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Savings warning amid meters rollout

The smart meter rollout will cost every home about £215 over the next 15 years but consumers will save just 3% annually on the average energy bill by 2030, a public spending watchdog said.

The Government estimated that consumers would save an average of just 2% on the average annual bill of £1,328 until 2020, rising to £43 a year or 3% by 2030, the Commons public accounts select committee said.

It said Decc had estimated the cost of the programme to install smart meters at £10.6 billion, and households would contribute to this through their energy bills. The average impact on bills of the suppliers’ net costs was expected to peak at £11 a year in 2017.

The committee warned that the savings were conditional on consumers becoming more “savvy” and cutting their energy use.

It said some aspects of the programme could be out of date by the time it is rolled out, giving the example of consumers receiving the information on their smart phones but still having to pay for “redundant” in-home displays.

The mass roll-out of smart meters is due to start late next year and suppliers are obliged to take all reasonable steps to have them in all households and small businesses by the end of 2020.

Committee chair Margaret Hodge said: “The costs of installing 53 million smart meters will be borne by consumers through their energy bills.

“It will cost around £215 per home or small business over the next 15 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 2% on the average annual bill of £1,328 until 2020.

“Even this is conditional on consumers changing their behaviour and cutting their energy use. The Department of Energy and Climate Change is relying on the consumer becoming more ‘savvy’ in making decisions about using energy.”

She added: “The department is depending heavily on assumed competition in the energy industry to control costs and deliver benefits.

“Relying on market forces to keep costs down may not be enough on its own to protect consumers.

“This is something energy companies don’t have a great track record on. Ofgem’s referral of the energy market to the Competition and Markets Authority reflected serious concerns about the lack of real competition in the industry.”

The committee said energy suppliers were concerned that there could be extra costs involved in persuading more reluctant consumers to accept the new meters to ensure near 100% coverage.

It has recommended that DECC assess the value for money of any individual parts of the programme that cause cost increases “and take action where appropriate”.

Ms Hodge said: “DECC should require suppliers to provide a clear breakdown for consumers of the cost of smart meters, their operational cost savings from stopping meter readings and whether consumers are achieving the expected reductions in energy consumption.

“The lack of clarity on the impact of smart meters on vulnerable and low income consumers is particularly concerning.

“Many of those consumers currently use prepayment meters, but there is no regulatory obligation on companies to provide prepayment smart meters.

“DECC must ensure vulnerable and low income households get the benefits available from smart meters.

“DECC also needs to ensure that smart meters are fully interoperable so that customers can switch easily between suppliers and that suppliers don’t replace meters unnecessarily when customers switch.

“The department must monitor progress, costs and benefits during roll-out to identify whether changes are needed to secure the delivery of smart meters at minimum cost to consumers.”

TaxPayers’ Alliance chief executive Jonathan Isaby said: ” This is the latest in a long line of headline-grabbing initiatives that risk pushing up the cost of energy to hard-pressed consumers.

“Ultimately, the only way that energy bills can be brought down in the long-term is for the Government to do away with green taxes and subsidies which increase the burden on families struggling with the cost of living.”

Which? executive director Richard Lloyd said: ” Energy prices are consistently one of the top worries for consumers, so the Government must commit to keeping the £11 billion cost of rolling out smart meters under control.

“As consumers will ultimately foot the bill for smart meters, the programme must be done at the lowest possible cost and ensuring that consumers benefit, not just suppliers.”

DECC said there would be no up front charge to consumers for having a smart meter installed.

It said it was “important to assess the £10.9 billion of costs alongside the £17.1 billion of benefits the programme delivers”.

Energy minister Baroness Verma said: “Smart meters put power into the hands of consumers, bringing an end to estimated billing and helping people understand their energy use.

“The nationwide rollout is part of the Government’s complete overhaul of the UK’s energy infrastructure which will revolutionise the market and support the development of smarter electricity grids.

“It will help reduce consumer bills, enable faster, easier switching and give households control at the touch of a button.”

Howard Porter, chief executive of Beama, the trade association for manufacturers of electro-technical equipment including those working on the smart meter roll-out, said: “The Public Accounts Committee is mistaken in believing that householders will be able to link their smart phone directly to their smart meter to view their energy data.

“A smart phone, or any other mobile device, is only the method of presenting the data – the phone screen acts in the same way as the in-home display screen.

“Technology to access and transfer the data securely from the smart meter to the display screen is also needed. This technology is built into the in-home display but not into a smart phone.”

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