Electricity and Gas (Energy Company Obligation) Order 2022

Debate between Lord Whitty and Lord Grantchester

Tuesday 12th July 2022 Grand Committee

[Lord Whitty (Lab)]

My Lords, the noble Baroness, Lady McIntosh, has anticipated me, which is completely understandable since I am a vice-president of the same organisation, but I would like to put this in a slightly broader context.

The other day, when we were having an exchange at Questions, the Minister admonished me for apparently disparaging the ECO scheme. My point is not that the scheme is not desirable. It is a means of delivery that has proved its worth in certain respects. Certainly, the energy companies have now developed systems that identify where they could intervene with their own customers. However, inevitably, by relying entirely on the ECO scheme to deliver energy efficiency provisions, people get missed out. I have always argued that putting the responsibility on the companies as the main means of delivery means that there will always be gaps, because the companies will prioritise in relation to their own consumers. What we really need, have needed for some time and, in the current circumstances, need even more is a scheme that helps absolutely everybody who is fuel poor or likely to be made fuel poor, of which there are now more because of the current energy crisis.

Energy efficiency measures meet a lot of the Government’s and the country’s objectives of saving energy, moving away from fossil fuels, working towards net-zero targets, and off-setting the energy dimension of the cost of living crisis. We therefore need to strengthen them. I assure the Minister that I approve of the direction in which these regulations move, because they broaden the way you can bring people in. They increase the schemes and the comprehensiveness by looking at multi-measures in a way that past interventions frequently have not. This means that schemes can be addressed that do not rely on mini-interventions but look at the total fabric of the house and the systems by which it is currently heated. The detailed measures on the upgrading of the ratings are also important, and the broadening of the people who can refer into the scheme, particularly via the health service dimension, is also much to be welcomed.

As the noble Baroness said, there are some gaps. The biggest, which is not a gap but an inadequacy, is the failure to set a really strong target for solid wall insulation. The danger is that we do not have the companies and contractors to do that, because the regulations do not imply sufficient jobs and there is not the training for installers that is needed to deliver the aspirations. In terms of where we are on home energy efficiency, that is probably the biggest single inadequacy of delivery so far and it needs to be addressed.

I echo the noble Baroness’s point about advice, because a lot of the fuel poor, or those who are increasingly in danger of becoming fuel poor, do not have adequate advice in this area. The kind of advice they need overlaps with the advice needed by people in the hitherto so-called “able to pay” category. The failure of the successive schemes to deliver effective support for the “able to pay” sector really underlines the need to upgrade the whole of the advice in this area. The information is still inadequate and difficult to access for both the fuel poor and those who perhaps can still make a contribution themselves, and in some cases pay for the whole lot themselves.

In general, I think this order is in the right direction for the delivery of the ECO scheme but needs to be put into a broader context. That broader context becomes more difficult, because in the next few years we are about to decide what the main form of home heating in this country will be. Individual householders and landlords have to face decisions on insultation, whatever the form of heating. It is not yet clear whether we will still have something approaching the gas network or whether gas will be replaced by a hydrogen blend or by hydrogen. The number of properties is not clear. Many properties do not qualify or are not appropriate for heat pumps in their present form. There will be some difficult decisions on how they address that. Most households would prefer to know what the totality of their movement is, whether they are fuel poor or in the “able to pay” sector. They would like to know that they can perhaps insulate up front and then change to a different form of heating, or at least that they will not have to change everything in their house twice and that, whether they go under the ECO or a scheme where they pay themselves, they will not then have to adapt all their appliances and network again in two, three, four or five years because we have changed the form of heating.

We need a more strategic approach to this, but I assure the Minister that, as far as it goes, I am in favour of what he is proposing to us today.

[Lord Grantchester (Lab)]

I thank the Minister for introducing this order and for writing to draw my attention to it, especially to how it is lowering consumer bills. The ECO scheme has been among the favourites for Conservative Governments to target. It is certainly to be encouraged that they focus on energy efficiency measures to upgrade homes and on targeted support, thus reducing heating costs for low-income and vulnerable households and those at risk of fuel poverty across Great Britain, but not Northern Ireland.

Although it is true that the number of homes with a band C EPC increased to 46% in 2021, it cannot be claimed that that was all due to the ECO scheme. Nevertheless, it is part of a flurry of measures, this one supporting 450,000 homes to be able to save on average £290 a year.

In his letter, the Minister wrote that savings in the least energy-efficient homes could average £600 this winter, which would be wonderful. Can he explain this figure? How many households would be in this number, and how many would reach that magical threshold of band C? Would this alarm many households, in that they might now become liable to higher bands of council tax?

One of the intricacies of ECO3 was that households switching from larger to smaller suppliers to save on their bills could take themselves to companies below the threshold and thus be outwith the obligation for improvement measures. Many of these customers have now found themselves with bankrupt companies. Under SoLR, on which I have questioned the Minister previously, they will have been redistributed to larger suppliers within the obligation. Can the Minister explain the effect of ECO4 on this? Will the threshold be a cliff edge or a reducing threshold while maintaining worthwhile energy efficiency measures?

One of the consequences of reducing thresholds was that energy companies found it cheaper to pay a resulting fine than to offer ECO schemes. Could any increased penalty be liable to push a vulnerable company into bankruptcy and all the consequences of SoLR? With the scheme continuing with household contributions, will energy companies target only those who can make a contribution and ignore those with the lowest incomes?