Energy and Climate Change Committee

Transcription

1 Energy and Climate Change Committee Fuel Poverty memoranda December 2011 Ref Organisation Page FP 01 DECC 2 FP 02 North Warwickshire Borough Council 11 FP 03 Civil Service Pensioners' Alliance 13 FP 04 Calor Gas Ltd 15 FP 05 Federation of Private Residents Associations 28 FP 06 Chartered Institute of Environmental Health 35 FP 07 Mears Group PLC 39 FP 08 Citizens Advice 43 FP 09 National Energy Action 48 FP 10 National Private Tenants Organisation 62 FP 11 SSE 65 FP 12 Office of Fair Trading 68 FP 13 County Durham Fuel Poverty Partnership 71 FP 14 Residential Landlords Association Limited 72 FP 15 EDF Energy 81 FP 16 West Sussex Local Authorities 84 FP 17 Islington Council 86 FP 18 Consumer Focus 88 FP 19 Carillion Energy Services 96 FP 20 National Grid 105 FP 21 London Borough of Newham 110

2 Memorandum submitted by the Department of Energy and Climate Change (FP 01) Executive Summary 1. A household is considered to be in fuel poverty if it needs to spend more than 10 percent of its income to achieve an adequate level of warmth (21 degrees for the main living area, and 18 degrees for other occupied rooms). The main contributing factors to a household being in fuel poverty are: a. A household s total income b. The cost of energy c. The energy efficiency of the property. 2. The latest statistics on the number of households living in fuel poverty were published by Government on 14 July The statistics indicated that in 2009, there were 4 million households in England living in fuel poverty, of these 0.8 million were homes not connected to gas grid and 0.7 million households were living in privately rented properties. 3. The Coalition Government is committed to doing all that is reasonably practicable to end fuel poverty in England by A combination of rising wholesale energy prices and poor quality housing stock in England has meant that despite significant investment there are still a large number of households in fuel poverty. We are committed to helping people, especially low income vulnerable households, heat their homes more affordably. We recognise the need to help more of the most vulnerable to keep their homes warm at an affordable cost. 4. A number of policies and programmes are in place or being introduced to provide support for low income and vulnerable households, including households who may be off the gas grid or in privately rented accommodation. 5. The Green Deal framework will be launched from October The coalition proposals published on 23 November 2011 outlines the benefits of the scheme. Every home will be able to install packages of energy-saving technologies at no upfront cost with repayments made over time out of the energy savings. In addition, there will be a new requirement on energy companies to provide 1.3 billion a year to ensure everyone is able to benefit from Green Deal no matter their income or the type of home they live in. Additional help will be available to ensure the fuel poor get better boilers and insulation, while subsidy will also be provided to help tackle homes that are hard to treat, including those with solid walls. 6. Currently, one of the key fuel poverty policies is the Warm Front scheme which provides a grant of up to 3,500 to provide energy efficient heating and insulation measures for those on income related benefit and living in energy inefficient properties. The scheme is open to eligible households living in private rented accommodating with permission from the landlord. In addition, where the property is not connected to the gas grid, a grant of up 6,000 is available to install oil central heating. Page 2

3 7. Other current schemes providing energy efficiency measures include the Carbon Emissions Reduction Target (CERT) and the Community Energy Saving Programme (CESP), which are obligations on suppliers to provide energy efficiency measures to reduce carbon. Government has extended the CERT programme to the end of 2012, and introduced a new Super Priority Group of low income households on income related benefits to which a proportion of the measures must be directed. The extension and introduction of the Super Priority Group will have a positive impact on fuel poverty, with approximately 185,000 households expected to be provided with measures which can provide a long term solution to fuel poverty. Many more households will receive measures which will protect them from falling into fuel poverty. 8. In addition to energy efficiency schemes, the mandatory Warm Home Discount scheme, which came into force on 1 April 2011 this year and replaces the previous Voluntary Agreement, requires energy suppliers to provide up to 1.1billion in funding over four years to assist vulnerable, low income households. The scheme will assist around 2 million households each year, including over 600,000 pensioners, in receipt of Pension Credit Guarantee Credit, who will receive an automatic payment of 120 on their electricity bill ensuring those off the gas grid are able access assistance. 9. The Independent Review of Fuel Poverty was established in March This Review, which is being led by Professor John Hills, was set up to consider evidence on whether fuel poverty is a distinct problem from income poverty, how well the current definition reflects the problems involved and the effectiveness of policies to counter it. The Review published its interim report in October and a final report is expected early in the New Year. Page 3

4 What are the barriers to tackling fuel poverty in the private rented sector? 10. Where properties are owned by a landlord and lived in by tenants, the cost of installation of energy efficiency measures traditionally falls on the landlord, with the benefits of lower energy use and bills commonly falling to tenants. In situations in which rents do not fully reflect differences in the thermal efficiency of properties there is little incentive for landlords to improve the energy efficiency of their properties. 11. Tenants often expect to stay in rented properties for short periods of time. This means that some of the bill savings will accrue to future tenants, rather than those who will bear the brunt of any disruption costs. This magnifies the problems of high discount rates that commonly affect the investment behaviour of individuals. 12. The Warm Front scheme provides energy efficiency measures, based on the eligibility of the tenant and with permission from the landlord, providing assistance to those low income and vulnerable households in private rented accommodation. In addition to the landlord s consent to the improvements and in return for an upgrade of their property they must agree to not increase the rent for two years. Since 2005, Warm Front has assisted 202,467 households living in privately rented accommodation. 13. The new Green Deal financial proposals will overcome some of the issues in this sector by affording landlords the opportunity to improve the energy efficiency of the property at no upfront cost, placing the payments for measures on tenants bills who will also enjoy the benefits of living in warmer, more energy efficient properties. However, the short-term nature of much of the rental market may mean that in the absence of regulation to improve standards, many cost-effective abatement opportunities could remain untapped. 14. Take up and impact of non-regulatory options, such as CERT, does not seem to have made a substantial impact in terms of insulating lofts and cavities in the private rented sector. This unresponsiveness may have been in part caused by the barriers associated with split incentives which may be overcome by Green Deal finance. Although in a sector with relatively high tenant turnover the benefits may still be spread thinly leaving no one party sufficient incentive to ensure installations are made. It is therefore considered that regulation may be required to secure the benefits of energy efficiency improvements in the PRS. Page 4

5 To what extent will the recent measures in the Energy Act 2011 (to introduce minimum energy efficiency standards in the private rented sector) help the problem? 15. The Energy Act 2011 includes provisions for a minimum energy efficiency standard to come into force no later than 1 April This standard set at energy performance certificate band E will lead to approximately 682,000 homes having to be improved. The prospect of the minimum standard will give landlords a strong incentive to act. Landlords will be able to make the required improvements over the coming years and plan around their tenancy changes. And in 2018 these regulations will mop up those few remaining landlords who have yet to change. Inaction will not be a viable option. 16. Landlords will not be permitted to let properties unless they reach this standard or they have done the maximum package of measures under the Green Deal or Energy Company Obligation (even if that still does not take them above F). 17. This requirement is subject to there being no upfront financial cost to landlords. Therefore, landlords will have fulfilled the requirement if they have either reached E or carried out the maximum package of measures funded under the Green Deal and/or ECO (even if this does not take them up to an E rating). Local Authorities will enforce the domestic minimum standard regulations, with the ability to impose a civil fine of up to A Local Weights and Measures Authority will enforce the non-domestic minimum standard regulations; the level of civil penalty will be defined in secondary legislation. 18. DECC will consult on these standards ahead of the introduction of secondary legislation between 2016 and 2018 and will continue to monitor take up of the scheme in these sectors. Page 5

6 To what extent is fuel poverty in rural areas driven by a lack of access to the gas grid and to what extent are other factors (such as housing condition and income levels) responsible? 19. Fuel poverty is driven by three factors: household incomes, energy prices and energy efficiency. The likelihood of a household being in fuel poverty will depend on the interaction between each of these factors. 20. Households that are off the gas grid tend to face higher costs than households that are attached to the grid. Table 1 shows the propensity of fuel poverty amongst rural, off-gas households in England in The data suggests that there is a high propensity to fuel poverty amongst this group 34% of rural households that are not attached to the gas grid are in fuel poverty. However, it is clear that the majority of off grid, rural households are not fuel poor. Clearly there are other factors that are important in determining whether these households are fuel poor. Table 1 fuel poverty amongst English households that are not attached to the gas grid in 2009 Proportion of households Not fuel poor Fuel poor Urban 78% 22% Rural 66% 34% Source: EHS 21. Income is a significant predictor of whether a household is likely to be in fuel poverty. Table 2 shows the level of fuel poverty across different income groups. It is clear that household income has a very significant impact on whether a household is fuel poor over 85% of the bottom income decile group are fuel poor. Table 2 fuel poverty amongst English households by income group in 2009 Proportion of households Household income decile Not fuel poor Fuel poor 1 st decile lowest income 14.8% 85.2% 2 nd decile 50.0% 50% Page 6

7 3 rd decile 74.1% 25.9% 4 th decile 85.9% 14.1% 5 th decile 95.0% 5% 6 th 10 th decile 99.0% 1% Source: EHS 22. The thermal efficiency of a dwelling is also an important driver. Table 3 shows the level of fuel poverty in England split according to the thermal efficiency of the dwelling (measured by household SAP rating). The figures show that households that cost more to heat are more likely to be in fuel poverty than those in more efficient dwellings almost 64% of the households in the lowest SAP band are fuel poor. It is important to note, however, that type of fuel used is one of the drivers of household SAP rating. As such, off grid households will tend to have lower SAP ratings than households that are attached to the grid. However, there are other important factors that impact on SAP (e.g. the level of insulation in the dwelling) that are not related to whether the household is on or off the grid. Table 3 fuel poverty amongst English households by SAP rating of dwelling in 2009 Proportion of households Banded SAP Not fuel poor Fuel poor < % 63.9% >20 and < % 46.2% >30 and < % 29.3% >40 and < % 20.6% >50 and < % 14.8% > % 7.3% Source: EHS Page 7

8 Given that the OFT found no evidence of a competition problem in the heating oil market, what (if anything) can be done to prevent a repeat of the situation in December 2010 when households were faced with high energy costs during a spell of particularly cold weather? 23. Heating oil distributers worked in hugely challenging conditions in December 2010 with 20% of annual heating oil demand being delivered in three working weeks of that month when snow / ice disrupted the road network. 24. Last winter DECC worked with industry associations to extend drivers hours and to develop a code of practice for the Federation of Petroleum Suppliers (FPS) concerning the prioritisation of deliveries during periods of abnormal weather. 25. Individual heating oil suppliers can offer additional support to customers, but this may vary by supplier and on a case by case basis by customer, such as identifying and prioritising vulnerable customers during delivery backlogs, or offering a range of payment options such as prepayment, instalments, stamps and direct debits. 26. This year, DECC has been working with FPS and Citizen s Advice, Consumer Focus Scotland and Wales and Action for Communities in Rural England (ACRE), in a national campaign launched in mid-september, to encourage heating oil customers to order early and ensure they are well prepared for winter. Early findings indicate that the uptake of heating oil was 10% higher in 2011, compared to the same period in Information about the campaign has been sent, via the Cabinet Office Resilience Network, to Local Resilience Fora for local authorities and the voluntary sector and it is hoped that the campaign can be expanded for future years. 28. We have also reminded fuel terminal/depot operators to ensure they have sufficient salt stocks to maintain on-site vehicle access. Overall, work by the Department of Transport this year has ensured that the country will enter the winter better prepared. This includes having a national, strategic salt reserve as well as making sure that local highway authorities make best use of their salt supplies. 29. Preparedness planning is ongoing more widely across government, with officials from UK government departments, the devolved administrations and the Local Government Association meeting regularly to review the situation with regard to winter, including heating oil availability and address cross-cutting issues. Page 8

9 How could DECC s policies for tackling fuel poverty in the private rented sector be improved? 30. It is estimated that 20% of the households in the private rented sector in England are fuel poor and that around 17% of those in fuel poverty live in private rented accommodation. Improving energy efficiency in the buildings in this sector can make an important contribution to the reduction of the number of people in fuel poverty and the adverse health consequences that are associated with living in cold, damp homes. 31. As stated above, Warm Front provides grants to improve the energy efficiency of properties that are either privately owned or privately rented. After consultation in 2010, the eligibility for Warm Front was refocused to target those households most likely to be in fuel poverty, by ensuring applicants are on a low income, vulnerable and living in an energy inefficient property. The new criteria ensure that the scheme is targeting those households with the highest propensity to be in fuel poverty. 32. From next year, the Green Deal and Energy Company Obligation (ECO) will provide the mechanism for landlords to make energy efficiency improvements to their properties at no upfront cost. In particular, the ECO will provide additional support for those households where Green Deal finance may not be sufficient. The Affordable Warmth element of ECO will provide basic heating and insulation measures for the poorest and most vulnerable households, including those who face the highest health risks from cold housing the elderly, families with children and those with long term disabilities and serious illness. Lower income and vulnerable groups will be able to benefit from all aspects of the ECO but the Affordable Warm strand, which we see to be worth around 350 million a year, will be reserved specifically for them alone, helping tackle the risk of fuel poverty. 33. From April 2016 landlords of residential properties will not be able to unreasonably refuse requests from their tenants for consent to make energy efficiency improvements, where financial support is available. 34. Following this, from April 2018, private rented properties must be brought up to a minimum energy efficiency rating of E. This provision will make it unlawful to rent out a house or business premise that does not reach this minimum standard. Page 9

10 How could DECC s policies for tackling fuel poverty among off-grid consumers be improved? 35. The current fuel poverty policies are aimed at all low income and vulnerable households regardless of their main heating source. When developing polices those households not connected to the gas network are a large consideration. Those eligible for a rebate under the Warm Home Discount scheme will receive the rebate on their electricity bill. A key reason for this is to ensure that the vast majority of consumers have access to the scheme, if they meet the eligibility criteria. In particular, this ensures that those living off the gas grid, including those in rural areas, can receive the same help with their fuel costs as households on the grid. 36. In addition, where eligible households for the Warm Front scheme are not connected to the gas grid, the scheme manager will aim to access funding to connect the household to the gas grid where possible. Where a household cannot be connected to the gas grid, Warm Front provides an uplifted grant of up to 6,000 to install an oil heating system. Since 2005, Warm Front has assisted 537,445 households not connected to the gas grid. 37. Looking to the future, the Renewable Heat Premium Payment (RHPP) and the Renewable Heat Incentive are financial support schemes to promote renewable heat technology. One of the objectives of the Renewable Heat Premium Payment (RHPP) scheme is to make some contribution to tackling fuel poverty. In order to meet that objective, DECC launched a competition among social housing providers to compete for a share of a pot of money (around 4m) for the installation of renewable heating systems. When assessing bids, the contribution towards tackling fuel poverty and the number of installations off the gas grid were considered. All of the winning bids focused on properties off the gas grid; and most of the winning bids indicated how the monies granted under this scheme would form part of their strategy for affordable warmth or tackling fuel poverty. Most of the winning bids have been announced: registered social housing providers will be installing these new renewable heating systems between now and the end of the financial year DECC has been carrying out a strategic analysis of heat, which is now almost complete. The analysis has been examining what the Government should do now and through the next decade, in order to ensure low carbon, secure and affordable heating (and cooling) supply for homes, businesses and industry, and to enable the UK to meet its carbon reduction and renewables targets. This suggests that one of our first priorities for decarbonising heating in homes should be to tackle consumers off the gas grid. We anticipate that we will be publishing the heat strategy in early December 2011 Page 10

11 Memorandum submitted by North Warwickshire Borough Council (FP 02) I would like to offer the following contribution to your inquiry into fuel poverty in the private rented sector. I have arranged it in sections relating to your specific questions. As an Executive Summary the actual cost of fuel is by far the biggest factor in fuel poverty, far more so than household income or the energy efficiency of a property. Private rented property should have to meet the legal minimum standard (absence of category 1 hazards under the 2004 housing Act), but much does not because of the nature of the relationships between landlords and tenants. It is regrettable that in the UK a person needs to have a license to board dogs (and pay a fee, and submit information, and pass and inspection annually), but not to rent out deathtrap housing to board people. Landlords do not even have to tell their local housing authority that they are doing so. The present enforcement system is far too weak and ineffective as it relies on tenant complaints rather than on up front compliance. If a car rental company hired out a vehicle with dangerous defects, it could be automatically prosecuted. If a landlord rents out a house with hazards causing ill health or risking death, it is not illegal until after a tenant complaint, then an enforcement notice, then non compliance with that notice. EPCs should be provided to housing authorities as a rule. Band F and G rated properties should not be rented out and should receive no housing benefit or other rent support. Transitional provisions to protect existing tenants without the risk of retaliatory eviction are required. Winter fuel and cold weather payments should be in kind (offset fuel bills), not in money, and should not be paid for band F and G properties but substituted for contributions to insulation measures. To what extent will the recent measures in the Energy Act 2011 (to introduce minimum energy efficiency standards in the private rented sector) help the problem? the provision to permit private sector tenants to request landlords to improve domestic energy efficiency rely on tenants knowledge of that facility and ignore the threat of retaliatory eviction and/or rent increases. Tenants can already request their landlord reduce hazards in the house, but many do not. Tenants could fear losing their homes whilst landlords recycle less demanding tenants into them, or else may fear increased rents to cover any increased costs to the landlord. The system is too passive and reactive rather than being proactive and permissive there should be a positive obligation to improve prior to the commencement of a new tenancy and a transitional phase for ongoing tenancies. Landlords should be obliged to provide EPCs to local housing authorities. The provision for 2018 does not appear to address existing or ongoing tenancies. What protection, if any, would be available to those tenants? To what extent is fuel poverty in rural areas driven by a lack of access to the gas grid and to what extent are other factors (such as housing condition and income levels) responsible? the cost of fuel is estimated to be seven times more significant a lever in the fuel poverty Page 11

12 triangle than energy efficiency or income. Being off the gas grid obviously restricts fuel choice with the remaining options more expensive. Properties off the gas grid are also more likely to be older, larger and have more exposed surfaces and solid walls, making them less energy efficient to begin with. People living in such properties are not, in my experience, wealthy in terms of income despite sometimes having a capital asset (the house), many being retired or on low wages and benefits. Given that the OFT found no evidence of a competition problem in the heating oil market, what (if anything) can be done to prevent a repeat of the situation in December 2010 when households were faced with high energy costs during a spell of particularly cold weather? Cap prices and challenge any excesses with punitive sanctions, or else provide fuel directly in lieu of winter fuel payment. How could DECC s policies for tackling fuel poverty in the private rented sector be improved? mandatory provision of EPCs to Councils, restriction on renting properties in bands worse than E (F and G) from a date to be agreed, and for ongoing tenancies 12 months after that date. Prohibition on payment of benefits for rent (HB or LHA) in such properties from a date to be agreed. Prohibition on winter fuel and cold weather payments as cash (should be credit on fuel bill), and at all on properties in bands E and F where the money could be used to make reasonable insulation or heating system improvements. Properties found with category 1 Hazards under the Housing Health & Safety Rating System should have any housing related benefit suspended until those hazards are rectified, with automatic tenancy protection against retaliatory eviction. How could DECC s policies for tackling fuel poverty among off grid consumers be improved? I am unaware that DECC has any policies covering this issue. November 2011 Page 12

