Memorandum submitted by the Parliamentary
Warm Homes Group (EEFP 30)
The Parliamentary Warm Homes Group (PWHG) welcomes
the opportunity to submit written evidence to the Committee's
new inquiry into energy efficiency and fuel poverty.
The PWHG was established to raise awareness
of the problem of fuel poverty and the policies which can eradicate
it. There are 108 MP/Peer Members of the Group.
Alan Simpson MP
Chair of the Parliamentary Warm Homes Group (PWHG)
ENVIRONMENT, FOOD AND RURAL AFFAIRS COMMITTEE
INQUIRY INTO ENERGY EFFICIENCY AND FUEL POVERTY
1. Defra's Departmental Report 2008 shows
slippage against PSA 7 on eliminating fuel poverty in vulnerable
households by 2010, with a rise in the number of households in
fuel poverty. Does Defra need to redefine its approaches to ensure
it meets the statutory 2010 target?
1.1 The PWHG believes that there has been
more than just "slippage" against the PSA 7 target.
There are currently an estimated four million households in fuel
poverty in England, compared to 1.2 million in 2004. NEA estimates
that 80% of these are vulnerable, meaning that it is highly unlikely
that the 2010 target will now be met. It is not just Defra that
needs to redefine its approach to tackling fuel poverty—a
cross-departmental strategy must be developed where Defra takes
the lead to bring together, the Departments for Work and Pensions
(DWP), Communities and Local Government (DCLG) and Business, Enterprise
and Regulatory Reform (BERR) to tackle all the main causes of
fuel poverty—energy inefficient housing, low incomes and
high energy prices.
1.2 The PWHG is deeply concerned that the
PSA 7, which was Defra's joint responsibility with BERR, has now
been dropped with no comparable replacement. This move indicates
a lack of commitment by Government to tackle fuel poverty at a
time when decisive and coherent action is needed. Government must
develop a fully-costed, cross-departmental fuel poverty strategy
if it is to meet its still legal 2016 target to eradicate fuel
poverty among all households. This should include a distinctive
rural fuel poverty strategy which responds to the particular challenges
experienced by those living in more remote areas.
2. How effectively can policies aimed at addressing
the energy efficiency of dwellings tackle fuel poverty, given
recent rapid increases in fuel prices, and how can strategies
be developed to join up energy efficiency approaches with those
on fuel prices and income maximisation?
2.1 The strong link between energy inefficient
homes and fuel poverty is well recognised. The average energy
efficiency rating (SAP) in the UK is 48 and the average household
in fuel poverty has a home with a SAP rating of just 33 (a rating
below 35 is considered a level which constitutes a health and
safety risk under the Government's own health and safety rating
system).
2.2 In the past, the Government indicated
if you could improve the energy efficiency of a dwelling with
better insulation, draught-proofing and heating systems to at
least SAP 65, that this would effectively "fuel-poverty proof"
a home. However, in the current climate of high energy prices,
a much higher SAP rating (around 80) will be needed and a much
wider range of measures including small-scale renewables will
have to be deployed, to permanently lift people out of fuel poverty.
It is therefore crucial that the Government also takes action
to address the problems of high energy prices and low incomes
as well as designing a systematic programme to improve the energy
efficiency of the existing housing stock.
2.3 The Government's recent decision to
increase the Warm Front budget follows its 25% cut in real terms
last year. It is welcome, but still falls short of the recommendation
by the Government's own Fuel Poverty Advisory Group (FPAG) which
stressed it "is essential that Warm Front funding be maintained
in 2008 to 2011 at the 2007-08 level of around £350 million."
Warm Front, fundamentally a very good scheme, has been beset with
problems linked to under-funding, such as the need for customers
to pay top up costs and long-waits for measures.
2.4 The Government hoped to tackle fuel
poverty by increasing the Carbon Emissions Reduction Target (CERT)
obligation on energy suppliers. We believe this is not the right
approach to fund energy efficiency measures. CERT is paid for
by a levy on consumers' bills and takes no account of household's
ability to pay. According to the energy regulator, Ofgem, it costs
the average household £38 a year. Whilst this does not represent
an enormous burden for affluent customers it puts further stress
on fuel-poor households and others struggling with energy costs.
