Energy Bill

Memorandum submitted by Age UK (EN 14)

1. The Energy Bill, which will give effect to the Green Deal, signals a welcome step change in the government’s approach to the improvement of our housing stock, much of which is characterised by inadequate insulation and inefficient heating systems. A concerted programme of home improvement work is essential if we are to improve energy efficiency in homes and reduce our use of fuel.

2. The Bill is very short of details about how the Green Deal will work, however, particularly in relation to people in fuel poverty. This briefing therefore aims to give thematic suggestions which might be best fleshed out with probing amendments, seeking, at least, a ministerial promise to reflect on the issue discussed and report back at a future stage. One specific proposal about data sharing (under ‘Identifying the fuel poor’, below) is also included, which would require a new clause.

3. Age UK is also supporting the following campaigns:

· The End Fuel Poverty Charter, calling for a fully costed Fuel Poverty Plan

· Friends of the Earth’s campaign calling for the Government’s minimum energy efficiency standard for private rented properties to be introduced from 2016 rather than 2018 as is currently planned; to ensure the Secretary of State raises the minimum standard progressively over time; and to bring forward from 2016 to 2014 the introduction of the Government’s existing measures enabling tenants and local authorities to make reasonable energy efficiency requests of landlords.

· Stop Climate Chaos Coalition’s Warm Homes Amendment, calling for the Government to set out a level of ambition from the Bill on energy savings and commit to issuing a plan to meet this level of ambition.

Background

4. The shape and structure of the Green Deal appears to make good sense to the ‘average’ householder with reasonable incomes, a good understanding of loans and debt, a clear grasp of form-filling and paper trails, and a confident approach to builders and building work disrupting their homes. However, we believe the Government must consider other types of households in regard to the Green Deal.

Key facts

· One third of households are headed by a retired person, half of them living alone. [1]

· 1.8 million pensioners (16%) live below the poverty line (and a very large proportion of the rest are clustered just above the poverty line). [2]

· 3.5million pensioner households live in fuel poverty, needing to spend more than 10% of their incomes on fuel bills to keep adequately warm. [3]

5. We are concerned that the Bill does not give answers as to how well the Green Deal will work for these households. Ministers must clarify how vulnerable older people will be able to share in the benefits of the scheme and be supported to do so. This is doubly important because the only publicly-funded programme assisting people in fuel poverty, Warm Front, is being shrunk, and will disappear entirely when the Green Deal is introduced.

Consumer protection

6. We are pleased that the Bill addresses the issue of consumer protection. It is essential that the assessment of the property and advice on measures which could be undertaken within the Green Deal be objective and independent. Implementation of the work must be done by accredited installers, backed by adequate measures to put right accidental damage and to ensure that systems are working properly and efficiently. Additionally, the Government should draw on the experience accumulated through Warm Front, particularly in regard to service delivery.

7. It will also be important that people who are not digitally-enabled have equal access by alternative routes to follow and check the procedures in the Green Deal process. Computer systems can speed up and make for savings in the administration of the scheme, but many of those people in vulnerable groups who will need the help from the Green Deal remain, for the present, without the facility to engage electronically.

Low income and fuel poor households

8. The Green Deal will include a financial framework that enables energy saving measures to be paid for in instalments via energy bills. The core principle is ‘The Golden Rule’, meaning that the instalment payment for the energy saving measures should not exceed the projected associated cost savings on an average bill for the duration of the Green Deal Finance arrangement, which could be for as long as 25 years.

9. The Green Deal recognises that there will be households for whom the ‘Golden Rule’ cannot be applied. In the main, these will be hard-to-treat households where significant work is required to make an appreciable difference to their energy efficiency, or households which ought to be heating their homes better, and for whom the effect of improved energy efficiency will be increased warmth rather than financial savings to sustain the repayment of a Green Deal loan. The Government argues that this is where the new Energy Company Obligation (ECO) comes in, releasing funds which can support these households; we believe the process needs further clarification. We would like to know:

· If the ECO will go into a single fund, or if each company (as with CERT) will be administering their own funds for the benefit of their own customers?

