WIREDGOV

Authored by David Fletcher, Associate Director of Energy Efficiency and Social Programmes.

On 29 March 2017 the Electricity and Gas (Energy Company Obligation) (Amendment) Order 2017 came into force following parliamentary approval.

This piece of legislation extends the Energy Company Obligation (ECO) until September 2018 and introduces a number of changes to the scheme rules.

Following this 18 month period, the government is expected to introduce a longer term scheme with further policy changes introduced.

What is ECO?

ECO is a government energy efficiency scheme in Great Britain to help reduce carbon emissions and tackle fuel poverty. Under the scheme, larger energy suppliers work with installers to deliver energy efficiency measures to British homes. 

The former ECO obligation period, known as ECO2, ran from April 2015 to the end of March 2017, with 611,579 energy efficiency measures approved to date.

What’s changed?

The extended scheme begins on 1 April 2017. The key changes to the scheme were outlined by the government in their consultation response and include:

• better focusing eligibility requirements so that more support is directed to people in fuel poverty or on lower incomes. For the first time those living in social housing with an EPC rating of E, F and G will also be eligible for particular measures under the Affordable Warmth element of the scheme.
• local authorities will have the ability to determine households as eligible for ECO support, following the introduction of the ‘flexible eligibility’ mechanism which suppliers can use to identify eligible consumers for up to 10% of their Affordable Warmth obligation.
• the closure of the Carbon Savings Community Obligation aspect of the scheme, and maintenance of a minimum level of solid wall insulation and delivery to rural areas, and
• a system of ‘Deemed scores’ will be introduced based on the current Standard Assessment Procedure (SAP) methodology, but with fewer inputs to help simplify administration and reduce costs.

Which energy suppliers are participating?

One of our key functions as administrator of ECO is to identify which energy suppliers are obligated under the scheme, and to determine the size of their obligations.

With a deadline of 1 February 2017, suppliers notified Ofgem of their domestic customer numbers and supply volumes (of gas and electricity) for 2016. We then verified the data and commissioned on-site audits of suppliers to ensure accuracy and robustness in terms of their data gathering procedures.

Following this we determined that three new energy suppliers exceeded the threshold to become obligated under the scheme, joining the 12 other suppliers obligated in 2016/17.

We then determined the delivery targets for each supplier which are in proportion to the supplier’s share of the domestic energy market. These targets must be achieved by the end of September 2018.

The new ECO obligated suppliers from April 2017 are: Economy Energy, Flow Energy and Spark Energy, bringing the total number of obligated ECO suppliers to 15. 

We have been working with these new suppliers to help prepare them for their obligations under the scheme, and will continue to do so as they begin to deliver measures.

Consumers should be aware that they do not need to buy their energy from one of these obligated suppliers to benefit from the scheme.

What’s next?

The government has made a longer term commitment towards a supplier obligation until at least 2022.

In the summer of 2017 we anticipate a consultation from government setting out a number of possible policy changes to the scheme, including potentially greater sharing of data across government to better identify those in fuel poverty. Ofgem will work with the Department for Business, Energy and Industrial Strategy as they formulate the policy options in this area.

We also look forward to continued engagement with Scottish Government officials as they consider how to take forward powers over the design and delivery of ECO in Scotland, as legislated for in the Scotland Act 2016.

Related links

Energy Company Obligation