As with any measure that increases fuel costs there is a regressive
element to the funding model for CERT. Programmes funded through
direct taxation, such as Warm Front, present a more equitable
model.
2.5 The PWHG believes that the Government
was right to increase investment into community programmes to
tackle fuel poverty. Street by street approaches which provide
a one-stop shop approach (offering benefits checks, energy efficiency
and energy tariff advice and measures) are in our view, the most
effective way to deliver assistance. However, we have concerns
that yet another scheme has been created—this time the Community
Energy Saving Programme. There are already a huge number of energy
efficiency schemes available, administered by different companies
and organisations and different departments within organisations.
Energy efficiency standards reached vary and no overall body audits
their performance. The whole system is confusing, fragmented,
inefficient and needs simplifying.
2.6 While the Government was right to focus
on energy efficiency in its recent announcement the opportunity
has again been missed to take action to regulate the energy markets
to force energy companies to provide affordable energy prices
to those on the lowest incomes. Increases in energy prices have
been the single biggest contributory factor to rising number of
households in fuel poverty. Between January 2003 and September
2008 the average annual domestic fuel bill (gas and electricity)
increased 125% from £572 to £1,287, resulting in a further
2.2 million households being forced into fuel poverty in England.
Already, in 2008, energy prices have risen by 40%. A further 15%
increase is expected by the end of the year. In France, electricity
prices are to rise by 2% this year, and gas prices by 5%. This
is because their Regulator has the power (and duty) to set affordable
price limits.
2.7 The PWHG has consistently called for
legislation to force suppliers to stop overcharging prepayment
meter customers and to offer their poorest and most vulnerable
customers their cheapest prices—called "social tariffs".
PWGH believes that a minimum social tariff should be framed in
such a way that low-income households pay the lowest possible
price that a supplier offers, regardless of how they pay for their
fuel or their geographical location. A social tariff should also
form part of an energy assistance package which would address
all three fuel poverty drivers (price, income and energy inefficient
housing).
2.8 Despite the Chancellor's promises in
the budget earlier this year that energy suppliers spend on social
tariffs would increase from around £50 million a year to
£150 million over three years, only three suppliers currently
offer a proper social tariff, as defined by Ofgem.
Scottish and Southern Energy's, "Energy
Plus Care" tariff and EDF's, "Energy Assist" tariff
are examples of a good practice, though there are real limitations
in terms of the scale of the schemes and the numbers that can
benefit.
EDF currently offers:
— a social tariff—15% discount
off standard gas and electricity prices—this is their lowest
energy tariff available;
— free energy efficiency advice—to
help change behaviour;
— free or heavily discounted energy
efficiency measures (e.g. insulation, draught proofing, light
bulbs etc.)—so households need less energy to heat their
homes; and
— free benefits entitlement check—to
help increase income.
While the PWHG fully supports this one-stop-shop
approach we do not believe that energy efficiency measures or
benefits checks should be funded as part of the promised £225
million spend by suppliers as this results in less money being
made available for social tariffs (the only mechanism available
to address high price rises). Energy efficiency measures should
delivered as part of CERT or Warm Front, and benefits entitlement
checks funded by the Department of Work and Pensions—this
is their responsibility. The programme should be administered
by trusted local councils and also include impartial advice on
switching tariffs and payment methods.
2.9 The Government also needs to take urgent
action to help households struggling to afford to heat their homes
this winter. The PWHG is calling for the immediate extension of
the Winter Fuel Payment (which currently goes to pensioners) to
the 1.6 million households on low incomes with a child under five
or a member who is disabled. These groups are often not eligible
for suppliers' social assistance programmes. This would cost just
£320 million a year (less than the recent one-off increase
for pensioners).
3. Does the UK efficiency action plan 2007
give sufficient weight to the need to address fuel poverty as
well as tackle green house gas emissions through increased use
of energy efficiency measures?
3.1 There is no integrated strategy in the
plan that will deliver an end to fuel poverty by the target date
of 2016. There is no plan to capture the bio-methane from waste,
to deliver sustainable (and decentralised) gas supplies. There
is no delivery mechanism to make fuel poor households the priority
target for the UK's shift into renewables. There is no suggestion
that Ofgem's primary duty be amended to include an end to fuel
poverty or a shift into sustainable, decentralised energy systems.