· If the consumer will still be eligible to follow the Green Deal ‘consumer journey’, with all the protection and accredited providers which characterise the Green Deal approach?

· If ministers will publish more detailed guidelines about the characteristics of the households who may be eligible for help via the ECO?

· Who will make the decision that the work (or a certain part of the work) will be met with ECO money rather than the Green Deal finance package? (We presume it will be an independent assessor).

10. We would also like to know whether this Government has calculated how much it needs to raise through the ECO to start bringing down the numbers of fuel poor households, and, if so, when might we expect to see fuel poverty eradicated? The target date (2016 in England) is still on the statute book, and ministers have talked about their targets on fuel poverty, but have not clarified their position.

Identifying the fuel poor

11. The Energy Performance Certificates (EPCs) must be clear and comprehensive. It is good to see that EPCs will be more publicly available, but the financial paperwork must meet the highest standards of accessibility and transparency. Lord Marland is leading a review of EPCs. Building a better understanding of where our poor and energy-inefficient housing stock is, and what can be done to improve its performance, is fundamental to the accomplishing of the Green Deal’s intentions. In the space between now and the start of the Green Deal, it would be very helpful to accelerate the EPC process, so that we can start 2013 with a better map of where to focus effort.

12. At the same time, the Bill offers an opportunity to extend the scope of data sharing. If the details of Council Tax Rebate claimants, where we know that householders are poor and we know their addresses, were matched with EPC information, where we know which houses have energy efficiency issues, we could be creating a tool which would enable the Green Deal to get off to a strong start with an orderly focus on the fuel poor. Other benefit recipients could be considered for inclusion too. The data sharing experiment, permitted under the Pension Act for matching Pension Credit recipients with domestic electricity bills, is judged a success and will be used to deliver the proposed Warm Homes Discount this year. It would be disappointing if the legislative opportunity presented by this Bill was not used to further the data matching process.

Community initiatives under the Green Deal

13. The Green Deal is being shaped very much around the individual householder interacting with a Green Deal provider. However, we believe there are circumstances where it may be more appropriate for a group of householders to work together – for example to develop a combined heat and power or district heating scheme, or where a group of hard-to-treat homes want to install ground source heat pumps (a task much more efficiently done if a neighbourhood is working together). In addition, people working as a community will tend to help each other, and reinforce each other’s determination to make energy savings. It will be important for the Green Deal to be able to deal with collective initiatives – perhaps where people come together as a co-operative or social enterprise – and that Green Deal finance or funding drawn from the ECO can be accessed by these schemes. There must be a facility in the Bill to allow for this possibility.

Future-proofing the scheme

14. Under the Green Deal, it is accepted that the loan incurred from home improvements will remain attached to the property for a number of years. However, the incomes of most older people decline (in terms of purchasing power) over time, and events such as bereavement can lead to a sudden, sharp drop in income and spending power. We are therefore concerned that a household which set out confidently with a Green Deal package and Green Deal loan could, over a period of years, slip into fuel poverty because their energy bills (including the loan repayment) come to constitute more than 10% of their disposable income. The Government has promised that consumers who default on Green Deal payments will have the same protection as the defaulters on current energy bills, such as protection from disconnection, and access to the energy companies’ own ‘safety net’ procedures. We believe this scenario to be a very real possibility for which the Government needs to be prepared with a structural solution.

June 2011


[1] Household Projections, 2008 to 2033, England . Office for National Statistics, 2010

[2] Households Below Average Income 2008/9 , Chapters 2 and 6, DWP, 2010 (figures quoted after housing costs)

[3] Based on our own estimate that 50% of all fuel poverty is in the older population (65+) and on a YouGov poll (December 2009) for the National Housing Federation, which puts the total all-age figure at 7.25 million .

Prepared 9th June 2011