November 6 letter to Ed Davey on the Energy Company Obligation and ‘green levies’ review
Dear Secretary of State,
Yesterday afternoon the Governing Council of the Association for the Conservation of Energy held an emergency meeting, to discuss the devastating impact already being caused to our industry from the fallout from the Prime Minister’s announcement on ‘green levies’ made just a fortnight ago.
Initially, knowing the conclusions of the regular assessments that your Department publishes concerning the consumer implications of decarbonising the economy, which is so dependent on the role of improved energy efficiency to reduce overall consumer bills (a far more important measure than prices per unit), we had been confident that your Government’s main supportive policy, the Energy Company Obligation, would be recognised as a sacrosanct component of the policy package.
It has become very clear over the past fortnight that this logical assumption was entirely wrong. Inevitably our member companies have been made aware of the threat to ECO’s continuation: not least because of the orchestrated attack upon the existence of the Obligation by the six power companies required to deliver it. This has been most obvious in terms of much of the reporting in newspapers, which has singled out ECO as being in the firing line. Many of these articles have been written by journalists known to be regularly used by the Big Six, and are largely intended to deflect attention from the enormous unit-cost increases announced last month.
However, discussions at our Council meeting yesterday – which as you will recall from past visits, involves the CEOs of the main energy efficiency companies – revealed that already the PM’s announcement is having a completely devastating impact upon this marketplace. Not only are no new ECO-related contracts being signed, committed programmes are being withdrawn, and the power companies are now refusing to honour payment for many that have been completed in good faith – even those involved with the brokerage system.
The consequence is that we are in danger of the Big Six effectively deciding the result of the PM’s investigation, by unilaterally terminating their activities under the ECO. The consequences of this for those in our industry operating in this marketplace are deeply alarming, with devastating losses of business confidence.
You will know that there are already some seven thousand people fewer working in insulation businesses alone than this time last year. We are now undertaking calculations of the further job losses across heating, renewables and insulation that will occur if the status quo remains, which we will report to you shortly; one aspect we do know is that the vast majority of these are from not just SMEs, but from precisely the kind of micro-businesses and start-ups which the Government is ostensibly relying upon to ensure our economic recovery.
ACE members are now preparing a robust alternative package to present to you and your Cabinet colleagues. It will demonstrate clearly that only by continuing with an ECO-type policy can we ensure that, in a decarbonised landscape, every household will enjoy lower overall fuel bills.
Throughout this century, the British government has run obligated programmes via the Big Six. The result to date has been massive improvements in the energy efficiency of around half of British homes: those who have benefitted previously are already less troubled by heavy unit-cost increases. Any price rebate paid to them could be construed as essentially ‘double-dipping’. In contrast, abandoning an assistance programme like ECO would be grossly discriminatory against those households yet to see their homes made energy efficient.
This package will include details showing how the existing ECO could be refined and improved; at present its return on investment at 3:1 is less than half that achieved by the (more effective) previous programme CERT. We are aiming to have this with you by the middle of the month at the latest.
Director, Association for the Conservation of Energy
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