The Department of Energy and Climate Change (DECC) has defended its planned rollout of smart meters to businesses and households following criticism by the National Audit Office (NAO) that the benefits of the £11.3 billion programme were questionable.

In a critical report, the NAO said there were ‘major risks’ that the DECC needed to address to achieve value for money from its national programme to install smart electricity and gas meters in all homes and small businesses.

Smart meters provide consumers with detailed information on their energy use and can enable energy suppliers to provide a wider range of off-peak tariffs as well as allowing suppliers to collect meter readings remotely. The DECC expects them to be an important step towards ‘smart grids’, which may help to manage demand across the electricity system.

In its report, the NAO outlined some major risks to the programme achieving value for money and said the DECC’s estimate of savings of £23 for dual fuel customers depended on them changing their energy use, as well as suppliers passing on efficiency savings through reduced prices.

There was ‘a risk that suppliers do not pass on all the net savings’, the NAO said, and there was ‘limited evidence to support particular assumptions about how much and for how long consumer behaviour will change’.

The report said the DECC’s estimate of a £7.3 billion net benefit included ‘headroom’ of 10% to 15% to allow for an escalation in the scheme’s costs.  But the NAO pointed out that Treasury guidance for cost escalation in projects involving equipment manufacture or development of information technology has historically ranged from 10% to 200%.

The NAO also warned that there was now ‘very little time contingency to address the risk that design approvals, procurement and testing take longer than planned, adding to costs and delaying achievement of benefits’.

The energy regulator Ofgem has also identified concerns about the smart meter scheme, and proposed a range of measures to protect consumers in advance of the mandatory rollout from 2014.

But it has stopped short of extending disconnection protection to business energy customers.  Instead, decisions regarding the impact of smart meters on non-domestic energy users will be announced when a major energy review is finalised in the autumn.

As well as allowing customers to monitor their energy use through real-time energy readings, which remove the need for estimated bills, the technology also allows suppliers to remotely disconnect customers or switch them from credit to prepayment mode if they do not pay their bills.

Ofgem has also said it also wants to ensure consumers’ rights to switch suppliers continue to be upheld where smart meters are installed. At present, there is a risk that when a customer switches supplier, some of the functionality of the smart meter will be lost, and Ofgem has promised to investigate this further.

Julian Morgan, managing director of independent price comparison and switching service, the Energy Advice Line, said it was essential that businesses were able to switch suppliers easily.

Shopping around and using the expertise of an impartial price comparison service like the Energy Advice Line was one of the best ways for firms to reduce their business energy costs at a time when business electricity and business gas prices were spiralling.

The Energy Advice Line is the UK’s only impartial price comparison and switching service exclusively for businesses.

“We’re the only impartial online gas and electricity price comparison service run by business energy experts for business energy customers,” Mr Morgan said.

BUSINESS energy users on variable price contracts have been urged to be alert for hefty tariff increases after Scottish and Southern Energy became the third of the big six power companies to announce an inflation-busting rise in gas and electricity bills.

The supplier has announced that gas prices for its 3.6 million customers will rise by 18% and electricity prices for 5.2 million customers by 11% from September 14.  The move, which will add £170 a year to the typical dual fuel bill, follows similar increases announced by ­Scottish Power and British Gas.

Julian Morgan, managing director of the Energy Advice Line, the UK’s first price comparison and switching service exclusively for businesses, said business energy users would be affected as well as domestic consumers.

Firms on Fixed Term Contracts would be unaffected until their existing contract came up for renewal. But Mr Morgan urged those on Variable Price Contracts to be prepared.

“Businesses in this category must keep an eye out for any notices through the post advising them of a price increase, as there will be a significant chance that these people will be getting a letter very soon,” Mr Morgan said.

“We would encourage business owners to be vigilant and compare prices if they are thinking that they are paying too much.

“It is also extremely important for firms on Fixed Term Contracts to remember when their contracts come up for renewal or make a note of the date, as it may not be in their interests to automatically roll the contract over and stay with their existing supplier.

