Summary and Background
147.This Chapter contains new and amended powers to create a future Energy Company Obligation (ECO), which the Government intends will replace, in time, the existing energy company obligations – the Carbon Emissions Reduction Target (CERT) (see the Electricity and Gas (Carbon Emissions Reduction) Order 2008 (S.I. 2008/188, as amended)) and the Community Energy Saving Programme (CESP) (see the Electricity and Gas (Community Energy Saving Programme Order) 2009 (S.I. 2009/1905)) – when they end in December 2012. Broadly, the policy intention is to create a new obligation which draws on the framework underpinning the existing energy company obligations but also reflects a number of new developments as described below.
148.By the time CERT and CESP end in December 2012, the Green Deal financing framework is expected to have been put in place. The availability of Green Deal financing will represent a significant change to the policy landscape and one of the key objectives of the ECO will be to underpin the market-led Green Deal, helping to ensure that, as far as possible, all households can access energy efficiency measures.
149.By the time the new obligation is up and running, the energy efficiency needs of the housing stock in Great Britain will also have changed such that hard-to-treat properties will form a much larger proportion of the pool of homes remaining to be insulated. For example, there will be far fewer lofts and wall cavities remaining to be insulated, and of those remaining, a much larger proportion will be technically less straightforward to treat. This is in addition to the approximately 7 million homes in Great Britain that require some form of internal or external solid wall insulation. Green Deal finance alone is unlikely to meet the needs of installing more expensive improvements in hard to treat homes, and therefore part subsidising the installation costs through the ECO may serve to reduce the size and term of the repayments by the householder and so make these forms of energy efficiency improvements economically viable.
150.The ECO may also focus on support for low-income households and the most vulnerable in society. Some households in this category may require more support than just Green Deal finance if they are to improve their energy efficiency and reduce their fuel bills. Some of the types of measures which may help low-income households or those with individuals who are particularly vulnerable to the cold such as the elderly or disabled , such as boiler repairs or new heating systems, will help to reduce the cost of heating a home but will not necessarily lead to energy efficiency or carbon savings. As a result it is difficult to incentivise such measures through a carbon or energy efficiency-based target using the existing enabling powers. The proposed new ECO powers will allow for an obligation to be set in such a way as to drive delivery of these measures too.
151.Many of the powers needed to establish the new ECO are contained in section 33BC of the Gas Act 1986, section 41A of the Electricity 1989 and section 103 of the Utilities Act 2000. These existing powers enable the Secretary of State not only to set an overall carbon emissions reduction target, but also to require obligated energy companies to meet their individual targets by action taken in relation to specified types of people or specified geographical areas. However, these existing powers need to be amended to ensure that the new ECO will be effective in the evolving policy landscape described above.
152.In summary, Chapter 4 of Part 1 of the Act amends and adds to the existing enabling powers in section 33BC of the Gas Act 1986, section 41A of the Electricity Act 1989 and section 103 of the Utilities Act 2000 which underpin the existing CERT and CESP Orders, so as to enable the Secretary of State to:
impose a ‘home-heating cost reduction target’ alongside the carbon emissions reduction target (see sections 68 and 69);
require a carbon emissions reduction target or home-heating cost reduction target to be met (in whole or in part) by action taken in relation to specified types of individuals living in specified types of property or specified areas;
require specified information from energy companies for the purposes of assessing the effectiveness of a new obligation towards meeting its policy objectives (see section 71); and
provide that the administration and/or enforcement of the new obligation is to be carried out by either the Authority, a body other than the Authority or the Secretary of State (see for example the amendments made by section 66(3) and 67(3) to the Gas Act 1986 and Electricity Act 1989 respectively).