13 Memorandum submitted by the Civil Service Pensioners Alliance (FP 03) 1.The Civil Service Pensioners Alliance (CSPA) is a campaigning organisation that is recognised by the Cabinet Office for the purposes of representing the views and interests of retired civil servants. 2. The CSPA has an active membership in excess of 60,000 who are organised into two separate Branches covering Northern Ireland and Scotland, and approximately 100 local groups covering England and Wales. In addition to promoting the interests of retired civil servants, the Alliance takes an active part in representing the interests of pensioners on a more general basis through affiliations to the National Pensioners Convention (NPC) and the Public Sector Pensioners Council. Although the CSPA campaigns on political issues affecting its members and pensioners, the CSPA is not politically aligned or affiliated to any political party. Excessive Costs To Off Grid Customers 3.The issue of excessive costs in the supply of Oil and LPG to Off Grid customers was brought to the attention of the CSPA Annual General Meeting, held in October at which the following resolution was adopted: This AGM recognises that many of our members are not on mains gas and thus are at the mercy of heating oil and LPG suppliers. Some of these companies, which often have a local monopoly, have raised prices well above the costs of the raw material. This AGM believes, therefore, that the domestic supplies of such companies should be brought within the remit of a regulator so that their prices can be monitored. 4. Although we have not responded to all of the questions posed in the terms of reference we have commented on those questions that clearly come within the terms of the above resolution. To what extent is fuel poverty in rural areas driven by a lack of access to the gas grid and to what extent are other factors (such as housing condition and income levels) responsible? Based upon the evidence provided to us by our members who proposed the terms of the above resolution, the causes of fuel poverty in rural areas with a lack of access to the grid is as much likely to be due to the population being a captive market because an apparent lack of competition and inadequate regulation, rather than just housing condition or income levels. This conclusion was highlighted by a report published in the Sunday Times newspaper, earlier on in 2011when they reported on a oil supply company, DCC Energy, that had been buying up smaller heating oil supplying companies. In the process the purchasing company did not change the name of the recently acquired smaller companies thus leading said smaller companies customers into believing they were dealing with the same organisations. This change only subsequently became apparent when said customers were hit with significantly increased heating oil bills. This problem arose due to a lack of transparency in the change of ownership of the supplying company and the fact that customers were not made aware of the information which in turn led the customers to believe they were still dealing with a trusted local supplier. Page 13

14 Given that the OFT found no evidence of a competition problem in the heating oil market, what (if anything) can be done to prevent a repeat of the situation in December 2010 when households were faced with high energy costs during a spell of particularly cold weather? Although the OFT may not have found evidence of a competition problem in the heating oil market, the above example published in the Sunday Times newspaper does show that although on the surface there may appear to be adequate competition, if a company such as DCC Energy is able to purchase sufficient number of smaller previously independent suppliers, which it is alleged means they now own some 14% of the oil distribution market in Britain, then the true market position has been perverted. As exampled by the DCC Energy case, there should be a requirement for them to notify the customers of any company that they have purchased of the change of ownership and whether or not this will have any impact on oil costs to the customers affected, and also to notify the OFT of the change in ownership. This would at least provide a first step towards transparency in the heating oil market. It would also potentially provide the OFT with some indication as to whether such acquisitions should be further investigated from a market competition viewpoint. How could the DECC s policies for tackling fuel poverty among off-grid consumers be improved? As has been exampled above, fuel poverty may not simply arise due to poor housing or low household incomes, but where an off-grid gas supplier holds a monopoly position. This can arise on private housing estates where there is no mains gas available but the private developer has built in the provision for LPG gas provision across the whole housing development rather than on a basis of supplying properties on an individual basis. This can lead to much higher charges being levied since there is no provision for competition. This can effectively lead to fuel poverty even though the general level of income and the housing condition would not otherwise be designated as coming within the traditional definitions of fuel poverty. Summary and Conclusion 5. Although we have only pointed to a couple of examples of difficulties facing households in the offgrid sector of the UK oil and LPG market, we do believe that they show the importance of the need for transparency in this sector of the energy supply market. This is required to maintain competition but perhaps more importantly adequate regulation to assist not only those households that fall within the traditional definition of fuel poverty, but also those households that would not otherwise be regarded as being in fuel poverty except that they are, due to excessive fuel prices being levied as a consequence of the lack of competition and inadequate regulation. November 2011 Page 14

15 Memorandum submitted by Calor Gas Ltd (FP 04) This submission focuses on the off grid sector and addresses three of the questions posed: To what extent is fuel poverty in rural areas driven by a lack of access to the gas grid and to what extent are other factors (such as housing condition and income levels) responsible? How could DECC s policies for tackling fuel poverty among off grid consumers be improved? Given that the OFT found no evidence of a competition problem in the heating oil market, what (if anything) can be done to prevent a repeat of the situation in December 2010 when households were faced with high energy costs during a spell of particularly cold weather? 1. OFF GAS GRID FUEL POVERTY OVERVIEW: 1.1. Fuel poverty in rural areas is caused by a number of complex and inter linked factors and is often misunderstood by Central Government There is a discernible lack of both credible independent information and formal assistance schemes relevant to householders in off gas grid Britain. To date CERT, CESP and Warm Front have not been particularly effective in reaching rural off gas grid areas Rural fuel poverty does not always neatly align with social poverty as is generally the case in urban areas, but is more closely associated with the quality of housing stock and/or the household demographic It is difficult to engage successfully with rural communities which are often sparsely located, with community boundaries which do not always adhere to Government statistical geographic output areas. Furthermore, owing to the often isolated physical location of rural households, or their reluctance to admit there is a problem, area based deprivation indicators do not easily identify rural fuel poverty Local knowledge is vital in determining where and how to effectively focus activity Working directly at a local level and applying bespoke solutions to fit specific community and householder needs, rather than applying a one size fits all approach, provides the most effective assistance to those most in need Some low hanging fruit do exist in terms of low cost practical solutions which can be applied in spite of the challenges that rural housing and demographics present A holistic approach is vital which encompasses social as well as technical solutions Electricity switching and benefit uptake are lower in rural areas than in urban, leading to lower disposable incomes In contrast with urban areas, many rural households have never changed their electricity supplier and as such are on unnecessarily expensive tariffs. Page 15

16 Benefit uptake in rural areas is often lower than in urban areas with rural people either not being aware of their entitlement or perceiving a stigma to be attached to claiming benefits Simple educational initiatives around benefits and energy options can make a real difference increasing household disposable income and reducing fuel bills Simple, low cost energy efficiency measures can be undertaken which can make a real difference to rural fuel poverty, such as improving draught proofing, managing energy demand and usage more effectively, and installing simple insulation measures such as loft insulation where appropriate Properly educating residents about appropriate rural energy efficiency measures is vital in ensuring that if/when capital works are undertaken, the correct choices for the house type, energy option, and lifestyle, are being made The market for LPG in off grid areas is acknowledged as open and competitive. Calor LPG users are protected from sharp spikes in home heating costs as a result of forward buying by Calor affording less volatile bills than for oil The recent advent of LPG micro combined heat and power (mchp) boilers offers the prospect of driving down household fuel bills, in contrast to many other greener technology solutions. mchp can simultaneously deliver all of the heat and up to 80% of the home s electricity, as well as cutting total household energy bills by 25% and carbon emissions by up to 50% ABOUT CALOR GAS LTD 2.1. Calor Gas Ltd is an experienced, specialist provider of energy to off grid rural communities. Calor began operating in 1935 with the aim of bringing clean, efficient and modern energy solutions to homes and businesses across Great Britain marked the Company s 75 th year, and Calor continues to play a vital role in meeting rural energy requirements, supplying bulk and bottled LPG (Liquefied Petroleum Gas) to homes and businesses located off the mains gas grid 365 days a year. As Britain s leading supplier of domestic LPG, Calor has developed an excellent understanding of the unique energy challenges that rural householders face Calor supports Government efforts to tackle rural fuel poverty. As an energy provider Calor takes its responsibilities very seriously and wants rural property owners to have a strong voice in the fuel poverty and energy efficiency debate and the same opportunity to reduce their fuel costs (and carbon emissions) as exists in urban on grid areas. 3. FUEL POVERTY IN RURAL ENGLAND To what extent is fuel poverty in rural areas driven by a lack of access to the gas grid and to what extent are other factors (such as housing condition and income levels) responsible? 1 Independent study by Oxera (2009) based on fuel cell mchp Page 16

17 3.1. Around 2 million English homes, comprising 4.6 million people, do not have access to the mains gas grid and of these households around a quarter are estimated to be fuel poor. Fuel poverty is a problem across Great Britain, but particularly in rural areas. The DCLG English House Condition Survey (updated November 2008) concluded that there are nearly three times as many households in fuel poverty in rural areas and that the numbers are increasing compared to urban areas. However, in spite of this, rural areas, and particularly those located off the mains gas grid, have seen little dedicated support or activity to alleviate the problem To ascertain the extent and distribution of the problem of fuel poverty in off mains gas England, working with the CRC and Centre for Sustainable Energy (CSE) Calor undertook a mapping exercise using data taken from the English Housing Condition Survey This was modelled by the CSE to Lower Super Output Area and cross matched at this geographic output level with Calor s Non Mains Gas database. Only 100% non mains gas LSOA s were mapped. The mapping demonstrated that fuel poverty exists to a certain extent across all English regions, with particularly high concentrations within the East, North East and East Midlands and North West regions. Similar mapping exercises were undertaken for Wales and Scotland. (See Appendix) 3.3. The fuel poverty status of a household depends on the interaction of three factors: Income Energy cost Energy consumption 3.4. The first two factors are inextricably linked to the nature of living in the countryside The 2010 manifesto of the Rural Services Network (of which Calor is a member) stated that, At present, people who work in rural areas earn significantly less that those living in urban centres. On average, the discrepancy between earnings is over 7,000 per year. 2 Furthermore, the rural population contains around twice the percentage of retired people than the general population. Under occupancy is also a problem in rural areas retired couples or older single people with fixed incomes may choose to remain in the large family home, but cannot afford to heat the space adequately. They are often unable or unwilling to downsize and stay within the same community. Private rented housing/tied accommodation is often problematic in rural areas anecdotal information collected through the FREE initiative suggests that people in private rented accommodation are worried that if their properties are improved the landlords will increase the rents. Tenants may save on fuel costs but face higher rent costs. There are also issues where tenants are unwilling to complain about their heating for fear of losing their home. Benefit uptake is also an issue in rural areas. Local authorities have expressed concern that take up of benefits in rural areas is lower than would be expected either because people are not aware of what they are entitled to claim or they are reluctant to be means tested. As part of the FREE initiative 100 rural households were surveyed about their energy consumption, housing type, and financial and social status. The results confirmed that 20% of respondents would welcome a benefit check as it appeared that they were not in receipts of all benefits they were entitled to. Finally, the lack of electricity switching is also a problem switching rates for 2 The Rural Services Manifesto 2010 and Beyond, p.13 Page 17

18 electricity supplier are far lower in rural areas than in urban areas, with the consequence that many rural households are on expensive tariffs and paying more than they could be for their electricity. These issues are related to a much wider debate in rural areas about access to many kinds of information, advice and services. Furthermore, the RSN has called on the Government to recognise that rural deprivation is often masked within areas of apparent rural affluence, indicating that the rural fuel poor may not be immediately or easily identified, and therefore overlooked by current Government schemes It is widely acknowledged that delivering products and services in rural areas is inevitably more expensive than in urban areas in fact RSN research suggests that the additional costs for delivering rural services can be as much as 90% higher. 3 In relation to cost, natural gas tends to be unavailable in rural areas and inherently more expensive alternatives such as oil or LPG need to be used. The most popular heating fuels for rural homes are heating oil (c.55%) and to a lesser extent electricity (c.28%), solid fuel (c.10%) and LPG (c.7%) The third major contributing factor to fuel poverty energy consumption is driven largely by the energy efficiency of the dwelling. Off gas grid communities, by their very nature, often comprise a collection of relatively isolated buildings located over a wide geographical area. Rural standing buildings tend to be older and possibly stone built, very often with solid floors and walls. Such properties are classed as hard to treat and traditional cost effective energy efficiency measures, such as cavity wall and loft insulation, cannot easily be employed. In addition many rural homes are listed buildings and/or in designated Conservation areas therefore subject to planning restrictions which can restrict and sometimes negate the installation of energy efficiency measures. Suitable energy efficiency measures are often expensive. Electrically based low carbon energy options are limited by the high CO 2 emission levels and restricted capacity of electricity in Britain; much of the electricity in rural areas is only single phase, limiting the power available for electric powered heating systems such as heat pumps. 4. EXISTING ENERGY EFFICIENCY SCHEMES How could DECC s policies for tackling fuel poverty among off grid consumers be improved? 4.1. Rural households face pressure to contribute to the Government s fuel poverty and carbon reduction targets, but with no realistic plan or support specifically developed for the countryside. Similarly, Government funded fuel poverty and energy efficiency assistance programmes have traditionally been neither aimed at, nor able to reach, the majority of rural homes: 4.2. CESP (Community Energy Saving Programme) CESP is a community based partnership involving Local Authorities and energy suppliers, has also traditionally not been effective for rural communities. CESP targets households across the UK, in areas of low income, to improve energy efficiency standards, and reduce fuel bills. CESP is funded by an obligation on energy suppliers and electricity generators who, through the scheme, must meet an overall carbon 3 Ibid, p.10 Page 18

19 emissions reduction target of million tonnes of carbon dioxide (MtCO2). CESP promotes a whole house approach i.e. a package of energy efficiency measures best suited to the individual property. The programme is delivered through the development of community based partnerships between Local Authorities (LAs), community groups and energy companies, via a house by house, street by street approach. CESP eligibility depends on the housing stock and residents falling within a CESP qualifying area (Data Zone) and being within qualifying levels of the Index of Multiple Deprivation (IMD) Accordingly, CESP delivery areas have been overwhelmingly urban as very few rural areas fit both criteria. Unlike urban areas where social deprivation exists in relatively small areas at a relatively large scale, the social and financial demographic of rural communities means that concentrated incidence of deprivation are rare, or the isolated areas of deprivation are averaged out by small incidences of affluence. Additionally, the house by house, street by street characteristic of CESP delivery is not well suited to the dispersed nature of rural communities CESP Failing Rural Off Gas Grid Communities a Scottish case study. Around 35% of Scottish households lack access to the mains gas network. The most popular heating fuels are heating oil and electricity, and to a lesser extent LPG. There is a larger proportion of solid fuel users (ie wood and coal) than the UK average. Scotland has a high number of homes that can be classed as hard to treat, where traditional and cost effective energy efficiency measures, such as cavity wall and loft insulation cannot be deployed. About one third of homes have solid walls or are of a construction whereby the cavity wall cannot be treated, while 25% of homes do not have a loft such as tower blocks and tenement properties. Fuel poverty is an issue across all of off mains gas Scotland, with fuel poverty levels significantly higher than those in England. Worst hit are the Western Isles with over 40% of households experiencing fuel poverty. The Orkney Islands and large areas of Western Scotland are also particularly affected. However, many rural fuel poor households find that they are fall outside the scope of available grant programmes, such as CERT, CESP, Warm Front and the Scottish Government s Energy Assistance Package, due to their personal circumstances, house type or location, or that the grant level is not sufficient to enable the necessary improvements to the fabric of the home to be made. Calor Gas, in partnership with Scottish Power, is currently in the process of identifying how the Community Energy Saving Programme (CESP) funding could be better applied in rural settings. CESP targets households across the UK, in areas of low income, to improve energy efficiency standards, and reduce fuel bills. CESP targets areas that have significant levels of low income households. These are identified through the Indices of Multiple Deprivation (IMD). IMD data is measured at Lower Layer Super Output Area (SOA) level in England and Wales. The Scottish equivalents are known as Data Zones. The CESP eligible areas are further broken down by Super Output Areas in England and Wales, consisting of approximately 1500 people per area (approximately 650 households), and Data Zones in Scotland with average populations of 750 people and Page 19

20 approximately 300 households. SOAs or Data Zones eligible for a CESP scheme must be within the lowest 10% income decile in England, and the 15% most income deprived areas in Scotland and Wales, based on comparable level of income deprivation. However, due to these criteria, few rural areas qualify as they do not tend to have the density of households in need of assistance. Scottish Power is obligated to deliver CESP in order to hit mandatory carbon reduction targets. It is keen to deliver CESP in rural areas, however to date has struggled to find suitable rural CESP projects. It was proposed that the six rural housing associations (HAs) that Calor has been working with through FREE should be explored as potential CESP candidates, as the FREE funding has enabled them to identify required measures for carbon reduction and energy efficiency improvements. If these measures qualify under CESP rules, CESP funding could be used to implement these measures. Their eligibility would depend on the housing stock and residents falling within a CESP qualifying area (Data Zone) and being within the lowest 15% of the Index of Multiple Deprivation (IMD). Furthermore, the Scottish Government has indicated that if there was a fuel switching project in Scotland that may require additional funding, they would consider funding this with Scottish Power. However, having explored this, it transpires that it is difficult, if not impossible, to establish a viable CESP project with any of the six HAs for the following main reasons: The housing stock does not fall into qualifying Data Zones this is the main reason that CESP cannot be made to work in many rural areas. If a targeted area straddles different levels of Data Zones, Ofgem will not approve the project. One of the HAs has already tried this. Furthermore, if any of the HAs did fall into a qualifying Data Zones it is unlikely that their communities would meet the IMD criteria. Unlike urban areas where social deprivation exists in relatively small areas at a relatively large scale, the social and financial demographic of rural communities means that concentrated incidence of deprivation are rare, or the isolated areas of deprivation are averaged out by small incidences of affluence. Finally all of the FREE HAs have in principle agreements with a utility not all of them with the same utility. A multi utility approach can t be taken because of Ofgem rules relating to thresholds and the fact that utilities can t pool outcomes. Scottish Power has funding for rural CESP projects and is looking for suitable candidates. Calor can identify up to six off grid Housing Associations who have already identified required energy efficiency and carbon reduction improvements and are now looking for funding to facilitate this. These potential CESP projects cannot be taken forward at this point due to the strict qualifying criteria of the Data Zones and IMD. Due to their dispersed nature rural communities rarely fit within Data Zone criteria. Due to the varied social demographic of rural communities (with a mix of affluence and deprivation) communities rarely fit within the IMD criteria. Page 20

21 The current CESP criterion unfairly disadvantages rural communities who are unable to take advantage of the financial assistance available to promote energy efficiency and carbon reduction measures. The UK Government should look to address this to ensure a scheme that is both equitable and relevant to rural households The learning from this should be applied to the application of the Green Deal and Energy Company Obligation to ensure that qualifying criteria take into account the specific needs of rural householders. 4.3 CERT (Carbon Emission Reduction Target) The current CERT programme which obligates energy suppliers to provide energy efficiency measures to eligible homes has been primarily marketed to, and delivered within, urban areas, where the majority of homes are eligible for relatively low cost improvements such as cavity wall insulation, and the CERT companies can make a large volume of improvements in a small geographical area, therefore maximising efficiencies. An investigation undertaken as part of the FREE initiative found that out of 100 rural households, 56% were either CERT Priority or Super Priority eligible, yet to date CERT has largely been under delivered in rural areas. 4.4 Warm Front The Warm Front programme provides both heating and insulation measures within a strict eligibility criteria. However a 2010 a Centre for Sustainable Energy report stated that the correlation between Warm Front grants delivered between 2000 and 2008 and levels of fuel poverty was strongest in urban areas and weakest in hamlets. 4.5 In addition, if assistance is available at a local level, many rural fuel poor households find that they fall outside the scope of the available grant programmes due to their personal circumstances, house type or location, or that the grant level is not sufficient to enable the necessary improvements to the fabric of the home to be made. 5. FREE CALOR S RURAL FUEL POVERTY PROGRAMME 5.1. Calor has pledged to assist off gas grid households across Great Britain in tackling fuel poverty and since 2010 has been working with the fuel poverty charity National Energy Action, and sister organisations in Wales and Scotland, to deliver the Future Rural Energy (FREE) programme a three year 1 million initiative funded by Calor to help tackle fuel poverty and promote effective energy efficiency advice and behaviours in off gas grid communities across Great Britain FREE was developed when Calor identified the need for a bespoke programme to bring independent energy efficiency advice and practical fuel poverty and carbon reduction measures directly to rural householders. In developing the FREE initiative Calor identified that: Page 21

