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)
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