Smart metering technology ‘could be out-of-date’ by the time it is rolled out, MPs warn

The Public Accounts Committee (PAC) has warned that some of the technology being implemented for the national smart meter rollout could be outdated by the time it is in place.

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The Public Accounts Committee (PAC) has warned that some of the technology being implemented for the national smart meter rollout could be outdated by the time it is in place.

MPs on the committee also questioned the value of the £10.6 billion project, which the government believes will cost each home or small business £215 over the next five years to install, but save them just £26 a year.

Under the Smart Metering Implementation Programme, the government is hoping to roll out over 50 million smart electricity and gas meters to all domestic properties and smart or advanced meters to smaller, non-domestic sites in the UK by the end of 2020. 

However, PAC chair Margaret Hodge MP said: “Some aspects of the programme could be out-of-date by the time it is rolled out.

“Evolving technology suggests that customers could receive the information on their smart phones, making the in-home display redundant. Energy suppliers will be required to offer in-home displays, even though customers may not want or use them. Consumers will have to pay for them even though they might already be out of date.”

The government has said that smart meters will give consumers near real-time information on energy use, the ability to manage their energy use so that they spend less on energy. They are also expected to result in an end to estimated billing and allow customers to switch suppliers more easily, as well as give suppliers access to accurate data for billing.

Each home saves just £26 a year

The PAC also questioned the value that the scheme will actually deliver to citizens. In June, a National Audit Office (NAO) report showed that the programme could cost £1.5 billion more than expected. This brings the total expected cost to £10.9 billion between 2013 and 2030, bringing economic benefits of £17.1 billion.

“It will cost around £215 per home or small business over the next five years to install the meters - an additional cost people can ill afford. Despite consumers footing the bill, they can on average make a saving of only two percent [or £26] on the average annual bill of £1,328 by the time the rollout is complete,” Hodge said.

The saving is expected to rise to just £43 a year, or three percent, by 2030.

Although the PAC confirmed that DECC has established the shared data and communications infrastructure required to ensure that smart meters work consistently for all consumers, regardless of their energy supplier, Hodge said that the DECC needs to make sure that smart meters are fully interoperable. This is so that they can actually deliver the benefit of allowing customers to switch easily between suppliers.

Potential areas of overspend

In addition, the committee was concerned that some aspects of the programme design may become too costly. For example, energy suppliers are concerned that there will be extra costs involved in persuading reluctant customers to accept the new meters.

Another possible area of additional costs is where suppliers 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 five percent of premises.

“The department should keep the design of the programme under review and, if costs escalate, assess the value for money of the individual components of the design that are causing cost increases, and take action where appropriate,” the PAC recommended.

Governance of the scheme also questioned

The PAC reported that DECC has relied heavily on external consultants to progress the smart meters programme, rather than acquiring the skills in-house.

In 2013-14, the department spent £14 million of £19.3 million spent on managing the programme on external commercial and technical expertise. It expects to spend around half of its 2014-15 budget on external expertise.

The committee therefore recommended DECC look at how other departments are developing their in-house commercial expertise. It highlighted the Ministry of Defence as an example of how to provide new pay arrangements outside civil service structures.

Meanwhile, it suggested that DECC and the Cabinet Office publish Major Projects Authority project assessments more openly. Despite reviewing the smart meters programme in 2011, 2012 and 2013, these reports are not publicly available because the reviews were carried out confidentially.

“Public confidence in the Smart Meters Programme may be undermined by the department’s refusal to publish the Major Project Authority’s assessments of the programme,” the PAC noted.

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