The true cost of having a smart meter has been unmasked and it suggests the potential savings households are claimed they could make are offset by these hidden charges.
Energy providers have to pay several companies when providing smart meters to customers, known as Meter Asset Providers.
Rent can be as much as 14p a day for one meter – equivalent to £51.50 a year – showing exactly how much suppliers have to fork out every day.
It is likely these costs are passed on indirectly in the form of higher energy bills.
Smart meters could be costing consumers as suppliers have to pay daily rent on each device
Additionally, there are other charges for smart meters too. This includes a monthly fee for suppliers for communication reading adding another £20 and for places where this is hard to read, such as flats, the cost can be another £5.
The cost for Smart Energy GB – the Government-backed taskforce trying to convince all households to get a smart meter – is around £1 per household for the year.
It has previous come under fire for paying celebrity spokespeople large sums to plug the devices on television adverts with stars such as Twiggy and Maxine Peake featuring.
This brings potential grand total of £75 to 80 per year – or £750 to £800 over the course of a decade. This is far more than the potential savings customers are estimated to make from the devices.
Smart Energy GB claims each individual household is estimated to see a net benefit of £250 over the appraisal period, which cover the years 2013 to 2034.
This is a saving of £11.90 a year after all equipment has been paid for. After 2034, it says savings will increase to £49 for every year.
The devices are not compulsory and take up plummeted last year, thanks to the coronavirus with 980,000 meters installed in the first three months of the year – compared to just 135,000 between April and June – a fall of 845,000.
By the end of 2020, 23,646,000 meters were operating. New targets have been put in place for individual suppliers, depending on their size.
Whilst suppliers renting out meters isn’t a direct hit on consumers, it’s likely that suppliers will have to hike their prices to compensate for the money being spent on the meters.
Not only have prices soared in the last year, due to wholesale costs increasing, but the Ofgem price cap is also set to rise by £96 at the beginning of April with default customers set to see their annual bill rise from the current level of £1,042 to £1,138.
Households up and down the country have been encouraged to have smart meters installed
Who do suppliers pay for meters?
Energy suppliers are free to fund and install their own meters. However, most instead arrange for a Meter Asset Provider to fund their meters, which they then lease back from the Provider.
This is a commercial arrangement between industry organisations and energy suppliers who negotiate terms with the Providers with a number of Providers available for energy suppliers to work with.
These agreements also apply to traditional metering and allow for charges to transfer to the new energy supplier when customers switch provider, according to the Department for Business, Energy and Industrial Strategy (BEIS).
Aside from paying the Meter Asset Providers, suppliers must also pay the Data Communications Company (DCC), a firm who services the devices and Smart Energy GB, the team responsible for the UK’s smart meter rollout.
How much do they pay?
Suppliers, on average, have to pay around 8p a day, per customer, to rent out a smart meter if they are contracted through a private company.
However, if no formal contract is in place, this can go up to 14p a day.
The smart meter rollout
There have been many concerns over the smart meter rollout since it launched in 2016 with lots of households encountering challenges with their first generation devices (SMETS1).
Many were found to have a fault where many stopped working after customers switched suppliers.
The second generation meters, SMETS2 devices, were meant to rectify this problem, however, many suppliers are still not installing these and continue to install the SMETS1 models.
The rollout has also been halted significantly due to lockdown and engineers being unable to get into homes.
The take up, in general, has also been considerably less than the Government anticipated meaning the initial target date of every home and small business being offered one has been pushed back multiple times.
Meanwhile, if a customer with a smart meter moves supplier, the invoice for that meter passes on to the supplier they moved to and they must continue to pay.
Suppliers also have to pay the DCC a daily pence per meter point for it to pass on communications – what the meter is saying passed on to the supplier.
For a medium sized challenger supplier, the fixed cost for 2020 to 2021 are 97.7p per month for electricity and 73.8p per month for gas for each meter.
There is also additional costs for meters where it is hard to communicate with the in home display, for example, high rise flats, called Alternative Home Area Network.
These charges are 40p per month, per meter, for both gas and electricity.
The cost for Smart Energy GB is relatively small coming in at around £1 per household for the year.
The price is based on the market share of the company but for one medium size challenger supplier, it went up 30 per cent in one year.
The DCC, which is wholly owned by the Government, get paid for communication to be passed on even if the supplier paying them has no customers with smart meters.
This communication network is meant to cut the cost of each energy supplier having their own smart metering communications system and enables consumers to keep smart services no matter which energy supplier they switch to.
Smart Energy GB has long advertised the benefits of the devices, with one of the main being the meters are free.
However, it is very likely that customers are charged more for their energy bills on a whole as a way for the energy providers to recoup the costs they are being made to pay.
Smart Energy GB admitted that consumers pay for the cost of their meter and its maintenance through their energy bills but said this is the same for both traditional and for smart meters.
It added the DCC get paid as it publishes a charging statement setting out how the charges for their services are passed on to their customers, for example, energy suppliers, network companies and other third parties.
Smart meters caused controversy with many saying theirs stopped working after switching
Why has the price for suppliers increased?
As above, one challenger supplier found their prices hiked by 30 per cent in one year.
Customers are invoiced monthly a fixed charge based on the latest market share data which is intended to balance the cost of smart metering across the industry.
As the programme ramps up the costs are forecast to increase, but costs are expected to reduce overtime as the programme matures.
The recent increase in prices for suppliers can be primarily attributed to costs the DCC is incurring in migrating SMETS1 meters onto the national smart metering communications network.
Once SMETS1 meters are migrated, all energy suppliers should be able to operate them and so consumers will retain smart services when they switch suppliers.
This is something that has been an ongoing problem with the first generation devices.
Once they are enrolled onto the national network, they can transmit data.
Some 3.8million SMETS1 meters have been migrated onto the DCC system so far.
The DCC said charges are set so they accurately reflect the costs of maintaining and expanding the rollout.
It added the charging methodology was set by the Government and closely scrutinised to ensure they are fair and essential.
If the DCC’s spend is not justified Ofgem can ‘disallow’ costs, meaning the DCC covers the cost, not customers.
Additionally, it it does not spend all of the charges revenue in a given year – it will always return the difference to customers through lower charges in the future.
It said this week, the DCC will be taking the step to return £12million of under-spend earlier than the regulatory process.
This process was a proactive decision made by DCC to ensure cash is handed back to customers as soon as possible where it has made savings or costs that are delayed or deferred.
A BEIS spokesperson said: ‘Energy suppliers have long been responsible for the provision of metering to their customers, whether smart or traditional, and the smart meter rollout does not change this.’
It added the smart meter rollout programme has now broken even, meaning every future installation will not only help individual consumers save money but deliver a net benefit to the country.
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