NEA has responded to the Help to Heat consultation

NEA has today responded to the Help to Heat consultation. We support the main principles outlined for the transition year and the longer-term ECO programme from 2018. In particular, NEA welcomes the Government’s commitment to focus the supplier obligation on households who are most in need, in line with the Fuel Poverty Strategy for England. We also support efforts to encourage greater involvement of local actors, especially where vulnerability is a concern. NEA also broadly supports the proposals to simplify and remove complexity from the transition year but also for the longer-term ECO programme. Not only can this help enhance the cost effectiveness of the programme but equally these steps can improve the client customer journey and the confidence trusted third parties have in the scheme, going alongside better customer protection which we understand will be implemented following the Bonfield Review.

NEA has consulted our supporters extensively before and during this consultation. In October 2015, NEA sought views from on the current ECO scheme to assess if it was considered an effective tool to address fuel poverty. From December to March 2016, NEA also worked with Citizens Advice to capture feedback from frontline agencies on the delivery of the ECO programme. NEA secured this feedback through facilitated discussion for attendees at each of NEA’s regional forums, covering over 200 individual organisations in total. NEA’s subsequent engagement pre-consultation has been to disseminate these learnings with policy makers to help ensure the next phase of the supplier obligation develops appropriately and marks an ambitious commitment to reduce fuel poverty across Great Britain. NEA also held a workshop with its supporters in early August 2016 to provide an opportunity to discuss stakeholders and business supporter’s views current ECO delivery; increase knowledge and share our understanding of the new ECO proposals; share NEA’s current position on key areas; hear and understand more about supporter’s views on the consultation and review the consultation questions.

Despite the welcome steps proposed within the consultation document to address many of the current barriers to success and challenges we have identified with the current scheme, NEA notes its disappointment that the overall spending envelope for ECO will be cut to c. £640m per annum. This follows a previous reduction in 2014 when the budget was cut by a third; from the original notional spend of c. £1.3bn per annum. Prior to the announcement regarding these likely reductions, NEA had highlighted in both written and oral evidence to the Energy and Climate Change Select Committee and the Public Accounts Committee that the UK Government’s stated objective to ensure that as many fuel poor homes as is reasonably practicable have a minimum energy efficiency rating of Band C by 2030 was at risk of not being met.

Key points and recommendations made within NEA’s response

Scale of the obligation

I. NEA notes its disappointment that the overall spending envelope for ECO will be cut to c. £640m per annum which follows a similar previous reduction in 2014 when the budget was reduced by a third; from the original notional spend of c. £1.3bn per annum. NEA highlights the risk that that the UK Government could miss the interim fuel poverty target in England for 2020 and the 2030 target

II. The Department for Business, Energy and Industrial Strategy (DBEIS) should investigate the quantum of the shortfall between the level of ambition presented by statutory targets and current and projected delivery rates of ECO and introduce suitably ambitious policies to fill this likely void

Extending the existing scheme and obligation structure

I. NEA supports the main principles outlined for the transition year and the longer-term ECO programme from 2018. In particular, NEA welcomes the Government’s commitment to focus the supplier obligation on households who are most in need, in line with the Fuel Poverty Strategy for England

II. NEA supports a one year transition programme and believes this strikes the right balance between the need to mitigate the impact on the supply chain when transitioning, to target the obligation fully on helping households in or at risk of fuel poverty beyond 2018

III. NEA supports the proposal to re-balance the obligations for 2017-18 by increasing the Affordable Warmth obligation

IV. NEA stresses that the removal of Carbon Saving Communities Obligation (CSCO) should not lead to an under appreciation of the merits of an area-based approach to delivering energy efficiency which is recognised as an effective method of delivery elsewhere across the UK

V. NEA proposes a rural safeguard is introduced to the carbon obligation and incentivises suppliers to deliver insulation measures to low income households so they can access the Renewable Heat Incentive (RHI) policy which requires basic insulation to be stalled prior to heating measures

Affordable Warmth targeting and household eligibility criteria

I. Proposals to simplify and remove additional sub-criteria of some eligible benefits are welcome and will aid promotion and administration of the scheme

II. NEA notes that proposals for income thresholds need to be carefully implemented alongside the development of eligibility flexibility. This must ensure that households that are just over the cap are consistently able to benefit from the scheme

III. Whilst the Government are right to seek to target assistance on those in the greatest need, the move to a relative income threshold is likely to disadvantage low income single parents with one dependent child and the calculation for household income will disadvantage specific areas of the country with higher than average housing costs. Restricting access to households only in receipt of Savings Credit should be implemented alongside eligibility flexibility once this becomes a more established feature of the scheme from 2018 onwards.

IV. Whilst NEA supports extending eligibility to low income social tenants with an EPC rating of E, F or G, access to social housing should be capped at a maximum of 20% of the total AW obligation. Social housing providers should also co-fund all measures and be required to undertake an up-to-date EPC and interventions need to reach a minimum post installation EPC of band E
V. New build homes should not be eligible.

