Energy efficiency and fuel poverty - Environment, Food and Rural Affairs Committee Contents

Conclusions and recommendations

Impact of price rises on fuel poverty levels

1.  Despite a clear statutory target for the Government to eradicate fuel poverty, as far as reasonably practicable, in vulnerable households by 2010 and in all households by 2016, we are witnessing the opposite, with a sustained increase in the numbers of those experiencing fuel poverty. (Paragraph 19)

2.  With the 2010 target date less than 12 months away, we agree with the Department of Energy and Climate Change that this target is likely to be missed. The Government should now explain why it did not review its fuel poverty policies earlier in the light of the upward trend in the number of fuel poor which began in 2005. (Paragraph 20)

Effectiveness of targeting assistance

3.  Those charged with tackling fuel poverty will be more effective if they have access to data on a range of variables, including energy efficiency levels of homes and household incomes and fuel costs. However data does not appear to be fully available to all those who require it. We recognise the sensitivities about the use of personal data and support the need for stringent safeguards and clear protocols on its use. However the current position is unnecessarily complicated. Coordinated action by relevant Government departments and agencies could remove some of the barriers quickly, given sufficient priority and political will. DECC should undertake, within 6 months, a comprehensive survey of data needs and current data access arrangements of agencies in both the public and private sectors working on fuel poverty issues. On the basis of this it should put in place within 12 months improvements to enable effective data sharing arrangements between and within agencies such as local councils, Government departments and energy supply companies. (Paragraph 25)

4.  DECC should assess the potential for cost savings from the reduced need to collect and share data on individuals under an area-based approach, while recognising that rolling out such an approach may require improved area profiling to ensure that assistance is prioritised for those households most in need. In addition the Government should urgently evaluate the benefits that could arise from the widespread use of infrared technology which can be quickly used to identify poorly insulated, high energy using properties on a street by street basis. (Paragraph 26)

Pre-payment meters

5.  Ofgem has finally conceded that customers, such as pre-payment meter customers and those who cannot benefit from preferential tariffs attached to certain payment methods or dual fuel deals, have not benefited from competition as much as other customers. (Paragraph 28)

6.  At this stage is not yet possible to judge the full impact of the remedial measures proposed following Ofgem's probe but the regulator must be pro-active and rigorous in protecting customers' interests, particularly those on low incomes. We recommend that the new Energy and Climate Change Committee keeps Ofgem's performance in delivering an effective regulatory regime under review and that DECC reports annually to Parliament on what has been achieved. (Paragraph 29)

Social tariffs

7.  Unless a tariff is the best available 'enduring tariff' it cannot be said to be a true social tariff and should not be promoted as such. We are pleased that Ofgem has moved to clarify guidance to energy companies on this. Nevertheless there remains a need for wider dissemination of information to customers on the availability of, and eligibility criteria for, social tariffs. We recommend that Ofgem requires energy supply companies to publicise criteria determining who is eligible for their social tariff. (Paragraph 34)

Rising block tariffs

8.  We welcome Ofgem's work on rising block tariffs and look forward to its conclusions as to whether new forms of tariff have the potential to incentivise customers to reduce their energy usage while not adversely affecting the fuel poor. (Paragraph 38)

Winter Fuel Payment (WFP)

9.  Improved targeting of the Winter Fuel Payment is essential to redirect resources to where they are needed most. The Government should make the Winter Fuel Payment taxable and end its payment to those subject to higher rate tax. This would provide around £250 million per annum which could be used to provide a revenue stream to bring forward a programme of energy efficiency improvements for fuel poor households and other households with, for example, disabled people who have disproportionately high personal energy needs. Faster progress in improving energy efficiency would reduce pressures to increase the WFP, thus making further savings in the long term. (Paragraph 51)

Maximising benefit take-up

10.  We welcome the provision of combined energy efficiency and benefits advice since this helps to deliver fuel poverty programmes effectively. The Government should evaluate how successful examples of this approach can be implemented throughout the UK. (Paragraph 54)

The Carbon Emissions Reduction Target (CERT)

11.  CERT is intended to be a carbon emissions reduction programme rather than a vehicle for tackling fuel poverty. Although CERT targets must be delivered in part through a low income "priority group", fuel poor households account for a small proportion of this group. Although we believe the Government should fund programmes to tackle fuel poverty, fuel poor customers must also be able to benefit as much as better off customers from climate change mitigation programmes such as CERT. Programmes to tackle fuel poverty should be additional to, not substitutes for, climate change mitigation programmes. Energy supply companies must continue to make their schemes available to all customers. (Paragraph 64)

