'Smart meters' - a political issue

Smart meters

Today's electricity meters record the total usage of electricity. We pay for the total number of kilowatt hours we take from the grid. But although wholesale electricity prices vary a lot throughout the day, the domestic consumer always pays a standard charge. Smart meters change all this. They can be used to vary the price every half hour, restrict usage at a time when electricity is in short supply, tell the customer how much he or she is using and offers suggestions about how the household's electricity bill could be reduced. These meters can send readings to the electricity company automatically, ridding it of the need to employ meter readers. Bill errors are hugely reduced, payment disputes decline and customer service costs fall.

The investment case for the electricity companies is utterly clear. The cost savings are large and well-documented. Similarly, the benefits to householders are obvious - they choose to buy electricity when it is cheaper and can control their expenditures better. Unexpected large bills become a thing of the past.

The value to the planet is also unambiguous. Giving customers more information about the price and carbon content of their fuel encourages a reduction in use, and allows the electricity generators to avoid having to keep big power plants warm to meet spikes in demand. When the huge Didcot A coal powered station just down the road from me is being kept hot, it is still using large quantities of CO2-heavy fuel.

So a progressive and thoughtful electricity industry would be pushing ahead with smart metering. But in the UK, progress is slow. The national government has just announced another subsidy to enable a further pilot test. Large-scale rollout is at least five years away. Costs are said to be £200 a home.

Let's look briefly at what has happened in other countries. In Italy, the state owned utility, ENEL, installed 30m smart meters over a five year period, 2000-2005. The total cost was about €2bn or €70 a house. The savings to ENEL are €500m a year and its total investment will be paid back by the end of the decade. Total power consumption from households has fallen 5% as a result of the switch (as opposed to rising about 1.5% a year in the UK). A stodgy government-owned company managed a project that our oligopolist power suppliers are still only talking about.

Of course, the UK suppliers have an excuse. They say that things are more complicated in the UK because we have a 'competitive' market. If a supplier installed a meter, and the customer switched to another company, who would pay for the meter? I have no doubt that there are problems here, but a smallish competitor in the liberalised Netherlands power market - Oxxio - has decided unilaterally to install ENEL meters in 600,000 households. Oxxio is owned by Centrica, the British Gas people. If they can do it in the competitive Dutch market, they should be able to do it here.