22 Whilst there is a wealth of general energy efficiency information and advice, very little material exists that is specifically designed to cater for rural housing types, energy options and social demographics In fact, a number of misconceptions prevail regarding efficient rural energy solutions, particularly concerning Renewables which to date have largely been offered as the solution to rural carbon reduction and fuel poverty However, the nature of both the housing stock and capacity of rural electricity, combined with the high cost of installation, often limits the range of renewable technologies that can effectively be deployed in rural areas Furthermore, recent reports from both the EST and Joseph Rowntree Foundation have highlighted concerns around the reliability of some renewable technologies in terms of performance, cost effectiveness, and correct operation This fundamental lack of knowledge about rural energy issues has led to a discernible scarcity of formal rural energy assistance information and packages, both in terms of funding and activity, with Government schemes primarily being targeted at and delivered within urban areas where large scale easy wins can be achieved for a relatively low capital investment. The lack of both credible independent information and formal assistance schemes relevant to householders in off gas grid Britain was one of the key motivations behind the development of Calor s FREE initiative Through the FREE initiative, Calor and its partners have been working directly with rural communities across 8 English regions (North East, North West, Yorkshire and the Humber, West Midlands, East Midlands, East, South East and South West), helping individual households to focus on their energy consumption and encouraging local communities to work together to promote best practice in energy efficiency and carbon reduction. Calor provided funding of 25,000 to each region to employ Rural Energy Officers to facilitate delivery of the FREE initiative at a local level in priority off mains communities, and also funded 20 days of technical support per region from NEA fuel poverty specialists. 5.4.The FREE initiative combined a practical event based programme of energy efficiency advice roadshows with relevant bespoke supporting materials including the first dedicated offmains gas energy efficiency website and advice pack for Rural Energy Officers. Specifically designed to support those working within rural communities, the pack and website offer bespoke advice and technical solutions relevant to a range of typical rural housing types, locations and lifestyles. This was complemented by a bespoke rural consumer facing energy efficiency booklet developed in conjunction with the Energy Saving Trust detailing simple, practical measures to reduce energy consumption in rural homes. 5.5.The FREE initiative is about getting bespoke advice and help to the people that need it most. Through materials and practical advice, it is helping off gas grid households to understand the full range of options open to them with regard to cost savings, new technologies, income maximisation and carbon reduction methods and encouraging local communities to work together to promote best practice. Page 22

23 6. KEEPING LPG FUEL BILLS DOWN 6.1.The Committee note that there is no evidence of a lack of competition in the heating oil market, and wonder what can be done to prevent a repeat of the situation in December 2010 when households were faced with high energy costs during a spell of particularly cold weather. 6.2.LPG is not regulated like the transmission of electricity and gas for reasons explained by Charles Hendry in a recent Written Answer: Regulation is typically introduced where natural monopolies arise. While the gas and electricity transmission and distribution networks are natural monopolies, this is not an issue for LPG supply where the UK has an open and competitive market with regulation by the UK's independent competition authorities who are the Office of Fair Trading (OFT) and the Competition Commission (Hansard, 31 st October 2011, col. 370W). 6.3.LPG used in the UK is primarily produced as a by product from the refining of crude oil and hence its price is related to the price of crude oil and the internationally traded price of propane. The end user price for consumers, however, tends to be less volatile than that of oil because some suppliers tend to buy a large proportion of their gas forward in order to cushion householders from sharp spikes in winter pricing. In relation to the query raised by the Committee it is worth pointing out that the litre price of Calor Gas s LPG remained virtually fixed from July 2010 to January 2011 with only a c7% increase during December. This was at a time when the highest cost of gas for propane, in Sterling, was ever recorded. 6.4.In order to provide rural Britain with secure, low cost, low carbon energy, Calor is working with UK boiler manufacturers to bring mchp (micro Combined Heat and Power) boilers to the rural market. mchp is the process of generating both electrical power and heat from a single source. An mchp boiler will heat the property with a high efficiency condensing boiler, but will also generate up to 80% of the electricity required in a rural home. Electricity is generated at or near the point of us when it is needed, avoiding the wasted energy associated with power stations and transmission systems. mchp is a low cost, low carbon solution which is particularly effective at delivering secure, affordable low carbon electricity to rural areas even very remote ones. It will reduce home energy bills given an appropriate level of Feed in Tariff A group of leading companies in the mchp sector, including Baxi, Ceres Power, British Gas and E on, recently launched a vision report highlighting how mchp can actively contribute to the UK s transition to greener heat and power generation. ( The report demonstrates that the installation of over 1 million micro CHP units in the UK by 2020 is an essential and credible aspiration, but that the right Government support will be key to making this happen. Indeed, the upcoming second phase of the Comprehensive Review of the Feed in Tariffs (FiTs) scheme presents a unique opportunity to kick start the industry towards a path of sustained growth and wide uptake by the end of the decade. It is the conviction of all participants that raising the FiT to at least 15p/kWh and committing to continued support for micro CHP after the initial pilot of 30,000 units, are essential short term Page 23

24 elements of an ambitious Government strategy concerning micro CHP. According to the report, a subsidy level of 15p/kWh would allow micro CHP to achieve internal rates of return (IRR) of around 5%, which is on par with the IRR targeted for photovoltaics in the recent Phase 1 of the Comprehensive FiTs Review Consultation. Commercial viability would allow rapid capital cost reductions for this emerging technology with corresponding FiT degression and eventual phase out of support once wide deployment has been attained. The cost of such support is estimated by the report at 12.7 million until the end of the Spending Review period in April 2015, which is less than 2% of the total FiT budget for this period. The policy cost per carbon abated until the eventual phasing out of FiT support for micro CHP would be as low as 60/t CO2. This constitutes considerably higher carbon cost effectiveness than the anticipated overall scheme effectiveness, as set in the FiT impact assessment published in February The benefits of enabling wide uptake of micro CHP at such a low cost are bound to be significant for both the UKs overall energy strategy and for the consumer especially those in rural areas where the range of low carbon technologies that can be employed is restricted by the limited capacity of the electricity grid, much of which is only single phase. One million micro CHP units would not only considerably enhance the grid s capacity to meet electricity demand during peak periods, but also empower a greater number of consumers to produce electricity and heat on site allowing them to lower their energy bills and encouraging a culture of bottom up participation in the energy system. Fossil fuel powered mchp is practical, can use the current electricity and fuel supply infrastructure and will be very costeffective per tonne of carbon saved Stirling engine based LPG mchp units are already on the market and installed in British homes. Such micro CHP units can reduce total household energy consumption by over to 30% in existing properties where it replaces an old boiler Furthermore Calor is investing with the UK company, Ceres Power, to bring the Calor LPG fuel cell boiler to the rural market as the next generation of mchp. As well as the existing benefits of using mchp, the fuel cell mchp boiler will provide a measure of black out protection as the system can keep the power running during power cuts a particular problem in rural areas. This will help the UK cope with possible shortages of generation capacity. This fuel cell boiler will cut carbon emissions on an average property using oil by up to 50%. Page 24

25 7. APPENDIX: Page 25

26 Page 26

27 Page 27

28 Memorandum submitted by the Federation of Private Residents Associations (FP 05) The Federation of Private Residents Associations (FPRA) are members of the End Fuel Poverty Coalition and a non-political, not-for-profit advice, support and lobbying organisation for our members who include private residential leaseholders, tenants' and residents' associations and residential management companies as well as those companies where the leaseholders together own the freehold of their own residential block and we have long been concerned about the issue of energy efficiency for long- leaseholders living within blocks of flats, due to the complex nature of most leases. For very good reasons most leases don t allow for improvements to be carried out as part of the service charge but this means consensus for works to be done must be sought from residents and this can stall improvements before they have started. Research by our legal advisor Dr Nick Roberts, published last year in the New Law Journal, proposed a few simple changes to existing leasehold regulations which would go some way to removing particular barriers (a copy is available on request), one of the biggest barriers is the co-ordination of all the flats in a block to reach a common consensus and we consider one of the most difficult challenges in insulating blocks of flats, far more so than just funding. The Attitude of Utility Companies to Resident Management Companies The FPRA estimate that for about 60% of blocks of flats in England and Wales the effective landlord for supplies to common parts is a resident management company of which the vast majority are run by volunteer Directors often with little support from an experienced property manager advising them. Utility companies have taken in recent years a tougher and tougher stance with these companies. Under Landlord and tenant law landlords including resident management companies have to collect and spend service charges as trustees (S42 of 1987 L&T Act). The company acts as a trustee but the service charge monies do not belong to the company. This means that these companies generally have no assets and many file as dormant at Companies House. In recent years utility companies have run credit checks on resident management companies and some have refused to supply all together again effectively stifling competition and any search for best value for long-leaseholders. Others will only supply if large deposits are made; this is not practical for most of these companies as they do not hold any reserves (or the lease may not allow it). Others demand direct debit payments; a trustee or its managing agent cannot do this (again excluding leaseholders from many discount schemes available to other tenures). For example it is against RICS Service Charge code of practice approved by Government to set up a direct debit on a client or trust account. In the interest of providing effective competition for resident management companies all supplies of gas and electricity to common parts of blocks of flats should be made as residential supplies and not commercial as at present. Other Forms of Tenure Ofgem only refers to flats. OFGEM is missing other forms of tenure that also have communal supplies. There are many developments of freehold houses either solely of houses or mixed with flats on the same development. It is entirely possible, and with the current move to more Page 28

29 shared equity and mixed development arrangements that those properties will pay an amenity charge for gas and electricity to some form of specialist company or landlord. OFGEM needs to consider how freehold houses which are part of communal supplies can be brought within any change of licensing conditions. The 'Green Deal' would not on its own provide the much needed incentive for leaseholders to insulate their homes. To be cost-effective, such improvements which need to be carried out to a block as a whole would involve very complex arrangements and negotiations especially in mixed tenure developments and where there are a number of parties to the lease. Many leases for instance are tripartite leases with a 'Head' Freeholder and Residential Management Company with responsibility for the management (often run by volunteers), as well as leaseholders who vary from being reasonably well off occupiers to those in dire fuel poverty struggling to pay their bills. Who should fund works in such a situation? Flat owners need help in making their blocks more energy efficient. But the Government s Green Deal designed to do just that - isn t likely to work for flat owners without providing incentives. As highlighted by the Arun District Council Energy Efficiency officer Jo Brooks recently in a recent thesis for an MSc Architecture: AEES Graduate School for the Environment in July 2011 presented to the DECC working group set up following the committee stage of the Energy Bill. (Full copy and recommendations from the thesis available on request) It has been well researched and modelled that in medium to high rise buildings, the energy & carbon savings that could be seen in top floor flats are different to those on middle floors and significantly different to those on the ground floor within the same building, even when the same measures are offered. Therefore it would seem wrong to me to install a measure for the whole building and then, based on carbon savings, divide the cost up equally among the number of dwellings in the block, even if this lease allows this. But this is precisely the basis on which the government is trying to promote the Green Deal to flat owners. Most blocks of flats in the private sector are co-owned and a number of parties are involved with each building including freeholder-landlords, leaseholder-landlords, leaseholder-owneroccupiers and short hold tenants, not to mention residential management companies and letting and managing agents too. In some circumstances the freeholder can even be a social landlord and the tenants private. Leases vary from flat to flat and block to block and the whole sector struggles from a lack of national regulation. The responsibilities of the various parties can also vary significantly, which makes improvements to these buildings very difficult to implement. For all these reasons, the FPRA has been lobbying Government to treat blocks of flats/apartments in the private sector, especially those where works would need to be done to common parts, as a separate entity under the Green Deal so that these issues are correctly and fairly addressed. 1. Leaseholders of flats are used to sharing expenses equally through service charges and therefore any scheme that require a detailed cost benefit analysis, distinguishing flats with one or two external walls or on the ground or top floor are, in our view, doomed to failure. My view is that the key barrier to delivery of the Green Deal to blocks of flats and other multi-occupancy properties will be consent to the 'Green Deal' charge from multiple bill payers (both lessees and sub-tenants). Page 29

30 2. We suggest that in order to deliver energy improvements to the structure and common parts of blocks of leasehold flats other funding programmes will be required such as the one in West Sussex in partnership with all the local authorities that has just come to an end due to the short term nature of the funding. (Details available on request) These issues may be particularly acute for measures such as cavity or solid wall insulation which may impact on multiple units within a building and may require a Green Deal charge to be attached to two or more individual meter. The most significant problems are likely to be those in multiple occupancy buildings were one or a minority of flat owners or tenants could prevent a Green Deal from going ahead on the block or row of properties, to the actual or perceived disadvantage of other occupants. In the presentation to the Government working group we focused on potential barriers to the wider uptake of the Green Deal related to freeholder, leaseholder and bill payer consents and we would be happy to share that with the committee if that would helpful. VAT on supplies to common parts Failure of utility companies to appreciate that resident management companies cannot be assessed like other commercial businesses. There is a lack of open competition for supplies to common parts and RMCos are being charged unreasonable tariffs. Disconnection protocol for supplies to common parts. There have been cases where supplies have been disconnected when this means no fire alarm or emergency lighting in blocks. We would also ask your Committee members to consider the supply of gas and electricity to the common parts of blocks of flats which will impact on the flat owners and tenants ability to keep up with rising fuel prices. Some RMC or RTM Companies classified as 'dormant' will not even be considered by Scottish and Southern or Eon for a quotation for supply. EDF would only supply on a 14 day direct debit basis. There has been an increase in the requests for direct debits and security deposits. Not always possible for small Flat Management Companies who are non trading companies. The problem of credit vetting has been an issue for some time with an increase in the suppliers credit procedures and the fact that service charges are no longer dealt with in the 'company' accounts. The suppliers carry out a credit check and ascertain the company is dormant. (Not uncommon for block of flats). The supplier then says they no longer wish to supply and are placing the block on 'out of contract' rates until they transfer out or They will supply but the RMC will need a 3 month deposit and payment by direct debit. not always possible from a service charge account. Suppliers often refuse to quote for this type of business because they cannot secure a good credit rating on the resident management company. Even if they have provided both company Page 30

31 and service charge accounts that show a healthy reserve balance and a positive net worth, apparently not sufficient to overcome concerns over the credit worthiness of the RMC client. The Contradiction between Licensing Conditions and VAT Regulations The VAT regulations concerning the supply of gas and electricity to common supplies to blocks of flats by landlords have been clear for many years. But they conflict with licensing conditions and managing agents, resident management companies and other landlords have constant battles with utility companies who incorrectly class the supplies as commercial for VAT purposes. Here are the key extracts from the VAT regulations available from HMRC. The VAT Act 1994, Schedule 4, Paragraph 3 defines any supply of heat, power, refrigeration or ventilation as a supply of goods. Supplies of fuel and power are subject to the standard rate of VAT unless there is a provision for a reduced rate for a qualifying use. Qualifying use means: domestic use ; or charity non-business use. The legal provisions for the reduced rate are in the VAT Act 1994, Section 29A. The following supplies are charged at the reduced rate: fuel and power for domestic use The following are treated as domestic use if they are part of the same residential unit: Subsidiary buildings situated a short distance away, such as a garage in a block located away from a house; and corridors, lifts, hallways and stairways in a residential unit. Item 3.2 of Fuel and power leaflet produced by HMRC, which defines what is Domestic use Other supplies that are for domestic use Supplies of fuel and power that exceed the de minimis limits are for domestic use only if they are for use in a dwelling or certain types of residential accommodation (excluding hospitals, prisons or similar institutions, hotels or inns or similar establishments). Examples are: armed forces residential accommodation; caravans; children's homes; homes providing care for- (a) the elderly or disabled; (b) people with a past or present dependence on alcohol or drugs; (c) people with a past or present mental disorder; houseboats; houses, flats or other dwellings; hospices; institutions that are the sole or main residence of at least 90% of their residents; monasteries, nunneries and similar religious communities; school and university residential accommodation for students or pupils; and self catering holiday accommodation. Page 31

32 The following are treated as part of the same residential unit: buildings such as garages used with houses; subsidiary buildings situated a short distance away, such as a garage in a block located away from a house; and corridors, lifts, hallways and stairways in a residential unit. Item 5 of the same VAT Publication states 5. Electricity 5.1 What supplies are taxed at the reduced rate? Electricity supplied for a qualifying use (see Section 3) is subject to the reduced rate. (as explained above ) 5.2 Supplies of small - de minimis - quantities Supplies of not more than an average rate of 33 kilowatt hours per day - 1,000 kilowatt hours per month - of electricity to one customer at any one of the customer s premises are subject to VAT at the reduced rate. This applies whether the bill is based on a meter reading - by either you or your customer - or on an estimate. Item 2.2 of the Reliefs and special treatments for taxable supplies specifically relates to Carbon Change Levy but defers to the VAT guidance as a parent document. There is a clear contradiction in the approach to common supplies to blocks of flats between VAT rules and the current interpretation of licence conditions of some, not all, utility companies. It would make sense to clarify the licence conditions such they are in accord with VAT rules. To do this the current proposal from Ofgem does not go far enough to provide the same competition for energy suppliers to long-leaseholders as it does for those living in a freehold premises which put simply means leaseholders are much more likely to pay more for energy supplies than those living in other tenure properties and it therefore follows are more likely to be in Fuel Poverty. The Lack of a Disconnection Protocol for Blocks of Flats The current confusion about supplies to common parts of flats means that protocols adopted to protect domestic customers from disconnection do not apply to blocks of flats. So because the landlord s supply may be treated as a commercial supply it is possible for utility companies to disconnect supply to common parts or to communal heating systems without regard to protecting vulnerable customers and those in fuel poverty. Even if the landlord s supply is limited to light and power in communal areas there can be grave consequences of disconnection. Disconnection can lead to no fire alarm and emergency lighting, no lifts, no pumped water and sewerage in tower blocks. To ensure that utility companies adopt sensible measures before disconnection to common parts of supplies of blocks of flats the licence conditions should be quite clear that all such supplies should be classed as residential. The FPRA believe the Protocol should include:- Page 32

33 Recognition that supplies to common parts to blocks of flats are domestic and retail supplies, not commercial. Any paperwork regarding disconnection must be served on the correct party not a communal building. It is not good enough to address it to the block of flats where it will be left on the floor of the hallway. If the block of flats is a new development the supplier should track down the responsible party. It will be the developer; if the developer is in receivership or administration it will be the insolvency practitioner. The supplier should establish whether disconnection will affect any vulnerable persons living in the block. The suppler should establish whether disconnection will prevent the supply of water and sewerage services to the block. The suppler should establish whether disconnection will mean that the fire alarm, emergency lighting and smoke detection systems will cease to operate and so put the occupants lives at risk in case of fire. The supplier should inform the local authority before any disconnection. The supplier should inform the fire service before any disconnection. We are currently waiting for a response from The Department of Energy and Climate Change on this point. The Current Proposal to Alter Licence Conditions 1. It is not clear whether Ofgem are considering supplies of gas and electricity or just gas. Surely it is intended that any changes should apply to electricity supplies as well. To not do so would seem strange and not be even handed to consumers as well as utilities. 2. Ofgem state that there must be a legal entity acting on behalf of individual residents. This seems to imply that the change would only apply to resident management companies. But some resident management companies do not have all residents as members of that company. Would these qualify? Then what about the other blocks of flats which do not have a resident management company as the landlord. There may be an individual or a company that provides services. Does that landlord act on behalf of individual residents? Ofgem seem to imply there is a difference here which will produce different results in supply in adjacent blocks dependent on the history of those blocks. These will produce even more confusion. In addition there are the general issues listed above to consider. What if the resident management company delegates its functions to another legal entity (very common for most volunteer Directors to appoint a managing agent? Would that qualify)? Page 33

34 3. Is a resident management company that is registered at Companies House supplying commercial services? Usually not as the lease will often be very specific about the remit. What if the resident management company appoints a managing agent who calculates and charges for the supply of gas and charges an administration fee to the company for doing so? (Very common indeed and what would be a reasonable fee to charge?). What about newer developments that use combined heat and power plants. Many of these schemes typically outsource the supply of light and power to others and there are also specialist companies that handle the complex billing processes involved. The current proposal from OFGEM would appear to discriminate against the use of CHP and other new ways to promote energy efficiency (surely this is in conflict with current Government policy?) I apologise for the length of our submission but as you can see this is a very complex area with competing pieces of legislation that long-leaseholders and those that mange their properties have to consider. We will of course be happy to provide further information or clarification to the committee and I am sure the technical team at the Association of Residential Managing Agents (ARMA) will be able to assist the committee too. December 2012 Page 34