Delivery of CERT

12.  We are concerned that the current CERT scheme appears to allow measures to be counted against suppliers' targets where the actual benefits are not quantified. Simply supplying customers with energy saving lightbulbs and real time display units will not achieve the maximum notional emissions savings, or cost savings to customers. The amendments to CERT must ensure that measures achieve actual reductions in energy usage and that the impact of measures such as real time display devices and advice provision are assessed by the Department of Energy and Climate Change. (Paragraph 67)

Smart meters

13.  We support the Government's intention to require the energy supply industry to install smart meters. Although ultimately the consumer will fund this initiative, we believe it could help the fuel poor in helping them modify their usage patterns to their advantage. (Paragraph 74)

14.  However, we believe that the 2020 target is unambitious. The Government must decide urgently on the roll-out model for the programme so that the industry can move ahead as fast as possible. Customers also need to be given clear information on the costs and benefits of smart meters, including advice on how they can use them to monitor and adjust their own energy usage and costs. (Paragraph 75)

Warm Front

15.  It is clear that the grant maximum for Warm Front has historically been set too low which has deterred a significant number of applicants from taking up the support available under the scheme. We therefore welcome the recent increase in the grant maxima, however the £6,000 maximum applies only to hard-to-treat properties that are off the gas grid. We recommend that it should be extended to all hard-to-treat properties but this could lead to fewer people benefiting unless overall funding for Warm Front is increased. We therefore recommend that DECC reviews overall funding levels and assesses in 12 months' time whether the levels have been increased sufficiently to fully deal with the problem that puts people off Warm Front help, namely grant levels that did not cover all the costs associated with installing a new high efficiency heating system. (Paragraph 82)

16.  We support the expansion of Warm Front to include the installation of low carbon technologies aimed at the difficult to reach households. The Government must ensure that the results of the small-scale pilot programmes are evaluated promptly in order to allow full national roll-out at the earliest opportunity. (Paragraph 83)

17.   We recommend that the Government considers whether the target timescales for completion of work under the Warm Front scheme should be reduced to ensure that vulnerable households are not left without heating during winter months. It should also review the scheme's performance against the target of achieving SAP 65 levels and ensure that only measures that achieve this target are deployed. Measures to meet a higher SAP rating should be encouraged. (Paragraph 85)

18.  We urge the Government to ensure that the cost of bureaucracy is minimised and that the Minister's review include a re-assessment of Warm Front scheme rules to allow the use of local contractors where doing so can improve value for money. (Paragraph 86)

19.  As eaga operates a monopoly in the provision of Warm Front service, customers have no choice but to use the contractors it specifies. The Government must ensure that eaga investigates all complaints and puts in place measures to address any consistently identified problems. (Paragraph 87)

Decent Homes Standard

20.  Decent Homes has clearly been an effective vehicle for raising standards in social housing. However, the low level of requirements set for thermal comfort means that significant scope remains for improvement in energy efficiency levels. It is clear that the social sector leads the way in improving SAP ratings, but, given the likelihood of many social tenants being on low incomes, it is important to maintain progress and for future investment programmes to prioritise the improvement of energy efficiency levels. (Paragraph 94)

21.  We are disappointed that the Government has not, to date, undertaken an assessment of the costs for achieving higher SAP rates for social housing. We recommend that the Department of Energy and Climate Change works with the Department for Communities and Local Government to ensure that an appropriate thermal comfort level is included explicitly as an outcome from the capital investment programme following on from the Decent Homes programme. We do not accept assertions that it is not practical to achieve a SAP 81 level. We recognise that higher SAP levels will not be feasible for all types of construction but that does not mean that policy should set targets at the levels achievable for poorer housing stock. We recommend that Government assesses the cost and feasibility of introducing a SAP 81 standard as the basis of an improved thermal comfort level for all social housing. If this is declared impractical the corollary is the climate change targets are also likely to be impractical. (Paragraph 95)

Housing Health and safety Rating System

22.  In the private rented sector there is a 'split incentive' for taking action on energy efficiency, because the landlord bears the costs of installing measures but the tenant reaps the benefit of reduced energy bills. As a result there is a need for stronger regulatory forces to encourage action in this sector. We are therefore concerned that one of the levers that is available, HHSRS enforcement action, is not being pursued as vigorously as it could be. (Paragraph 99)

23.  We recommend that the Government urgently reviews the extent to which local authorities use their powers under the Housing Health and Safety Rating System to tackle excess cold. We further recommend that guidelines are issued in the next six months to all local authorities with housing responsibilities highlighting the importance of using HHSRS provisions to ensure fuel poverty levels in the private rented sector are reduced. (Paragraph 100)

