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Mike Weir (Angus) (SNP)
I beg to move,
That this House has considered regulation of the domestic renewables industry.
I am pleased to appear under your chairmanship this afternoon, Mr Evans—however, perhaps the motion should read “failures in regulation of the domestic renewables industry”. At the outset, I say that this is not an attack on Government policy, but it is about raising consumer issues that have arisen in my constituency with two constituents who have had difficulty with installations and have found, frankly, that the regulation of the industry gives them little, if any, protection.
The first case I refer to involves Mrs Leslie, who comes from a small village near Forfar. She had photovoltaic installation in her home and, after a while, discovered a leak in the roof below the installation. It was not immediately obvious because it leaked into the attic and not into her living quarters. She had a loan from the Energy Saving Trust Scotland to fund the work, which had to be conducted by a microgeneration certification scheme—MCS—member. She sought advice from them about what she should do.
In the correspondence that took place before Mrs Leslie contacted my office, she was advised that the accreditation body for her installer, which had since entered administration, was NICEIC—which sounds like something from “Spamalot”, but apparently means the National Inspection Council for Electrical Installation Contracting. I duly contacted this organisation to explain what had happened in her case. I understood from her that an eligibility condition of the Energy Saving Trust loan was a borrower obligation that the works be conducted by a MCS-certified installer. As I said, the leak had not been immediately apparent after installation because the water penetration was in the attic and had not reached the ceiling of her domestic accommodation. However, it transpired that the installer had ceased to trade, and because of the terms of the loan that she had received from the Energy Saving Trust, she was unable to find builders certified and competent to conduct the necessary work.
I asked whether NICEIC would confirm what warranties were in place in respect of the work conducted by the members of its organisation and provide leads to suitably qualified builders who could conduct the necessary remedial works. Four days later, NICEIC wrote to advise that, although the installer had been registered with it in 2012-13, the installer had not been registered with it at the time of the installation. It therefore referred us to a rival registration body going by the name of NAPIT—the National Association of Professional Inspectors and Testers—with which the installer was registered at the time and which should have, we were told, assessed the installer for competence in the technology used.
I duly wrote to NAPIT, again asking what warranties were in place in respect of the work. It responded in a letter received on 26 February, confirming that it had held a registration for the installer until one month after the installation of the panels, so cover should have applied. Anybody with any sense would think that, if there was registration with a reputable body, they should be covered. It turned out, however, that the installer had failed to process a work notification on the NAPIT database that the work had been carried out. As there was no record of the work, there could be no warranty. I have to say to the Minister that I was as baffled as my constituent that an installer could deprive a consumer of applicable warranties by the simple expedient of failing to report that the work had been carried out. Although this installer was apparently registered, there was no warranty because of some failure on the part of the installer. That gives no protection to the consumer who was relying on that accreditation when they took the work on.
I established, via Glasgow City Council trading standards—the company was based in Glasgow—the identity of the liquidator, and my constituent has now submitted a claim, but as we all know from other liquidations, it is unlikely that she will get much out of that. We continued to engage in correspondence with Scottish Renewables and the Energy Saving Trust with a view to having the loan condition that all works must be conducted by an MCS-certified contractor waived, as the constituent was having problems getting a certified installer to perform the repairs. Just after the election, we were advised that, in the circumstances, they were content for her to engage a contractor of her choice to fix the roof and that they would not hold that to be a breach of the borrower obligation. Fair and well—it was good that that happened. At least, she might have some help, but she still had to pay for that herself because of the lack of any help through the registration process.
Throughout the process, my constituent was left asking, “What does approval by the Energy Saving Trust, the microgeneration certification scheme and the various accreditation schemes mean and what is it actually worth when you find yourself in this situation?” When that was put directly to the Energy Saving Trust, it explained, on 12 May, that
“whilst recommending that householders use MCS-certified installers”,
it
“is not involved in the certification, approval or monitoring of such installers”.
However, the home renewables loan scheme makes it a borrower obligation that loan recipients use such an installer. That appears to be a restriction of trade and distortion of the market that should clearly signal to consumers that this is an accreditation of real value, but as Mrs Leslie found, it had no real value at the end of the day. I share her concern that public money is being channelled to companies that are basically being allowed a competitive advantage on the basis of assumed competence without their being subject to proper scrutiny.