The action plan is a wish list, not a delivery mechanism.
4. What should be the comparative contribution
of government and energy supply industry programmes to achieving
fuel poverty objectives, and what levels of investment are required
(for example for Warm Front, the Carbon Emissions Reduction Target
(CERT) and the Supplier Obligation post 2011)? How can these programmes
be better integrated?
4.1 The prime responsibility for eradicating
fuel poverty belongs to the government, not the privatised energy
companies. Government should take action to ensure that the energy
industry operates within a transparent and robust regulatory framework
which ensures that the country's poorest and most vulnerable consumers
have access to the cheapest energy prices and fair tariffs. Given
the high level of company profits, the rising prepayment meter
differentials, the lack of action on social tariffs, and record
levels of households in fuel poverty, it is clear that the current
regulatory approach is quite simply not working.
4.2 As previously noted, the PWHG does not
believe that CERT is the most equitable or cost effective way
to deliver or fund fuel poverty measures. CERT is also a step
in the wrong direction compared to its predecessor the Energy
Efficiency Commitment (EEC). Under the latter, 50% of energy saving
measures had to come from within a Priority Group of low-income
customers in receipt of certain means-tested or disability related
benefits. Under CERT the overall expenditure has doubled but the
priority group figure has been lowered to 40% (ignoring the recommendation
of FPAG). National Energy Action estimated that if suppliers exercise
their flexibility option in full, at best only 36% of benefits
will go to the Priority Group. The recent expansion of the Priority
Group to include those aged 70 and over, regardless of income
has also further diluted the social aims of the scheme. To be
properly fair, this scheme should be paid for out of central taxation.
4.3 The PWHG is calling on the Government
to develop a fully-costed fuel poverty strategy. We are pressing
for the systematic roll out of a single national energy efficiency
scheme which is delivered at a community level. The Government
should carry out a feasibility study into the benefits of merging
all of the current energy efficiency and micro-generation schemes
and pooling their funding. The suppliers' obligation, CERT, could
become a simple financial obligation, with funding from the energy
distribution and generation industry also brought together under
one roof. Local authorities could then either bid down for money,
or funding allocated according to a formula based on either levels
of fuel poverty or high carbon use/combination of the two. Significant
investment would have to be made in training to develop a skilled
work force capable of delivering such a scheme.
4.4 The current fragmented approach to improving
the energy efficiency of the housing stock has many failings:
— The plethora of schemes available
leaves consumers confused and distrustful of those offering help.
— The different programmes often compete
with each other for business.
— Both CERT and Warm Front are commercially
driven meaning many households in need of help miss out. Eg People
living in remote rural areas are twice as likely to be fuel poor
but half as likely to have benefited from a grant for insulation
or heating under Warm Front, partly because it is more expensive
to deliver measures there.
— There are no common energy efficiency
standards so different schemes improve homes to varying degrees.
Eg under the Housing Health and Safety Rating System (HHSRS) an
energy efficiency SAP rating of 35 or below is considered a level
at which action is necessary. Warm Front, however, requires that
properties benefit from a SAP of 65 wherever feasible. There is
also a variation in methodologies used by different agencies to
assess energy efficiency.
— Few of the main energy efficiency
schemes available offer measures to help tackle energy efficiency
in hard to treat homes eg those with solid walls or without a
loft that can be insulated.
4.5 A single energy efficiency scheme, with
teams going door-to-door providing a one-stop shop approach (benefits
checks, impartial information on switching tariffs/ access to
social tariffs/ changing to cheaper payment methods, energy efficiency
advice and measures) could:
— Dramatically increase the uptake
of energy efficiency measures.
— Be more cost-effective and more efficient
also providing a whole house approach.
— Create economies of scale—allowing
for a greater variety of measures to be rolled out more cheaply
including small-scale renewables.
— Ensure no area, is a "no-go"
area for energy efficiency help, no matter how remote.
— Ensure every home, wherever possible,
meets common minimum energy efficiency standards.
— Allow councils flexibility to adapt
to local need.
— Provide simplicity for consumers
and use the brand of trusted local councils.
— Overcome issues surrounding data
sharing.