35 Memorandum submitted by the Chartered Institute of Environmental Health (FP 06) 1. Executive summary 1.1. The Chartered Institute of Environmental Health (CIEH) speaks for over 10,000 members across the UK. Many work in local authorities including local authority housing officers The Housing Health and Safety Rating System (HHSRS), introduced by the Housing Act 2004, provides a robust and effectives means of tackling Category 1 Hazards to human health created by poor housing conditions, including excess cold The CIEH approves of public policies which address fuel poverty in terms of downward pressure on fuel costs and additional support for those on low incomes. However, addressing the conditions of properties, particularly in respect of energy efficiency measures is an equally important component of a coherent strategy for tackling fuel poverty Local authority housing officers should be given full political backing (nationally as well as locally) to tackle excess cold hazards, especially in respect of the homes of tenants in the private rented sector. There are a number of carrots, sticks and tools recommended by the CIEH to make public policy more effective in tackling fuel poverty. 2. The health impacts of fuel poverty 2.1. The CIEH approaches the issue of fuel poverty from a concern about the health hazards affecting those affected. The health effects of excess cold hazards include cardiovascular and respiratory disease, especially in older people 1. The increased cost of heating homes can cause stress and anxiety to the occupiers, especially if they are in fuel poverty Approximately 2 million homes in England have a Category 1 hazard for excess cold under the HHSRS (see English Housing Survey, Headline report , page 41) 2. The CIEH has worked with the Building Research Establishment to develop a cost calculator to assess the impact on the NHS of not dealing with Category 1 hazards According to the CIEH s toolkit Good housing leads to good health the cost to the NHS of dealing with cold-related illnesses and conditions was then approximately 1 billion per year. The 1 For more details see the HHSRS Operating Guidance page 60 and the Review of Health and Safety Risk Drivers pages Page 35

36 HHSRS cost calculator shows that excess cold and falls hazards are the most cost effective hazards to deal with in terms of savings to the NHS In research commissioned by Friends of the Earth, the CIEH and BRE provided an estimate that the costs to the NHS in England of treating patients who are tenants in the private sector, living in properties with an energy rating of F or G, is currently 145 million a year For households in, or at risk of, fuel poverty, energy costs are too high. In helping to tackle this problem, Governments need to work to keep those costs down, help the poorest households by supplementing their incomes and help reduce consumption (and therefore total cost) of fuel by targeting the properties they live in for energy efficiency measures. 3. Environmental health and the private rented sector 3.1. The private rented sector includes some of the country s worst housing stock and is home to many of society s most hard-to-reach and vulnerable groups and where some of the most deprived communities live. Approximately 1 million homes in this sector contain serious hazards under the HHSRS, the majority being excess cold Local authority housing officers have powers under Part 1 of the Housing Act 2004 to tackle the hazard of excess cold in privately rented homes. The CIEH urges local authorities to address this and other health hazards (for example from falls) in the private rented sector strategically, rather than limiting their activity merely to responding to complaints Environmental Health Practitioners (working for local authorities and also for private landlords) work with landlord forums to impress on them the problems associated with excess cold, warning that unless landlords improve energy efficiency in properties, they could lose money as well as face enforcement action under the HHSRS. 4. The barriers to tackling fuel poverty in the private rented sector 4.1. Usually local authority housing officers only resort to enforcement action under the HHSRS in the event that informal resolution has failed. However, Government-imposed cuts in local authority spending have severely restricted their ability to be proactive in protecting the most vulnerable tenants The restriction on enforcement action created by budget cuts has been compounded by the Government s decision to cut funding for private sector housing renewal. This funding has in the past enabled local authority housing officers to bring to the table the prospect of grants and loans to assist in achieving voluntary action to remove hazards to health. The budget was first introduced in 1949 to support the renovation and conversion of tenanted property. In 1983/84 the expenditure was 1.1 billion with most of the money going to support the 90% repair grant programme. In 2010 the budget was 317 million. In 2011, it is NIL. 5 health costs of cold dwellings.html?terms=the+health+costs+of+cold+dwellings Page 36

37 4.3. A further barrier is the Government s reluctance to intervene as was demonstrated during the passage of the Energy Act The Government first opposed the campaign by over 40 organisations, the CIEH included, led by Friends of the Earth and the Association for the Conservation of Energy, for a minimum energy efficiency standard for private rented properties. When the campaign was strongly supported by legislators in Parliament, the Government put back the start date for this legislative requirement from 2016 to The Energy Act The Energy Act does not affect the HHSRS and generally, the enforcement powers of local authority housing officers under the HHSRS are adequate. The CIEH has provided the Department of Communities and Local Government with suggestions where some minor technical changes would be helpful The CIEH supported the Rugg report s recommendation 6 for landlord registration and at the last General Election called on the next Government to act to ensure all dwellings in the private rented sector meet the decent homes standard and that effective action should be taken against rogue landlords. The Energy Act has not taken any steps in this direction Energy Performance Certificates are not required for Houses in Multiple Occupation (HMOs) and unfortunately the Energy Act did not address this omission. It gives the unfortunate signal to landlords and their tenants that energy efficiency is not a priority in HMOs, which represent an important stock of more affordable housing for many hard-to-reach groups The CIEH has some evidence of the seriousness of the issue of retaliatory evictions, namely landlords suddenly terminating tenancies in situation where the tenants have made complaints, including complaints to local authorities of health hazards in their homes. The CIEH fears that tenants who request Green Deal measures from their landlord will similarly be at risk of retaliatory evictions. The Government was asked to include a provision in the Energy Bill to protect tenants from such evictions, but the Government declined to do so. The CIEH has provided the Department of Communities and Local Government with a dossier of cases and a copy accompanies this submission. 6. Fuel poverty in rural areas 6.1. The South West Public Health Observatory report Fighting Winter Cold in the South West (2008) underlines 7 the strong link between excess winter deaths/fuel poverty and rural areas, where many smaller authorities are located Rural housing is often harder to treat and the population often suffers from higher food, transport and fuel costs. 7. Proposals for improvement 7.1. The CIEH supports the introduction of the Green Deal and wishes it to be an attractive and effective offer in the private rented sector, where there are large numbers of properties requiring higher Decent Homes and energy efficiency standards. A number of carrots and sticks ought to be applied to ensure this outcome is achieved Page 37

38 7.2. Carrots should include: access to the ECO for energy efficiency measures where tenants are in fuel poverty; focus the Landlords Energy Saving Allowance on these works and make claims easier; reduce VAT to 5% for a wider range of energy efficiency works; re-introduce the private housing sector renewal budget Sticks should include: adequate resources for local authorities to enforce the HHSRS; protection from eviction of tenants who complain to local authorities of excess cold or who ask their landlords for Green Deal works; reinstate 2016 as the start date for a minimum energy efficiency standard for private rented properties In addition to these carrots and sticks, additional tools required by local authority housing officers include: political support (national and local) for effective enforcement of the HHSRS; the requirement of Energy Performance Certificates for HMOs; flexible application of registration requirements for landlords; closer working with landlords representative organisations on the further development of accreditation schemes for landlords. 8. About the CIEH 8.1. As a Chartered professional body, we set standards and accredit courses and qualifications for the education of our professional members and other environmental health practitioners As a knowledge centre, we provide information, evidence and policy advice to local and national government, environmental and public health practitioners, industry and other stakeholders. We publish books and magazines; run educational events and commission research As an awarding body, we provide qualifications, events, and trainer and candidate support materials on topics relevant to health, wellbeing and safety to develop workplace skills and best practice in volunteers, employees, business managers and business owners As a campaigning organisation, we work to push environmental health further up the public agenda and to promote improvements in environmental and public health policy We are a registered charity with over 10,500 members across England, Wales and Northern Ireland. December P age Page 38

39 Memorandum submitted by Mears Group PLC (FP 07) Executive Summary A typical annual bill for homes that do not have mains gas connection is around 250 higher than those that do. There is a suite of heating options available to people living in off grid social housing. Air Source Heat Pumps can be a cost effective and unobtrusive solution for people living in off grid, individual dwellings. Air Source Heat Pumps are not currently funded by the Renewable Heat Incentive and should be included within the range of options. Social Landlords can only leverage the Renewable Heat Incentive for communal stock. Some social landlords were redirecting the revenue generated by Solar PV Feed in Tariffs to address issues of fuel poverty in harder to reach groups such as those living in off grid properties. The lack of available funding options open to social landlords means that many off grid tenants remain reliant on electricity which is the most expensive form of heating. The Affordable Warmth fund should be extended to include people living in off grid properties in social housing. I. Introduction 1.1 Mears are the UK s largest provider of social housing maintenance and domiciliary care services. We also run 12 home improvement agencies, which provide advice and support to older private home owners. Mears works across a stock of 500,000 social homes and provides domiciliary care for 20,000 people. We support some of the most marginalised people within the UK, many of which would be defined as being fuel poor. 1.2 We have a long standing commitment to supporting the communities where we work and by working in partnership with Housing Associations and Local Authorities we are able to offer a range of initiatives which are aimed at lifting people out of fuel poverty. 1.3 We have micro generation accreditation and our work has been recognised with awards such as the Sustainable Housing Award (2011) for the Sustainable Larger Housing Retrofit Project of the Year and the 2009 award for Low Energy Social Housing Project of the Year. The judges were impressed by the range of solutions and products used in the project to deliver an 85% saving in the energy consumed in the house, a 1930's terrace, a potential saving of 600 on annual energy bills. Judges commented "It is a great example of what can be applied to the social housing sector, addressing fuel poverty and CO2 emission targets." 1.4 For the purpose of this submission we will concentrate our answers to our work with customers who live in off grid properties. Mears currently services over 3000 off grid properties. We are currently developing our services for off grid homes by investing in new technology to help us collate information and support tenants and landlords. Our aim is to review all off grid social housing stock and provide priced options that detail the life cost of the proposals. We plan to illustrate the benefits to the social landlord and the resident and explain what funding is available to cover the costs of the work. We also Page 39

40 provide energy awareness training. Mears works with social landlords to find the right option for individuals or a combination of options. 1.5 There are a suite of options available to people living in social housing which is off grid. These include, air source heat pumps, ground source heat pumps, solar thermal and solar PV. LPG and heating oil are rarely used in social housing stock. 1.6 When working across stock with differing levels of efficiency we and our partners have leveraged available funding to rebalance and help those who are most likely to live in fuel poverty such as those tenants in off grid properties. II. What are the barriers to tackling fuel poverty among off grid consumers? 2.1 A typical social house heating and insulation package costs around 9,000. Social landlords have leveraged a number of different sources of funding to cover the works. CESP, CERT and RHI funding allowed social landlords to claim back approximately Funding could also be leveraged through the Solar PV feed in tariffs scheme. The electricity generated from the FIT was around 836 per annum tax free. After the work was completed the improvements would reduce annual electricity costs for tenants living in the property from 450 to 300. The whole installation would pay for itself within an average eight years. 2.2 However, Renewable Heat Incentive only applies to communal properties and cannot be leveraged for individual dwellings and CESP funding was rarely used in areas of mixed tenure. This means there are few funding sources for social landlords looking to improve fuel efficiency and lower costs for their off grid tenants. 2.3 Social landlords looking for innovative ways to support off grid tenants redirected the funding received from Solar PV installation. The Feed in Tariff Scheme became a valuable funding source for Registered Social Landlords looking to address fuel poverty issues. 2.4 Revenue generated by the feed in tariffs could be ploughed straight back into alleviating fuel poverty for other harder to reach tenants such as those in off grid properties. 2.5 The Government s decision to reduce FIT rates across the board has made solar PV installation unviable for social landlords. This combined with the lack of alternative funding schemes for individual social house dwellings is a major barrier to tackling fuel poverty. III. To what extent is fuel poverty in rural areas driven by a lack of access to the gas grid and to what extent are other factors (such as housing condition and income levels) responsible? 3.1 A typical annual bill for homes that do not have mains gas connection is around 250 higher than those that do. Lack of access to the gas grid is a significant cause of fuel poverty among off grid tenants. While access to the grid is not easily remedied the barriers to social landlords providing more cost effective heating solutions can and should be addressed. 3.2 DECC should address the lack of funding for the purchasing and installation of Air Source Heat Pumps for off grid social housing. These can be one of the most cost effective solutions for people without access to the gas grid. RHI should be extended to cover air source heat pumps and individual social house dwellings. The current situation means that most tenants are reliant on electric heating which is one of the most expensive forms of heating. Page 40

41 3.3 Reliance on electric heating often creates a double whammy for off grid tenants. Many are on the cheapest plans which heat a property at off peak times (through the night.) Given that many of our older or unemployed customers may be in their property throughout the day or may require hot water and heating in the afternoon they can be reliant on additional plug in heaters to top up. This pushes their heating costs even higher. 3.4 Housing Condition is also a factor among individual social house dwellings, as they can miss out on the regular inspections and cyclical works that communal estates are subject to. On many estates there are weekly inspections to identify and correct damage at the earliest possible stage. With fewer inspections, housing conditions in individual dwellings may not be at the same high standards of larger estates. 3.5 Individual dwellings are also not eligible for funding streams that social landlords leverage for communal areas. This means that improvement works on these isolated properties are often reliant on wider funding programmes such as the decent homes standard. While the Decent Homes Programme has enabled social landlords to improve the overall condition of housing stock the funding did not cover the installation of alternative heating sources for off grid tenants. IV. Given that the OFT found no evidence of a competition problem in the heating oil market, what (if anything) can be done to prevent a repeat of the situation in December 2010 when households were faced with high energy costs during a spell of particularly cold weather? 4.1 Social housing tenants are typically among the poorest people in the UK. Fluctuations in oil prices can result in severe financial hardship or going without heating. It is important to remove the dependence on oil. Air Source Heat Pumps are the most cost effective long term solutions for individuals with no access to the grid. About the size of an air conditioning unit, they are relatively easy to install, less intrusive than other measures and fix to the outside of any property. V. How could DECC s policies for tackling fuel poverty among off grid consumers be improved? 5.1 DECC could improve its policies for tackling fuel poverty by recognising that social landlords redirected funding leveraged from the FIT to tackle fuel poverty across the wider housing stock including off grid properties. A dual tariff should be created which distinguishes between not for profit schemes (such as those run by Local Authorities, Housing Associations, ALMO s and charities) which require the higher tariff to incentivise solar installation but plough any revenue back into reducing fuel poverty and private schemes which have no impact on tackling fuel poverty. 5.2 Renewable Heat Incentive should be extended to cover Air Source Heat Pumps and should be available to fund installations in individual social house dwellings. 5.3 ECO has a critical role to play in tackling fuel poverty through helping households to improve the energy efficiency of their homes and reduce heating costs. The Affordable Warmth element of ECO is designed to provide support to those low income and vulnerable households least able to heat their homes to an adequate standard. As the Green Deal and ECO consultation document states It is clearly crucial that this ring fenced element of the Page 41

42 overall obligation is targeted at those households where it can make the most difference, and will form a key part of the Government s programme to tackle fuel poverty. 5.4 However, The Green Deal and ECO consultation makes it clear that the intention is to restrict Affordable Warmth eligibility to properties in private tenures. The question asked within this consultation is: Do you agree that eligibility for Affordable Warmth measures should be restricted to households who are in receipt of the benefits and tax credits similar to the CERT Super Priority Group and who are in private housing tenures? A restriction in this way would prevent social housing tenants in off grid properties from gaining access to ECO Affordable Warmth funding which seems unfair and unreasonable. As a minimum, off grid social housing should be able to access Affordable Warmth Funding and should not be disadvantaged. December 2011 Page 42

43 Introduction and summary Memorandum submitted by Citizen s Advice (FP 08) Citizens Advice welcomes the opportunity to respond to the Energy and Climate Change Committee s inquiry into fuel poverty. The Citizens Advice service provides free, independent, confidential and impartial advice to everyone on their rights and responsibilities. It values diversity, promotes equality and challenges discrimination. The service aims: To provide the advice people need for the problems they face. To improve the policies and practices that affect people s lives. The Citizens Advice service is a network of nearly 400 independent advice centres that provide free, impartial advice from more than 3,000 locations in England and Wales. In 2010/11 the Citizens Advice service advised 2.1 million people on 7.1 million problems. Fuel poverty amongst households that live in privately rented accommodation and or who are not connected to mains gas is of significant concern to us, and both issues consistently feature in the evidence that we receive about fuel poverty from bureaux. We are very pleased that the Committee has undertaken to examine fuel poverty as it relates to these important issues. This submission covers the following key points: Individuals who rely on off-grid heating can have particular difficulty affording their fuel and the lack of protection for low income and vulnerable consumers can lead to serious detriment. Although we welcome the work of the Office of Fair Trading (OFT) in this area, we are concerned that it will not be sufficient to fully address the needs of these consumers. We therefore support the stated intention of the Federation of Petroleum Suppliers to self-regulate but request that DECC is involved in the development of this and provides a strong steer about the direction it should take. We welcomed the Government s announcement that it will become illegal for landlords to refuse reasonable energy efficiency requests from their tenants and that rental of the very coldest properties will be banned through a minimum energy efficiency standard. However we have grave concerns about introducing these measures without also bringing in protection from retaliatory eviction. Off-grid 1. Citizens Advice Bureaux have raised concerns about the difficulties that CAB clients face when they are off the gas grid for some time, and we submitted evidence to the OFT s market study earlier this year. 2. The key types of detriment that CAB clients face fall into the following categories: affordability; lack of affordable payment options; lack of support for low income consumers; lack of protections for vulnerable people; dubious or underhand sales practices; and lack of competition. A CAB in the South West saw a woman who was struggling to heat her home as she could not afford her heating oil. She lived with her disabled child in private rented accommodation, in a rural area, and had no access to mains gas. In the summer she had purchased oil at 50p/litre but over Christmas the price had doubled to 1/litre and the company was in any case unable to deliver to her. She found another supplier that could provide oil for collection, but the price was 1.50/litre. She could not afford this and was looking for help. The CAB adviser checked and there were no grants available. Because Page 43

44 she had solid walls, she could not have cavity wall insulation installed and lack of access to her loft space made it impossible to determine whether her loft was insulated. She was not eligible for a winter fuel payment and there were no additional benefits that she could claim. The only possible source of funding was an energy trust, but this was only available to pay off arrears, not to cover ongoing consumption. The woman and her child were having to wear several layers of clothing including a hat, gloves and a coat for sleeping in. The woman was aware that it was cheaper to buy oil in the summer months, and tried her best to save in order to do this. A 60 year old man went to a CAB in the North West of England because he was having difficulty with his LPG supply. He was paying 180 per month to his supplier but he had arrears of 800. When he went to the bureau, there had been significant snowfall in the region, with temperatures regularly falling below 0 C. There were nine people in the household, including three children under thirteen, and two people with a disability. The man s brother-in-law had epilepsy and his seizures were more frequent in cold weather. Despite this, the supplier would not deliver any fuel unless the arrears were cleared in full. The adviser noted that this neglected to take into account any other financial commitments the man had. Eventually, after a protracted negotiation, the supplier accepted 550 upfront, which meant the man had to use up all the savings he had made due to taking a payment holiday from his mortgage and still had to borrow a significant amount from other family members. 3. When the OFT published the findings of its market study, we welcomed its commitment to look more closely into oil suppliers practices to ensure compliance with existing consumer protection legislation. We understand that many of the worst practices we hear about - such as charging a different price on delivery from that quoted, or siphoning oil from a customer s tank to recover debt - are already covered by existing law. It should therefore be possible to stamp out such practices with a robust approach to enforcement. 4. However, we remain very concerned about the experiences of vulnerable and low income consumers, and we strongly believe that more needs to be done to protect these groups. Although the OFT found no evidence of a failure of competition across the market, our experience is that some consumers have little or no choice over their heating fuel supplier. While competition may be seen to work across the market as a whole, this fails to deliver positive outcomes to all groups of consumers. A CAB in the West Midlands reported that they had seen a woman who owed 2000 to her LPG supplier. She lived with three children and was self employed, but on a low income and was in receipt of tax credits and council tax benefit. The price of gas had increased considerably and she was unable to change supplier because she shared a tank with several neighbouring households. Even if all the households agreed to change supplier, they would be charged 500 for a new tank as the tank belonged to the supplier. A CAB in the South East saw a woman who lived on a mobile home site. She was a full time carer for her disabled husband and the couple s only income was benefits. Their home was heated by LPG, which was brought onto the site four times a year and distributed to residents. The residents of the site had no choice over the supplier used. The woman said that all the residents on the site were unhappy with the prices charged and wanted to change to a different supplier. 5. In our experience consumers on low incomes or those who are vulnerable for another reason are more likely to be constrained in their choices than other consumers, and competition alone is less likely to meet their needs. We were therefore disappointed that the OFT did not make any recommendations about how vulnerable groups of consumers might be protected. 6. In order to address some of the problems that customers face with affordability, we are promoting bulk purchasing of heating oil through our oil clubs campaign. Information about these initiatives, including how to set up and run an oil club, tips for co-ordinators, and a map that enables customers to search for a club in their area is available on our website, and some CABs have been involved in promoting clubs locally. Page 44