“The announcement by Scottish and Southern Energy makes it more important than ever to use an impartial price comparison service like the Energy Advice Line and shop around for the best available deal.”

Scottish and Southern Power announced the increase on the same day as its owner, Spain’s Iberdrola, revealed profits were up 6.6% to £1.5billion.

The company tried to soften the blow by delaying its hike until September 14, a month later than the British Gas rise and six weeks after ­Scottish Power. It has also pledged not to increase prices again before August 2012.

Chief executive Ian Marchant said: “I am sorry we have had to announce an increase at a time when many people’s budgets are under strain, but the upward pressures on prices have become too great.”

But Mike O’Connor, chief executive of consumer champion Consumer Focus, said: “This increase heaps more pressure onto already cash-strapped consumers and will tip thousands more people into fuel poverty.”

The Energy Advice Line is the UK’s only independent price comparison and switching services exclusively for small and medium-sized businesses. The service enables firm to quickly and simply compare business energy and business gas prices, and to switch to the best available deal on the market.

Mr Morgan said there was clear evidence that businesses which shopped around and switched suppliers for a better deal at renewal time achieved significant savings over those businesses that stayed with the same supplier year-on-year.

Businesses can also prevent being caught unwittingly in expensive rollover contracts with their existing suppliers by signing up with the Energy Advice Line’s free renewal reminder service.  For further information visit www.energyadviceline.com

British companies rate the cost and supply of business energy as a top risk factor to their organisation, according to a new report by leading energy supplier npower.

The report, released ten days after a second major British energy supplier announced double-digit tariff increases, found that 300 large and small firms counted energy as a top risk concern, next to sales and legislation. Only 66 per cent of those surveyed have a strategy to manage it.

Julian Morgan, chief executive of leading price comparison and switching service, the Energy Advice Line, said it was no surprise that energy costs topped the list of concerns for business owners.  Spiralling business energy prices, rafts of new green legislation and volatile global energy markets, made it a complex issue for businesses to tackle, he said.

“That’s why we urge organisations large and small to seek professional advice when making decisions about their business energy needs,” Mr Morgan said. “An impartial service like the Energy Advice Line can not only help businesses save money, but our team of experts can help make sense of a very complex market.

“There are thousands of business electricity and business gas tariffs on the market, and business energy contracts can be complicated. We can help simplify the process and enable firms to get the best available business energy deal for their needs.”

UK businesses and households can expect hefty energy bill increases over the next months as two of Britain’s six biggest energy suppliers have already announced price increases, with others expected to follow.

David Cockshott, npower’s director of industrial and commercial energy markets, said the findings of its Business Energy Index 2011 report were a cause for concern.

“It is worrying that while businesses have identified that risks associated with energy — from security of supply to cost — pose a real threat to their immediate and future operations, many have admitted to not having a strategy in place to manage it.”

The npower report also found that major energy users were more likely than smaller users to have on-site energy generation as a means of avoiding exposure to commercial utility tariff fluctuations. However, less than half of all the firms surveyed said they used self-generation technology.

Of those technologies that are used onsite, combined-heat and power plants were the main choice, while wind turbines were the least favourite, closely followed by biomass.

Nearly two thirds of companies which do not use on-site generation said it was not a company priority, but lack of finance and management resources were also mentioned as reasons.

“As demand on the grid starts to become a major issue, large energy users in particular will need to look at new ways to manage their energy more intelligently, whether through self generation or through demand management tools such as load management,” Cockshott said.

The Energy Advice Line is the only independent price comparison and switching service in the UK designed exclusively for businesses.

You can view the five most competitive energy offers from the UK’s leading suppliers (including npower) online, compare their prices with your renewal quotation and switch to your preferred option at a click of a button.

The Energy Advice Line’s expert team can also offer advice on how to switch suppliers, as well as a renewal reminder service to ensure you do not get caught in an expensive business energy rollover contract.