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Written Statements

Volume 598: debated on Monday 6 July 2015

Written Statements

Monday 6 July 2015


Financial Services Compensation Scheme

The level of protection offered by the Financial Services Compensation Scheme (FSCS) is changing. The statutory level of deposit protection is set by the European deposit guarantee schemes directive (DGSD), which was updated last year. It requires that all European member states provide for a deposit protection limit of €100,000. The FSCS limit must be set at the prevailing exchange rate on 3 July 2015.

Given the strength of sterling in relation to the euro, this means that the current level of protection provided by the FSCS under the statutory scheme will reduce. The Government have taken action to ensure that depositors are not exposed to a sudden reduction in the level of protection they receive from the FSCS.

HM Treasury has laid a statutory instrument to ensure that depositors who are currently entitled to up to £85,000 of protection from the FSCS will continue to be so until 31 December 2015. This is to ensure that depositors can have clarity and certainty about the protection they are entitled to, and time to react accordingly. These depositors will continue to be protected up to the maximum level of £85,000, by the FSCS until 31 December 2015, after which the new rate of £75,000 announced by the Prudential Regulation Authority (PRA) will come into effect. The PRA must review the coverage level at least every five years.

Individuals and small businesses that are depositors of banks, building societies or credit unions authorised by the PRA will qualify for the protection. The protection is not dependent on the time when the deposit was made—eligible deposits made after 3 July 2015 will also be protected.

These actions ensure that depositors who are currently entitled to protection of up to £85,000 are not subjected to a sudden reduction in this protection. It will ensure that there is sufficient time available for depositors to be made aware of the changes, and to take such steps as they feel necessary to manage their financial affairs appropriately in light of this change.

Implementing the new DGSD has resulted in a number of changes to deposit protection in the UK including expanding the coverage provided by the FSCS to cover large corporates and small local authorities; and provision of a new “temporary high balance” cover of up to £1 million for six months for certain deposits, such as the proceeds from the sale of your home. The extended coverage will not apply to deposits which only became entitled to protection under the new DGSD, which came into effect on 3 July 2015.


Energy and Climate Change

Renewable Heat Incentive

Today, the Department of Energy and Climate Change is laying the Renewable Heat Incentive Scheme and Domestic Renewable Heat Incentive Scheme (Amendment) (No.2) Regulations 2015 before Parliament. These amendments will introduce improvements that are essential to the smooth-running of both renewable heat incentive (RHI) schemes. Further detail on the changes brought about by these regulations is provided below.

Updating industry standards

The RHI regulations reference a number of industry standards for renewable heating technologies, specifically those of the microgeneration certification scheme (MCS). The use of MCS standards is a key part of the domestic RHI scheme to provide assurance to the consumers that both the installer and the installation meet clear standards of competence. MCS is also used within the non-domestic RHI scheme for systems smaller than 45 kW.

The amendment regulations introduce updated installer standards for heat pumps, solid biomass and solar thermal; the amendments to the latter standards are minor aimed at achieving consistency of language across all MCS standards. The heat pump installer standard has been updated to bring MCS standards in line with the European energy-related products (ErP) directive; this directive will come into force across Europe for all heat pumps manufactured or imported into Europe on 26 September 2015.

Both schemes’ regulations will be updated to reference these new standards.

In addition to the new MCS standards, these regulations will introduce a new methodology for calculating heat pump efficiency; this is the seasonal coefficient of performance (SCOP) calculator. This new calculator will be used by certification bodies to determine if a heat pump meets the requirements of the ErP directive and to establish the seasonal performance factor (SPF) required for the RHI scheme. Establishing the SPF using this calculator will be a requirement for the domestic RHI and for any MCS certified ErP compliant heat pump.

Biomethane expenditure forecasting

Deployment of biomethane injection to grid under the RHI has grown significantly over the last 12 months. There are currently 27 plants in the RHI system and more plants are expected to come forward and be operating by the end of 2015.

The RHI has a budget management mechanism set out in the regulations where tariffs are automatically reduced by pre-set amounts if forecast spend crosses defined thresholds. The assessment whether to reduce tariffs is made on a quarterly basis.

The current approach to estimating biomethane deployment can cause a temporary but significant underestimate of forecast expenditure for biomethane plants due to the ramp-up in production typically associated with establishing a new biogas plant. The current approach does not reflect this ramp-up period in which plants can take around six months to reach full production. This undermines the effectiveness of the RHI budget management policy. The amendments introduce a more accurate forecasting methodology to better reflect operational realities for biomethane plants.

Clarification on biomass sustainability reporting requirements

The RHI regulations include requirements for the use of sustainable biomass by participants. These ensure the use of biomass incentivised by the scheme is sustainable in terms of greenhouse gas emissions savings and broader landuse impacts. These requirements were introduced through regulations in February 2015 and come into force on 5 October 2015. The proposed amendments clarify the reporting requirements for non-domestic participants so that combined heat and power (CHP) installations participating in both the renewables obligation (RO) and the RHI do not have to demonstrate compliance with the sustainability requirements under the RHI scheme where they are meeting these requirements under the RO. We are also making two small amendments to correct the definition of sustainable biomethane and the land criteria for non-woody fuels.

Power for the scheme administrator to reject applications

This applies only to the non-domestic scheme as the domestic scheme already contains provisions where applications can be rejected. The amendment will provide Ofgem with an explicit power to reject applications to the non-domestic RHI scheme where the applicant fails to provide further information to support the application within the time period specified in a request by Ofgem. The changes will deliver cost savings by reducing the operational burden of managing these applications. They will also improve financial clarity given that once applications are rejected it is no longer necessary to accrue for possible spend in relation to them.