45 7. Following discussions with DECC, the FPS, Action with Communities in Rural England (ACRE) and others, we used the launch of our oil clubs campaign in September to help spread the jointly agreed message that it is cheaper to buy oil outside of the peak periods. 8. In addition to the high cost of off-grid fuel, those who use heating oil or LPG have no protection that is equivalent to the gas and electricity supply licence conditions. Suppliers are under no obligation to provide assistance or protection from disconnection, to low income or vulnerable consumers, nor are they obliged to take into account ability to pay when recovering debts. A CAB in Wales reported the case of a woman who lived with her partner and 11-year-old daughter in rented accommodation. Her daughter, who had epilepsy and a heart condition, had been sent home from school as she was unwell and she had later had a seizure. When the woman tried to run a bath for her daughter, she found her LPG supply had been disconnected. She phoned the supplier the following day and was told that there was an outstanding bill. The woman said that she had received the bill, but disputed the amount and had written to the supplier but received no reply. The supplier told her that unless she paid a significant part of the 700 bill, she would not be reconnected. The supplier representative also said that the woman should move home as LPG is relatively expensive. The CAB adviser challenged this, and was eventually able to persuade the supplier to reconnect the supply, waive the reconnection fee and make a repayment arrangement for the outstanding debt. 9. In order to improve practices and bring greater consistency across the sector, we recently drafted a charter setting out good practice in dealing with vulnerable and low income customers and we encouraged the FPS to sign up to this 10. The FPS has informed us that they will not sign up to the charter as they are working with the OFT towards developing self-regulation, and this would make the charter redundant as a separate document. However, our discussions with the OFT indicate that discussions between the OFT and the FPS will focus simply on clarifying existing law. 11. We are very keen that any industry self-regulation adequately addresses the problems for vulnerable consumers in the sector and the FPS has indicated that it will involve Citizens Advice in the development of any regulatory code beyond what is currently required by law. 12. We would welcome moves by the industry to self regulate, but this must be done as swiftly and as collaboratively as possible. If progress is slow or not sufficient to address the difficulties we see, then we would ask the Government to consider statutory regulation. 13. Our experience of self regulation in other sectors is that it works best when Government strongly supports it and when the industry concerned is aware that independent regulation is likely should it fail to appropriately self-regulate. We would therefore like to see DECC involved in discussions about selfregulation of the off-grid sector and we would welcome a strong steer from DECC about the direction that such self-regulation should take. Private rented sector 14. Citizens Advice, as part of a coalition of around 40 organisations, campaigned for the 2011 Energy Act to introduce a minimum energy efficiency standard for the private rented sector from 2016, and greater protection for tenants who ask their landlords to improve the energy efficiency of their home. We believed it was important to provide protection from retaliatory eviction to tenants who make reasonable energy efficiency requests. 15. Private rented homes are the worst maintained part of the national housing stock and contain large numbers of vulnerable households and people living in fuel poverty. Urgent action is needed to ensure that Page 45

46 all private rented sector tenants live in homes maintained to an acceptable standard. As the private sector grows, this becomes an ever more pressing matter. 16. We strongly welcomed the Government's announcement that it would become illegal for landlords to refuse reasonable energy efficiency requests from their tenants and that the rental of the very coldest properties would be banned through a minimum energy efficiency standard (although we continue to have reservations about the timetable and the precise definition of the minimum implementation could be as late as 2018; and there is a loophole whereby properties can still be let below the minimum if the landlord has taken advantage of the available Green Deal and Energy Company Obligation finance). 17. However, we remained concerned that many tenants may be deterred from making requests of their landlords through fear of eviction. Under Section 21 of the Housing Act 1988, a landlord can end an assured shorthold tenancy agreement by giving a minimum of two months notice, without giving any reasons. 18. Research carried out by the Citizens Advice service 1 has shown that many tenants fear that if they make demands of their landlords, they may be served with a notice to quit. The fear of retaliatory eviction is a significant barrier to many tenants asking for improvements and maintenance of rented properties, even where the landlord is in breach of health and safety regulations. Environmental Health Officers cite threats of retaliatory eviction as a significant challenge in their work to enforce health and safety standards. 19. Feedback from bureaux since The tenant s dilemma was published shows that the problem of retaliatory eviction persists: A CAB in South East England saw a woman who was in her early forties and had long term health problems. She had lived in her flat since 1993 and in 2005 had signed a fresh assured shorthold tenancy. In 2009 she complained to the landlord s agents that the flat was excessively cold and had damp and mould growth. Neither the landlord nor the agents addressed the problem, so the client contacted the local authority, who inspected the flat. The local authority contacted the letting agent and set out the results of their visit, specifying the action the landlord had to take. The work was not carried out within three months and the council issued an Improvement Notice under the Housing Act 2004 The work was still not carried out and shortly afterwards the letting agents issued the client with a section 21 notice requiring possession. The client had no rent arrears and had a good record of payment of rent over the seventeen years she had lived in the property. The client felt sure that the agents had issued the notice in retaliation after she successfully pursued the disrepair allegation. A CAB in the East Midlands saw a woman who lived in privately rented accommodation on an assured shorthold tenancy. The kitchen in her house was very damp, with mould, and she was concerned that the damp could be affecting her children s health. Additionally, her telephone line had been corroded due to the damp wall. She complained to the estate agent who promised to contact the landlady. The agent arranged for two builders to look at the problem, and they confirmed dampness, but did not arrange a solution. The tenant s subsequent calls to the agent were met with a lack of interest or not answered at all, so she contacted the local Environmental Health team who served the landlord with a notice to undertake remedial work. Following this she was served with a section 21 notice to quit. A CAB in the South West saw a couple who were renting privately on an assured shorthold tenancy. The couple had been in the property for four months and were concerned about damp. They complained to the letting agency but the landlord refused to carry out maintenance work. The couple then contacted the Environmental Heath department and a visit was arranged, but before it was carried out the letting agency contacted the client to say that the landlord would serve a section 21 eviction notice if they continued to complain about the damp. The couple were very keen to stay, as moving would be very stressful as they were expecting a baby. They therefore promised to desist from involving Environmental Health and tried to keep the damp at bay themselves using damp proof paint. 1 The tenant s dilemma warning: your home is at risk if you dare complain, D. Crew, Citizens Advice, June Page 46

47 20. In 2008, Housing Minister Grant Shapps acknowledged that threatening tenants with retaliatory eviction when they seek to uphold their statutory rights is fundamentally unfair, saying retaliatory evictions are completely unacceptable we need sufficient protections in place to make sure retaliatory evictions do not happen. 2 Under the Housing Act 2004 tenants are now protected from retaliatory eviction when their landlord fails to protect their deposit. We believe that this principle should extend to tenants who make energy efficiency requests using the provisions of the Energy Act. Some such provision should be introduced at the earliest opportunity. Without it, the Government will be encouraging tenants to demand energy efficiency measures from landlords without giving them protection from the potential consequences. Apart from the hazard to tenants, it is consequently less likely that these measures will succeed in driving up energy efficiency standards in the private rented sector. 21. The Government responded to pressure in Parliament by establishing a Green Deal Consent and Retaliatory Evictions Working Group, to look at the evidence. This consisted of representatives of stakeholders from different sides of the argument, including Citizens Advice, as well as DECC and CLG officials. However, it was clear from the outset that, in the absence of large-scale quantitative evidence, the conclusion was going to be that action on retaliatory evictions would not be recommended. Weeks before the report was completed, DCLG reassured landlords that there would be no postponement of section 21 evictions while a Green Deal application was in progress. 3 As regards retaliatory eviction, there would be a DECC "watching brief". 22. As we made clear in our submission to the Working Group, the recurrent theme of a limited evidence base suggests a case for commissioning robust research to monitor the retaliatory evictions issue as the policy unfolds into practice. December Interview with Environmental Health News in At the National Landlords Association Conference, Manchester, 9/11/11. Page 47

48 Memorandum submitted by National Energy Action (FP 09) 1. Background 1.1 National Energy Action (NEA) welcomes the Energy and Climate Change Committee s decision to hold an inquiry into the causes and extent of fuel poverty in the private rented sector and in households without access to mains gas. From its inception in 1981 NEA has campaigned on fuel poverty issues and has sought to develop and promote policies and programmes to ensure affordable warmth for all households in the United Kingdom. NEA operates through its headquarters in Newcastle upon Tyne and through offices in Wales and Northern Ireland, and also works in collaboration with its equivalent organisation in Scotland, Energy Action Scotland. 1.2 NEA estimates that fuel poverty now affects more than 6.5 million households across the UK and is concerned that this total will increase further as domestic consumers face additional cost burdens resulting from continuing high global energy prices and Government proposals for a low-carbon energy industry. Yet the response from Government in terms of remedial action has been totally inadequate. There is no sign of the commitment, direction and resources that are urgently required to comply with the provisions of the Warm Homes and Energy Conservation Act In fact, recent developments show a weakening of political will to resolve fuel poverty and, despite supportive words from Government, no indication of a willingness to implement the scale and structure of the policy response required. 1.3 The Energy Act 2011 is intended to address the themes of this specific inquiry and it may yet prove to be the case that the legislation can be effective in these areas. The Act does contain provisions to improve energy efficiency standards in the private rented sector and it is intended that a combination of the Green Deal and the Energy Company Obligation should address the problem of hard to treat housing, although the latter ambition is more concerned with solid wall insulation than with access to affordable heating. However NEA does not believe that early manifestations of Government thinking provide reassurance that this will happen without a major rethink of proposals relating to fuel poverty in the private rented sector and assistance for those low-income households occupying hard to treat properties. 1.4 The time lag in publication of official data means that published Government statistics on fuel poverty trends are generally two years or so behind the current reality. The tables below 1 have employed statistical modeling to reflect, predominantly, the impact of energy price 1 Statistical analyses undertaken by the Centre for Sustainable Energy on behalf of Consumer Focus, November Page 48

49 increases since publication of the official data for The tables illustrate estimated fuel poverty by tenure and by main heating source in Fuel poverty by tenure England 2011 Tenure % households in group Number of households Not fuel Fuel poor Not fuel poor Fuel poor poor Owner occupier 77.8% 22.2% 12,056,500 2,509,000 Private tenant 71.6% 28.4% 2,355, ,000 Local authority 68.3% 31.7% 1,214, ,500 Registered Social Landlord 76.9% 23.1% 1,466, ,000 Fuel poverty in England 2011 by fuel used for main heating source % households in group Number of households in group Fuel Not fuel poor Fuel poor Not fuel poor Fuel poor Gas 78.2% 21.8% 14,258,000 3,968,000 Oil 61.1% 38.9% 532, ,000 Solid fuel 40.2%% 59.8% 78, ,000 Electricity 64.6% 35.4% 1,260, ,000 Total 76.0% 24.0% 16,371,000 5,164, NEA s comments on these issues follow the sequence of specific questions set out in the Energy and Climate Change Committee Terms of Reference. 2. What are the barriers to tackling fuel poverty in the private rented sector? 2.1 The private rented sector poses a number of specific problems, but these often come down to the motivation and attitude of both landlord and tenant in relation to energy efficiency improvements. This is frequently described in terms of a split incentive in that landlords bear no responsibility for the energy bill and tenants will not or cannot invest in improving the standard of a dwelling in which they have no financial interest. The private rented sector is both volatile and growing in scale. In 1999 there were 2 million private sector tenancies but this had risen to 3.6 million by Patterns of residency are also significantly different in this sector; the most recent English Housing Survey shows that 1 in 3 private tenants had occupied their home for less than one year and more than 50% for less than two years. 2.2 These conflicts of interest represent a fundamental barrier that can be made more formidable by the poor condition of some properties within this tenure category. Standards across the private rented sector are diverse and, whilst the majority of properties in this tenure satisfy reasonable heating and insulation criteria, the highest proportion of the worst housing is Page 49

50 found in this sector. Energy Performance Certificate Bands F and G would normally see a property classed as posing a Category 1 Cold Hazard under the Housing Health and Safety Rating System 2 and, as such, warrant enforcement action on the part of the local authority. Energy Efficiency Rating by Tenure 2009 Tenure A-B C D E F G Owner-occupied 25,000 (0.2%) 1, (8.9%) 5,429,000 (36.3%) 5,779,000 (38.6%) 1,884,000 (12.6%) 508,000 (3.4%) Private rented 42,000 (1.2%) 527,000 (14.7%) 1,256,000 (35.0%) 1,082,000 (30.2%) 473,000 (13.2%) 208,000 (5.8%) Local authority 20,000 (1.1%) 448,000 (24.7%) 843,000 (46.5%) 371,000 (20.5%) 102,000 (5.6%) 29,000 (1.6%) Registered social landlord 53,000 (2.7%) 645,000 (32.7%) 853,000 (43.2%) 311,000 (15.8%) 91,000 (4.6%) 19,000 (1.0%) 2.3 Private sector tenants are more likely to be in fuel poverty than either owner occupiers or tenants of Registered Social Landlords with only local authority tenants having a greater likelihood of fuel poverty. The higher propensity to fuel poverty is not directly attributable to low household income since most private tenants do not appear to be income poor. In , private sector tenants paid on average twice as much in weekly rent as social tenants ( 153 compared with 75) but were much less likely to receive Housing Benefit (24% compared to 62%). 3 In fact the incidence of fuel poverty in the private rented sector is not overwhelmingly different from other tenure groups; rather it is arguable that the extremely poor quality of some private sector housing, allied to the low incomes of a minority of tenants, makes the depth of fuel poverty greater for many tenants in this tenure group. Fuel poverty by tenure England Tenure Owner occupier Private tenant Local authority Registered Social Landlord % households in group Number of households Not fuel Fuel poor Not fuel poor Fuel poor All % of fuel poor households poor 82.8% 17.2% 12,056,000 2,509,000 14,566, % 78.9% 21.1% 2,594, ,000 3,287, % 75.8% 24.2% 1,346, ,000 1,776, % 82.6% 17.4% 1,575, ,000 21,535, % 2 A Decent Home: definition and guidance for implementation, DCLG, 2006 indicates that an energy efficiency rating of SAP 35 or below is a simple proxy for a Category 1 Cold Hazard. G-rated properties score between 1-20 on the SAP rating and F-rated properties score English Housing Survey: Headline Report , DCLG, Fuel Poverty in England Detailed Tables, DECC, Page 50

51 3. To what extent will the recent measures in the Energy Act 2011 (to introduce minimum energy efficiency standards in the private rented sector) help the problem? 3.1 The Energy Act contains a number of provisions that should impact on the private rented sector. From 2018, private landlords will be required to improve any property that is rated F or G on the Energy Performance Certificate scale to a minimum target rating of EPC Band E. 5 In advance of that date, from April 2016, tenants will be able to request the right to implement energy efficiency improvement works to which the landlord must give consent. 3.2 So the Energy Act does have potential to deliver major energy efficiency improvements across the private rented sector but there are serious concerns and uncertainties about the timescale, the role of landlord and tenant and financial arrangements for remedial heating and insulation improvement works. 3.3 Whilst the Act entitles the tenant to request permission from the landlord to undertake energy efficiency improvements, and permission cannot be withheld, this is the full extent of the landlord s obligation. That is, landlords are not required to undertake or commission any practical works and nor are they required to contribute towards the cost of such works. 3.4 NEA believes that this is wrong both in principle and in practice. Heating and insulation standards in the social rented sector were driven by the Thermal Comfort element of the Decent Homes Standard which established minimum energy efficiency criteria to be satisfied by the landlord on behalf of the tenant. The previous Government had intended that the Decent Homes Standard should be extended to cover dwellings occupied by vulnerable households and had set specific incremental targets to achieve this objective. NEA does not believe that compliance with minimum standards of decency in a rented property should be the responsibility of the tenant in organising or financing the works. It appears both perverse and inequitable that a tenant should assume responsibility for measures that ought to be the duty of the landlord and which will add to the value and quality of the dwelling. 3.5 As indicated earlier, the lack of meaningful prescription, regulation or incentives will tend to perpetuate the situation where neither tenant nor landlord will be strongly motivated to act. The proposal that all private rented properties at or below Energy Performance Certificate Bands F and G should be withdrawn from the lettings market is welcome but is also inadequate. The target date of 2018 is incomprehensibly delayed and the target energy efficiency standard is minimal in its ambition. 5 This is the minimum target. However where basic improvements are unable to attain this standard the property will be considered compliant. Page 51

52 3.6 As currently designed, improvement works in the private rented sector could in future be funded through the Green Deal and this too raises some difficult issues. As previously noted, tenants will continue to be averse to acquiring financial liabilities even where the improvements are of benefit in the short term. But this may not be the case with landlords who will now be in a position to commission significant and expensive works, provided they form part of the suite of permissible Green Deal measures, in the knowledge that current and future tenants will bear responsibility for repayments. 3.7 There is also uncertainty around use of the Energy Company Obligation to fund works in the private rented sector. Current proposals intend that annual Energy Company Obligation funding should be in the region of 1.3 billion and that these resources should be split 75%/25% respectively between a carbon reduction target and an affordable warmth target. During the passage of the Energy Act the Government had given repeated assurances that the withdrawal of the Exchequer-funded Warm Front programme should not be a matter of concern since the Energy Company Obligation would provide significantly greater resources for fuel poverty programmes. 3.8 In fact the projected expenditure on the affordable warmth element of the Energy Company Obligation represents a significant reduction in funding to improve energy efficiency in dwellings occupied by low-income and vulnerable households. Prior to the Comprehensive Spending Review of 2010, expenditure on Warm Front had exceeded 1.1 billion over the period This expenditure was augmented by annual expenditure on Priority Groups 6 through the Carbon Emissions Reduction Target of approximately 600 million over that same period, and this in turn was further supplemented by the 350 million Community Energy Saving Programme. Not only is projected expenditure on affordable warmth to be significantly reduced, it will also be funded in its entirety through regressive levies on domestic consumers energy bills. Following the demise of Warm Front in March 2013 there will be, for the first time in more than 30 years, no Government-funded energy efficiency programme in England. 3.9 Private sector landlords could, if they so chose, benefit from a number of current incentives offered by Government in order to encourage energy efficiency investment. There are a number of potential sources of funding to improve the energy efficiency of properties in the private rented sector. The Landlords Energy Saving Allowance (LESA) is a tax allowance that enables landlords to claim up to 1,500 against tax every year. The allowance covers the cost of buying and installing certain energy saving products for rented properties including: cavity wall and loft insulation 6 Effectively households in receipt of a means-tested or disability-related benefit although all households aged 70 or over were also categorised as part of the Priority Group. Page 52

53 solid wall insulation draught proofing and hot water system insulation floor insulation The LESA can be claimed up to 1 April 2015, after which the allowance will no longer be available. Of course, private sector landlords can also improve their properties through the Carbon Emissions Reduction Target which offers free or discounted energy efficiency measures subject to the status of the tenant The Government has finally resolved to set the precedent of minimum energy efficiency standards in the private rented sector although the timeframe is unnecessarily long and the standard insufficiently rigorous. NEA understands that the Irish Republic is to require that, by 2020, no property should be rented out where it is E, F or G-rated on that country s Building Energy Rating (BER) scale. In addition, consideration will be given to withdrawing state support for housing costs where properties do not comply with minimum energy efficiency standards an approach that NEA has previously supported for the UK. Energy Performance Certificate Band E equates to on the SAP rating system and this modest target is insufficiently challenging. 4. To what extent is fuel poverty in rural areas driven by lack of access to the gas grid and to what extent are other factors (such as housing condition and income levels) responsible? 4.1 Clearly lack of access to mains gas represents a major factor in fuel poverty in rural areas and other communities that lack access to what, despite recent significant price increases, remains the cheapest current heating option. The table below illustrates the variation in heating costs depending on the fuel source used. Space and water heating costs by fuel type North of England October Fuel type Heating system Annual cost House coal Open fire with back boiler 1,266 Electricity Storage heating and radiators 1,314 Natural gas Gas-fired boiler and radiators 1,259 Liquid propane gas LPG-fired boiler and radiators 2,331 Oil kerosene Oil-fired boiler and radiators 1, The subsequent table provides some indication of the effects of different central heating options in predisposing to fuel poverty. However whilst it suggests a general correlation it does not necessarily tell the full story in that it provides no information on the financial circumstances of the households or of the energy efficiency characteristics of the dwelling in 7 Sutherland Comparative Heating Costs, October 2011, based on 3-bedroom semi-detached property. Page 53

