Energy and Climate Change CommitteeWritten evidence submitted by Consumer Focus
About Consumer Focus
Consumer Focus is a statutory consumer group established by the 2007 Consumers, Estate Agents and Redress Consumer Focus is the statutory consumer champion for England, Wales, Scotland and (for postal consumers) Northern Ireland.
We operate across the whole of the economy, persuading businesses, public services and policy makers to put consumers at the heart of what they do.
Consumer Focus tackles the issues that matter to consumers, and aims to give people a stronger voice. We don’t just draw attention to problems—we work with consumers and with a range of organisations to champion creative solutions that make a difference to consumers’ lives.
1. Uptake targets
2. It is important to differentiate between energy efficiency measures in general, Green Deal finance and the Energy Company Obligation. We do not consider that there should be annual targets for take-up of Green Deal finance. This is a private sector loan instrument which may be useful for some consumers, but is only one way of paying for energy efficiency measures and may not be suitable for many consumers. Targets could lead to overselling, including by government, which could result in long-term detriment for consumers. Consumers will take up Green Deal finance if they think it offers them a good deal.
3. We consider instead that Government requires a clear, long-term, target for domestic energy efficiency installations. The Green Deal framework, including ECO, seeks to deliver on a number of fronts: to help fuel poor households; kick start solid wall insulation; open up a competitive energy services market; and deliver carbon savings. However, Government’s own predictions are that the Green Deal and ECO will only help 3.6 million homes, and will fail to meet its carbon and fuel poverty goals. Government should set out a clear vision for the existing housing stock, set targets that give notice to consumers and the property market, be prepared to continuously improve the Green Deal framework by learning from problems as they arise, and provide adequate resources to meet its goals.
4. Consumer Focus advocates the development and delivery of a strategy to improve all homes to target standards of EPC band B, or in the case of “hard to treat” homes, EPC band C. The standards were developed in the research behind our 2009 report “Raising the SAP”. Use of a minimum EPC band is attractive for its simplicity, but it is a target that will be more difficult for some homes to meet than others. We successfully advocated the use of the EPC as part of the Green Deal advice programme, to start building a clear and consistent cross-Government tool to communicate the value of energy efficiency to consumers.
5. Energy Company Obligation delivery
6. As the Energy Company Obligation is funded through consumers’ energy bills it is crucial that the scheme is delivered in a cost-effective way. With its predecessor, CERT (the Carbon Emissions Reduction Target), there was a lack of transparency and accountability regarding the costs of the scheme and how those costs were recovered from consumers. DECC has recognised this and committed to improving transparency under ECO.
7. Under Article 23 of the ECO order,1 companies must provide information requested by the scheme administrator2 in relation to:
(a)
(b)
8. As well as the total cost this can include information on the breakdown of costs, which will be important in assessing the effectiveness of the policy and how it can be improved.
9. It will be important to monitor marketing and search costs. There is evidence that under CERT the cost of finding suitable consumers in the Priority and Super Priority Groups has added significantly to the cost of the scheme, and the same problem could continue with the Affordable Warmth component of ECO (AW ECO). Supporting policies could be introduced to reduce these costs, for instance data-matching using the Department of Work and Pensions data, or measures that increase demand for domestic energy efficiency in general.
10. It will also be important to monitor the level and sources of co-financing for each ECO installation. DECC’s impact assessment for Green Deal and ECO assumes that under the Carbon Saving Obligation (CSO) of ECO measures will be co-financed up to a certain level, for instance by householders taking out Green Deal finance. If consumers are unwilling to take out Green Deal finance, or to co-finance measures through other means, the cost to all energy consumers of delivering the obligation will increase. In such a case, the government should take additional steps to ensure ECO targets can be met without additional cost to energy consumers. This could be done through measures that increase demand for domestic energy efficiency in general, for instance, a council tax rebate or other incentive, or measures that help overcome barriers specific to solid-wall (and hard-to-treat cavity wall) insulation.
