Draft Electricity and Gas (Energy Company Obligation) (Amendment) (Specified Period) Order 2026
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The Parliamentary Under-Secretary of State for Energy Security and Net Zero (Martin McCluskey)
I beg to move,
That the Committee has considered the draft Electricity and Gas (Energy Company Obligation) (Amendment) (Specified Period) Order 2026.
It is a pleasure to serve under your chairmanship, Mrs Barker. The draft order was laid before the House on 26 January this year.
This Government remain fully committed to ensuring that households, particularly those on low incomes or at risk of fuel poverty, can live in warmer, more energy efficient homes that are affordable to heat. At the heart of that endeavour lies the warm homes plan, which is a comprehensive and long-term strategy to reduce energy bills, alleviate fuel poverty and enhance energy security. We have committed to investing £15 billion, the biggest ever public investment to upgrade British homes and cut energy bills. Of that amount, £5 billion is allocated to support low-income households.
The energy company obligation has played a key part in helping households to reduce their energy bills. ECO was launched in 2013, and the current phase, ECO4, which has run since 2022, has delivered more than 1 million energy-saving measures to around 300,000 households. The scheme places an obligation on the larger energy suppliers to deliver energy efficiency improvements to vulnerable and fuel-poor households that result in measurable bill savings.
Although ECO4 has delivered a significant volume of home energy efficiency improvements, it has not been without challenges. As the National Audit Office recently set out, there have been widespread, systemic issues in the delivery of solid wall insulation, which we have taken urgent steps to tackle. We are also bringing forward comprehensive reforms to the retrofit consumer protection system to make it stronger, more transparent and more accountable, so that this cannot happen again. We expect all installers to ensure that households receive timely and high-quality remediation of any non-compliance identified.
Given these systemic issues and inflation that is still too high, we have taken the considered decision not to replace ECO4, therefore easing pressure on household energy bills. This, in combination with the Government’s funding 75% of the domestic cost of the legacy renewables obligation, will remove around £117 of costs on average from household energy bills across Great Britain.
This instrument will introduce a small and necessary change to the existing scheme by extending the end date of ECO4 from 31 March 2026 to 31 December 2026. The extension provides obligated suppliers with additional time to meet their existing targets, and most importantly allows them time to focus on the remediation of non-compliant installations. The instrument does not change targets, impose new obligations, increase supplier costs or increase consumers’ bills.
Finally, the changes made by the draft order are limited but important. By extending ECO4, we are ensuring a stable period of delivery and an orderly closure to the scheme, and we are safeguarding consumers. I commend the draft order to the Committee.
Greg Smith (Mid Buckinghamshire) (Con)
It is a pleasure, as ever, to serve under your chairmanship, Mrs Barker.
Energy efficiency in the home sits at the heart of our ability as a country to support those struggling with energy bills, protect consumers from volatile energy bills and maintain the skilled retrofit workforce that this country will need in the years ahead. Since 2013, the energy company obligation has delivered around 4.4 million measures in 2.6 million properties. Under ECO4 alone, around 949,800 measures have been installed in approximately 281,000 households. Whatever its imperfections, it has been a lifeline for millions of low-income families, and the supply chain that grew around it employs tens of thousands of people across the country.
As the Minister said, this statutory instrument will extend the ECO4 end date by nine months to 31 December 2026. The stated purpose is to allow suppliers additional time to meet existing targets, remediate non-compliant installations and avoid a cliff edge in delivery before any successor arrangements are in place. The Opposition support this extension. It is responsible and the right thing to do and we will not stand in its way this afternoon. However, support for the principle of orderly transition does not mean that the Government escape scrutiny and there are several questions that I would be grateful if the Minister could answer clearly.
On cost, the Chancellor was emphatic in her Budget statement last year that ECO costs households £1.7 billion a year through levies on their bills and that ending the scheme would save the average household £59 annually. She described it as a failed scheme and said that she was scrapping it. However, this nine-month extension means that the levy continues on bills for longer than households were led to expect. Ministers must set out plainly how much consumers will pay during this extended period, and whether that figure of a £59 saving remains accurate. As the shadow Secretary of State for Energy Security and Net Zero, my right hon. Friend the Member for East Surrey (Claire Coutinho), has rightly observed, moving costs from energy bills to general taxation is not the saving it appears on paper. Households are still paying; they are just paying from a different pocket.