Three months before my constituent’s installation, the Department of Energy and Climate Change published its “Microgeneration Strategy”, in which it was asserted:
“In many cases, the non-financial barriers to microgeneration uptake are best tackled by the industry itself, with Government support where required. This is the basis of the action plan in the Strategy, which set out key deliverables, milestones, and responsibilities in the following areas… The Microgeneration Certification Scheme…will be made more effective, through simplified processes, improved governance and better alignment with existing certification schemes and testing requirements at the European and international level”.
From that, I would suggest that a consumer is entitled to assume that the MCS has real value to them, but that is not what my constituent has found. The document says:
“On insurance and warranties, actions will be taken to help policy makers and the industry better understand the consumer protection structure, so that this is accurately reflected in regulation and the industry’s everyday processes. This should lead to consumers making better informed choices.”
But again I would say, if the choice is looking at the installer and the regulator, that my constituent did go through the MCS, did go through two regulators and was no better off at the end of the day.
The document goes on to say:
“The MCS is making good progress in improving its governance. The scheme will be re-established as a free-standing, not-for-profit company, limited by guarantee.”
In the same month as that was published, the chief executive of the Energy Saving Trust had an article on the Which? Conversation part of the Which? website in which he said:
“As the supply chain scrambles to keep up, it’s fallen to two industry-backed and government-approved schemes to help regulate the market. The Microgeneration Certification Scheme…sets industry standards for installers of small-scale renewables and the REAL Assurance Scheme covers all non-technical aspects of an installation, from pre-sale contact to post-installation services.
Our concern is that the rapid expansion of the small-scale renewable market has stretched the capabilities of both these schemes to safeguard the consumer against poor installation and customer service.”
To back that up, I asked the Library for some figures on complaints dealt with by the Renewable Energy Consumer Code. It appears that the number went from 607 in 2011 to 1,892 in 2014. That is a very substantial number, even allowing for the fact that there are liable to be more installations now than in 2011.
In its document for the trade, the microgeneration certification scheme boasted:
“Being a part of this energy revolution will develop green skills and wider business opportunities, which the MCS brand will support by providing a mark of confidence. MCS will also enable you to access markets and reduce costs to your customers by assuring quality, knowledge and understanding are built into all aspects of the pre-sale and installation activities.
We believe that, by having the MCS Logo you will be able to distinguish yourselves as an installer company of merit.”
That is what consumers would expect when seeing that accreditation on an installer’s brochures, invoice or whatever. My constituent not unreasonably believed that, as a recipient of an advance of public money in the form of loan funds, she was being invited to select a contractor from a list approved by Government agencies. She trusted that their selection was a form of approval that was contingent on demonstrable competence. She has been let down twice, first by an installer that was neither technically competent nor financially solvent and secondly by an approved accreditation scheme that produces warranties that fail to materialise if the contactor fails to report the job. Is the Minister satisfied that the microgeneration certification scheme, which apparently fails to monitor the administration of guarantees and warranties, is fit for purpose? It appears that in this case it certainly was not.
The second case is also from the Forfar area. I do not know whether Forfar has been particularly unfortunate in this regard, but my constituent Mrs Hosie had a similarly unhappy experience. In June 2010, she had an air source heat pump installed by an MCS-approved installer, E. Scallan Ltd, certified by BRE Global. It soon became apparent that the air source heat pump was using a lot of electricity and that the installer was unable to remedy the situation. Mrs Hosie contacted BRE, which said that the installer had moved on to another accreditation body—NICEIC. When contact was made with that body, it emerged that the installer had moved on yet again, to the aforesaid NAPIT, but under the name Scallan Renewables.
