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.
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.