May’s energy cap casts doubt on ability to roll out smart meters
THE Government’s planned roll-out of “smart” energy meters and electric vehicles are under threat as a result of Theresa May’s flagship conference pledge for a cap on electricity and gas bills, industry figures have warned.
Senior sources said the Prime Minister’s plans to set limits on energy prices paid by consumers cast into doubt ministers’ plans for all homes to be offered smart meters by 2020.
They also disclosed that Big Six energy companies are gearing up for a “significant” legal challenge if the cap was proposed at levels previously indicated by Mrs May and the Competition and Markets Authority (CMA), which would “wipe out all profitability for the whole industry”.
The warnings came after an analysis seen by The Sunday Telegraph concluded that the introduction of new meters is expected to cost the industry £6billion between now and 2020 and that a cap that “pushes the industry as a whole to break-even or losses has significant implications on the smart meter roll-out programme.”
The analysis, produced by Alliance Bernstein, an investment firm, adds that “smart metering and charging is absolutely essential to secure cost-effective deployment of electric vehicles.”
A senior energy industry source said: “On the one hand the Government wants to promote smart meters and electric vehicles but on the other hand they are doing something that means the companies meant to deliver this might not be able to.”
Energy firms have been obliged by Ofgem, the regulator, to offer smart meters to all customers by 2020, with fines liable for those that fail to comply. But the executives believe that a mandatory cap that wipes out profits could relieve them of that obligation.
In her party conference speech, Mrs May said the cap was being introduced to “see every household protected from rip-off bills”. The Government has championed smart meters as a way to eliminate the need for manual meter reading, fix billing errors and help households reduce consumption.
Mrs May’s pledge followed an analysis by the CMA which concluded that customers were paying £1.4billion a year more than they would in a “fully competitive market”.
Last week, British Gas refused to rule out a legal challenge. But a senior industry source said: “If the £1.4billion is removed through a reduction in profits across the board, then the whole industry will go into loss. We would judicially review it.”
An Ofgem spokesman said the Government’s draft bill specified that a cap would enable “efficient suppliers to make a profit”. A spokesman for the Department for Business, Energy & Industrial Strategy said: “Offering smart meters to consumers is not a choice for suppliers – every household and small businesses must be offered a smart meter by the end of 2020.”