Extending the ECO4 end date

Consumer Scotland

Consumer Scotland is the statutory body for consumers in Scotland. Established by the Consumer Scotland Act 2020, we are accountable to the Scottish Parliament. The Act defines consumers as individuals and small businesses that purchase, use or receive in Scotland, goods or services supplied by a business, profession, not for profit enterprise, or public body.

Our purpose is to improve outcomes for current and future consumers, and our strategic objectives are:

• to enhance understanding and awareness of consumer issues by strengthening the evidence base
• to serve the needs and aspirations of current and future consumers by inspiring and influencing the public, private and third sectors
• to enable the active participation of consumers in a fairer economy by improving access to information and support

Consumer Scotland uses data, research and analysis to inform our work on the key issues facing consumers in Scotland. In conjunction with that evidence base we seek a consumer perspective through the application of the consumer principles of access, choice, safety, information, fairness, representation, sustainability and redress.

Consumer principles

The Consumer Principles are a set of principles developed by consumer organisations in the UK and overseas.

Consumer Scotland uses the Consumer Principles as a framework through which to analyse the evidence on markets and related issues from a consumer perspective.

The Consumer Principles are:

• Access: Can people get the goods or services they need or want?
• Choice: Is there any?
• Safety: Are the goods or services dangerous to health or welfare?
• Information: Is it available, accurate and useful?
• Fairness: Are some or all consumers unfairly discriminated against?
• Representation: Do consumers have a say in how goods or services are provided?
• Redress: If things go wrong, is there a system for making things right?
• Sustainability: Are consumers enabled to make sustainable choices?

We have utilised these principles to inform our response.

Introduction

Thank you for inviting Consumer Scotland to contribute to the UK Government’s consultation for the extension of the Energy Company Obligation (ECO4) scheme and to comment on the potential impacts for consumers.

As the statutory advocate for gas, electricity and heat network consumers in Scotland, we welcome the opportunity to contribute to the further scoping and development of reformed consumer protection systems as part of the Warm Homes Plan and more broadly on the UK Government’s ongoing work on the transition to low carbon heating and more energy efficient buildings.

General

Question 1. Do you agree that we should extend the date by which obligated suppliers may deliver to their ECO4 target, which is currently 31 March 2026, and other relevant dates, by 6 to 9 months?

Consumer Scotland is broadly supportive of the proposal to extend the date by which obligated suppliers may deliver to their ECO4 target. The proposed regulatory changes present an opportunity for suppliers to provide support to those consumers at highest risk of fuel poverty by upgrading properties with EPC ratings of E-G with the aim of bringing these to a minimum rating for D.

Question 2. Do you agree that the date by which obligated suppliers may deliver to their GBIS target, which is currently 31 March 2026, and other relevant GBIS dates, should remain unchanged?

The Energy Company Obligation 4 (ECO4) and the Great British Insulation Scheme (GBIS) are two complementary UK government initiatives aimed at improving household energy efficiency and reducing fuel poverty. While they serve overlapping goals, they differ in scope, target demographics, and delivery mechanisms. As with any regulatory or legislative change, Impact Assessments should be completed to evaluate the potential effects of these proposed changes could have on consumers in Scotland. Consumer Scotland encourages this type of evaluation to understand if there will be any disproportionate negative impacts as a result of extending the ECO4 obligation end date and not the GBIS end date.

Carry-over

Question 3. Do you agree that energy suppliers should be able to carry-over up to 20% of their ECO4 obligation for use in a future obligation?

Consumer Scotland acknowledges that carry-over of surplus annual bill savings (ABS) has been in place in all ECO schemes prior to ECO4. We broadly support the proposal to allow this ABS to count towards a suppliers’ future obligations as it allows suppliers to continue to deliver energy efficiency measures beyond their initial obligations. Therefore, delivering more energy efficiency measures to low income and vulnerable consumers prior to subsequent schemes coming into place.

However, we cannot provide specific feedback regarding the carry over into future schemes as proposals on future home upgrade obligations will not be published until later this year.

Question 4. Do you agree that the solid wall minimum requirement and EFG minimum requirement should remain at their current levels and should be achieved by the new end date of ECO4?

Solid Wall Insulation is a crucial step towards improving the energy efficiency of homes by reducing heat loss leading to lower energy consumption and therefore reduced energy bills. Additionally, it has been proven to reduce condensation and mould and therefore enhance the standard of living for consumers.

In Scotland, England and Wales households could save as much as £550 per year for detached houses and £160 per year for mid-floor flats alongside carbon dioxide savings of 1,500 kgCO2/year and 410 kgCO2/year respectively because of installing solid wall insulation[1].

The current total for Phase 1 – 4 of the ECO4 Obligation is currently set at 45,000 properties treated for Solid Wall Insulation SWMR and £77,950,000 for EFG Minimum Requirement[2]. Consumer Scotland agrees all obligated suppliers should aim to achieve these requirements before the extended end date of ECO4 and that these targets should not be reduced.

Question 5. Do you agree that the two conversion methodologies represent the best solutions to facilitate delivery in the transition to a future obligation? If not, please provide alternative proposals.

Question 6. Are there any measure types that you believe should not be eligible for carryover?

Consumer Scotland has not taken a position on the specific technical conversion methodologies proposed in this consultation to facilitate the delivery in the transition to a future obligation.

Consumer Protection

Question 7. Are there any additional consumer protection reforms we should introduce during the ECO4 extension?

We welcome improved consumer protection and the introduction of additional standards for monitoring the quality of service provided to consumers.

We would welcome further opportunities to discuss these proposals and the impact that the reformed consumer protection system can have on consumers.

Consumer Scotland recently published a framework[3] to support policymakers take account of the consumer perspective when developing policies and interventions to address climate change.  This framework sets out the key issues for consumers in the transition, as follows:

• Cost: The costs of responding to the climate emergency are distributed fairly
• Convenience: Sustainable products and services are designed in ways that fit easily into consumers’ lives
• Clarity: Consumers understand what they need to do and why
• Confidence: Consumers trust sustainable products and services, have strong protection, and have access to redress

This ‘four Cs’ framework underpins our response to the consultation.

This can be a useful framework to assess any proposed changes to regulation as well as relevant Impact Assessments to determine if any consumers will be disproportionately negatively affected by changes proposed in the consultation. We recommend that the UK Government applies the framework in this way.

Innovation

Question 8. Do you agree with our proposal not to allow any new applications for innovation measures or data light measures over the extension period?

Consumer Scotland is supportive of the proposed approach to honour any existing Innovation Measure (IM) applications, recognising the length of the extension will not afford enough time for new applications to be reviewed, approved and completed.

Next Steps

We would be happy to discuss the content of our submission to this consultation in more detail. Looking forward, we would be keen to work closely with the UK Government as its thinking on energy efficiency improvements for vulnerable consumers develops.