DECC welcomes feedback on the future of the Energy Company Obligation

Published:  06 March, 2014

The Department for Energy & Climate Change has published a consultation document on the future of the Energy Company Obligation.

The consultation was announced by Secretary of State Edward Davey at Ecobuild on 5 March, and will run until 16 April.

The proposals contained in 'The Future of the Energy Company Obligation' consultation were highlighted as part of government’s announcement on 2 December 2013. The aim is to reduce pressures on consumer bills and ensure ECO provides value for money for energy consumers, whilst continuing to help tackle fuel poverty, support the development of a sustainable energy efficiency supply chain and improve the energy efficiency of our housing stock.

It is proposed that certain changes should take effect by 1 April 2014, but the amending legislation will not be in place until later in 2014.

Ofgem will continue to administer ECO in line with the current ECO Order, until the amendments are made, and measures installed from 1 April onwards should be reported to Ofgem within one month of the change in legislation coming into effect. DECC will include provisions within the amended legislation in order to facilitate this.

The DECC is welcoming feedback on the below proposals.

Proposed changes to the current obligation (ending March 2015)

• Reducing the March 2015 Carbon Emissions Reduction Obligation (CERO) target by 33%, while the Carbon Saving Community Obligation (CSCO) and Affordable Warmth (also known as the Home Heating Cost Reduction Obligation (HHCRO)) remain the same.

• Enabling the obligated energy suppliers to carry forward a certain proportion of over delivery against their March 2015 targets to count towards their March 2017 targets.

• Enabling obligated energy suppliers to deliver less than their share of the new 2015 CERO target. In which case, an energy company would see the CERO obligation for March 2017 increased by 1.1% the shortfall in March 2015. This flexibility would not apply to the Affordable Warmth or CSCO targets- both will need to be delivered by 31 March 2015.

• Changes to the legislation to allow suppliers to reallocate the carry forward of over achievement from the previous obligations across their supply licences, in order to optimally realise the benefit of this excess delivery.

• Allowing those energy suppliers that have delivered more than 35% of the primary CERO measures for Phases 1 and 2 by the end of March 2014, to receive 1.75 times the carbon score for primary measures delivered to that date. Activity carried forward from CERT/CESP would be excluded from this uplift.

• To extend the CSCO element of ECO from the lowest 15% to the 25% lowest income areas. Further, simplifying the qualifying criteria for the CSCO rural sub obligation to allow suppliers to deliver against this sub-target to any domestic property located in the poorest quarter of rural areas, as well as to people living in rural areas who are members of the Affordable Warmth Group. These changes will only apply for measures installed from 1 April 2014.

• To allow District Heating connections made from 1 April 2014 to be included as a primary measure under CERO.

• To allow loft insulation and the easy to treat cavity wall insulation installed from 1 April 2014 to be included as primary measures under CERO.

• To require the delivery of a minimum level of solid wall insulation to be delivered by the end of March 2017 across all companies and both carbon elements of ECO.

Overall, DECC believes these proposals will work to increase the flexibility of the scheme, make it easier to deliver and enable it to be delivered at lower cost.