Memorandum submitted by Warm Zones Community
Interest Company (FP 35)
EXECUTIVE SUMMARY
Progress against Government targets
The Government will not meet its statutory target
to eradicate fuel poverty amongst vulnerable households by 2010
and is likely to fail to meet the second statutory target of eradication
fuel poverty amongst all households by 2016 without a significant
increase in the level of investment, particularly in so called
hard to treat properties.
The definition of households in fuel poverty commonly
used—ie those households where more than 10% of income has
to be spent on fuel for adequate heating
The current definition is adequate, although
it is not helpful in delivering many of the programmes. WZcic
believes concentration should be on delivering programmes to provide
affordable warmth rather than discussing the definition.
The coherence of the Government's initiatives
on energy efficiency
The current initiatives are not coherent or
well coordinated and tend compete with each other to deliver the
same measures in the same properties. CERT does not always deliver
the most appropriate measures to address fuel poverty and the
stop start nature of many of the schemes mitigates against coherent,
consistent, long term delivery.
The methods used to target assistance at households
which need it most
The current schemes are not well targeted on
those in fuel poverty with many of those benefitting from the
schemes not in fuel poverty and significant numbers of fuel poor
households not eligible for the assistance available.
Social tariffs and plans to put social price support
on a statutory footing
The clarity that putting assistance on a statutory
footing is welcome, however, WZcic would welcome a degree of flexibility
for the energy supply companies to invest in more effective and
sustainable support for their low income customers such as income
maximisation services.
Winter Fuel Payments and Cold Weather Payments
Support for increased income and reduced fuel
bills is welcomed, however, the current level of investment in
short term income and price support is three times the level of
more sustainable investment in energy efficiency improvements.
WZcic would like to see a more balanced provision.
Support for households who are not connected to
the mains gas grid
WZcic supports the extension of the mains gas
network where this is cost effective, however, to be an effective
way to address fuel poverty, ways must be found to fund the necessary
heating systems to enable low income households to take advantage
of the gas supply. Other measures must also be found for properties
where the extension of the network is not a cost effective option.
1. BACKGROUND
1.1 Warm Zones Community Interest Company
(WZcic) is a social enterprise, which is a wholly owned subsidiary
of national energy efficiency charity National Energy Action (NEA).
The company was formed in 2000, initially to operate five pilots
to test the Warm Zone approach to the delivery of energy efficiency
and related services to address fuel poverty. This approach involves
the proactive, door step assessment of the energy efficiency standards
and income and welfare benefit status of all the households in
the Zone area. This assessment is followed by the coordinated
delivery of energy efficiency measures and a range of related
services to meet the needs of the households identified. Although
primarily targeted at low-income and other vulnerable households,
Warm Zones aim to offer something to all households in the areas
in which they operate. Since the completion of the initial pilot
phase in 2004, WZcic has continued to refine the Warm Zone model
and developed new zones.
1.2 In nearly 10 years of operational experience
WZcic has assessed almost 900,000 properties and delivered high
quality, customer focussed, energy efficiency and related services
to over 290,000 households. In 2008-09 the 15 operational Warm
Zones delivered energy efficiency measures to 65,000 households.
In addition, during the same period, the company's income maximisation
services achieved over £7 million of verified additional
welfare benefits with an average increase in household income
of almost £3,000 per annum for each successful household.
1.3 WZcic welcomes the Committee's decision
to conduct an inquiry into the effectiveness of policies to address
fuel poverty and the opportunity to comment on the range of issues
identified by the Committee and welcomes the opportunity to submit
written evidence.
2. Progress against Government targets
2.1 The Government has two statutory based
fuel poverty targets: ensuring, as far as reasonably practical,
that no vulnerable households suffer from fuel poverty by 2010
and ensuring, once again as far as practical, that no households
are in fuel poverty by 2016. It is clear that the first target
will not be met. The Government's own estimate indicates that
there are currently 4.6 million households in fuel poverty in
England. Recent increases in energy prices and the impact of the
economic slow down have reversed the progress made in reducing
fuel poverty achieved the early 2000s.