11. Suppliers should also be required to provide information on how the cost of the scheme is recouped from consumers, although such a requirement is not currently covered by Article 23 of the ECO order. In response to the Green Deal and ECO consultation, DECC set each supplier’s total obligation on a “per unit” basis, rather than a fixed-cost per household. However, there is no regulation on how suppliers recoup the costs from individual consumers in practice. This is an important public policy decision and should be made transparent. If the evidence shows suppliers are recouping costs from households on a per household basis, regulation should be introduced to ensure costs are collected on a per unit basis, in line with the spirit of the policy.
12. It will be important to monitor the spread of ECO across geographical areas. Unlike Warm Front, Affordable Warmth ECO does not have “hard to reach” and “hard to treat” targets. Rural areas in particular may lose out because suppliers will find it cheaper to meet their targets in urban areas with large concentrations of low income consumers. It is also important to monitor the number of off-gas consumers who get heating measures installed under AW ECO.
13. Consumer satisfaction in Green Deal and ECO
14. While we do not advocate targets for the take-up of Green Deal finance, both Green Deal and ECO must be monitored to ensure they deliver consumer satisfaction and can be accessed by all consumers who could benefit from them. Consumer confidence in the Green Deal will affect consumer confidence in the market for energy efficiency more broadly, including the cost of delivery of ECO. As the government’s flagship energy efficiency policy it will be easy for the public to conflate the Green Deal and energy efficiency measures more generally.
15. Potential causes of consumer detriment and dissatisfaction with the Green Deal relate to:
(a)
(b)
(c)
(d)
(e)
(f)
(g)
16. The potential for consumer detriment is increased because consumers can be disconnected for non-payment of Green Deal because it has the same status as energy bill payments.
17. To understand the impact of these factors, and respond accordingly, we have recommended that DECC and/or the Green Deal Ombudsman and Registration Body (ORB):
(a)
(b)
(c)
(d)
(e)
(f)
(g)
18. Key to the success of the Green Deal will be the response of the property market to the Green Deal charge. Current consumer research suggests consumers are likely to ask for any Green Deal charge to be cleared or will look for a property without the charge, undermining the unique selling point of Green Deal finance, the charge being attached to the property. If this remains the case, paying off the charge could be an unexpected cost for the occupier and uptake of Green Deal finance will be reduced. There should therefore be monitoring of consumer attitudes to the charge, and by the Green Deal ORB collecting information on the number and level of early repayments and the reason for early repayments.
19. Consumer satisfaction with Affordable Warmth ECO should be monitored. Unlike Warm Front, which AW ECO replaces, there is no requirement to carry out consumer satisfaction surveys of AW ECO post-installation. There is also no independent scrutiny of AW ECO delivery, as provided by the Warm Front Delivery Advisory Board with respect to Warm Front. This is particularly significant as AW ECO could be less consumer-friendly than Warm Front in number of ways. For instance, there is: no obligation on suppliers to provide two years free boiler service to AW consumers; lack of clarity on boiler warranties; a less thorough inspection regime; no obligation on suppliers to offer consumers a standardised package of measures, which will make it difficult for advice workers to give clear advice to low income consumers.
20. Access for all
21. There are a number of groups we consider could be at risk of exclusion from the Green Deal and/or ECO, and whose experiences should be monitored.
22. Private tenants: the private rental sector has some of the least energy efficient properties and our consumer research shows that renting is one of the major barriers to uptake of energy efficiency measures. The Green Deal could help increase installations in this sector by overcoming the barrier of split incentives, however, consent is required from the landlord and tenant and it is unclear how the sector will respond to the scheme.
23. Leaseholders and freeholders may need multiple consents, and may find work is blocked due to the need to apply the Green Deal charge to individuals’ energy bills, where it may be more appropriate to apply it as part of the service charge.