On the issue of quality, a National Audit Office report published in October 2025 found that many of the home improvements funded under ECO were carried out to a poor standard, particularly those involving external wall insulation. Families have been left with damp, mould and homes made worse by interventions that were supposed to help them. That is not an abstract concern and my hon. Friend the Member for West Aberdeenshire and Kincardine (Andrew Bowie) has raised those failures directly in the House. The Opposition have committed to working cross-party to ensure that affected households receive proper remediation—and we stand by that commitment. However, the Government must confirm that Ofgem’s oversight is fully resourced, that installers and not consumers are funding that repair work, and that further audits will be carried out without delay.
Finally, on the supply chain, the Government’s own rationale for this extension acknowledges the need to protect the supply chain and jobs while continuing support for low-income households. That language reflects a real anxiety in the sector. Anna Moore, chief executive of retrofit company Domna, put it plainly when she warned that suddenly removing £1.3 billion of funding was “chaotic” and had
“created a cliff edge for thousands of low-income households in fuel poverty as well as SMEs employing some 10,000 people.”
Joel Pearson of Net Zero Renewables made the same plea directly to the Chancellor. These are not abstract economic arguments; they are real firms, jobs and communities that depend on this sector continuing to function.
The extension buys a little time, but time alone is not a strategy. The Chancellor has announced that there will be no successor to ECO4, and that future support will come through the warm homes plan—£15 billion over five years, funded through general taxation. The Opposition do not oppose the principle of that shift, but the warm homes plan remains, at this stage, more promise than programme. It has not yet been finalised, piloted or mobilised. This extension exists in part precisely because the replacement is not ready. This is an honest admission and we welcome it, but it underlines that the instrument is a holding measure, not a solution. ECO4 is also estimated to deliver carbon savings of around 0.38 metric tonnes of carbon dioxide equivalent per year once all measures are installed. Whatever replaces it must be designed to match and exceed that ambition—not simply to fill a political gap.
I would therefore be grateful if the Minister could address three specific points. Can he confirm the precise additional cost to bill payers during the nine-month extension period? Can he provide a full update on the remediation programme for substandard installations and give this Committee confidence that affected households will not be left waiting indefinitely? Finally, can he set out a clear timetable for the warm homes plan so that the supply chain can plan with confidence, rather than continuing to operate under uncertainty?
The households who have relied on the ECO scheme deserve an efficient transition, not the chaotic cliff edge that the Government are presenting; the retrofit workforce that will be central to this Government’s own climate ambitions deserve certainty, not managed decline; and taxpayers deserve full transparency about what this extension will cost them. We support this instrument, but the Government must use the time it buys wisely.
Pippa Heylings (South Cambridgeshire) (LD)
The extension of the ECO scheme until December will be welcome news for the numerous insulation installers who have faced significant instability after the ECO scheme cliff-edge cut in the November Budget. However, the Liberal Democrats remain frustrated at the original decision to scrap the energy company obligation. Energy retrofit firms warned of a supply chain collapse after the Government pulled vital funding for upgrading damp, mouldy and draughty homes for the poorest households, as well as pulling funding from the small and medium-sized contractors that deliver the work. I am now hearing of thousands of redundancies among skilled installers coming down the line. What a waste and a crying shame—putting businesses and livelihoods at risk over this period.
It is also concerning that there are no carry-over arrangements for when the scheme ends. The National Insulation Association made its concerns clear in the consultation, opposing the cut and saying that any extension should come with a pro rata increase in obligation levels. Equally, the lack of detail in the warm homes plan for ECO’s replacement, with a suspected 18-month delay to delivery, means that next winter there will effectively be no operational national fuel poverty strategy. Given the middle east energy crisis, reducing energy demand is one of the best ways to help lower-income households reduce bills. Improving building fabric could cut heat demand by 15% to 20%, which would also help to reduce risk and balance the grid, reducing the peak heat gap in winter, as research by Energy Systems Catapult shows.
It is shocking that 90% of solid-wall homes are still uninsulated. That is why the Liberal Democrats keep calling for a 10-year emergency home upgrade scheme that would offer free insulation to low-income households.
