On Friday 22nd July 2016, with Martyn Reed of Elmhurst Energy, I attended the ECO: Help to Heat Workshop in London. The purpose of this consultation event was to seek stakeholder views on the Energy Companies Obligation (ECO). ECO is due to finish at the end of March 2017 and the 2015 Spending Review set out plans to have a supplier obligation in place until 2022, with a focus on fuel poverty.
The consultation has three main purposes to:
- Provide interested parties with visibility of the high level vision for supplier obligations to 2022.
- Set out specific proposals for a first set of reforms, to be delivered from 2017
- Seek views on both the proposed changes for this first year transition and the high level design for the longer term (2018-22).
The consultation document was issued on the 29 June 2016 with responses by 17 August 2016. To read the full consultation click here: https://goo.gl/Golzek
IDEA members are invited to respond individually, or to send their comments to me on firstname.lastname@example.org.
Energy Assessor Key Elements
The presentation very much reflected the structure of the consultation document itself, the key elements for energy assessors being:
- This consultation is strictly only about the transition year and a consultancy for the term beyond will be issued at a later date. A concern might be that anything tested in the short term may “drift” into the full programme.
- The amount of funding will reduce from £870 million to £640 million per year.
- April 2017 to March 2018 is a transition year before full scheme comes in for the 4 years between April 2018 until March 2022.
- There will be no need to do an EPC or an RdSAP calculation, apart from to support district heating claims.
- It will introduce deemed scores which allocate a nominal carbon saving based upon the type of dwelling (end of terrace etc.), the number of bedrooms and the fuel type.
- Scotland have the right to go their own way from April 2017 but it is excepted that they will align themselves with England and Wales.
- In March 2017 CSCO (and CSCO Rural) will be scrapped, leaving just Affordable Warmth (AWG) and CERO.
- In April 2018 CERO will go leaving just AWG.
- Facilities are being put in place to allow social landlords, councils and charities better access to funding.
- The amount of funding to be spent on boiler replacement will be capped.
- There will be minimum levels of funding allocated to solid wall insulation.
The new Department of Business Energy Industrial Strategy (BEIS) announced appointments to BEIS as follows:
- Secretary of State for Business, Energy and Industrial Strategy – R Hon Greg Clark MP
- Minister of State – Jo Johnson MP (jointly with the Department for Education)
- Minister of State – Nick Hurd MP
- Minister of State – Baroness Neville-Rolfe DBE CMG
- Parliamentary Under Secretary of State – Margot James MP
- Parliamentary Under Secretary of State – Jesse Norman MP
There will be a transition year in advance of the long-term 2018-2022 scheme. This will enable a focus on fuel poverty, simplification process and to provide industry the time to adapt to changes in scheme rules whilst allowing time to develop policy in the longer term and to improve data sharing required to target high-cost properties with occupants on low incomes.
The changes to the scheme structure will move away from the current ECO complex administration (RDSAP) of CERO, CSCO & AWG with benefits-based targeting. Current eligibility is too complex and incudes 3 million households of which only 29% are fuel poor. The scheme excludes social housing and those not on the benefits system.
For the 2017-18 transition year, a move to simpler administration (deemed scores) offering AWG & CERO with low income targeting. Objectives are to increase fuel poverty targeting for accuracy and to balance accuracy with a simple delivery.
Post 2018 will introduce the Fuel Poverty Obligation with simpler administration (deemed scores) with low income and high cost targeting.
Eligibility proposals include means tested benefits, social housing and flexible eligibility. For social housing, the worst properties will be eligible with an EPC rating of E, F or G (SocialEFG). Flexible eligibility refers to LA declarations with referrals being confirmed by letters. Referrals are optional and will not be mandated. There will be 2 main categories – fuel poor not in receipt of benefits, and low income & vulnerable households. Potentially this will enable a street-by-street delivery and focus on fuel poor who are harder to reach.
New CO-led legislation is proposed to make data sharing across government departments easy. The DWP, CO, industry and VOA plan to utilise new powers for better targeting from 218 onwards.
The current set of ECO measures will remain. SWI will be retained, a figure equivalent to 17,000 p.a. with a minimum applying both CERO and AWG. Party wall insulation will become a full primary measure that can support secondary measures. The Use Factor will be reduced from 35% to 15%. For social housing in AWG, insulation, renewable heating, district heating and first time central heating are proposed.
There will be a limited delivery of qualifying gas boilers to ensure a greater long term impact on fuel poverty, focusing on insulation for 1 million homes during this parliament. Other heating measures will remain eligible:
- First time central heating
- Qualifying non-gas boilers
- Non-qualifying gas boilers
- Renewable heating
- Storage heaters
- District heating
- Heating controls
New Scheme Rules Date of Effect
It is proposed that the new scheme rules will take effect from 1st April 2017. This includes changes to administration and changes to eligibility criteria. Measures installed prior to this date will be installed according to the current scheme rules but may count against future targets.
Early delivery against the AWG minimum will be allowed – measures installed from 1st July 2016 may be claimed against this minimum. This gives suppliers more time to meet the target whilst providing flexibility to deliver their obligation in a more cost effective manner.
Deemed scores are proposed for most measures in order to simplify property assessments and reduce the volume of data that must be collected prior to installation. Also proposed is the removal for the need of a GDAR or Chartered Surveyors Reports for measures relating to CERO in order to reduce surveying costs.
Current rules will be relaxed around the extension of notification of a measure including allowing a proportion of automatic extensions to prevent measures being lost for administration purposes.
Further administrative proposals include a system of trading obligations to allow suppliers to deliver their obligation more efficiently. PAS will be updated and further incentives are under consideration for high cost areas. Regarding the brokerage platform, views are also being sought.
- Reducing the number of obligations by ending CSCO
- Removing the rural sub-obligation
- Simplifying eligibility criteria for certain qualifying benefits
- Providing simpler routes to evidencing AWG through flexible eligibility and social housing options
- Introducing deemed scores to reduce the volume of evidence that must be collected
- Relaxing the rules around the monthly reporting of measures
- Allowing trading of obligations to enable suppliers to better manage their obligations, particularly across multiple licenses
- Introducing new scheme rues (except AWG minimum) from a common date
Ofgem policy timelines
Ofgem will publish the response to BEIS’s consultation on the 17th August, 2016. In January 2017, Ofgem will undertake a 6-week consultation on administration changes with an aim to publish the final guidance and consultation response in April 2017.
Changes to Obligations
There will be no further CSCO installations after 31st March 2017. There will be an initial determination to suppliers on the 30th September 2016 with the ability to transfer/re-elect out of CSCO prior to final determination in 2018. Ability to transfer/re-elect into CSCO would mitigate the potential risk of rejections post 2017.
Changes to CERO/HHCRO will take effect from 1st April 2017. CERO measures and AWG minimum measures can be installed now under the current rules and would count towards the overall targets.
There will be no changes to CERO from an administrative perspective but deemed scores may be introduced and the recommendation requirement removed. The measures table will be updated to reflect deemed scores and changes to PWI (IUF and ability to support secondary measures).
It is anticipated that eligibility changes will be able to be matched through DWP as at present. There will be a clarification of compliance requirements and which measures count towards AWG minimum, SocialEFG and LA flexibility. LA declarations will be accepted as evidence of eligibility.
Areas for Consultation
Consultation 1 will include the automatic extensions process, the definition of a new building in relation to when it was erected, the process for transfer of obligations and deemed scores.
Consultation 2 is about how to evidence SocialEFG, first time central heating, 100% of a measure for central heating, and not to let at above market rate.
Phyllis Prior Boardman BEM BSc (Hons) CIHCM