24. Financially-stressed consumers: in our 2010 Access for All report we found there are 2.5 million consumers who are not in fuel poverty but are financially stressed, and this number is likely to have risen since. This group will not be able to access ECO but may not meet the responsible lending rules. Monitor complaints and enquiries from financially stressed consumers who want to improve the energy efficiency of their home, but cannot access Green Deal finance or ECO support.
25. Park homes: Park homes do not require an EPC under EPBD legislation, and therefore the Green Deal is not currently applicable. DECC recognise our concern about these properties, recognising there a high proportion of occupants are in fuel poverty. Monitor the number of park homes taking up ECO and enquiries and complaints from park home owners regarding access to energy efficiency.
26. We share DECC’s view that PPM customers should not be discriminated against as their payment of energy bills is reliable. However, we are concerned about this group as they are particularly vulnerable due to their ability to self-disconnect. We are also concerned that they will not have the Green Deal charge, the benefits of measures, and the continuing importance of managing energy use adequately explained to them by landlords or salespeople. Monitor number of PPM customers taking up Green Deal, complaints and enquiries arising from this consumer group, survey customers for impact on self-disconnection and management of energy use.
27. Consumer engagement
28. Consumer Focus has not specifically researched consumer awareness of the Green Deal, partly because market research shows that naming a product or service “Green Deal” is unlikely to attract consumers; instead, we expect providers to name and brand their products and services in a way that appeals to their target consumer segments; some may use the Green Deal in their branding but many will only use Green Deal as required by the framework regulations to signal accreditation of advice, installation and finance services.
29. We are more concerned about consumers’ lack of motivation to install energy efficiency measures in general. The Green Deal is a finance and accreditation framework, and as such only goes a small way to addressing the barriers to take-up of energy efficiency measures. As mentioned above, low consumer engagement in energy efficiency would be likely to increase the cost of delivering ECO.
30. In November 2011 we surveyed 1,127 consumers and found that only 32% would be interested in getting energy efficiency advice. There are multiple reasons for consumers not wanting to get advice, including barriers that relate to knowledge or awareness; lack of motivation; and physical or legal barriers; only a small proportion of cases will be addressed by the Green Deal. The survey found that more consumers thought they had done all they could to make their home energy efficient than actually have in practice, when compared against to national figures on insulation levels.
|
Q. Why are you not interested in getting advice on saving energy? |
|
|
I have done all I can to insulate my home and cut my energy bills |
40% |
|
I rent my home and do not have the power to make any changes such as installing insulation |
20% |
|
Too much hassle to have work done |
8% |
|
Too expensive |
8% |
|
I do not see the need to save energy |
5% |
|
I’m planning on moving house soon |
4% |
|
I\we can do my\our own research\I\we can look into it myself\ourselves |
2% |
|
Am sceptical about it\think it’s a con\don’t trust them\don’t know who to trust |
2% |
|
I\we know about this\I\we know everything (already) |
1% |
|
I’m a leaseholder and the freeholder will not allow the installation of insulation or |
1% |
|
DIY\I\we can\will do this work myself\ourselves |
1% |
|
I\we can do this ourselves (unspecified) |
1% |
|
I have already had advice\been advised before |
1% |
|
Too old |
1% |
|
Not interested |
0% |
|
Another reason |
3% |
|
Don’t know |
8% |
January 2013
1
The Electricity and Gas (Energy Companies Obligation) Order 2012.
23.—(1) The Administrator may require a supplier:
<?oasys [ci ?> (a) <?oasys [ix ?>to provide it with specified information, or information of a specified nature, about a supplier’s proposals for complying with any requirement under this Order;
<?oasys [ci ?> (b) <?oasys [ix ?>to produce to it evidence of a specified kind demonstrating it is complying with, or that it has complied with, any requirement under this Order;
<?oasys [ci ?>(2) A supplier must provide to the Administrator such information as the Administrator may require relating to the cost to the supplier of achieving its obligations under this Order.
2 OFGEM.