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DECC

The Future of the ECO: a £245m windfall for energy suppliers?

Today, we submitted our response to DECC’s consultation on the future of the Energy Company Obligation (ECO). This is the consultation which seeks to rubber-stamp cuts to the ECO, pledged in the run-up to last year’s Autumn Statement, amounting to £30-35 off the average energy bill. We, and many others, have consistently argued that cutting Britain’s only national energy efficiency programme – designed to reduce household energy bills and carbon emissions in the long term – to achieve a modest one-off energy bill reduction is completely perverse.

But our analysis with the Energy Saving Trust, the Centre for Sustainable Energy and the Cavity Insulation Guarantee Agency finds that the cuts amount to more: nearly £42 per household – yet energy suppliers are only handing back around £32.50, on average, to each household. This represents an aggregate windfall to energy companies of £245 million this financial year.

The cost of this windfall if the consultation’s proposals are implemented? Virtually no homes to be improved under the Energy Company Obligation this year. A terrible deal for consumers. A kick to the supply chain while it’s down. The loss of credibility for a Government which did not stand its ground in the first place, and is now about to line the energy companies pockets. We’re certain it does not want to do that.

We’ll rehearse the arguments about why the cuts were a terrible idea in the first place – even if they had turned out not to be excessive. The result is:

  • A very modest one-year rebate to households, easily swallowed up by a future round of gas and electricity price increases…
  • …at the expense of permanent energy bill reductions for at least 264,000 households in this year alone (compared to business as usual);
  • A regressive ‘double-dividend’ for those 50% of British households who have to date received energy efficiency improvements, and higher bills for longer for everyone else;
  • A terrible precedent of announcing pre-determined chops and changes to a programme:
    • Less than one year in;
    • Just as it was beginning to settle and run smoothly;
    • Absent any comprehensive, transparent data on what it actually costs (official data suggest it was roughly as much as anticipated).
  • An ever-widening gap between the carbon savings required from the residential sector under the Climate Change Act, and the carbon savings that will be delivered:
    • We recognise that new public money is being made available over the next three years to maintain overall carbon neutrality – but with the use thereof not being consulted upon as well, this ECO consultation is effectively being conducted in the dark.
  • Rag-doll treatment of the energy efficiency supply chain, which: took heavy losses following the awful transition from CERT and CESP to ECO and Green Deal; made very difficult decisions to successfully restructure, invest in and adapt to in the new delivery landscape; only to have this painfully recovered confidence even more thoroughly undermined – with attendant negative effects on investment and employment.
  • Powerfully undermined Government credibility – some energy companies are now calling for the whole of the ECO to be scrapped. The precedent set by the Autumn Statement suggests that it is very possible they will have their way. Despite fully understanding the purpose and benefits of energy efficiency programmes, there has been no backbone and no firmness of principle on the Government’s part.

Our analysis has garnered a lot of press attention, links to which can be found below.

Utility Week
Big six ‘to get £245m windfall’ from Eco changes (15.4.14)
Building.co.uk
Government’s ECO cuts ‘£250m deeper than first thought’ (16.4.14)
ENDS Report
Investor interest in ECO collapses in April (16.4.14)
Daily Telegraph
Energy companies ‘in line for £245m windfall’ from green levies deal (17.4.14)
Business Green
Are the Big Six set for £250m windfall from ECO reforms? (17.4.14)
The Times
Let households share £250m energy windfall, Big Six told (22.4.14)
Business Green
Labour slams government over Big Six’s £250m ECO windfall (23.4.14)

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