2.2 It is the view of WZcic that without
significant additional investment, particularly in the so called
hard to treat properties off the mains gas network and those with
solid walls, the 2016 target is also in jeopardy. As well as additional
resources, more effective targeted delivery will be required to
ensure the available assistance is delivered to those households
most in need.
3. The definition of households in fuel poverty
commonly used—ie those households where more than 10% of
income has to be spent on fuel for adequate heating
3.1 WZcic regards the current definition
as adequate. Any move to amend the definition could be seen as
an attempt to "define the problem away". The definition
is not particularly helpful in targeting fuel poor households
as it is necessary to conduct an assessment of the energy efficiency
of the dwelling and the income of the household before determining
whether a household is in fuel poverty. Very few schemes carry
out such assessments, even after measures have been installed.
However, the definition is useful in measuring progress against
the statutory targets.
3.2 WZcic would prefer that, rather than
debating the adequacy or otherwise of the definition, efforts
were concentrated on developing and implementing effective policies
and programmes to ensure that all homes can be adequately and
affordably heated.
4. The coherence of the Government's initiatives
on energy efficiency
4.1 There are a number of programmes that
provide funding to deliver energy efficiency measures in the homes
of low income household and as a result can contribute to addressing
fuel poverty. It is the view of WZcic that these policies are
not currently coherent or well coordinated. The main programmes
are:
4.2 The Government's Warm Front scheme provides
grants to private sector households claiming a range of means
tested and other welfare benefits to install a range of insulation
measures and heating systems in England. There are similar Government
grant schemes in the devolved nations.
4.3 The six major energy suppliers have
a licence obligation to invest in measures to reduce carbon emissions
resulting from energy consumption in the home. The primary aim
of this obligation, the Carbon Emissions Reduction Target (CERT),
is to reduce carbon emissions, although the companies much achieve
a proportion of the savings (currently 40%) from so called Priority
Group households. The Priority Group is defined as those households
claiming a range of welfare benefits (roughly the same as the
Warm Front qualifying benefits) and households containing someone
over the age of 70. CERT delivers a range of measures that provide
the companies with cost effective carbon savings. These include
a limited range of insulation measures including cavity wall and
loft insulation. CERT measures can be delivered in any home irrespective
of tenure.
4.4 In addition local authorities and other
social landlords invest in energy efficiency measures in their
properties to meet the thermal comfort criteria of the Decent
Homes Standard.
4.5 These programmes represent considerable
investment in energy efficiency, a significant proportion of which
can be invested in schemes to address fuel poverty. However, it
is the view of WZcic that these schemes are not well coordinated.
Warm Front and CERT often compete directly to install the same
measures in the same properties. There is also considerable competition
between the six energy supply companies and their installers and
agents to identify opportunities to install the limited range
of cost effective measures funded by the scheme. This competition
is wasteful with the companies and their agents contacting the
same households to offer them the same measures. Perhaps of more
concern, it is the experience of WZcic that this competition and
the resulting plethora of choice can prevent many households from
taking up energy efficiency measures. Faced with too many options,
many households simply do nothing.
4.6 The energy supply companies are given
a considerable amount of freedom to deliver their programmes in
the way they wish. While this flexibility may deliver the savings
at the lowest cost to the companies and hence to their customers,
it does limit the value of the investment devoted to physical
energy efficiency measures and therefore to tackling fuel poverty.
For example, approximately 29% of the CERT targets delivered to
date have resulted from low energy lighting.[121]
While this may be cost effective for the companies, a few low
energy light bulbs will have a limited impact on fuel poor households.
Low energy light bulbs are being phased out of the scheme, however,
the recent introduction into the scheme of Real Time Display units
and advice could deflect significant amounts of CERT resources
from hard insulation measures.