Sadik Al-Hassan (North Somerset) (Lab)
It is a pleasure to serve under your chairship, Mrs Barker. I am glad to see that there is likely to be no impact on consumers or energy bills as a result of this amendment, particularly in the light of the current hostilities in the middle east. At a time when prices are rising and energy bills are due to be affected, it is reassuring to know that residents in North Somerset and across the country, who are simply trying to heat their homes, will not be impacted.
For low-income and vulnerable households already struggling with the cost of living, schemes such as ECO4 are more vital than ever. The extension will ensure that suppliers have the time they need to complete installations and, critically, remediate non-compliant works, so that households who need help the most actually receive it in full.
Martin McCluskey
I thank hon. Members for their contributions to the debate. I will turn briefly to each of the points that were raised.
The hon. Member for Mid Buckinghamshire asked about cost. The measure comes at no cost, and there is no additional funding behind the amendment. It is an extension of the obligation largely to ensure that remediation is conducted on those properties that require it. That comes at no additional cost. The bill savings that the Chancellor outlined in the Budget stand, and consumers will see them when they receive their energy bills on 1 April, after which the new price cap will see energy bills reduce by 7% over the price cap period, funded by the move of 75% of the RO to general taxation and the abolition of ECO from bills.
On the second point, the remediation programme is moving at pace. We have already contacted all affected households. We are encouraging everyone to come forward for an audit. If any Committee members have affected households, I encourage them to ensure that their constituents take up the offer of an audit. There is no route to remediation without constituents contacting us to ensure that they get an audit. As I said in the House, I think in October, this will happen at no cost to the consumer. It is backed by guarantees that will ensure that it is paid for through the system and the supply chain, not drawing on any additional funds, at this stage, from the Government.
On the supply chain more generally, we recognise the fact that there has been disruption—the hon. Member for South Cambridgeshire raised this as well. We have done a number of things to try to combat that. First, we have set up a taskforce alongside industry and the Local Government Association to bring together the bodies that procure from small and medium-sized enterprises in the ECO supply chain. That has already borne some fruit; hon. Members may have seen last week that an additional £295 million, announced to run through the warm homes local grant and the warm homes social housing fund, will provide a bridge through to the additional schemes that will come in future.
I would like to push back gently on some of the points about the lack of a fuel poverty plan. Significant amounts of money are already being deployed through the warm homes local grant and the warm homes social housing fund. The deployment of the new scheme from 2028 will involve integrating those two schemes, which are working right now and are already delivering measures to people’s homes.
I have also heard, not just from hon. Members today but more generally, the idea that we are no longer standing behind insulation. I would not want people to leave this Committee with that impression. The warm homes plan has a significant focus on new technology, but also on insulation, and I anticipate that the amount being deployed for insultation will remain.
I agree with the hon. Member for South Cambridgeshire: there is no point deploying measures onto homes that are leaky and will not keep people warm and dry. Many of the warm homes local grant and warm homes social housing fund projects I have visited in the short time I have been doing this job are benefiting from a combination of insulation alongside modern technology such as heat pumps, batteries and solar.
For every building and project, it is about getting the mix of measures correct to deliver warm homes and lower bills. It would be remiss of us to publish a plan in this day and age that did not reflect the technological changes of the 10 years and the efficiency of batteries, heat pumps and solar, which are helping people to drive down their bills today.
We intend to consult on the integration of the two schemes shortly. Again, I impress on hon. Members that we will not be left without a scheme for low-income people. Some £5 billion of the £15 billion for the warm homes plan is focused on low-income households. As I said earlier, an additional £295 million is already being funded through those schemes, in addition to what was already budgeted for in these scheme years.
Finally, on remediation, which I know has interested and concerned hon. Members across the Chamber when we have discussed this subject before, I want to repeat that it is really important that people come forward for those audits. The supply chain and the system stand ready to remediate homes, but we cannot do that without people coming forward for those audits.
I thank all hon. Members for their contributions to this debate. As I said, the instrument before us will ensure that the ECO scheme concludes in an orderly, responsible and consumer-focused manner. I commend the draft instrument to the Committee.
Question put and agreed to.