Hard to treat properties

24.  CERT's emphasis on cavity wall and loft insulation has been ineffective in helping those living in solid wall properties. We recommend that the Government establish how new technologies, such as air source heat pumps, can be deployed for hard to treat homes. We further recommend that the Government develop a financing model to enable fuel poor households to take advantage of such technologies. There is greater potential for fuel poor households to benefit from community scale schemes. (Paragraph 107)

25.  Local authorities should be required to survey their areas and identify opportunities to retro-fit microgeneration systems in both its housing and business sector. The Department for Communities and Local Government should evaluate the implications for all new housing developments over 50 units in size being required to install a district heating system. (Paragraph 108)

New homes

26.  We welcome the planned ratchetting up of energy efficiency requirements under Building Regulations aligned to the levels of the Code for Sustainable Homes, but we have concerns about the extent to which these are being enforced in practice. The Department for Communities and Local Government pilot scheme to review this is welcome but the lessons from this need to be disseminated nationally to those responsible for building control functions. The Department should issue guidance to local authorities and other building control bodies urgently reiterating the need for rigorous enforcement of energy efficiency requirements. (Paragraph 112)

Future proposals for energy efficiency programmes - Heat and Energy Saving Strategy Consultation

27.  To date energy efficiency programmes have not reduced levels of fuel poverty enough to meet the Government's targets. This reflects in part the lack of separately identified policy goals for fuel poverty reduction within energy efficiency programmes. We are concerned that the sublimation of fuel poverty objectives within the climate change mitigation led aims of energy efficiency programmes has led to a lack of focus on achieving the maximum benefit from expenditure on such programmes for the fuel poor. The latest consultation documents reinforce this view since fuel poverty is addressed as a side-issue rather than being interwoven into all policies. (Paragraph 119)

28.  Despite laudable long-term aims, the consultation documents contain little practical detail and postpone definitive proposals, pending further consultations, summits and the establishment of a Heat Markets Forum. This will only delay the so-called "Great British refurb" and its programme of energy saving measures. We find this surprising given the plethora of previous consultations and calls for evidence, including on metering and billing, the renewable heat incentive and the household energy supplier obligation post-2011. The 2015 target for the insulation of lofts and cavity walls lacks ambition in terms of fuel poverty and meeting the climate change target. We are also extremely concerned at the lack of progress on many of the recommendations we made in our report on Climate change: the "citizen's agenda" in 2007. (Paragraph 120)

29.  Given the urgency of the issue, and given that the technologies and techniques to achieve high home energy efficiency are now well known, DECC should have set out a detailed action plan on how to deliver domestic energy efficiency (reflecting both climate change and fuel poverty objectives) within its consultation on the Heat and Energy Saving Strategy. The Government should now curtail its consultation process and in the next three months should produce a detailed action plan for home energy efficiency sufficient to achieve its fuel poverty objectives. (Paragraph 121)

Scale of funding required

30.  We consider around £4 billion a year over the next seven years to be a realistic estimate of the cost of raising the energy efficiency levels of fuel-poor households to SAP 81, sufficient to remove the majority of households from fuel poverty. This would require nearly a trebling of current funding for energy efficiency programmes directed at fuel poor households. However redirecting other "fuel poverty" programme funding into energy efficiency measures would reduce the need for additional public money. (Paragraph 128)

Balance of funding responsibilities - energy supply industry and Government roles

31.  Whilst it is right that energy companies contribute to improving the overall energy efficiency of the UK we believe that policies designed to address fuel affordability should be funded from general taxation. (Paragraph 134)

Awareness of support

32.  There is a lack of clarity about what companies are spending on CERT and to what extent this expenditure is being recouped from customers. Equally customers are largely unaware of the assistance available to them under the scheme. We called over two years ago for action to clarify information on fuel bills and have been disappointed with the lack of consistent action from the energy supply industry in response to this. (Paragraph 147)

33.  We recommend that Ofgem requires all energy suppliers to apply improved and consistent standards for the provision of information on bills. Bills must include a clear breakdown of the costs per household of CERT, so as to give every indication of the cost/benefit of this intervention, as well as giving a cost per household of other programmes required by the regulatory regime such as the European Emissions Trading Scheme and the Renewables Obligation. Billing must also provide signposted information to encourage customers to take up home energy assistance available under its CERT scheme. (Paragraph 148)

34.  We recommend that Ofgem requires energy companies to report annually on the expenditure undertaken to meet CERT or its successor programmes. This information should show clearly the proportion of spending funded by both the company and its customers. (Paragraph 149)