54 terms of thermal insulation. Nevertheless there is clearly an association between fuel source and system and the scale of fuel poverty. The table relates only to households with some form of central heating; for those households without access to central heating the situation is even worse with 53% of these households being in fuel poverty (73.2% of households where solid fuel is the heating source). Fuel poverty in England 2009 by fuel used for main heating source 8 % households in group Number of households in group Fuel Not fuel poor Fuel poor Not fuel poor Fuel poor Total number of households in group Gas 84.0% 16.0% 15,128,000 1,936,000 17,742,000 Oil 70.1% 29.3% 610, , ,000 Solid fuel 51.1% 49.9% 82,000 82, ,000 Electricity 75.4% 24.6% 1,208, ,000 1,520,000 Total 82.6% 17.4% 17,290,000 3,647,000 20,691, However, the link between income and heating source is not always straightforward. More affluent households do generally have greater access to mains gas as a heating source but the difference is not hugely significant across income levels. The overwhelming majority of lowerincome households use mains gas for heating a reflection of the historic economic benefit of this fuel source in recent decades. 4.4 Similarly, there is little overall difference between household income and use of LPG for heating in terms of numbers although in all cases these numbers are low. Use of heating oil shows a link between incomes with oil-fired central heating increasing moderately in line with income. Solid fuel use is low across all income levels but tends to decrease in inverse proportion to income levels. Electricity use for heating is broadly similar across households on low to moderate incomes but decreases sharply in higher income households. Main heating fuel by full income decile (number and % of households) England Mains gas LPG Heating oil Solid fuel Electricity Decile 1 1,690,000(7 9.0%) 17,000 (0.8%) 58,000 (2.7%) 40,000 (1.9%) 285,000 (13.3%) Decile 2 1,637,000(7 6.4%) 18,000 (0.9%) 51,000 (2.4%) 22,000 (1.0%) 344,000 (16.1%) Decile 3 1,721,000 (80.4%) 9,000 (0.4%) 56,000 (2.6%) 33,000 (1.5%) 276,000 (12.9%) 8 Fuel Poverty 2009, Detailed Tables, DECC Off-gas consumers: Information on households without mains gas heating, Consumer Focus, Page 54

55 Decile 4 1,750,000(8 1.8%) 12,000 (0.6%) 85,000 (4.0%) Decile 5 1,825,000 12,000 61,000 (85.2%) (0.6%) (2.8%) Decile 6 1,797,000 13,000 98,000 (4.6%) Decile ,000 7,000 84, %) (0.3%) (3.9%) Decile 8 1,937,000 7,000 90,000 (90.5%) (0.3%) (4.2%) Decile 9 1,917,000(8 12,000 94, %) (0.6%) (4.4%) Decile 10 1,867,000 20, ,000 (87.2%) (0.9%) (7.2%) 31,000 (1.4%) 236,000 (11.0%) 29,000 (1.3%) 191,000 (8.9%) 16,000 (0.8%) 197,000 (9.2%) 23, ,000 (6.1%) (1.1%) 21,000 (1.0%) 80,000 (3.7%) 11,000 (0.5%) 100, %) 14,000 (0.6%) 79,000 (3.7%) 4.5 However, whereas more affluent households are able to manage their higher costs and/or consider fuel switching or adopting a renewable technology option, these opportunities are not available to low-income households. Financially disadvantaged households must persevere with their expensive and often inefficient heating methods, a circumstance that will be worsened by the termination of the Warm Front programme in Given that the OFT found no evidence of a competition problem in the heating oil market, what (if anything) can be done to prevent a repeat of the situation in December 2010 when households were faced with high energy costs during a spell of particularly cold weather? 5.1 The Office of Fair Trading (OFT) report was limited in its remit to study of competition and consumer protection issues. Consequently, the report was not specifically concerned with issues of affordability and the need to devise remedial solutions to a problem that was considered fundamentally to be linked to internationally traded prices for oil and LPG. 5.2 The Office of Fair Trading declared itself satisfied that any adverse impact on vulnerable and fuel-poor consumers did not result from a lack of competition or choice, barriers to market entry by new suppliers or collusion by existing suppliers. Whilst the OFT did advocate further support for off-grid consumers through, for example, improved oversight of price comparison websites and enforcement of existing consumer protection powers it also concluded that price regulation was not justified on grounds of competition and that: the UK Government and Devolved Administrations can of course consider policy interventions targeted towards the vulnerable parts of the off-grid population. 5.3 Despite these assurances there must be serious concerns that off-gas consumers pay whatever the market will bear rather than a price that reflects a pass through of costs with an acceptable level of profit margin. It is at least highly regrettable that a service essential to the Page 55

56 health and wellbeing of users should be subject to market forces driven by short-term supply and demand. 5.4 However, given the OFT findings that prices for off-grid fuels are not exploitative and, in general, reflect global market realities, then remedies must be sought elsewhere. Where the fundamental problem is the cost of the fuel in relation to other sources then there is limited scope for intervention although, of course the heating technology can often be made more efficient. Otherwise the main opportunities to reduce costs lie in fuel switching and/or some form of financial support for financially disadvantaged households using expensive fuels In March 2010, the Energy and Climate Change Committee published findings from its inquiry into fuel poverty. That inquiry considered a number of issues associated with households off the gas grid and heard evidence from the Department of Energy and Climate Change on a number of current initiatives including partnership working between gas distribution networks and agencies to connect 20,000 additional properties occupied by low-income households to the mains gas network. Clearly there are limits to the cost-effective extension of gas networks but NEA would welcome the continued incentive for gas network operators under RIIO from to extend the gas network into disadvantaged communities. Some of the companies have now produced business plans which show the extent to which they would continue to provide such connections and whilst these could make a huge difference to the individual households, the scale is likely to remain very limited. For example, Southern Gas Networks are proposing 9,000 fuel-poor connections over that eight-year period and, even scaled up, it is unlikely that this will play a substantial role in ending fuel poverty in rural/off gas grid areas. It is appropriate that their plans be reviewed in 2014/15 to ensure any industry link-ups can be made following the introduction of Green Deal and ECO. 5.6 Whilst lack of access to mains gas is generally perceived as a problem associated with rurality it can often be an issue in intensely urban areas where the predominant housing type may comprise both high-rise and low-rise purpose-built blocks of flats. Greater consideration should be given on social, economic and environmental grounds to use of communal gas-fired district heating in buildings where individual gas heating systems are not appropriate. 5.7 Alternatively, there may be much greater scope in future to develop innovative technologies for space and water heating in areas without access to mains gas. Household or community scale low carbon technologies can provide off-gas grid communities and individual households with solutions to mitigate the impact of rising energy costs. Disadvantaged and fuel-poor households can benefit from these approaches where conventional energy efficiency 10 This approach was employed until the late 1980s with recipients of means-tested benefits entitled to additional payments where they were reliant on expensive fuel sources such as oil. Page 56

57 improvements, such as demand-side energy efficiency interventions are already utilised or are inadequate or impracticable. Where properly specified and installed and/or operated by a professionally trained or accredited installer, these technologies can provide energy services (heat and power or cooling) economically through greater fuel efficiency or through harnessing plentiful renewable sources of energy such as wind, waste streams or solar. They are particularly relevant therefore in solid-walled and non-traditional construction properties, and in those dwellings that are not connected to the mains gas network and therefore reliant on more expensive fuels. However minimal progress appears to have been made in testing and proving such technologies as air-source and ground-source heat pumps. However, regardless of the recommended solution the benefits can only be optimised where the property has been improved to an effective standard of thermal insulation and, where practicable, this should be the priority in all cases. 5.8 The Energy and Climate Change Committee had also urged further consideration of regulation of the market for non-mains fuels although, as noted earlier, this recommendation was not supported by the OFT investigation. There may still be scope for more flexible payment schedules for the Winter Fuel Payment, a further Committee recommendation, but there are no indications that the Department for Work and Pensions is considering such an option. 5.9 Given the limitations of any technological approach, it is apparent that the most effective short-term solution would be to ensure that low-income households, those on specific meanstested benefits and reliant on expensive heating sources, should receive additional financial support through the social security system in the form of energy costs-related income supplements. 6. How could DECC s policies for tackling fuel poverty in the private rented sector be improved? 6.1 The private rented sector poses a dilemma. The sector contains some of the worst housing occupied by the most financially disadvantaged households but responsibility for the condition of these properties lies first with the owner. At a minimum it is wrong in principle for taxpayer money to be spent on improving the business assets of private landlords. It is even more wrong that tenants should be expected to pay for improvements which often do no more than meet the basic minimum Decent Homes Standard. 6.2 Clearly this was the case with Warm Front where properties in this tenure category were improved to a significant degree by public funding. However this occurred in circumstances where there appeared to be little alternative since there was no effective policing of standards, Page 57

58 no licensing regime and virtually no implementation of enforcement powers under the Housing Health and Safety Rating System. 6.3 NEA sees no case for public funding of basic energy efficiency measures in the private rented sector and nor do we believe that consumer-funded programmes such as the Carbon Emissions Reduction Target or the future Energy Company Obligation should be used to fund such works. The Energy Act entitles tenants to request energy efficiency improvements and precludes a negative response from landlords; but there is no requirement on landlords to arrange or fund these improvements and NEA believes this to be fundamentally wrong. 6.4 Nor do we believe that DECC proposals to introduce mandatory energy efficiency improvements post-2018 are anywhere near sufficient. The intention to remove the least energy efficient (F and G-rated dwellings) from the stock is a welcome advance; however, we cannot support these improvements being financed through either the consumer-funded Energy Company Obligation or through the Green Deal. An economically heated and effectively insulated property is a requirement of the Decent Homes Standard and, where the Green Deal is used to fund these works, we would face the inequitable situation of tenants paying extra for the privilege of occupying a dwelling that met basic standards of decency. 6.5 The target date for removal of F and G-rated properties must be brought forward from It is absurd and perverse that this requirement should be delayed to such an unnecessary extent and incomprehensible that the proposed target date is two years after the Government has undertaken to eradicate fuel poverty for all households in England. 6.6 A recent report from the Energy Saving Trust 11 set out to quantify the cost of removing all F or G-rated properties from the housing stock. The analysis only considered expenditure needed to improve dwellings to an E-rating and, as such, could have been much more ambitious. Nevertheless the main findings were that: 37% of properties could be improved at a cost of less than 1,000 per dwelling A further 47% of dwellings could reach EPC Band E for less than 3,000 An additional 1.5% of properties would cost between 3,000-5,000 Hard to treat homes, comprising 15% of all homes, required expenditure of between 5,000-9,500 to meet EPC Band E 11 F & G banded homes in Great Britain: Research into costs of treatment, Energy Saving Trust, Page 58

59 7. How could DECC s policies for tackling fuel poverty among off-grid consumers be improved? 7.1 NEA has previously discussed the considerable barriers to addressing fuel poverty where households lack access to cheaper forms of domestic energy. There are no clear technical solutions to the problems other than an incremental approach that expands the gas network where cost-effective and promotes innovative technology as this becomes more reliable and accessible. 7.2 As noted earlier, priority should be to develop a coherent view of what can and should be done to maximise extension of the mains gas network what is technically feasible and costeffective and what financial and planning structures need to be in place to allow and encourage such a development. 7.3 In the short term, fuel-poor, low-income households dependent on expensive forms of heating should be assisted through the benefits system. This would require financial support linked to the additional costs incurred by households of differing sizes in maintaining a warm and healthy living environment. Determining the amount of any heating subsidy should be a simple process based on the size of the dwelling, the number of occupants and the heating fuel and system. 7.4 One area in which DECC proposals might deliver significant benefits would be to ensure that properties off the mains gas network and occupied by vulnerable and financially disadvantaged households were prioritised for thermal insulation improvement. 7.5 This will require continued support both through existing programmes and through the imminent Energy Company Obligation. In many cases the insulation improvements will involve basic measures, but many of the properties off the mains gas network are in rural locations and will not be amenable to the most economical and cost-effective interventions. These properties may require considerable investment, for example where solid wall insulation is required. 7.6 Under current proposals the new Energy Company Obligation will be divided in a 3:1 ratio to carbon reduction initiatives and an affordable warmth element. NEA believes that the full amount of ECO funding should be devoted to fuel poverty programmes and that this need not be at the expense of carbon reduction ambitions. In this respect NEA would cite the support of the Committee on Climate Change which commented in its 3 rd Progress Report 12 : The particular area of concern is the cost of subsidising solid wall insulation under the ECO which under current proposals would be passed through to all consumers, whether beneficiaries or not. If 12 Meeting Carbon Budgets 3 rd Progress Report to Parliament, Committee on Climate Change, Page 59

60 assessment suggests a significant risk of fuel poverty, mitigating measures that could be introduced include more targeting of the fuel poor under the ECO (e.g. to prioritise solid wall insulation in the 1.9 million fuel poor households that live in solid walled properties. 7.7 In addition, and as highlighted above, NEA believes that the synergies between affordable warmth and implementation of domestic or community low carbon technologies can be strong and need to be fully understood. NEA is being funded by the Department for Energy and Climate Change (DECC) to carry out an investigation into the barriers associated with the take up and accessibility of micro-generation and community energy for fuel-poor households. The project seeks to identify the key barriers and, working with industry and representative organisations, develop a set of costed policy options to address these in turn. 7.8 Access to appropriate energy infrastructure is a key barrier to the take up of these approaches. The inability of disadvantaged households to benefit from low carbon technologies may result from a number of physical factors including: lack of access to renewable sources of energy or fuel; lack of access to the appropriate energy infrastructure; or poor security of fuel supplies (for example biomass). This means that some fuel-poor consumers simply become sponsors of policy to the benefit of others and to their own detriment. As highlighted above, lack of access to the gas grid is still an issue for many households. As well as the economic advantage conferred through access to mains gas, access to the electricity grid infrastructure and the ability to connect electricity generating technologies remains a complex and often expensive operation. 7.9 The main issue relating to accessibility is that the existing incentive mechanisms (Feed-in Tariffs etc) provide an operational incentive rather than a contribution towards the capital costs associated with feasibility assessment and installation. These up-front capital costs, and the need for ongoing maintenance costs, represent one of the biggest barriers to increased take up of these technologies by financially disadvantaged households. In some cases capital may be accessed through financial institutions but this option will rarely be available to fuel-poor private sector households. 8. As highlighted above, the Secretary of State for Energy and Climate Change announced in the 2010 Annual Energy Statement that the Government would tackle the barriers to investment in domestic energy efficiency by launching the Green Deal. The aim of the Green Deal is for every participating household to save money by insulating their dwelling. Participating energy companies and high street stores would finance the work upfront, in the context of a competitive finance market. Householders will then repay the finance over time through savings on their energy bills Page 60

61 8.1 Whilst, in the main, the Green Deal Finance Mechanism is an inappropriate mechanism for low-income and vulnerable householders, in off-gas grid properties, these finance arrangements might be made more attractive where integrated with other schemes such as the Renewable Heat Incentive or Feed-in Tariffs. This could provide low-income and vulnerable households with an opportunity to fund the installation of domestic or community-scale low carbon technologies at no upfront cost. December 2011 Page 61

62 Memorandum submitted by National Private Tenants Organisation (FP 10) 1. Executive Summary 1.1 The English National Private Tenants Organisation (NPTO) works for professionally managed, secure, decent and affordable private rented homes in sustainable communities. 1.2 This submission to the Energy and Climate Change Select Committee addresses the questions of (1) barriers to tackling fuel poverty in the private rented sector (PRS) and (2) the extent to which recent measures in the Energy Act 2011 help the problem of fuel poverty in the private rented sector. 1.3 In relation to barriers to tackling fuel poverty in the PRS evidence is provided covering the principal drivers of fuel poverty. There is a strong correlation between poor quality housing in the PRS and fuel poverty. An increased use of the Housing Act 2004 Housing, Health and Rating System is an essential tool to help reduce fuel poverty in the PRS. 1.4 In relation to the Energy Act 2011 the effectiveness of measures in helping fight fuel poverty in the PRS are discussed. 2. Barriers to tackling fuel poverty in the private rented sector 2.1 A household's fuel poverty status depends on the interaction of three drivers: income, fuel prices paid and fuel requirement (i.e. fuels used, dwelling and energy efficiency). The PRS has the highest number of households in the lowest Energy Performance Certificate Energy Efficiency Bands F and G (SAP less than 39) 1. Over 40% of tenants in the coldest privately rented homes live in fuel poverty Barriers related to income and available income for energy costs Factors affecting the amount of income available for energy costs: Research by housing charity Shelter found that PRS rents are unaffordable in 55% of English local authorities. In these areas rents are more than 35% of median average local take-home pay - the level considered unaffordable by Shelter's Private Rent Watch report. The charity said 38% of families with children who rent privately have cut back on buying food to help pay rent. The research found rents had risen at one-and-a-half times the rate of incomes in the 10 years up to This obviously has an effect on the amount of income available for energy costs as rent will take priority. Tenants are often forced to self-ration their energy use. Changes to housing benefit and rising food prices will also have an effect on available income for energy costs NPTO believes that urgent consideration should be given to PRS rent affordability especially as the size of the PRS increases and market forces could push rents up even further. The issues of excessive rents and rent control should be addressed Given the competing pressures on low-income households, many do not spend the amount needed to stay warm. 2.3 Barriers related to energy consumption costs Due to a lack of professionalism and in some cases wilful neglect on the part of some PRS landlords, heating (space and water) systems can often be old, inefficient, poorly maintained and in some case unsafe, this leads to higher operating costs. Legislation relating to standards of PRS properties is often not enforced due to lack of local authority resources and tenant's fear of retaliatory eviction by landlords. PRS tenants often are unaware of their legal rights. Over three- 1 DCLG, English Housing Survey: Housing Stock Report 2009, Chapter 6, page 49, DECC, Energy Bill: Green Deal Impact Assessment, Shelter, Private Rent Watch Report 1- Analysis of local rent levels and affordability, October 2011 Page 62