— Provide a rising scale of grants
based on need and ability to pay—this would be more equitable
than CERT. Supported with low cost green loans for those not in
fuel poverty but without the disposable income to purchase measures.
— Be reliably monitored and verified.
5. What should the longer term strategies
be, in particular for those in the social housing sector after
Decent Homes, and what role should the energy supply industry
have post CERT (post 2011)?
5.1 The PWGH would like to see a single,
integrated energy efficiency scheme. As regards to the Decent
Homes Standard, the energy efficiency standards need radical improvement.
The thermal comfort criteria and the new Housing Health and Safety
Rating System do not sit well alongside each other. BRE research
suggests that many local authorities have voluntarily exceeded
the inadequate DHS but anecdotal evidence suggests that this is
not always the case. There should be a universal minimum energy
efficiency standard. Given the likely trend of rising energy costs,
a new minimum standard of SAP 80 should be set to meet the 2016
duty to end fuel poverty in the UK.
5.2 Provision must be made for the improvement
of hard to treat homes, those that do not have cavity walls, or
which have no loft or access to a loft to insulate. There needs
to be careful monitoring of the DHS standard is to ensure that
HHSRS enforcement action is actually being taken when problems
are identified. The outcomes of enforcement action also need to
be monitored to ensure that high energy efficiency standards are
actually being delivered and opportunities to provide affordable
warmth not missed. In practice DHS can do little to help vulnerable
households who own their own homes except sign post them to grant
schemes available such as Warm Front and CERT who may or may not
have adequate funds available. This needs to be addressed.
6. How can we make greater progress on hard
to treat homes (for example solid wall properties or those not
connected to mains gas supplies)?
6.1 There needs to be greater flexibility
of energy efficiency measures allowed under fuel poverty schemes
and an increase the maximum grant allowed under Warm Front. This
should be increased to £5,500 to pay for the extra costs
of delivering measures such as solid wall or external wall insulation
or micro-generation in non-standard dwellings.
6.2 Energy efficiency schemes must have
targets for remote rural areas and hard to treat homes. The current
framework encourages action on "low hanging easy to treat
fruit". Households in remote rural areas are twice as likely
to be in fuel poverty, but half as likely to receive help under
Warm Front. Anecdotal evidence suggests the same is true of CERT
programmes which focus on more densely populated areas where it
is cheaper to market and install energy efficiency measures.
6.3 For those households in fuel poverty
but not eligible for free energy efficiency measures, the Government
should encourage the development of community credit unions/green
loans which can provide low cost loans to help pay the upfront
costs of energy efficiency measures or micro-generation. Feed-
in tariff schemes, now widespread in Europe, offer a far more
dynamic model of transformation to affordable and renewable energy
systems than in the UK. Best practice on this should be developed,
identified and shared.
6.4 Re homes not connected to the gas network
the PWHG recognises the possible short-term economic benefits
of connecting to the gas network, but believes there is a pressing
need for longer-term thinking. There are issues over security
of supply as Britain becomes a net importer of gas, much from
politically volatile countries and concerns over the rising cost
of gas. There are also doubts over the ability of the network
to cope with a significant increase in capacity. "Gas from
waste" schemes, which can operate in remote areas as well
as in connection to the gas grid, need to be urgently developed
in the UK, along lines already operating in Europe.
6.5 As a long-term solution the PWHG believes
more sustainable solutions are needed. There is considerable potential
for establishing innovative energy service projects and micro-generation,
especially in rural areas.
6.6 Action must be taken to promote greater
awareness of proven renewable technologies among councils and
social landlords in particular, especially as an alternative to
expensive home fuels such as oil-based central heating and liquid
petroleum gas.
6.7 The Government must urgently review
the practice of installing oil-based central heating systems under
Warm Front and as a mechanism to meet the Decent Homes Standard.
These are highly expensive to run and can condemn those on low
incomes to a life in fuel poverty.
7. How should smart metering, new technologies
and microgeneration be deployed and incentivised in fuel poverty
approaches? Is there sufficient scope in current approaches to
apply the most appropriate solutions?
