Smart meter rollout costs £1bn higher than expected in 2016

A study on the smart meter programme, published on Saturday (21 July) by the British Infrastructure Group of Parliamentarians, finds that delays and cost increases have pushed up the rollout costs by £1bn higher than anticipated in 2016.

The group, which comprises 92 members of the House of Commons and Lords, says these costs will increase further in the run-up to the government’s 2020 target date by when every household or small business is due to have been offered a smart meter.

The Not so Smart report, says: “Mismanagement of programme developments and costs, exploitative commercial agreements, and a lack of their own installation capacity have left suppliers struggling to meet their mandated rollout obligations. Total programme costs are therefore set to again rise even further than predicted.

“Without urgent action, the rollout is set to become yet another large-scale public infrastructure project delivered well over time and budget, and which fails to deliver the expected benefits.”

The group, which is headed by former Conservative party chairman Grant Shapps, says the government’s estimate that the programme will deliver £5.75bn worth of net benefits is based on “optimistic and inflated assumptions”.

The MPs and peers conclude that suppliers are “almost certain” to miss the 2020 target for rolling out smart meters to every home and small business.

It recommends that the government should review the economic case for its smart meter programme in the likely event that it misses its 2020 target.

It accuses suppliers, which face the threat of fines worth up to 10% of turnover if they fail to meet their rollout targets, of using “scare tactics” to convince customers to accept a meter.

There are “no safeguards” in place to ensure these fines or perpetually rising programme costs are not passed on to customers through higher bills and lower savings, according to the report.

The report also suggests that functioning meters are being “needlessly” replaced.  When customers switch suppliers, some Meter Asset Providers are “exploitatively” charging the new supplier more to lease or rent the installed smart meter, than it costs the new supplier simply to replace it with one of their own.

The government should “explicitly” task Ofgem with regulating the meter asset market to prevent the needless replacement of functioning meters, it concludes.

Robert Cheesewright, director of policy and communications at Smart Energy GB, defended the rollout.

He said: “The smart meter rollout is a vital investment for Great Britain, leading to savings that will outweigh the costs by billions of pounds. The government and Ofgem have been clear that they expect energy suppliers to pass these savings on to customers

“Some people with first generation smart meters have experienced problems maintaining smart functionality when switching, but this is a temporary issue as all first-generation smart meters will be enrolled into a new secure smart data network to make switching quicker and easier.

“The alternative to smart meters is an expensive, outdated system where we waste billions of pounds needlessly generating dirty energy, with customers facing the uncertainty of estimated bills.”

David Blackman

This article first appeared on edie’s sister title, Utility Week