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The Electricity and Gas (Energy Company Obligation) Order 2022

Volume 716: debated on Wednesday 22 June 2022

My noble Friend the Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Lord Callanan) has today made the following statement:

Upgrading our homes to be more energy efficient is the best long-term solution for reducing our energy costs, keeping ourselves warm and healthy in winter and tackling fuel poverty. It is also essential for our transition to net zero and in supporting local jobs and growth. This is why the Energy Company Obligation scheme remains a key policy in supporting low income and vulnerable households to upgrade their homes with energy efficiency and heating measures.

Making homes more energy efficient reduces heating costs permanently, mitigating the impacts of current and future price rises. There are wider benefits; energy efficient homes are more comfortable to live in, with consequent improvements to householder’s health and wellbeing.

The Energy Company Obligation has a good track record of delivering such upgrades to homes. Since 2013, it has installed around 3.5 million energy efficiency measures in 2.4 million homes across Great Britain.

In April, we published the response to the consultation on the future of the Energy Company Obligation across Great Britain, committing to an expansion of the scheme from £640 million to £1 billion a year and extending it by four years to 2026. Today the Government have laid the regulations for the scheme.

The last iteration of the Energy Company Obligation scheme, EC03, came to an end on 31 March 2022 and since 1 April 2022, EC03 measures could continue to be delivered to previous scheme rules—subject to some exceptions—until 30 June 2022. Similarly, suppliers have had the option to deliver to the new scheme, EC04, rules from 1 April 2022.

EC04 will be focused on low-income and vulnerable households in Energy Performance Certificate (EPC) Band D-G homes. The scheme will bring positive value to society, with estimated installations of around 800,000 measures in around 450,000 homes. Households could save on average £290 annually off their energy bills over the lifetime, or up to £1,600 in the least energy efficient homes. However, those savings could average £600 next winter. 360,000 homes will be upgraded to EPC Band C, helping more households out of fuel poverty.

Government will mandate minimum energy efficiency improvements requiring Energy Performance Certificate (EPC) Band F and G homes to be improved to a minimum Band D and Band D and E homes to be improved to a minimum Band C, contributing to our statutory fuel poverty target and interim milestone.

To make greater progress on upgrading the least energy efficient homes, there is a minimum target of upgrading 150,000 Energy Performance Certificate (EPC) Band E, F and G private tenure homes. This will ensure the least energy efficient homes are not left behind. Furthermore, a minimum target of 90,000 solid wall insulation measures is introduced to maintain the focus on insulating harder to treat homes, while supporting the solid wall insulation industry.

Under the scheme, support for repairs and replacements of broken gas and electric storage heating systems will be limited to 5,000 homes per year and the repair of inefficient oil and liquefied petroleum gas (LPG) systems will be permitted as a last resort where renewable heating cannot be installed. This will ensure measures installed under EC04 align with the Government’s Heat and Buildings Strategy and net zero targets.

Homes in off-gas rural areas will be incentivised in Scotland and Wales, to ensure homes that may be harder to reach and more expensive to deliver are not left behind. EC04 has been designed to complement the Home Upgrade Grant in off-gas homes in England, social housing funding and the private rented sector regulations. It will continue to work alongside existing energy efficiency and fuel poverty policies in Scotland and Wales.

Up to 50% of a supplier’s obligation may be delivered under the reformed Flexible Eligibility mechanism (EC04 Flex), an increase from 25% under the previous scheme. EC04 Flex enables local authorities, the Scottish and Welsh Governments and energy suppliers to target and refer other low-income households who may not be in receipt of means tested benefits.

A new scoring methodology will be introduced, providing greater support to the worst performing homes. Support will continue for new and innovative installation methods and measures via a reformed innovation measure mechanism. Only fully tested measures with adequate consumer protection will be eligible.

This expansion of the scheme forms part of the wider support package to help households with rising energy bills.

In May, in recognition of increased cost of living and continued rising energy costs, a package of support worth £37 billion was announced, which includes the Energy Bills Support Scheme. Most vulnerable households will receive at least £1,200 of support this year and, all households will receive a £400 grant as a credit from energy suppliers from October 2022 onwards, which does not need to be repaid.