MPs warn on smart meter costs

The Public Accounts Committee is due to publish a new report on the DECC’s smart meter roll out. The report is expected to outline that the costs are in the region of £215 per household whilst the savings depend on the homeowners efficient choices for energy use. The cost to the household will be paid through energy bills over 5 years or 2% off bills.

The report also says that the roll out of smart meters is inappropriately timed. The PAC argues that phone apps are now designed to be able to carry out a similar function. There is a risk that costs may continue to increase as the DECC steps up marketing of smart meters to recover the consumer’s trust.

In response the DECC has said irrespective of the £10.9 billion cost, the economic benefits will be over £17.9 billion.

PAC Chair Margaret Head said:

“Despite consumers footing the bill, they can on average make a saving of only two per cent on the average annual bill of £1,328 by the time the roll out is complete. Even this is conditional on consumers changing their behaviour and cutting their energy use. DECC is relying on the consumer becoming more "savvy" in making decisions about using energy.” "The Department is also 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."

The PAC has called for the Government to provide more precise details to consumers, to include smart meters initial cost, operational and ongoing costs and energy saving results. Head continued:

“Steps are required to ensure smart meters are fully interoperable so that customers can switch easily between suppliers and that supplies do not replace meters unnecessarily when customers switch.” Richard Lloyd, Executive Director of Consumer Rights campaign group Which? commented on the report:

“The Government must commit to keeping the £11bn 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."

The DECC however insists that the smart meter roll out will deliver net savings both to consumers and the economy as a whole. Whilst the initial cost is £26 a year per household, by 2030, the consumer savings would reach £43 a year. Energy and Climate Change 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 roll-out 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."