4.7 The companies also switch schemes on
and off, often at short notice, to manage the delivery of their
targets. While this may be logical from the financial planning
perspective of the companies, it creates significant problems
for the supply chain and makes it difficult to deliver coherent,
consistent, long term programmes. The stop start nature of the
programmes is also likely to increase costs as the supply chain,
including materials manufacturers and suppliers, installers and
programme managers, have to contract and expand their businesses
to accommodate the variations in the funding stream.
4.8 The Thermal Comfort criteria of the
Decent Homes Standard has encouraged considerable investment in
energy efficiency in social sector properties. However, the standards
are low and properties which meet the basic standards are unlikely
to provide affordable warmth to the majority of tenants. While
it is accepted that many social landlords have gone beyond the
minimum standards, WZcic believes that the aim of the standard
should be to provide affordable warmth to the majority of social
tenants. As such the thermal comfort criteria should, as a minimum,
guarantee that properties meet the current Building Regulations
standards for insulation and heating system efficiency. The Government
is in the process of reviewing the Decent Homes Standard. This
review offers the opportunity to revise the Standard to the extent
that it represents a more effective tool to address fuel poverty
in the social sector.
4.9 Increasingly, local authorities are
setting targets for the proportion of private sector properties
in their areas required to meet the Decent Home Standard. As a
result an enhanced Thermal Comfort requirement in the Standard
could also help to combat fuel poverty in owner occupied and private
rented properties.
4.10 It is interesting to note that the
Scottish Government is developing a more coherent approach to
their energy efficiency programmes than those in England. The
Energy Assistance Package provides a single customer interface
for energy efficiency schemes and seeks to combine Government
funding with resources available from the CERT programme, to deliver
the required energy efficiency improvements. This programme could
point the way for more coherent energy efficiency programme delivery
in the rest of the UK.
5. The methods used to target assistance
at households which need it most
5.1 WZcic would argue that in general current
energy efficiency schemes are not well targeted at those most
in need. The programmes identified above are largely demand led
and require potential beneficiaries to contact the companies or
the managing agents directly. The companies and managing agencies
utilise a range of methods to target those eligible for assistance,
however, there is only limited attempts to target those most in
need. In deed, many of the methods used to promote the schemes
and identify eligible households actually make it difficult for
the most vulnerable households or those who need the assistance
most, to access the schemes. For example, press advertising which
contains freephone numbers and free post addresses, are unlikely
to elicit significant numbers of responses from those who lack
the confidence to use the telephone or who have literacy difficulties.
5.2 The design of some schemes also mitigates
against effective targeting of those most in need. For example,
the inclusion of all over 70's in the CERT Priority Group, meant
it was easier for the energy supply companies to promote their
schemes to more articulate, aware and better off over 70's than
those most in need.
5.3 The direct, proactive approach taken
by Warm Zones is much more effective at identifying those most
in need, those who tend not to make direct applications for assistance.
This approach, together with the partnership building with local
caring agencies and other voluntary organisations, can provide
vulnerable households with reassurance and result in improved
take up amongst the most vulnerable and needy households.
5.4 As was noted above, the current schemes
use proxies, mainly welfare benefits, for fuel poverty. It is
well documented that welfare benefits are not good proxies for
fuel poverty. For example the National Audit Office found that
75% of households eligible for Warm Front were not in fuel poverty,[122]
although the report did acknowledge that subsequent increases
in energy prices would be likely to push a large proportion of
these households into fuel poverty. The same report suggested
that the scheme is only available to 43% of vulnerable fuel poor
households suggesting that over half of such households are not
eligible for assistance.
5.5 The Warm Zones door step assessment
process involves an energy efficiency assessment of the property,
together with an income and welfare benefit assessment of the
household. As a result the Warm Zones are able to identify those
household who are in actually in fuel poverty rather than relying
on benefit proxies. Where the necessary funding is available,
many of the zones provide free measures to all non qualifying
fuel poor households.
5.6 The direct, proactive approach and door
step assessments utilised by WZcic provides the most effective
way to target the available assistance to those households most
in need.
