The smart meters campaign

The Energy Retail Association (ERA) is calling on the Government to provide a clear timetable for a decision on smart meters and to mandate their roll-out across Britain.

On 24 April 2008 the Government tabled amendments to the Energy Bill (New Clauses 8-10). These provide enabling powers for a universal domestic smart meter mandate to be brought forward at a later time, and set out the need to consult before these powers are enacted. The amendments were passed by the House of Commons at the third reading of the Energy Bill on the 30th April 2008.

A Government mandate for the roll-out of smart meters is essential if we are to meet the Government’s expectation that the 25 million homes in Britain should receive a smart meter within 10 years and at a reasonable cost.

Without the mandate there would be no clear business case for energy companies to roll-out smart meters across Britain.

The Government must ensure that the whole industry is able to work together to implement this change, which will facilitate a whole new era of energy use.

The Look Smart coalition

The Energy Retail Association have teamed up with energywatch, the consumer watchdog, and Utility Week as part of the Look Smart campaign in order to lobby for a mandate to roll out smart meters across Britain within 10 years. For more information on the Look Smart campaign, view the Mandate.

Why is this happening now?

Climate change is high on the national agenda. The EU and British Governments along with the energy industry are looking for better and greener ways to produce and use energy. An important aspect in any attempt to tackle climate change is to promote more energy efficiency in the home. The ERA and its members agree that we need to take decisive action, and that is why we are committed to the smart meter roll-out.

The recent amendments to the Energy Bill on 30th April 2008 included a smart meter enabling clause. This clause makes a future smart meter roll-out mandate possible.

In order to provide the required mandate for smart meter roll-out, the Department for Business Enterprise and Regulatory Reform (BERR) must satisfy itself that the proposed implementation arrangements represent the most cost effective approach for consumers and the British economy. Such an outcome must be demonstrated in a detailed Impact Assessment (IA) currently being prepared by officials. The draft version published by BERR on 22nd April appears to contain significant inaccuracies which could undermine the immediate prospects for the delivery of smart metering.

These include significant over-costing of the meters themselves and of the communications platforms required to support them, compared to industry estimates. Conversely the assessment appears to underestimate both the consumer benefits and potential carbon savings from smart metering with an overly cautious ‘optimism bias’ further depressing the overall cost benefit analysis.

These factors leave government estimates of the cost of roll-out at a significantly inflated total of £14bn against industry projections of a maximum of £8bn. The industry wishes to emphasise that it is not seeking any Government funding for this project, and is committed to working with BERR to ensure that the IA reflects more accurate cost assumptions when the final version is published later in the year.

The timing of the final IA has been planned to allow early reports from the Ofgem trials on smart metering to be considered in any recommendations.

However this early, incomplete data should only be considered as an indicative contribution to customer response results, as it is unlikely to be statistically robust at this stage. The ERA believes that the manifest advantages of tackling climate change, reducing in domestic energy use and tackling full poverty are already sufficiently robust to justify mandating smart meters and setting a timetable for their roll-out now.

There are a number of important processes still to be negotiated before a roll-out of smart meters can be guaranteed. The key remaining legislative and regulatory milestones (with estimated dates) are:

1. Energy Bill Lords 2nd reading, committee stage, report and 3rd reading (21st May-July 2008)

2. Energy Bill House of Commons remaining stages (October 08)

3. Ofgem smart meter trials report on initial findings (November 08)

4. BERR publication of full Impact Assessment (expected December 08)

5. BERR decision on smart meter mandate (expected December 08)

ERA will be providing detailed analysis of the prospects for smart metering as each of these milestones is reached.