Smart meter installation risks becoming a ‘fiasco’

A committee of government MPs have warned that the installation of smart meters is open to abuse by energy suppliers.

This statement has followed a recent warning by the consumer group Which? who have also said that the energy companies approach to installing smart meters is at risk of becoming a fiasco.

Smart meters are a useful device which can help a household keep its energy costs down. They are able to show people how much gas and electricity is being used in real time and can send the information directly to suppliers, ending the need for meter readings. A European directive requires all of its member states to install this type of intelligent metering system into 80% of homes by 2020.

In the UK, the government want the meters to be installed in all homes by 2019 and estimate that the scheme could provide £18.1 billion in savings. Installation is estimated to cost around £11.7 billion, but the government want the energy companies to install the devices. So far, the energy companies have been installing meters in homes where customers ask for them.

A committee of MPs has warned that the installation of these meters is open to abuse by the energy companies and have called for more vigorous regulation of the plans buy the government. The committee suggests that savings made by installing a smart meter may not actually be passed on to consumers. They point out that the government is relying on the energy market to respond and drive down energy prices.

However, previous reports from Ofgem, the regulator for the energy market, have warned that it does not operate as an effective competitive market.

Margaret Hodge, the chair of the committee, said: “Consumers will have to pay suppliers for the costs of installing and operating smart meters through their energy bills and no transparent mechanism presently exists for ensuring that savings to the supplier are passed on. The track record of energy companies to date does not inspire confidence that this will happen.”

The committee warned that vulnerable people were also at risk and could end up paying more for their energy. They are calling for the government to ensure that these people do not miss out on the potential savings that smart energy meters can bring.

Which? have called for the scheme to be put on hold, because of the spiralling costs. They argue that the government should be installing these meters in order to keep the associated costs down.

Which? argue that if the government were to co-ordinate the installation, it could be done on a street by street basis, rather than one customer at a time. They warn that many people will not accept them from energy companies that they no longer trust.

Which? also want the energy firms to annually report on the costs of the energy meters, and how the savings are passed on to consumers, to Ofgem.Charles Hendry, the Energy Minister, accepted that the government had been ‘too hands off’ in the past, but argued that ministers were overseeing the scheme and that it had safeguards built in.