Electricity and Gas (Energy Company Obligation) Order 2018

Baroness McIntosh of Pickering Excerpts

Tuesday 30th October 2018 Grand Committee

[Lord Teverson (LD)]

My Lords, I thank the Minister for his very detailed explanation of what this secondary legislation does, although I have a few questions. This is an example of where we pretend we are not taxing consumers. As this is not public expenditure, we have to put it through energy companies, which are in the private sector. They decide and spend a lot of time working out who should get these things when it could all be done a lot more simply if we did not go through this public expenditure pretence. When I go through ECO, it always seems to me that it would be so much better if it was administered by local authorities. They know households with problems and have all sorts of obligations towards private renters, who are a real problem in terms of energy efficiency and getting landlords to implement these sorts of schemes. It would be so much easier if we were honest with ourselves. This is a form of taxation, it is public expenditure, and we should just sort it out, rather than go through all the bureaucratic inefficiency that we have.

Having said that, I welcome the scheme very much in terms of moving this agenda forward. The present scheme, as I understand it, ran out at the end of September. We now have this instrument in front of us. I do not know how long it will take to get the thing started. I understand that there are some roll-over functions, and I welcome that, but so often with this sort of funding—even more so with European funding—there is always a risk that the companies and installers involved in this have a cash-flow crisis because we stop and start these programmes. I may be worrying unnecessarily, but I would be interested to understand how that gap is coped with and when the scheme is expected to really take off.

I noted with some amusement paragraph 7.20 of the Explanatory Memorandum, which said:

“There is a high level of interest in the scheme from energy suppliers who deliver the scheme, fuel poverty groups and installers, and some interest in the scheme from the public”.


That is extremely honest of the instrument, but I am sure we would all agree that it would be good if the public, who are affected by this, were motivated to push to get the scheme going. From that evidence, there may be a real need for some sort of public information scheme. I would be interested to hear from the Minister how that will be solved.

I find some of this order a little bit difficult to follow. Clearly there is an emphasis on social housing, which I welcome. Given the budget of the ECO—it is not insubstantial but it is limited—I also welcome that it is going on areas of fuel poverty rather than just carbon savings. No one is more committed to climate change issues than me but it is right to concentrate expenditure on fuel poverty.

What do we do about the rest of the housing stock that is not covered by this? The Minister mentioned that there is still a real gap in the Clean Growth Strategy in dealing with household efficiency in the rest of the market. I notice that the strategy states that it will:

“Support around £3.6 billion of investment to upgrade around a million homes”.


The programme covers 900,000 homes with an average spend of £640 million per calendar year. That works out at only about £2 billion for the time that is left until the end of March 2022. I would be interested to see what happened to the other £1.6 billion between the strategy and this paper.

On the private sector side, how do we check that landlords are meeting their legal obligations? How do we check that the measures work? I am sure that there is already a process for this but the instrument mentions the “monitored measure” option. I do not want to go into great detail but that option gives bonuses to suppliers or accounts in additional savings or help.

From the evidence, we all know that fuel poverty families getting better insulation does not tend to reduce their energy spend. Quite understandably, it just makes sure that the family is warmer than it was before, so I do not understand how we measure the effect of this given that people will probably use more energy to keep warmer instead of being cold. Are the Government confident about how these schemes are audited?

I welcome the fact that the scheme will continue beyond this until 2028, as in the Clean Growth Strategy, and I welcome the concentration on fuel poverty. Again, following the unfortunate relative failure of the Green Deal during the coalition Government, we absolutely need a national scheme to find a way to upgrade the rest of the UK’s housing stock.

[Baroness McIntosh of Pickering (Con)]

My Lords, I bow to the superior knowledge of the noble Lord, Lord Teverson. I have a couple of questions. I want to press my noble friend, if I may.

At the outset, I declare my interest in the register as a vice-president of National Energy Action. I have long taken a close interest in the Warm Front programme. Like the noble Lord, Lord Teverson, I welcome the continuation of the scheme. Obviously, it is a matter of record and ongoing regret that around 4 million households are still in fuel poverty. Any scheme that can be seen to reduce that is very welcome. How does the scheme compliment what is already happening? What more could potentially happen through building regulations? A more joined-up approach to warm homes would be very welcome indeed.

Being half Danish, I am particularly interested that we currently export residual household waste from the city of York and north Yorkshire to Holland at a cost to the local taxpayer. However, at the end of the day, the benefit is to Dutch residents, because the waste is burned and energy from waste is recovered in the form of district heating. My aunt in Denmark gets the benefit of that—although not from our residual waste in north Yorkshire—through cheaper electricity, hot water and heating. I am very interested to know the potential number of new district housing connections that could be made through the continued scheme before us this afternoon. Does my noble friend have a projection of that? What plans do the Government have to retrofit? There is a firm in Denmark that has changed its name to Ørsted, but I prefer the old name of DONG—the Danish Oil and Natural Gas company—which is easy to remember. It claims it could retrofit properties here in London. Is that something that the department has considered?

My last question is about the figure in the order before us today for potential savings. Is the overall home-heating cost reduction target of £8.2 billion realistic? How do the Government plan to achieve that?

[Lord Grantchester (Lab)]

I thank the Minister for his introduction to the order before the Committee today. As he explained, it introduces a completely new energy efficiency programme—ECO3—focused essentially on those in fuel poverty but with elements of ECO2 and 2t. Indeed, the first ECO order, made in January 2013, was itself a successor to previous government energy efficiency schemes such as Warm Front, CERT and CESP. These previous schemes were more centrally funded, whereas ECO is an obligation on energy companies to fund and finance energy efficiency measures using their own resources and without additional government support. In that regard, austerity is still continuing.

The order extends to 2028, which, as I mentioned last week, is only four years short of 2032, the end period for the fifth carbon budget. We note that the Government are at risk of failing to meet that. The new ECO3 measure, as suggested, replaces the wider remit of former ECO schemes, which were based on a carbon-saving metric and encompassed a number of programmes relating to energy efficiency for carbon-saving purposes, where only a minority of the overall funding was directed specifically towards people in fuel poverty. The main programme therefore restricts measures to those households in band E, F and G properties. For these reasons, I cannot fully endorse the order before the Committee today. I also detected a slightly less than encouraging response from the noble Lord, Lord Teverson, and perhaps some criticism.

The order is a continuation, reducing and restricting policies that fail to address the wider issue of energy efficiency on a more comprehensive basis. Nevertheless, it does contain some good measures in response to previous Labour criticisms. The Government should be commended for reducing the obligation threshold for suppliers from 250,000 to 150,000 accounts over time, and for looking at the problems encountered by customers when switching from a company above the threshold to a smaller company operating below the accounts threshold.

Also to be welcomed is the Government’s response to extending the 25% of the suppliers’ obligation to be met by local authority flexible eligibility. It is, in effect, a nominations scheme in which local authorities can participate, whereby area-based activity can be undertaken to improve similar properties in a location. Another important aspect of this measure is the focus on innovation and the benefits it can bring—for example, Q-Bot, which undertakes the laying of insulation in inaccessible places.