on competition in the energy market to keep the cost of the roll-out under control is naive and unlikely to work.
* The roll-out is being led by energy suppliers. Energy companies face low levels of consumer trust-with only 23% of consumers considering energy suppliers to be trustworthy, and allowing them to run the roll-out without clear government leadership risks damaging confidence in the overall purpose and benefits of smart meters.
* The ‘one house, one meter at a time’ approach is flawed. To maximise efficiencies alternative approaches must be considered, for example a street-by-street programme would enable proper consumer engagement and save costs.
At the heart of the Government’s strategy is a hands-off policy to rolling-out a major infrastructure project. This leaves it in danger of being fundamentally undermined.
Without a rethink, consumers could resist having a meter installed in their homes, which will drive up costs, and opposition could grow to a ‘blank cheque’ being written for the industry.
The collapse of consumer confidence and engagement undermined the roll-outs in the Netherlands and Australia. We therefore urge the Government to act now to ensure that the roll-out is as cost effective and trusted as possible.
What Which? wants:
The Government may try to dismiss concerns about the smart meter roll-out in favour of meeting
their ambitious deadlines, no matter what the cost is. But Which? believes that time out for a
review now, particularly in the current economic climate, is the only responsible way forward.
Consumers want confirmation that costs will be kept under control, Which? does not believe the Government can provide this reassurance today. Which? wants the Government to stop the current smart meter roll-out programme, review the hands-off, supplier-led approach and restart in 2014 so that it works for consumers who will have to pay for it.
Which? proposes some ways the Government’s approach could be changed, including:
* Stop assuming and publicly stating that competition in energy supply markets will be sufficiently strong to keep costs to consumers as low as possible. Instead be explicit about the steps that will be taken to ensure that consumers will not get ‘ripped off’.
* Require that suppliers submit costs annually on a per customer basis to Ofgem (E-serve) and give Ofgem the authority to scrutinise and challenge the costs, and the amount that is being applied to consumers accounts.
* Require that metering costs are applied as a percentage of the unit price and that bills and marketing information set out how the smart meter costs vary across energy suppliers.
* Use the new powers under the Energy Act 2011 early and in a transparent and aggressive way to obtain information from energy suppliers, so that the costs and benefits and the efficiency of delivery can be evaluated.
* Have explicit plans to intervene to protect consumers in the event of evidence of consumer detriment (such as misselling), including using the threat of fines and compensation payments.
* Mandate energy suppliers to work in co-operation to procure and commission a national street-by-street roll-out process where all households in each neighbourhood are done at the same time.
* Develop a consumer engagement programme to realise and maximise the value of smart metering, including wider energy related messages such as the value of insulating homes.
R.Teague, southwest around 3 weeks, 5 days ago