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What Value Smart Meters?

By Katie Anderson on January 17, 2012

A committee of MPs has warned that an initiative to introduce smart meters to homes across the UK could end up costing domestic consumers more money unless efforts are made to regulate energy suppliers.

Casting doubt on energy suppliers’ capacity to pass on savings to consumers, the committee noted that the domestic energy market in the UK is hardly the most competitive, suggesting natural market conditions would be insufficient to protect consumers. Which? has also called for the Government to adopt a more hands-on approach to the task of rolling out smart meters to at least 80 per cent of households on the grid – a legal requirement under European Community (EC) directives.

The European Community Task Force for the Implementation of Smart Grids into the European Internal Market states that “Member states shall ensure the implementation of intelligent metering systems that shall assist the active participation of consumers in the electricity supply market in line with… the electricity and gas internal market directives”.

The MP committee has questioned whether the existing framework for implementing the directives is sufficient to “assist the active participation of consumers”. In other words, would energy savings from smart meters actually be passed on to consumers? Chair of the committee, Margaret Hodge, is uncertain.

Ms Hodge said: “Consumers will have to pay suppliers for the cost 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 Government is relying on competition in the market, but, as has been previously reported by Ofgem, the energy market does not currently operate as an effective competitive market”.

Smart meters can help energy users save money by highlighting appliances and systems that consume the most electricity, thereby shaping usage habits and purchases (such as replacing an energy inefficient central heating boiler with one that uses gas and electricity more economically). If consumers are required to pay for the implementation of the EC directives, however, it is entirely possible that households will end up paying more money on energy bills in the short-term.