63 fifths (63%) of all private individual landlords have no relevant experience or qualifications. Only 6% of landlords are members of a relevant professional body or organisation. 89% of landlords were private individual landlords responsible for 71% of all private rented dwellings, with a further 5% of landlords being company landlords responsible for 15 per cent of dwellings. More than three quarters (78%) of all landlords only owned a single dwelling for rent, with only 8% of landlords stating they are full time landlords NPTO believes that local authorities should make greater use of selective licensing powers (please see the NPTO report at: and introduce landlord accreditation schemes, and that consideration should be given to a national landlord registration scheme to address the lack of landlord professionalism in the PRS and raise the standards of rental accommodation. Greater security of tenure is required in the PRS to ensure amongst other things, that tenants are not frightened (justifiably) of attempting to see their legal rights upheld Many PRS homes do not have gas and therefore tenants will pay more for electric heating e.g. electric storage heating, than they might for gas heating. 26% of all PRS homes have no gas connection or the gas connection is not used and 49% have solid walls or non-traditional walls and can not take advantage of cavity wall insulation Prepayment meters which are often present in PRS homes do not allow tenants to take advantage of the cheapest tariff schemes on offer. The NPTO believes that action is needed to reduce charges paid by prepayment meter consumers. According to fuel poverty charity National Energy Action, 5.8 million prepayment meters were in use in Britain in According to Consumer Focus estimates, prepayment meters can cost on average an additional 195/year for gas and electricity. In addition, many suppliers add on additional charges that they claim are necessary to finance and maintain the meters themselves. 2.4 Barriers related to fuel requirement The PRS also has the highest incidence of excess cold of all housing tenures. Over 400,000 private rental homes 15 per cent of the total are classified as a Category 1 excess cold hazard under the HHSRS. This is the highest incidence of all tenures. Excess cold is a major cause of ill health among private rented sector tenants, resulting in reduced quality of life and high levels of fuel poverty for the tenants concerned. It also leads to increased costs to health and social services 6. PRS tenants, particularly those on low income, often have little choice where to live There is a strong correlation between poor quality housing and fuel poverty, 50% of fuel poor households in England live in EPC F and G homes compared with 23% of all households in EPC F and G bands 7. According to the English Housing Stock Report for % of private rented households have damp problems. The last English Housing Survey , reported that 31% of PRS households were non-decent. In the PRS 61.4% of homes failing the decent homes standard did so because of Housing, Health and Safety Rating System (HHSRS) serious hazards and 57.7% because of thermal comfort shortcomings 8. NPTO believes that local authorities should make greater use of their regulatory powers particularly in relation to the HHSRS to fight fuel poverty. It has been estimated that the cost to the NHS of not improving privately rented dwellings associated with excess cold to an average SAP level is around 145 million per annum NPTO believes that the provisions in the Energy Act 2011 for powers to ensure that from April 2018 it will be unlawful to rent out residential or business premises that do not reach a minimum energy efficiency standard (the intention is for this to be set at EPC rating 'E'), should not wait until 2018 and should come into force at the earliest opportunity. 4 DCLG, Private Landlord Survey, Consumer Focus, A Private Green Deal, December Consumer Focus, A Private Green Deal,December Consumer Focus, Raising the SAP, 13 May Julie Rugg and David Rhodes, The Private Rented Sector: its contribution and potential, Building Research Establishment Ltd, The Health Costs of cold dwellings, November 2010-February 2011 Page 63

64 2.4.4 Some of the cheapest heating appliances available to low-income PRS tenants are the most expensive to run. Tenants can be forced to use these because their homes lack cost effective heating systems e.g. gas central heating, and such appliances are needed to supplement inefficient heating systems Not all PRS tenants receive Energy Performance Certificates (which can be up to 10 years old) so therefore are not aware of the SAP rating of their prospective home and the estimated cost of heating it. Over two-fifths (42%) of all dwellings have had an Energy Performance Certificate 10. A survey commissioned by the Energy Efficiency Partnership for Homes in 2008 found that 59% of consumers found it easy to understand an EPC but older respondents and those from C2DE social classes were less likely to find it easy The extent to which recent measures in the Energy Act 2011 help the problem of fuel poverty in the PRS 3.1 NPTO welcomes the improvements to energy efficiency in the PRS that the Green Deal could bring but has concerns relating to Green Deal consent denial from rogue landlords, which could lead to retaliatory eviction (using Housing Act 1988, Part 1, Chapter 2, Section 21, for Assured Shorthold tenancies), the threat of eviction and fear of retaliatory eviction. NPTO has produced an extensive report on the issue available at: NPTO believes that the provisions in the Energy Act 2011 for powers to ensure that from April 2018 it will be unlawful to rent out residential or business premises that do not reach a minimum energy efficiency standard (the intention is for this to be set at EPC rating 'E'), should not wait until 2018 and should come into force at the earliest opportunity.. NPTO also fears that rogue landlords could retaliate to tenant's reporting illegally let properties by evicting tenants using Section 21 of the Housing Act 1988, i.e. retaliatory eviction. NPTO feels that regulatory measures are required to deal with this problem. 3.3 NPTO believes that a substantial information and advice (educational) program is required to promote the benefits of the Green Deal to landlords and tenants if it is to be successful and lift many PRS families out of fuel poverty. December DCLG, Private Landlord Survey, Energy Efficiency Partnership for Homes, Private Tenants Research Presentation, May 2008 Page 64

65 Memorandum submitted by SSE (FP 11) 1. About SSE 1.1 SSE is one of two UK based major utilities involved in the generation and supply of energy. Through its supply brands it is the UK s second largest retail supplier of electricity and gas with over 9 million customers, having been the fifth largest in SSE takes very seriously its responsibility towards vulnerable customers who live in private rented housing or in homes in rural areas without access to the grid. SSE encourages any customer with concerns about their energy to contact their supplier who can often offer a range of practical assistance. 1.3 Evidence in this response is grouped around the key themes identified in the inquiry. 2. Fuel poverty in the private rented sector 2.1 There are several factors which may lead to customers living in privately rented housing being defined as fuel poor. These factors can include energy inefficient housing with a lack of insulation, energy prices and societal factors such as lower than average incomes. 2.2 Improving the energy efficiency of private rented properties is the fastest and most cost effective way of helping vulnerable tenants by reducing their energy bills in the long-term. 2.3 However, helping vulnerable customers in private rented housing has often been seen as difficult due to the split incentives between the landlord, who owns the building, and the tenant, who usually pays the energy bill and therefore stands to gain from any savings. 2.4 To address this, it is essential that more is done to incentivise private landlords to improve the energy efficiency of the homes that they rent out. This should be mandated sooner than the proposed date of Furthermore, the Government and industry should stipulate a trajectory for landlords to comply with, exceeding the initial standards that are introduced. In doing so, the Government would encourage landlords to go beyond the minimum standard when they are undertaking works on their property in the knowledge that they would be future-proofing their asset. This may also bring wider benefits to the property market as properties with above the minimum standard of efficiency would be more attractive for those looking for buy-to-let properties. 2.6 The split financial incentive between the tenant, who benefits from reduced bills over time, and the landlord, who makes the improvements to the building, are not the only obstacle to the take-up of energy efficiency measures. There are also significant non-financial barriers such as the associated inconveniences and lack of understanding. SSE notes that suppliers continue to offer vulnerable customers free or heavily discounted insulation to properties loft or cavity walls, however the level of take-up has been limited, implying that the obstacles are not exclusively financial. 2.7 SSE believes that the provisions in the Energy Act 2011, such as the Green Deal and the ECO, and particularly the introduction of minimum standards for rented houses, to support customers in private rented housing are broadly focused on the right priorities. However, consideration must be given to the transition from the current CERT and CESP schemes and to ensuring that these customers are able to access these improvements as soon as possible, Page 65

66 which may require the implementation of the measures in the Energy Act to be introduced sooner, where possible. 2.8 In terms of private tenants access to the available financial assistance, from SSE s experience there have been instances in which vulnerable customers have not readily accessed the assistance they may be entitled to. In a handful of instances customers whose tenancies include their energy bills alongside their rent are not accessing the Warm Home Discount rebate that they are entitled to as they are not the account holder and are therefore unable to claim. 3. Fuel poverty in rural areas 3.1 As a large energy supplier with customers living across the UK, a significant number of SSE s customers live in rural areas, some of whom live in properties that are not connected to the mains gas grid. These households are therefore reliant on other fuel sources for their heating. 3.2 Rural fuel poverty is often very different from urban fuel poverty, both in its causes and solutions. Many of those customers living in homes off the grid meet the fuel poverty definition due to several factors including the inefficiency of their housing and lack of insulation, they may be single or elderly people living in large, hard to heat homes and they face the rising costs of fuels such as Liquefied Petroleum Gas (LPG) and heating oil. 3.3 SSE welcomes the OFT s conclusion, in their 2011 investigation into the market for the supply of energy to customers who are not connected to the mains gas grid, that competition exists between suppliers for these customers and that this is not an impediment to these customer s energy needs. 3.4 With sufficient competition existing, consideration must progress onto how these customers living off the mains gas grid can access energy efficiency and insulation improvements to considerably reduce their energy costs. The potential cost savings are large because off-grid customers need to be able to have a better understanding of their energy use and how to reduce it. With improved energy efficiency and insulation these customers will purchase fewer tanks per year thereby limiting the prospect that their purchases occur at a time of peak demand, and consequently peak costs. 3.5 The provisions in the Energy Act 2011 to introduce the Green Deal and the ECO should help off-grid customers make essential energy efficiency improvements. SSE would make the following observations about how off- grid customers could be specifically helped through these mechanisms. 3.6 The inclusion of microgeneration as an eligible measure within the Green Deal is to be welcomed and will assist off-grid customers, however financial incentives, Feed-in Tariffs (FIT) and Renewable Heat Incentive (RHI), will not count towards the Golden Rule or be eligible for Green Deal financing. SSE believes that by making the Renewable Heat Incentive available to Green Deal financing this could help to displace heating oil and LPG, as well as boost the uptake of the Green Deal and encourage customers to take a whole house approach to retrofitting. The cost implications of such an approach would need to be considered, SSE has complied evidence on the cost implications that can be provided at the Committee s request. 3.7 There is significant potential for reductions in carbon emissions and energy costs from upgrading old electric storage heating systems with more advanced versions. These will have lower standing losses and will therefore offer better control and improved comfort to Page 66

67 consumers. It is therefore vital for off-grid customers that advanced electric heating solutions are made available through the Green Deal and the ECO. 3.8 The ECO presents an opportunity to provide assistance to those customers living in off-grid properties. SSE would advise that the ECO should identify vulnerable households using a maximum SAP score alongside other benefits criteria. Such an approach was suggested for the Warm Front eligibility criteria. Were it to be carried forward into the ECO this approach would more adequately identify vulnerable households. If the eligibility of the Affordable Warmth part of the ECO was ascertained through a maximum SAP threshold then it will likely help off grid properties as these properties tend to have lower SAP scores. 3.9 SSE also suggests introducing an area-based targeting approach in parallel to the approaches suggested in the Green Deal and ECO consultation. Certain areas, a bit like CESP zones, would be identified by Government and any activity in these areas would count towards the ECO affordable warmth target. These areas would be identified based on certain characteristics such as prevalence of inefficient housing and fuel poverty. This could include an indication of rurality or lack of access to the gas grid. Unlike CESP, activity outside these areas would also be eligible provided the other criteria were met. 4. A fuel poverty agency improved targeting and tailored assistance 4.1 The greatest flaw about the current policy approach to tackling fuel poverty is that although a target was set up, Governments have failed to actually find a mechanism for finding people within the existing fuel poverty definition. 4.2 This has meant that while Government has focussed on measures designed to tackle the causes of fuel poverty, no single body has co-ordinated a holistic response to find and help the fuel poor. Suppliers have a growing number of obligations placed upon them however they do not have the necessary tools to identify customers in need. 4.3 SSE therefore advocates that a more effective system is found to address fuel poverty that gets help to those in need by targeting the vulnerable and assisting them in a more tailored way than at present. To do this requires the introduction of a single agency which has the function of matching the limited amount of data held by suppliers with data that is held by DWP on who is claiming what assistance and what they are entitled to. Using this data, potentially at a local level, the agency would then be able to co-ordinate assistance accordingly. December 2011 Page 67

68 Memorandum submitted by the Office of Fair Trading (FP 12) 1. The Office of Fair Trading (OFT) is pleased to be invited to write to the Energy and Climate Change Committee with its observations in relation to the call for evidence for the Fuel Poverty Inquiry. The terms of reference of the Inquiry present a number of topics on which the OFT's recent market study into off-grid fuel supplies may be useful to the Committee. Principally these are: fuel poverty and its relationship with competition and consumer protection; concerns around short term but often significant movements in prices for heating oil around the winter period; and the case for further regulation in the off-grid sector. Fuel poverty and the competition and consumer regime 2. The OFT excluded a direct analysis of fuel poverty from its recent study of off-grid fuel supplies. While protecting vulnerable consumers is a key theme across our work, the OFT has no specific remit in relation to fuel poverty. The OFT continues to receive representations from consumers and others that fuel poverty and poor fuel affordability are clear evidence of an uncompetitive market. Of course, uncompetitive markets will tend to produce poor outcomes for consumers that are likely to manifest as higher prices. However, it is not the case that the converse is true: competitive markets do not guarantee affordability for all. If affordability is the desired objective then competition and consumer policy have an important role to play, but they will rarely, if ever, represent the whole solution. Winter pricing 3. The sudden movement in prices for heating oil during the early and severe snow in December 2010 gave rise to considerable public concern regarding affordability, and to accusations of anticompetitive behaviour. While the reaction is understandable, it is important to recognise that such price changes are to be expected in response to sudden shifts in demand and supply in free markets, and mirror the way prices move in other industries with similar characteristics. 4. Winter is, for obvious reasons, a period of high demand, particularly during the run-up to Christmas. Demand rises during periods of particularly cold weather, and the early arrival of snow may have added an element of panic buying. As a consequence, demand in December 2010 was 40% greater than a typical December. 5. Distributors found they had more orders than they could quickly supply, a situation made worse by impassable roads in many parts of the country. In markets where supply capacity is limited, prices will rise quite sharply in such circumstances. For example, prices in the airline industry or package holiday sector rise, often significantly, as demand increases; air travel is more expensive around the busy Christmas period and holiday accommodation is more expensive in peak season. 6. Such an analysis gives rise to two observations that may be helpful to the Inquiry. First, that all other things equal, high prices in winter are to be expected in a competitive market, and the more acute the pressures on demand the higher prices are likely to rise. Second, that smoothing demand away from the winter peak will ease the degree to which prices rise in busy periods. 7. The Inquiry will be aware that various efforts have been made to get consumers to change their buying habits and spread demand more evenly across the year. Most recently, the Federation of Page 68

69 Petroleum Suppliers alongside consumer groups ran a campaign in September. The effect of such campaigns on consumer behaviour are constrained due to relatively small tank sizes, which make it difficult for consumers to stock-up, consumers' budgeting considerations, and a degree of consumer apathy. 8. Greater supply capacity would also ease prices during the winter peak but would come at a cost, which would be passed on to consumers and therefore result in higher prices on average over the course of the year. As things stand, the industry has not invested in additional capacity mainly because, for most of the year, the existing infrastructure is underutilised. Policies for addressing fuel poverty 9. During the course of its off-grid market study the OFT came across a number of issues that it felt unable to address itself but which nevertheless raised concerns regarding affordability. 10. Our off-grid study found that consumers may elect to buy smaller quantities of fuel due to affordability concerns. As with most products, heating oil is usually cheaper per litre in larger quantities. The mechanisms that allow customers to meet their short term needs may reduce affordability over the medium term. However, in the course of our study we came across some mitigating practices. For example, communal buying may be able to assist in such situations by increasing volume size and affordability. Some suppliers also offer support by way of a range of payment options (including ways to spread costs such as instalments or prepayments) and credit terms, although the ability of suppliers to finance such measures and their policies in this regard vary. 11. I would draw the Inquiry's attention to Chapter 3 of our market study report, which presents analysis of the characteristics of off-grid households, including the mapping of their locations against fuel poverty and multiple deprivation indices (Figure 3.2 and Figure 3.4). The case for further regulation 12. The OFT was asked by a number of correspondents whether the consumer protections provided to on-grid energy consumers and overseen by Ofgem should apply in the off-grid sector. Obviously, for off-grid households that use electricity as their primary source of fuel these protections do apply. Such households account for about half of the off-grid community and so the question relates to the remainder who are, predominantly but not exclusively, in rural locations. The study found no grounds for recommending price regulation in the off-grid sector. 13. With respect to non-price regulation, general consumer law - notably the Consumer Protection from Unfair Trading Regulations (CPRs) and Unfair Terms in Consumer Contracts Regulations (UTCCRs) - offers important protections to off-grid consumers. Following on from the market study the OFT is taking a range of actions to ensure that off-grid energy suppliers comply with this law. 14. There are a number of areas where on-grid gas consumers benefit from Ofgem's consumer protections that are not mirrored in the off-grid market by the CPRs and UTCCRs. Whether these protections should be extended to off-grid consumers is primarily a matter for policy makers. As we noted in the Off-Grid Study report, it is somewhat anomalous that protections that have been extended to one group of consumers on grounds of fairness have not been extended to another group. That said, there are differences between on-grid and off-grid supply that make a direct read across problematic these are discussed below. Furthermore, there would be costs associated with extending regulation we note that the heating oil industry in particular is characterised by a large Page 69

70 number of small firms and frequent new entrants. Some of these are likely to be subject to the moratorium on new regulation for micro businesses and start-ups. 15. With respect to disconnection protections for pensioners, this may be a meaningful concept in relation to bulk Liquefied Petroleum Gas (LPG) supplies, where the supplier typically owns the tank and the consumer has often entered into a long term supply contract. There is, however, no close analogy with heating oil supply, where the customer owns the tank, tends not to be in a long term supply contract, and may indeed buy from a variety of suppliers throughout the year. In this market the analogous concept would be obligation to supply, which is somewhat more difficult to address. 16. Similarly, under certain circumstances on-grid energy suppliers are required to offer to consumers experiencing payment difficulties a pre-payment meter and/or access to the Fuel Direct scheme. Pre-payment meters, which are effectively 'pay as you go' schemes, have no direct analogy in either LPG or heating oil distribution where consumers typically pay for a bulk delivery in once transaction (albeit perhaps by saving up in small amounts through a long term saving scheme first). The feasibility and costs associated with the technology necessary to facilitate pay as you go payment for LPG or heating oil is not something on which the OFT holds any data. The Fuel Direct scheme is administered by Department for Work and Pensions who are best placed to advise on its potential application to other fuels. 17. Returning to LPG, there may be benefits for consumers to extending disconnection protections: we have recently a complaint about a supplier apparently notifying an elderly woman in November that it would no longer provide further supplies because of health and safety concerns surrounding the location of her tank. However, we have not received a high volume of complaints regarding disconnections. 18. The study team was concerned that, in relation to LPG, some customers who may be unable to afford to relocate a tank (or simply don't have a suitable location to relocate it) if it no longer meets the standards set out in the industry Code of Practice may find themselves unable to access the market at all. While this problem has its roots in health and safety considerations, which are clearly an important feature of a well functioning market, the effect on a small number of vulnerable consumers may be particularly extreme. Of course, consumers unable to afford to relocate a tank are unlikely to be able to switch to other sources of supply such as electricity or heating oil. The overall effect may be to create a small number of consumers who are, in effect, unable to obtain any fuel source to heat their homes. 19. The statutory Warm Homes Discount now applies to on-grid energy suppliers. There is nothing of a similar nature in relation to heating oil. A cross-subsidy scheme, like Warm Homes Discount would almost certainly require inter-firm transfer payments as the social profile of customers is likely to vary substantially between heating oil suppliers who tend to serve local markets. There is also a limited amount of management capacity at the smallest suppliers. 20. Ofgem also requires energy suppliers to offer a range of payment schemes. While many heating oil businesses offer similar schemes (such as pre-payment saving or direct debit schemes) not all do so and it seems likely that capability to administer such schemes varies significantly from supplier to supplier. December 2011 Page 70

71 County Durham Fuel Poverty Partnership (FP 13) The Committee is examining the extent of fuel poverty in the private rented and off-grid sectors and options for dealing with the problem Submission from the County Durham Fuel Poverty Partnership The County Durham Fuel Poverty Partnership is a multi agency partnership formed to provide strategic direction to tackle fuel poverty and domestic energy conservation issues in County Durham. More information is available on the following web page: In 2009/10 Durham County Council participated in a national rural fuel poverty partnership scheme alongside the Commission for Rural Communities and the Rural Services Network. The aims of this pilot was to understand fuel poverty and energy efficiency issues that related in particular to rural off gas communities. The findings of this pilot have been embedded into the County Durham Fuel Poverty Action Plan with specific issues such as the establishment of an oil purchase consortium to allow residents to benefit from heating oil bulk purchase schemes. The pilot also assisted with the development of whole stock SAP targeting and reporting energy database. This allows strategic targeting of off gas properties for schemes such as Warm Front, CERT and CESP. More information is available on the following web page: As a result of these strategic interventions the uptake of Warm Front Measures in County Durham is 14.4m over the past two years. How could DECC s policies for tackling fuel poverty in the private rented sector be improved? By encouraging and allowing Local Authority Benefits Managers to share data on private rented properties to allow direct targeting of these properties for fuel poverty and energy conservation schemes How could DECC s policies for tackling fuel poverty among off-grid consumers be improved? By utilising the existing Home Energy Conservation Act to require Local Authorities to produce strategies to tackle the issues of rural fuel poverty Given that the OFT found no evidence of a competition problem in the heating oil market, what (if anything) can be done to prevent a repeat of the situation in December 2010 when households were faced with high energy costs during a spell of particularly cold weather? The aims of the Rural Fuel Poverty Pilot was to understand fuel poverty and energy efficiency issues that related in particular to rural off gas communities. The findings of this pilot have been embedded into the County Durham Fuel Poverty Action Plan with specific issues such as the establishment of an oil purchase consortium to allow residents to benefit from heating oil bulk purchase schemes. We have developed Rural Energy Champions using embedded community volunteers to provide information such as purchasing oil during the summer months when it could be cheaper December 2011 Page 71