35.  It is not clear whether Ofgem has sufficient access to the energy companies' financial information. We received conflicting evidence on this from Ofgem who told us "we do have powers that we use in our energy supply probe exactly to get all the detailed information that we need from companies", yet also that "there are some areas where we are seeking additional powers […] in respect of the wholesale gas and electricity market we want to have additional powers that tackle market abuse". (Paragraph 152)

36.  We are concerned that Ofgem has been slow to address failings in some parts of the energy market and has not communicated clearly to customers what steps they and energy companies have taken to ensure prices for all customers are kept as low as possible. (Paragraph 153)

Delivery of a national action plan - an area based approach

37.  We welcome the Secretary of State for Energy and Climate Change's recognition that energy efficiency proposals have to date been incremental and his support for a comprehensive national approach delivered at a community level. (Paragraph 163)

38.  We regret that there has to date been a lack of ambition in the Government's plans to upgrade the energy efficiency of our existing homes, which is in stark contrast to the clear aims for improving the energy efficiency levels of new homes. We consider that the piecemeal approach to programmes has been a deterrent to setting higher ambitions for energy efficiency of English homes and that the arguments for an area-based approach, focusing first on the areas of most need, are compelling. (Paragraph 164)

39.  Given the experiences already gained under existing schemes such as CEEF and Warm Zones we do not think it is justifiable to wait for the outcomes of CESP before developing detailed proposals on area-based approaches. We therefore recommend that DECC undertake an assessment within the next six months of the costs and benefits of realigning existing programmes into a comprehensive, area-based programme, examining the potential benefits to be had from more efficient targeting and delivery, with improved customer awareness and uptake. This assessment should encompass how area-based approaches could enable integration of energy efficiency with income maximisation and price minimisation measures for the fuel poor. It also needs to address the benefits of integrating energy efficiency and heat generation programmes. (Paragraph 165)

40.  Locally-led programmes can be highly effective in utilising local knowledge, joining together local partners and engaging local residents. Local authorities are well placed to lead on energy efficiency and fuel poverty programmes, with their unique combination of cross-organisational links, democratic mandate to deliver local priorities, contacts with local residents and in-depth understanding of local circumstances on a range of factors such as the condition of housing stock and socio-economic profiles. (Paragraph 166)

41.  We recognise that there is a need to define areas for schemes carefully, including setting the appropriate geographical scale as well as location and therefore support the use of local authorities as coordinators and delivery agents of area-based programmes, and not merely as partners in delivering energy companies' targets. (Paragraph 167)

42.  This approach could enable energy company delivery of CERT programmes to be replaced with a levy on energy companies paid into a central fund. Combined with funding from other programmes this would be distributed to local authorities to fund delivery of the national action plan to upgrade energy efficiency. (Paragraph 168)

Refocusing Government priorities

43.  Fuel poverty has slipped down the list of Government priorities at a time when rising energy prices mean action is most needed. The creation of the Department of Energy and Climate Change provides the opportunity to rectify this but there is little indication that this is yet happening. (Paragraph 171)

44.  We recommend that the Secretary of State for Energy and Climate Change sets out in the next three months the level of priority his department will give to fuel poverty objectives and how it will work with other Government departments, agencies and private organisations to fully implement its proposals. (Paragraph 172)

A national plan for energy efficiency

45.  The Government needs to set out a road-map showing how it intends to meet its fuel poverty targets and identifying the contributions from each of the three elements affecting fuel poverty levels (namely prices, incomes and energy efficiency levels) towards reaching the targets. This strategy should include a costed action plan which identifies the levels of funding required to deliver the programmes needed, together with a timetable for planned phasing of expenditure and identification of key funding sources. Responsibilities of each department should be clearly set out. (Paragraph 177)

46.  The major factor in derailing the Government's progress towards its 2010 target was the unanticipated and unplanned-for hike in electricity and gas prices. While it is not always possible to accurately forecast price movements it is nevertheless possible to set out a range of likely price scenarios. DECC's action plan therefore needs to be based on a range of scenarios for fuel prices, covering the spectrum from high to low, in the coming years and decades. This should set out specifically how it plans to meet the 2016 target within its fuel price scenarios. (Paragraph 178)

47.  We recommend that as part of this plan the DECC sets a target date for improving the English housing stock to a specific level of energy efficiency. This level will be dependent on the modelling of the impact of price rises and income levels on fuel poverty. We recommend that SAP 81 should be adopted wherever practicable, with a minimum SAP level of 65. (Paragraph 179)

48.  Alongside the work on the action plan, we recommend that DECC commission, and report on within 6 months, a review of fuel poverty reduction policies undertaken by similar European countries and assess their effectiveness in a UK context. (Paragraph 180)

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2009
Prepared 10 June 2009