Energy Bill [Lords]

Memorandum submitted by End Fuel Poverty Coalition (EN 22)

1. This briefing note captures the key overarching principles to which the End Fuel Poverty Coalition believes the Energy Company Obligation (ECO) should adhere and is submitted for consideration by members of the Energy Public Bill Committee.

2. About the End Fuel Poverty Coalition - the End Fuel Poverty Coalition (EFPC) is an alliance of environmental, poverty and consumer organisations. We want energy efficient homes, decent incomes and affordable fuel for low income households. We consider the achievement of high levels of energy efficiency can also help create a vibrant low carbon economy, generating hundreds of thousands of jobs.

3. Summary

· The ECO must exclusively target the vulnerable and those on low incomes.

· ECO resources will not be sufficient to effectively address fuel poverty, or to subsidise more expensive measures on behalf of better off households, let alone both. More money is needed.

· Ending fuel poverty requires more than just the right financial mechanisms – the ECO must sit within a broader ‘road map’ for ending fuel poverty.

· Surveys of the British population consistently find that we place the right to a ‘warm dry home’ at the top of our list of priorities, but millions of households in Britain do not have this right

· It is estimated that in the UK there are an average of 40,000 extra deaths each winter as a result of cold housing

4. EFPC position on the Energy Company Obligation (ECO) - correctly designed, the new Energy Company Obligation can make a significant contribution to a radical overhaul of the housing of vulnerable and low income households, however, the Government’s current proposals will result in the ECO being spread too thinly. Ministers intend for it to not only help the fuel poor but also subsidise expensive energy efficiency measures in households which are not fuel poor. ECO resources will be inadequate to achieve either of these objectives, let alone both. This briefing note captures the key overarching principles to which the EFPC believes the ECO should adhere.

5. The ECO must exclusively target the vulnerable and those on low incomes. The Government intends for ECO to deliver on both carbon reduction and ‘affordable warmth’ targets. Action to focus the ECO, at least in its initial years, exclusively on those in the greatest need is therefore a win-win. It will also contribute significantly to achievement of the Government’s statutory target to eradicate fuel poverty by 2016.

6. This approach will also mitigate the risk of the ECO actively increasing, not decreasing, the numbers of fuel poor households. The costs of the ECO will be met through domestic energy bills, leading to a regressive impact on those on lower incomes. The higher the ambition of the ECO, the greater the impact on bills – and the greater the negative impact on fuel poverty [1] .

7. ECO resources will not be sufficient to effectively address fuel poverty, or to subsidise more expensive measures on behalf of better off households – let alone both. More money is needed.

8. When Warm Front finishes in 2012-2013, England will have no publicly-funded energy efficiency programmes for the first time since the 1970s (the Scottish, Welsh and Northern Ireland governments have pledged to continue funding their equivalent programmes until at least 2016). The Government must use public funding to bolster the total amount available – for example, by recycling proceeds from the impending carbon floor price and the sale of emissions permits for the next round of the EU ETS.

9. Ministers have suggested that ECO expenditure will provide funding of around £1-2 billion

per year. Although that is clearly a substantial sum, it must be compared to the estimated £30 to £60 billion that is required to overhaul the homes of the fuel poor [2] - to say nothing of the much broader funding needed to improve all homes in the country to a decent standard.

10. Ending fuel poverty requires more than just the right financial mechanisms – the ECO must sit within a broader ‘road map’ for ending fuel poverty.

11. The Government’s move to regulate energy efficiency standards in the private rented sector is welcome recognition that tackling fuel poverty is not just about providing the right financial incentives and subsidies. A coherent strategy is required to ensure meaningful improvements to heating and insulation standards across the entire housing stock.

12. The Government has commissioned an independent review of fuel poverty targets but this must not delay the urgent action required to tackle the increasing problem of poor quality housing and unaffordable energy costs in all tenures. It is essential that programmes are scaled up now in recognition of the extent of the problem [3] . The EFPC urges the Government to put in place a ‘road map’ for eliminating fuel poverty in line with the statutory fuel poverty target, and to set out the role of ECO and other funding mechanisms within this. We understand that the Government will consult on the design of the ECO later in 2011.

13. Why fuel poverty? Surveys of the British population consistently find that we place the right to a ‘warm dry home’ at the top of our list of priorities, alongside the right to shelter, food and water [4] . Millions of households in Britain do not have this right. They live in cold, damp homes or forgo other essential goods and services in trying to keep their home warm. Fuel poverty results from a combination of low household income, poor energy efficiency standards and high fuel prices. However, while there is a clear link between low income and fuel poverty, there is one major difference – investment in improved heating and insulation standards can provide a permanent and sustainable solution for fuel-poor households. The EFPC believes that a comprehensive national energy efficiency programme to address fuel poverty is urgently needed and that the Energy Company Obligation should be at the heart of this programme.

14. It is estimated that in the UK there are an average of 40,000 extra deaths each winter as a result of cold housing; this figure takes no account of the increased suffering endured by vulnerable people of all ages as a result of illnesses precipitated and exacerbated by the cold. Illness caused by poor housing is estimated to cost the NHS at least £2bn a year, and incalculable damage is caused to the most vulnerable in society due to the lost life opportunities and poor mental health outcomes which are directly attributable to cold, damp homes.

15. EFPC supporter organisations have produced a series of briefings and reports exploring the key design issues of the ECO and its role within a fuel poverty strategy.

June 2011