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Law forcing energy companies to insulate UK homes runs out as bills soar

Poorest households could be left struggling to get vital energy efficiency upgrades – just as fuel costs rocket

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Caroline Molloy
4 April 2022, 12.00am
The government allowed a scheme to run out despite Sunak saying it helped 'hundreds of thousands of people in fuel poverty'
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Imageplotter/Alamy Live News

Tens of thousands of Britain’s poorest energy customers could miss out on a chance to bring their bills down before winter – because the government allowed its flagship insulation scheme to run out.

On Friday, following questions from openDemocracy, the Department of Business, Energy and Industrial Strategy announced an 11th-hour extension to the Energy Company Obligation (ECO), which forces energy suppliers to stump up for insulation and other energy-efficiency improvements for people on low incomes. The ECO had expired hours earlier without a replacement in train.

Suppliers can continue to provide insulation upgrades under the old rules while the details of the replacement scheme are worked out. But the last-minute move appeared to catch energy companies themselves on the hop – and fuel poverty charity National Energy Action has warned that they may be reluctant to carry out the work, as the scheme is no longer backed by legislation.

Asked by openDemocracy about the ECO’s lapse last week, British Gas was the only energy firm to respond, saying it was still waiting for the energy regulator Ofgem to tell it what to do.

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The ECO has run in three phases since 2013, the most recent of which ended on Thursday. The government now has limited time to rush through legislation for an official fourth phase.

The UK’s energy price cap jumped 54% on Friday, taking average gas and electricity bills from £1,277 to £1,971 a year. The price cap, which currently covers 22 million households, is predicted to rise another £600 in October.

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The delays to formalising the new ECO scheme come at the “worst possible time”, a National Energy Action spokesperson told openDemocracy, adding that the optimal time to be installing new installation measures is between now and the autumn. “Tens of thousands of households could miss out and be in a really difficult position,” he added.

Last year, the ECO paid for nearly 400,000 improvements to more than 150,000 homes – mostly wall and loft insulation and more efficient home-heating systems.

Chancellor Rishi Sunak told MPs in March that the ECO was helping “hundreds of thousands of people in fuel poverty”. But just days before the scheme expired, Ofgem told openDemocracy that an extension had “yet to be confirmed” – and that it would only engage with suppliers “once there is more certainty about the requirements of the next phase of the scheme”.

Parliament is not expected to have a chance to extend the scheme formally until the summer, and it could be squeezed out by other legislation that the government wants to pass before July, when the annual parliamentary recess begins.

Matt Copeland, head of policy at National Energy Action, told openDemocracy that any “long delay” or “continued hiatus” in implementing a full replacement scheme “could badly damage the health, wealth and well-being of the poorest households”.

“The last time we had any delay, we had the worst quarter of energy efficiency in a decade,” he added. “We hope that won’t happen again, and it’s critical the government acts now. Will energy suppliers have the confidence to take on an additional risk burden to do the work now, in advance of legislation clearing parliament?”

The government is due to launch its delayed energy security strategy this week, amid ministerial wrangling about the merits of wind power and nuclear, but openDemocracy understands the strategy is likely to say little about home energy efficiency.

We need a national effort to insulate homes ahead of next winter

Ed Miliband, Labour's shadow climate secretary

Shadow climate secretary Ed Miliband slammed what he called the government’s “empty rhetoric and false promises on energy efficiency”, telling openDemocracy: “The government’s energy relaunch will have no credibility unless it finally delivers on energy efficiency, the best, most effective way to reduce energy bills, cut our demand for fossil fuels and bring down carbon emissions.

“It is simply not good enough if there are serious delays in households getting access to support – especially as we need a national effort to insulate homes ahead of next winter. They must provide the urgent, national insulation plan that the country needs, and they need to do so now.”

The government has set itself a statutory target that no one in fuel poverty should be living in an ‘energy inefficient’ home by 2030.

But based on current progress, Copeland said, “instead of eight years, it will take over 60 years for that to happen”.

The ECO and its predecessors have been unpopular with suppliers, who have lobbied to have the rules cancelled or watered down. In 2014, David Cameron cut the amount suppliers needed to spend insulating homes, though the Johnson government’s October 2021 heat and buildings strategy pledged to increase them back to around the level they were before Cameron’s cuts.

Energy companies are currently resisting political pressure for a windfall tax on their profits. Centrica (the parent company of British Gas) made just under £1bn in profit last year.

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