7.1 The PWHG recognises that there may be
benefits for smart meters, but believes that further research
is needed on how and if this new technology will benefit vulnerable
households on low incomes. As an impact assessment on smart meters
conducted for the Department of Business Enterprise and Regulatory
Reform (BERR) in April 2007, highlights:
"Assumptions for main benefits [of smart
meters] for consumers (energy saving, shifting peak load etc)
are unlikely to hold for the fuel poor. We would not expect fuel
poor or vulnerable households (low income single parent, incapacitated,
or elderly households) to be able to reduce their energy consumption
as a result of direct or indirect feedback, at least, not as much
as non fuel poor households."
7.2 A whole host of issues have yet to be
answered—It is not known if displays showing fuel costs
will cause some poorer families to ration fuel at the expense
of their health and comfort. Poorer households may not experience
the same percentage savings on fuel bills as the average family—this
has fairness implications for who pays for their implementation.
If time of use tariffs are introduced, working poor households
could be adversely affected, forced to pay higher prices for their
energy and unable to shift their use. Recent trials have suggested
that vulnerable households are less likely to engage with smart
meters and reap the benefits, finding them too confusing to use.
Whether or not smart meters benefit low income
and vulnerable groups will depend largely on the kind of technology
selected and displays available. It also depends on whether these
are 2 way meters, linked to local energy generation and, crucially,
to who pays for the costs and how.
Recent trials suggest that the average energy
saving from smart meters is just 1.5%. It is absolutely essential,
that smart meters do not divert funding from programmes which
roll out energy efficiency measures. While the PWHG recognises
the benefit to suppliers, given the comparatively small impact
they have on reducing household bills, smart meters should not
be included as a Priority Group measure under CERT.
7.3 As noted, the PWHG believes there is
huge potential for micro-generation especially in households off
the gas network and Government must promote greater awareness
of these technologies. Trials conducted by NEA have shown that
air-source heat pumps can be installed for the same cost as oil-based
central heating (£4,000-5000) but have running costs that
are significantly cheaper than oil.
NEA also conducted effective trials of air-source
heat pumps in park homes (permanently located mobile homes). One
elderly couple were spending up to £40 a week on coal for
their solid fuel heating system but were still not able to keep
warm. By installing insulation and an air-source heat pump their
heating costs were reduced by £25 a week in winter months
to £12 a week. It also had a positive impact on the environment
as carbon emissions were reduced by 60%.
8. Is there a problem identifying those who
are already, or are at risk of becoming, fuel poor, and how can
data sharing across the public and private sector be improved
so that assistance can be targeted?
8.1 There is a strong argument to share
the energy performance certificate and benefits data between Government
departments and with local councils, to help more effectively
target energy efficiency advice and assistance.
8.2 The Pensions Bill will include a provision
for data sharing between the DWP and the energy suppliers. PWHG
recognises the good intensions of this action but has concerns
that it will lead to non-old fuel poor households—the working
poor, low income households with children or a member who is disabled—missing
out on a fair share of social assistance as companies will meet
their obligations in the easiest way possible.
9. What are the specific issues for new homes
and how can strategies ensure that all new homes minimise the
potential for occupiers to experience fuel poverty?
Fuel poverty is generally an issue related to
the existing housing stock and this is where energy efficiency
investment is required. That said, with ever rising energy prices,
the only way to "fuel poverty proof" a home, will be
to install small scale renewables/ distributed energy, along with
effective enforcement of high energy efficiency standards for
new build.
10. How does the Winter Fuel Payment system
impact on fuel poverty and could this funding be better utilised
to tackle the underlying issues leading to households becoming
fuel poor?
10.1 In 2008-09 the Government will spend
an estimated £2.7 billion on Winter Fuel Payments (WFPs).
The universal nature of the scheme means that millions of households
who are comparatively affluent and far removed from fuel poverty
will benefit. The Government estimated that Winter Fuel Payments
take just 100,000 households out of fuel poverty—this does
not represent a cost effective fuel poverty programme.
10.2 The PWHG has consistently called for
the extension of the Winter Fuel Payment to the 1.6 million households
on the lowest incomes with children under five or a member who
is disabled. The Government estimates it would cost £320
million a year to extend the scheme. The PWHG believes that this
would make a significant contribution to helping households struggling
to pay their bills this winter and is a relatively small amount
given the overall cost of the scheme.
Parliamentary Warm Homes Group
October 2008
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