6. Social tariffs and plans to put social
price support on a statutory footing
6.1 WZcic supports any measures that reduce
the cost of energy to low income households. In addition, putting
social price support on a statutory footing should ensure consistence
of approach across the companies. This consistency will make it
more straightforward for those agencies providing advice to low
income households to ensure such households get the most appropriate
tariff from their energy supplier.
6.2 However, there alternative ways to support
low income consumers that can be more cost effective that simple
subsidising their energy bills. The current voluntary expenditure
on social programmes by the energy supply companies, contains
flexibility to fund a range of initiatives to support their low
income customers. Some of the companies have utilised this funding
to support income maximisation services that assist households
to claim the welfare benefits to which they are entitled. Each
£1 invested in such a service produces increased income of
up to £20 for successful households. This increased income
will continue for a number of years, whereas £1 spent on
price support will represent a one off benefit.
6.3 It is WZcic experience that successful
claimants obtain an increase of almost £3,000 in their annual
income. As a result WZcic would argue that the companies should
be allowed flexibility in their social expenditure once the statutory
social tariff is introduced.
7. Winter Fuel Payments and Cold Weather
Payments
7.1 As a non means tested payment, the Winter
Fuel Payment is not well targeted on those most in need and goes
to significant numbers of better off households. WZcic accepts
that the universal nature of the benefit makes it easy to administer
and does ensure that those over 60's who are in need do receive
the benefit.
7.2 Cold Weather Payments are better targeted,
being linked to the benefit system and the recent increase in
their value make the payments significantly more useful to the
low income households in receipt of the benefit.
7.3 There is a significant disparity between
the level of short term income or fuel bill support for elderly
and other low income households and the long term, sustainable
investment in energy efficiency improvements. The cost of the
Winter Fuel Payment alone is approaching £3 billion per annum
while the Warm Front budget is £369 million in the current
year and the sum spent on the CERT Priority Group is unlikely
to be more that £500 million per year. Investment in energy
efficiency improvements provides sustainable reductions to fuel
bills in addition to reductions in CO2 emissions.
8. Support for households who are not connected
to the mains gas grid
8.1 WZcic is concerned that current energy
efficiency schemes provide a limited range of support for households
occupying a number types of property, including those not connected
to the mains gas network. There is clear evidence that mains gas
is currently the cheapest fuel for space and water heating. WZcic
has welcomed the recent introduction of arrangements by the energy
regulator, Ofgem, to fund the extension of the mains gas network
to households and communities living in the most deprived areas.
8.2 However, the experience of WZcic, in
trying to implement such schemes, is that although the installation
of the new gas network can be funded, the stumbling block is identifying
funding for the necessary new gas heating systems. Unless there
is a high proportion of social housing in the area and the social
landlord has the resources to fund the new heating systems, these
schemes are unlikely to be viable. To trigger the Ofgem funding,
a certain proportion of households in the area need to be able
to take advantage of the gas supply. It is difficult to see how
new heating systems could be funded in low income private sector
households as it is unlikely that the householders will have the
necessary capital to invest in the systems themselves. Unless
a source of funding for the necessary heating systems can be found,
this exciting initiative is likely to have a limited impact.
8.3 There are a significant number of properties
where, because of their distance from the gas network and other
physical factors, it will never be economic to extend the network.
As a result, WZcic supports the inclusion of alternative technologies,
within the current schemes, to provide affordable space and water
heating in properties off the mains gas network. Measure such
as heat pumps, bio fuel boilers and solar thermal systems could
make a contribution to the provision of affordable warm in off
gas network properties. The main drawback is that these technologies
tend to be more expensive than gas and oil heating systems. As
a result, these measures are not attractive to the energy companies
CERT funding and fewer households could be helped from tax payer
funded programmes such as Warm Front, if these measures are included
in the scheme.
February 2010
121 Carbon Emissions Reduction Target Update; Ofgem
December 2009. Back
122
The Warm Front Scheme: Report of the Comptroller and Auditor General;
HC 126 Session 2008-09; 4 February 2009. Back
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