Smart meter rollout will cost consumers millions, Which? warns

Energy Ministers want every home in Britain to have a smart meter by 2020 and the cost of the nationwide rollout is estimated to be £11.7 billion.

But consumer champions Which? say households may end up paying millions of pounds more than necessary through rising energy bills and has called on the Government to order a halt to the programme and re-work the costs.

The independent research organisation says it believes smart meters can deliver many benefits for consumers, such as an end to estimated energy bills and the opportunity for people to better understand their energy use and take steps to reduce it.

However, over the last 12 months, serious concerns have been raised about the rollout by consumers and official agencies. This included the National Audit Office’s report in summer 2011 which highlighted problems with the current strategy.

Meanwhile Ofgem’s review of the energy retail market found that there are a number of features that serve to reduce the effectiveness of competition – a central tenet of the Government’s strategy for controlling the cost of the smart meter rollout.

Which? commissioned the Centre for Sustainable Energy (CSE) to review the current plans from a consumer perspective. A central part of this review was to assess whether the costs of the rollout are realistic, proportionate and controlled.

Having scrutinised the CSE report, Which? now believes the current Government strategy for the smart meter rollout is flawed. It has the potential to damage consumer confidence and to cost consumers millions of pounds more than necessary, a significant problem at a time when people say the cost of energy is their number one financial concern.

Richard Lloyd, executive director at Which?, said: "Smart meters can bring many benefits, but consumers won't accept them at any cost, or from suppliers they don't trust. It's naïve to hope that competition in the energy market will keep under control the cost of installing smart meters in every home in the country.

"The Government must not write a blank cheque on behalf of every energy customer, especially at a time when millions of people are struggling to pay their bills. The Energy Department should stop and review the smart meter rollout before it becomes an £11 billion fiasco.

"To get this mammoth project done right, a delay is far more sensible than blundering on in the hope that competition will keep down the price paid by consumers. When will the Government show it is serious about turning ministerial words into action and put the affordability of household bills first?"

Lead author of the report, CSE’s chief executive Simon Roberts, added: "Without the support and involvement of consumers, the programme will not succeed. It is therefore imperative that the needs and interests of consumers are fully understood by those developing the programme and effectively embedded in its design and delivery."

CSE’s review for Which? examined the current plans for the rollout and operation of smart meters to take account of how they measured up against clear consumer-oriented objectives. These objectives include keeping costs as low as possible, a trustworthy and confidence-inspiring rollout process, and a fair share of the benefits of smart meters.

"It’s clear from our review that the interests of consumers are neither well understood by Government nor well protected by the Government’s current plans," said Roberts.

The review concludes that, without remedy, the programme may run into deployment problems as a result of increasing consumer resistance – as experienced in other countries. Alternatively, without remedy the programme may fail to deliver a full share of its benefits to consumers, instead enabling energy suppliers and others in the energy market to gain at the expense of consumers.