Mrs Hosie then contacted the Renewable Energy Consumer Code and, after a conciliation stage, applied to go to arbitration in February 2014, during which it became apparent that when the installer applied on 25 January 2012 to change the name of the registered code member from E. Scallan Ltd, it had failed to disclose that Scallan Renewables, as a partnership, was a separate and distinct legal entity from E. Scallan Ltd. In its submission, Scallan Renewables argued that Mrs Hosie’s contract was with E. Scallan Ltd, not Scallan Renewables, which had no liability. Mrs Hosie, not unreasonably, argued that Scallan Renewables was registered under RECC with the same membership number as E. Scallan Ltd and that the businesses were significantly intertwined. The arbitrator, however, dismissed Mrs Hosie’s claim, on the basis that transfer of the membership number from ESL to Scallan Renewables did not constitute a transfer of legal liabilities, while acknowledging that the contractor had not made the position clear.
The RECC executive asserts that the contractor is in breach of the code because it did not advise the executive that the change of name was allied to a change of legal personality; and that, had it done so, RECC would have thoroughly scrutinised the request and sought undertakings that the new body would be asked to confirm that it would assume responsibility for contracts and warranties in the name of the former entity. In other words, as far as RECC was concerned all that happened was a change of name, but the effect for Mrs Hosie was to remove all her legal protection. The fact that such rigorous scrutiny is triggered only if the contractor seeking a name change flags up the simultaneous change of legal personality calls into question the effectiveness of the code as a consumer protection measure. As in this case, the installer can simply fail to mention that fact to RECC and all protection disappears.
As things stand, RECC has a prima facie finding that the contractor is in breach of the code and has brought it into disrepute, and documentation relating to that is published on the RECC website. None of that, however, has produced a solution for my constituent, who remains considerably out of pocket and disadvantaged, while trying to sell her house. She feels, not unreasonably, that a plethora of accreditation bodies have failed to secure proper consumer protection and that she is left with a system that is not fit for purpose but has been part-funded by the taxpayer.
My constituents feel that the Government need to be much more hands-on in securing proper regulation of the sector, particularly when substantial sums of public money in loans and grants are at stake. Of course, under the Government’s green deal schemes, many people have been persuaded to look at renewable energy schemes as a way of reducing their own energy consumption and helping to meet our green energy targets and climate change targets. Considerable amounts of money have gone into those schemes, but unless robust regulation is in place to protect the consumer and give them confidence that, should anything go wrong, there is a way of making a complaint and getting restitution, the schemes will be seriously imperilled. I urge the Minister to consider whether the schemes need to be looked at and stronger regulation implemented to ensure that consumers who are trying to do the right thing are properly protected.
The Minister of State, Department of Energy and Climate Change (Andrea Leadsom)
It is a great pleasure to serve under your chairmanship, Mr Evans. I am extremely sorry to hear about the experiences of Mrs Leslie and Mrs Hosie, and I hope that the hon. Member for Angus (Mike Weir) will pass on to them an assurance that we will look into their cases with the regulatory bodies that he has mentioned. I will write to him about that. He is absolutely right to raise those cases; it is incumbent on us as MPs to raise specific cases whenever things go wrong. I hope that in talking about the subject and how the system works, I will be able to give him some reassurance that such cases are not the norm and that we will look into them. To have any problems is not good enough, but I believe that we have a robust system that is working.
I am grateful for the opportunity to take part in this debate with the hon. Gentleman. He has raised some interesting points about domestic renewable energy in the UK, particularly about the importance of ensuring that the right measures are in place to strengthen consumer protection. I hope that as I set out the steps that industry and other key stakeholders are taking to strengthen consumer protection, I will be able to reassure him, Mrs Leslie and Mrs Hosie.
We want to see more consumers choosing to heat their homes and generate their own electricity through renewable sources of energy. The development of a sustainable market for those technologies is possible only if consumers are confident that the market can deliver high-performing installations and provide for redress when things, unfortunately, go wrong.
We have demonstrated our commitment to small-scale renewable energy through the feed-in tariff and the renewable heat incentive scheme. The feed-in tariff has been a success since its introduction in April 2010. Some 700,000 installations, totalling 3.5 GW, registered for the scheme during its first five years up to April 2015. The domestic renewable heat incentive has had 37,000 installations register since April 2014.
The Government’s financial incentive schemes require installations of up to 45 kW for heat and 50 kW for electricity to be carried out by certified installers, as the hon. Gentleman points out, under the microgeneration certification scheme or an equivalent scheme. The Government do not regulate the market but rely on self-regulation through the MCS and compliance with building regulations, which is similar to the approach in the oil and gas industry.