VI. NEA fully supports the eligibility flexibility proposal and believes it can help open access to the scheme for fuel poor households that are not on means-tested benefits and encourage greater involvement of local actors, especially where vulnerability is a concern. NEA also believes the higher end proportion of 20% of the obligation could be met through this route.

VII. The eligibility flexibility also mean that a high number of households not within the LIHC fuel poverty definition could potentially access support. This could reduce the Government’s ability to meet its 2020 milestone unless there is some targeting of the scheme which can ensure the right households are supported. A DBEIS led evaluation will be required on how well this flexibility can identify people in the LIHC definition of fuel poverty, and if successful the proportion of flexibility could be increased beyond 2018.

VIII. If local authorities do not intend to use the new eligibility flexibility powers, a relevant body must be declared with the ‘delegated responsibility’ to refer households to obligated suppliers on their behalf.

IX. Linking the flexibility proposal to a renewed monitoring framework under the Home Energy Conservation Act (HECA) could facilitate better integrated working, allow central Government to track how each local authority was responding to this new opportunity or more generally track local efforts to address fuel poverty, reduce domestic carbon emissions and relevant public health responsibilities.

X. NEA believes that consideration should be given to introducing the flexibility proposal alongside a new legislative framework that enables the Secretary of State to focus delivery of energy efficiency programmes on specified types of people most at risk of living in a cold home through secondary legislation so that the most vulnerable households don’t miss out on support.

XI. In order to facilitate ‘boiler on prescription’ models any arbitrary restrictions on heating measures that can be accessed through eligibility flexibility need to be considered carefully.

Eligible energy efficiency measures

I. NEA supports limiting the delivery of qualifying gas boiler replacements but there may also be a strong case for not applying the scoring cap to certain elements of the scheme or in particular circumstances. NEA’s proposed exemptions from the cap aim to incentivise co-funding and extend delivery to areas that would otherwise not be attractive to suppliers. Additional support will also need to be identified to help low income households who require a new heating system and are unable to benefit from ECO, raise their own capital to pay for energy saving measures or access a loan from existing responsible creditors.

II. NEA supports allowing some non-fuel poor private tenure homes to be included in flexible eligibility in order to facilitate multi-property projects. However, suppliers must demonstrate how the multi-property projects also directly benefit fuel poor households or low income households that are vulnerable to the effects of living in a cold home.

III. NEA believes heating controls should be fitted to all new first time central heating systems (gas or non-conventional fuels) where appropriate, and only modern, highly efficient electric storage heaters should be excluded from the cap.

IV. NEA believes district heating projects need to be capped and the contribution that ECO plays towards the capital expenditure of a DH project should be limited to co-funding the heating exchanger unit, radiators and control inside the property, not subsidising the cost of installing the network itself.

V. NEA notes the need to provide adequate warranties for alternative renewable heating systems and enhance consumer protection, particularly district heating projects.

VI. It is important that a solid wall minimum continues within the scheme and that these measures are targeted at fuel poor households or those low income consumers that have an EPC band E or below

VII. Party wall insulation measures installed after 31 March 2017 should be counted towards the transition year but making them a primary measure when uncertainty about the extent of savings is questionable

Installation process and compliance

I. Deemed scoring and other simplification proposals will reduce the cost of administering the scheme and this should be fully reflected in any cost projections of suppliers meeting the transition year targets

II. Green Deal is now no longer part of the scheme and there is no justification for requirements such as the use of GDAR or CSR to continue.

III. Solid wall insulation and district heating should require a full RdSAP assessment and EPC due to the fact that the potential carbon savings can vary significantly. In addition, a move back to deemed scores doesn’t have to mean the end of a post installation EPC, and NEA recommends a post install EPC is provided for the householder/landlord.

IV. NEA supports the transfer of obligations on multiple licences and welcomes the involvement of obligated parties that want to help meet the Government’s commitment to focus the supplier obligation on households who are most in need. NEA therefore supports the proposal to allow trading of obligations between suppliers.

V. If an obligation is traded from one obligated party to another, the purchaser must then prove they have met the target at the end of the obligation period in which it is purchased and further onward trading of the obligation should be prohibited.

VI. NEA does not support any client contributions as the scheme becomes targeted at those on the lowest incomes. In the short-term, ensuring the scheme administrator actively monitors any requirement for households to make capital contributions towards the cost of any energy efficiency work must be a priority and must be addressed by the start of the transition year in April 2017 with an end date for contributions by March 2018.

Brokerage

I. NEA believes the brokerage mechanism should be mothballed for the duration of the transition year if not closed altogether.

Devolution

I. There is a risk that if an entirely separate administrator or different compliance regime operated in Scotland this would incur additional costs for GB consumers.

To read our full response click here

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