Government proposes to lower threshold for Eco scheme

The government is looking at lowering the thresholds for the companies that must operate the Eco (Energy Company Obligation) scheme.

The proposal to take a fresh look at the 250,000-customer threshold, above which companies are obliged to participate in the energy efficiency scheme, is contained in a new consultation paper outlining the government’s thinking on the next phase of Eco.

The document, published on Good Friday, says the arguments are “balanced” on whether to extend the scheme beyond the 15 companies currently covered by the obligation.

It says that with the recent influx of new suppliers “some of the original justifications for retaining the current customer number threshold no longer apply” with smaller companies able to avoid costs shouldered by their larger competitors.

However the paper also says that figures, which show that 93 per cent of the market is accounted for by Eco participating companies, indicate “the threshold may not distort competition.”

And it says many small suppliers could be forced out of the market if the threshold was lowered because they cannot access capital as cheaply and suffer greater cash flow limits, compared to larger companies.

The consultation paper also proposes targeting the Eco3 phase of the scheme, which is due to cover the next five years, wholly on fuel poor households. Under the current Eco rules, 70 per cent of the scheme’s beneficiaries are low income households

The group of households, which are automatically eligible for Eco measures on low income grounds, will be widened to those receiving child benefit and disability benefits.

Suppliers will be able to meet up to 25 per cent of their Eco obligations through measures delivered to households identified by local authorities. This change is designed to ensure fuel poor households not in receipt of benefits can be eligible for help under the scheme.

In addition, the paper proposes that 15 per cent of the obligation has to be delivered in rural areas, equating to around £1.16 billion worth of notional lifetime bill savings.

The scheme’s rules will be changed to make it easier to replace broken or ineffective electrical storage heaters with new central heating systems. Replacement of inefficient heating will be subject to installing certain types of insulation, according to the consultation paper.

The government has decided against proposing that devices, which receive support under the Renewable Heat Incentive, will be eligible for further support under Eco.

The shake-up of the Eco is accompanied by parallel proposals to tighten the focus of the Warm Home Discount scheme more closely on fuel poor households.

It also extends eligibility for the discount to working households receiving universal credit who earn less that £16,190 a year.

Victoria MacGregor, director of energy at Citizens Advice, welcomed the scheme’s increased focus on low-income households.

She said: “There’s limited support currently available for consumers to make their homes more energy efficient, so it’s right that it is focused on the people who need it most.

“Increasing the involvement of local bodies should also help ensure support gets to consumers who might otherwise miss out.”

But McGregor warned that the government needed to boost investment in energy efficiency in order to meet its fuel poverty targets.

“Private landlords should be required to ensure that all their properties are truly energy efficient. The government should require private landlords to carry out works up to the value of £5,000, to bring these homes up to standard.”

The government announced in last autumn’s Clean Growth Strategy that the Eco scheme would be extended to 2028 and that funding would be maintained at £3.5 billion per annum.