The MCS is an industry-led scheme that covers product and installation company certification. The scheme works within the parameters of third-party certification according to established European and international requirements. The certification bodies that operate in the scheme are assessed and accredited by the United Kingdom Accreditation Service, or by equivalent national bodies if based in other countries. The scheme covers the whole United Kingdom. I am informed that 327 MCS installation companies are registered in Scotland, but many of those that are based in other parts of the UK offer services in Scotland.
MCS installers must also be members of a consumer code that is approved under the Chartered Trading Standards Institute consumer codes approval scheme. The only such approved code at present for the small-scale renewable energy sector is the Renewable Energy Consumer Code, which the hon. Gentleman mentioned. I am told that RECC carries out strenuous due diligence on all businesses that apply to join the code. In particular, it is designed to ensure that bogus companies and other businesses with directors or senior staff who have a questionable trading history are not admitted to the sector. An independent applications panel reviews the evidence and takes those important decisions.
In 2014, of more than 1,184 membership applications, 30 businesses were referred to the applications panel and 20 were refused membership on the grounds of the risk that they posed to the sector. RECC monitors all members closely, and any that appear to be breaching the code are subject to a disciplinary procedure. If a complaint cannot be resolved within a reasonable timeframe, the consumer may refer it to the independent arbitration service. An arbitration award is binding and enforceable. In 2014, 50 cases were referred to the independent arbitration service for resolution.
The Department of Energy and Climate Change takes any mis-selling, fraud or poor-performing systems in our support schemes extremely seriously. For example, last year, we introduced a service to enable consumers to obtain reliable estimates of potential renewable heat incentive payments to help them to verify quotes from installers.
We must recognise that, considering the hundreds of thousands of systems installed under the financial incentive schemes, the number of complaints that have been raised is relatively small. By way of example, RECC has estimated that 0.7% of all domestic solar PV installations in 2014 resulted in a complaint being registered with them. In other words, there were 754 complaints out of 110,120 installations. I am absolutely not complacent, because that is 754 complaints too many, and the hon. Gentleman has raised two such cases that we will look into. Nevertheless, the system appears to be working to a reasonable standard.
In addition to RECC’s internal complaints handling and independent arbitration service, there are other established dispute resolution processes for domestic heat and electricity generation. Those processes are regularly reviewed by a range of key stakeholders from industry, consumer organisations and the administrators for the financial support schemes. The MCS reports that the total number of installations across the full range of technologies since August 2012 was approximately 395,596. MCS received 1,348 complaints during the same period, which represents 0.34% of the installations registered since August 2012. The majority of consumers are content with their installation, although we recognise that the statistics do not cover complaints that may have been registered with other organisations such as a citizens advice bureau or trading standards.
As a result of its desire to reduce the complaint rate still further, MCS will introduce an alternative dispute resolution scheme in September. The scheme will be mandatory for certified installers should a consumer wish to go down that route, and it will give consumers an additional mechanism for resolving disputes that builds on the current RECC provision. Additionally, MCS is looking to strengthen the insurance-backed warranty schemes, building on what is currently required by the RECC code, which will give consumers further protection where companies leave the scheme and are no longer trading. Mrs Leslie’s case, which the hon. Gentleman mentioned, will potentially be covered by that new provision.
The issue of installation companies flitting between certification bodies to avoid discharging their responsibilities to consumers has been raised with my office. Both MCS and RECC enforce the safeguards that are in place to prevent that practice. However, MCS is considering tightening those safeguards through the introduction of additional requirements for certification bodies. Those changes aim to ensure consistency in the operation and enforcement of the certification requirements while improving the visibility of companies that may be acting unscrupulously.
I make it clear that we are absolutely not complacent, but it is important to recognise the many companies that are doing the right thing in meeting their obligations under the MCS and RECC schemes. The additional measures that are being developed, together with better co-operation across the sector, should help to weed out companies that are not interested in meeting industry standards.
I am grateful to the hon. Gentleman for securing this debate. I will write back to him specifically on the cases that he raises, and I hope to see the domestic renewables sector fulfilling its potential across the UK, with consumers having the confidence to play their part.
Question put and agreed to.