Last edited 03 Apr 2017

Energy companies obligation ECO

On 4 December 2012 Parliament passed the Electricity and Gas (Energy Companies Obligation) Order 2012. The energy companies obligation (ECO) then came into effect in January 2013. It ran until March 2015 when a new obligation period (ECO2) was introduced, running from 1 April 2015 to 31 March 2017 and extending the lifetime of the original scheme.

The energy companies obligation replaced the Carbon Emissions Reduction Target (CERT) and the Community Energy Saving Programme (CESP), which ended on 31 December 2012.

The energy companies obligation provides support for the installation of energy efficiency measures to reduce energy consumption in the UK and to help people living in fuel poverty and in properties that are hard to treat. This is part of the UK government’s strategy to achieve its legally binding commitment to cut emissions of greenhouse gasses by at least 34% by 2020 and by 80% by 2050 compared with 1990 levels. This commitment is set out in the Climate Change Act.

The energy companies obligation includes:

The ECO is worth approximately £1.3 billion a year and is funded by the big six energy suppliers. It is intended to run alongside the green deal and can be provided directly to customers, or through pre-approved arrangements, such as green deal providers.

ECO is administered and monitored by the Office for Gas and Electricity Markets (Ofgem). Energy suppliers report on delivery against their obligation, to demonstrate that they will meet their target by 2015.

The Energy Saving Advice Service offers advice about the help consumers may be able to get.

NB On 14 April 2016, the National Audit Office (NAO) published Green Deal and Energy Company Obligation, in which it found that the design of the ECO to support the Green Deal added to energy suppliers’ costs of meeting their obligations. This reduced the value for money of the ECO, but it was not able to determine by how much.

In January 2017, it as announced that the scheme would be extended to September 2018 and that there would an increased focus on low income and vulnerable homes. The new measures, which were introduced on 1 April 2017 included:

  • Reforms to simplify the scheme, with energy companies required to provide struggling households with energy efficiency measures to make their homes warmer and bring their bills down. There are three ways to qualify under the Affordable Warmth element of the scheme: i) those in receipt of certain means tested benefits ii) those living in social housing with an EPC of E,F or G and iii) those referred to suppliers by local authorities under the newly-introduced flexible eligibility. Suppliers can also refer households who are in or at risk of fuel poverty or vulnerable to living in a cold home.
  • Suppliers will be required to install a minimum 21,000 solid wall insulations per year, up from the earlier proposal of 17,000.
  • Continuing protection for the delivery of energy efficiency measures in rural areas, with a requirement that 15% of suppliers’ Carbon Emissions Reduction Obligation be delivered in these areas.

Consumer Minister, Margot James said: “The big energy firms already have to help households save gas and electricity bills, by improving homes so they are easier and cheaper to keep warm. We’re strengthening this obligation today and making sure they prioritise low income households as part of our plan to insulate 1 million homes by 2020.”

Ref https://www.gov.uk/government/news/energy-reforms-come-into-force-today

It was confirmed that around 2.2 million measures were installed in around 1.7 million properties between 2013 and the end of January 2017.

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