72 Memorandum submitted by the Residential Landlords Association (FP 14) About (RLA) 1. The Residential Landlords Association (RLA) is one of the two direct membership national landlords associations operating in England and Wales. We have some 10,000 subscribers representing a membership of around 15,000. Our members own or control over units of accommodation. Primarily our members are landlords in their own right but a number are managing and letting agents, some of whom are also landlords. Our members operate in all sub-sectors of the Private Rented Sector (PRS). Properties are rented out to families, working people, young professionals, the elderly, students and benefit customers. Private Rented Sector Technical Committee 2. The RLA took the lead in forming a Technical Committee to co-ordinate advice and assistance in relation to the introduction of the Green Deal in the PRS. This Committee comprises all of the national private landlord and agent bodies in the Sector. The Committee has worked closely with the Department (DECC) during the passage of the Energy Act and related work preparing for Green Deal. The definition of fuel poverty in the PRS 3. Whilst the definition of those who are in fuel poverty is clear it is nevertheless an elusive concept. Who is fuel poor can also be due to a change in income, the cost of fuel, and even the amount of fuel consumed all of which can quickly change. One month someone can be within the definition and next month outside it e.g. because they take on paid work. 4. Like it or not the PRS can be a fast turnover tenure where the average tenancy lasts around 18 months. One let may be to someone in fuel poverty and the next time to someone who is not. A person can be inside the definition at the start of a tenancy and out of it when the tenancy ends. Further, increasingly due to constraints on social housing and difficulties in accessing owner/occupier accommodation, the PRS is housing more less well off tenants who would otherwise have been allocated social housing. All Page 72

73 of this makes fuel poverty a challenge for the PRS. This is happening at a time when the PRS is becoming an increasingly important provider of housing and may soon equal the social sector in size. PRS stock condition 5. 40% of PRS stock is pre These properties have no cavity walls and often attics rather than lofts. Thus, the PRS has an undue proportion of older hard to treat stock. The PRS should not be criticised for its stock condition. Rather, this needs to be seen as a challenge. In our view it also explains why the PRS needs assistance when looked at in conjunction with the number of those in fuel poverty housed in the Sector. Unlike the social sector the PRS has not had between 35 billion and 40 billion invested in its stock with a further 2 billion to come under the Decent Homes Programme. Real rent returns on PRS renting are now low and outside London thoughts of capital growth are a thing of the past. The Report by Professor Michael Ball of Reading University commissioned by the RLA makes disturbing reading and it contradicts Press Reports of a booming rental market. A summary of the Report is to follow in hard copy form. Engaging with the PRS 6. Up to now the landlord has been expected to fund energy efficiency improvements but the tenant gained the advantage. Unfortunately, the reality has been that energy efficiency is not reflected in improved rental returns. Landlords will improve their properties if they see a financial return so that there is a business case for them to do so. 7. The Government hope that the Green Deal Golden Rule will transform this. Certainly, energy performance certificates have to date had no real impact. Tenants are not interested in them at the moment. Experience shows that energy efficiency at present plays little or no part normally in driving tenant choice as to what property to rent. We have our doubts that the golden rule will produce the required result. The savings need to be markedly greater than the cost of green deal finance. High rates of interest will not help. The average calculation applied to determine savings means that actual savings may not be achieved. A further concern is that properties which have been improved with the benefit of the Green Deal could be seen to be blighted for tenants who may be less ready to take on such a property because of the ongoing liability to pay the Green Page 73

74 Deal charges. This will be the case unless very real savings can be demonstrated commensurate with a tenants own lifestyle. If interest rates are too high and the Green Deal is seen as expensive finance then this would accentuate this potential problem. We hope that we are wrong but this is our view based on what we have seen so far. 8. The three way nature of organising energy efficiency improvements is a particular challenge for the PRS. Tenant, landlord and green deal provider are all involved. The evidence is that this added complication has made providers under the CERT and similar schemes reluctant to engage with the PRS. There are far easier hits dealing only with owner/occupiers or social housing providers, where it is much more a one to one relationship.. PRS Green Deal Partnership 9. In conjunction with the PRS Technical Committee we have advocated the creation of a PRS Green Deal Partnership to bring landlords representatives together with selected Green Deal providers who are willing to work with the PRS. This has been discussed with DECC. What such a partnership would do is to give providers a route to market and, in return, the landlords side could assist providers by helping them tackle the challenges inherent in the Sector. Gas v Electricity 10. Local authorities when setting amenity standards and carrying out enforcement work under the Housing Health and Safety Rating System (HHSRS) are opposed to electric heating systems and the Chartered Institute of Environmental Health support this view. It is not just an issue in relation to OffGas Grid properties but more generally. Many landlords prefer electric heating. It absolves them from having to organise gas safety checks with the risk of enforcement action, including possible prosecution, if inadvertently such checks are not carried out. Getting access to do these checks can be a problem and there is the cost of carrying out the checks. Health and safety requirements relating to gas can be expensive e.g. the recent requirement by the Health and Safety Executive in certain cases to fit access hatches to obtain access to gas flues. Electricity is perceived as being the safer alternative as it removes the risk of carbon monoxide poisoning. Looking forward as North Sea Gas reserves are depleted and we become more Page 74

75 and more dependant on imports it is likely that the cost of gas is going to rise compared with electricity. The current cost advantage for gas will be much diminished. The Committee therefore needs to be aware that for many landlords electricity is the heating fuel of choice. Landlords believe that with appropriate insulation modern storage heating systems and panel heating systems suffice for these purposes, coupled with electric immersion heaters to heat the water supply. An additional problem when it comes to heating water is that modern condensing boilers are perceived as being less reliable and need replacement much more frequently than old type boilers. Compulsion in the PRS 11. The PRS is the only sector currently subject to compulsory minimum energy efficiency standards with implementation no later than The RLA is extremely concerned at the way in which the Government are currently handling the implementation of this measure. We have urged the Government to use the relevant regulation making powers to prescribe minimum standards now; rather than waiting. Although the Government have announced that their intention is that the requirement will be to upgrade to at least an E under an EPC, there is no certainty regarding this. Landlords have had their fingers burnt before in this situation. The result is that landlords will sit on their hands until they know what the minimum standards are. They do not want to have to carry out two separate sets of works if the requirement is changed and arrange for their funding and for them to be carried out. Unfortunately, when it comes to Government experience shows that the goal posts are often fitted with wheels! This has happened in relation to the changes to the feed in tariff which has sent completely the wrong message. Whilst everyone was expecting changes in April 2012 to have them implemented with virtually no notice in November 2011 has sent out shock waves. We would ask that the Committee send a strong message to DECC to bring in the regulations straight away to prescribe what the minimum standards will be. The intention had always been that there was a lead in period during which private landlords would be encouraged to undertake improvements voluntarily but this will not happen without landlords knowing with certainty what is required of them. At the moment it looks as if the sector is being set up to fail to justify implementation earlier than need be the case. Page 75

76 Prioritisation of the PRS 12. We believe that the PRS needs to be given priority especially in relation to the social sector, having regard to the larger amount already spent on housing in the social sector via the Decent Homes Programme, already referred to above. Specific measures need to be taken to encourage the take up of energy efficiency improvements in the PRS, especially to reduce those in fuel poverty. Further use of Energy Company Obligation (ECO) Affordable Warmth resources in the social sector would be a disturbing development to say the least. A suggested approach to the PRS 13. We have already highlighted our proposal for a PRS partnership to take the lead in conjunction with Green Deal providers. The Government s consultation paper The Green Deal and Energy Company Obligation raises interesting questions regarding the approach to be adopted towards identifying those individuals who are in fuel poverty. Rather than pepper potting, we feel that greater attention needs to be given to an area based approach. From local knowledge and looking at house prices/rental levels it is relatively easier to identify those areas, particularly in towns and cities where less well off are living. It is also important to look at stock type and tenure. We have already referred to the difficulties of both people moving in and out of fuel poverty and also to individuals in fuel poverty moving in and out of rented accommodation. If we are looking to reduce the trends in fuel poverty as well as reducing carbon emissions, perhaps it should not always matter too much if people who are not, for the time being, in fuel poverty, are assisted in less affluent areas particularly where there is a preponderance of older hard to treat properties. At the end of the day it is the long term improvement of properties which is key. We would therefore advocate much more an area based approach to identify those in need of assistance. This will at least help with an initial identification of those who may qualify for assistance. At the same time it will identify those hard to treat properties which will benefit from assistance via ECO. Page 76

77 Using the Benefit System to identify the vulnerable 14. Whilst the use of means tested benefits is a readily available means of identifying the less well off, the problem is that it is weighted towards those in receipt of state benefits; rather than the low paid who are in work. The fact that the low paid in work are helped with their fuel bills and thereby freeing up household income can be a driver to encourage work. Using the state benefits for those not in work to passport them into lower fuel bills is yet another perverse incentive encouraging people to remain as part of the benefits culture. Funding Energy Efficiency Work 15. As well as the Green Deal and ECO we would strongly advocate much improved landlords energy saving allowance for landlords to provide tax relief for improvement measures. The current LESA system is limited to 1,500 per annum per property and the scheme itself is time limited. It is also limited to certain measures. We strongly advocate the introduction of a system of capital allowances spread over say four years to enable the full cost of approved measures to be recovered via tax allowances against income tax or corporation tax. Experience with grants has shown that many landlords prefer to self fund particularly where tax relief is available. The Government already has concerns about how much money is available to fund ECO and in the current state of the capital markets funding for the Green Deal may not be readily available. Therefore encouraging landlords to self fund in this way would mean that there was more money available particularly in the PRS which is more difficult to reach and where there is a need to bring in resources particularly to deal with issues arising out of compulsory improvement measures when they come into force. If the State is going to demand improvements then it is only right that tax relief should be available in respect of expenditure in meeting these requirements and more widely for all kinds of improvement measures. Technical Issues 16. In all of this it is important not to have overlooked technical issues. Of particular concern is that which can be experienced with condensation and mould, in particular. Often due Page 77

78 to tenant ignorance or misuse the PRS seems particularly prone to these problems. We are therefore concerned that requirements for energy efficiency improvement can accentuate this problem. Tenant education is therefore very important. RLA Proposals to help alleviate fuel poverty 17. The RLA puts forward a number of ideas which could help bring about improvements and reduce levels of fuel poverty: (1) EPCs (a) (b) there is a need to raise the awareness of the important part EPC s can play for tenants when choosing a rental property. Tenants need to look at the running costs and the potential savings that can be achieved by improvements which are advised in EPCs. We welcome the Government s efforts to improve the EPC. Departments of local authorities need to be aware of the part EPCs can play in helping reduce fuel poverty. They need to encourage their provision and use. (2) Advice for tenants (a) (b) The Government needs to provide easy to understand guidance for tenants on: Maximising their income Debt assistance Behaviours that will reduce fuel usage Landlords could be encouraged to assist by providing tenants with this information in the information packs that many landlords provide to tenants at the start of a new tenancy. Landlord associations, national and local,could assist in circulating and raising awareness. The direct.gov website should include fuel poverty issues on its debt pages and link customers to practical advice on how to make savings on fuel bills Page 78

79 (3) Tax Landlords should not be penalised by the tax regime when making capital investments to help alleviate fuel poverty. We have already referred to improving LESA. The feed in tariff for renewable energy is another example because it is tax free to home owners for tax for landlords who install it in their tenanted properties. This reduces uptake and disadvantages tenants. (4) Gas Safety Certificates A radical idea would be to place a duty on gas suppliers to carry out gas safety checks on all domestic appliances they supply gas to and include the cost in standing charges. This would remove a common concern for landlords who have gas installations in having to arrange gas safety inspections. (5) Vouchers Tenants who agree to improvements to their properties need to be incentivised to reward them for the hassle involved. Vouchers could be given as a thank you Overlap between the two strands of ECO 18. Managing and understanding when ECO is available to those in fuel poverty who live in hard to treat properties is important as dealing effectively with hard to treat properties in those areas which are more likely to accommodate should be a key priority in rolling out ECO. Fuel Poverty Initiatives 19. The Government must ensure that the PRS is specifically dealt with and highlighted as being included in any initiatives aimed at dealing with any aspect of fuel poverty. Experience shows that frequently the PRS is not mentioned in advertising campaigns or briefing documents as being eligible for assistance. No account seems to be given of the need to inform tenants in the PRS. As a result many landlords (and their tenants) Page 79

80 believe that the default position is that their properties are excluded so they do not pursue the initiatives. On the other hand if something is advertised then it works. The boiler scrappage scheme was advertised as being available to landlords in the PRS and the very first voucher under the scheme was issued to a private landlord. Conclusion 20. The RLA very much welcomes the enquiry and supports measures to alleviate fuel poverty. Clearly warm and thermally efficient homes not only save energy and reduce carbon emissions but they promote healthier and happier lives. We believe that adopting the measures outlined in this evidence will help promote these objectives if they were to be adopted. December 2011 Page 80

81 Memorandum submitted by EDF Energy (FP 15) Introduction 1. EDF Energy is one of the UK s largest energy companies with activities throughout the energy chain. Our interests include nuclear, renewable, coal and gas-fired electricity generation, combined heat and power, electricity networks and energy supply to end users. We have over five million electricity and gas customer accounts in the UK, including both residential and business users. 2. EDF Energy welcomes the opportunity to submit written evidence to support the Committee s examination of the extent of fuel poverty in the private rented and off grid sectors and options for dealing with the problem. Summary points 3. Managing energy consumption levels in the private rented sector is a key influence on the ability to tackle fuel poverty. It has proven difficult to provide energy efficiency improvements to households in the private rented sector for a range of reasons, primarily due to both the limited influence a tenant has and the limited incentive for a landlord in relation to energy efficiency management. 4. An important factor regarding fuel poverty in rural areas is that there are consumers who have limited control over their choice of heating solution, in particular those with no access to the gas grid who are subject to higher fuel costs. 5. Alternative low carbon heating technologies could make a significant contribution to a large proportion of households unable to access the gas grid in rural areas. Heat pumps can present an adaptable and more cost effective solution in comparison to where there is no gas connection and alternative expensive heating fuels such as oil and LPG are used. Heat pumps can reduce heating and hot water bills and household carbon emissions in comparison to oil. 6. EDF Energy believes that an affectively designed Energy Company Obligation (ECO) can provide valuable support to vulnerable householders to access efficient and low carbon heating, in addition to increasing levels of installation of higher cost measures such as solid wall insulation. We believe the ECO should enable assistance through providing affordable warmth using a range of heating solutions on an equitable basis. Some households could benefit from subsidies to deploy heating solutions, including those off the gas grid that would result in lower or similar heating costs to those with gas heating. 7. It is important that the ECO seeks to meet policy objectives in the most cost effective way, to ensure that the Government s policies are implemented with least impact on all consumers bills including those in fuel poverty. Response to specific questions a What are the barriers to tackling fuel poverty in the private rented sector? 8. EDF Energy recognises the three key facets to fuel poverty: household income, energy consumption levels and energy costs. In relation to the private rented sector energy consumption levels can be a key influence on the ability to tackle fuel poverty for a range of reasons. It has proven difficult to provide energy efficiency improvements to households in the private rented sector for a variety of reasons, including the limited influence that tenants have over improving the housing stock and managing their energy costs. The landlord also has a limited incentive to install energy efficiency measures as it is the tenant who pays the energy bills and would see the benefit of reduced costs. The transient nature of tenants in the private rented sector can also impact on how rented stock is managed by the landlord which can on occasion reduce the responsibility taken by the landlord. b To what extent will the recent measures in the Energy Act 2011 (to introduce minimum energy efficiency standards in the private rented sector) help the problem? Page 81

82 9. EDF Energy welcomes the inclusion of minimum energy efficiency standards in the private rented sector in the Energy Act However, these will have to be enforced and implemented in a way which encourages all landlords to improve the energy efficiency standard of their property stock without penalising either tenants or landlords who live in properties which are difficult to improve due to technical reasons. EDF Energy fully supports the aims of Government s Green Deal policy and believes, if implemented successfully, this could help provide greater access to energy efficiency improvements for all private sector landlords and tenants. c To what extent is fuel poverty in rural areas driven by a lack of access to the gas grid and to what extent are other factors (such as housing condition and income levels) responsible? 10. An important factor with regard to fuel poverty in rural areas, is that there are consumers who have limited control over their choice of heating solution, in particular those living off the gas grid, and as a result are subject to higher costs from fuels such as heating oil. This is a key factor of fuel poverty alongside those who live in hard to treat homes and/or on low incomes. Effective support should be provided for those in the deepest fuel poverty through providing free or subsidised heating measures to these households, including those off gas properties through the affordable warmth aspect within ECO. 11. For the significant proportion of households unable to access the gas grid in rural areas, alternative low carbon heating technologies could make a significant contribution. As part of the solution, alternative technologies and measures can be considered in order to help reduce energy costs if households are provided with support to access efficient and low carbon heating. Heat pumps in particular can present an adaptable and more cost effective solution in comparison to where there is no gas connection and expensive heating fuels such as oil and LPG are used. Air Source Heat Pumps extract heat from the outside air to deliver heating and hot water efficiently and cost effectively. In comparison to oil, heat pumps could reduce heating and hot water bills by up to 350 a year and household carbon emissions by up to 27% a year 1. Experience in international markets such as Sweden and France demonstrate that heat pumps can be deployed at scale and this has been demonstrated by rapid growth in sales. In 2008, 130, 000 heat pumps were sold in France alone Figure 1 below also demonstrates an average case comparison of heating between an air source heat pump and an oil boiler. The scenario, applying Energy Saving Trust assumptions, demonstrates the costs benefits of heating homes with air source heat pumps and the reduced payback times for householders with no access to the gas grid compared to other types of properties. In some scenarios, where efficiencies of performance are even greater, the benefits are even more significant, not withstanding the advantage of reducing carbon dioxide emissions. The capital costs of installing a low carbon heating, such as heat pumps, are higher than for conventional solutions such as oil heating. The introduction of the Renewable Heat Incentive Premium Payments mitigates this by providing a 850 initial grant for those who install an air source heat pump. However, this grant initiative is due to end soon and there is not yet agreed detail on how the renewable heat incentive for domestic households will be implemented to provide longer term support. For the private rented sector, it is important that any support incentives such as the RHI are available to landlords as the initial capital outlay will be their responsibility, with the tenant receiving the benefits of lower fuel costs. Figure 1: Comparison on heating and capital costs, heat pump vs oil Comparison using conservative EST assumptions. ASHP Oil Boiler Installed costs (3) 8,500 2,000 Fuel Electricity Heating Oil Efficiency 300% 82% 1 Saving of 350 is based on information provided by the Energy Saving Trust for a typical three-bedroom house heated by oil. Comparison is made using an oil boiler with an efficiency rating of 82% and an Air Source Heat Pump with an efficiency rating of 300%. CO2 saving of 27% based on1.6 tonnes (average UK household energy related carbon emissions is 5.9 tonnes) is based on a comparison made using an oil boiler from Energy Saving Trust fi gures. Actual savings for a particular household will vary depending on the size and construction of the house, and the way the occupants use the heating system and appliances. Figures based on the EDF Energy Standard Tariff average regional electricity price of 13.2p per unit (including VAT) and do not include any allowance for future price increases. 2 p172 -Meeting Carbon Budgets the need for a step change Progress report to Parliament Committee on Climate Change October 2009 Page 82

83 Fuel Price ( /kwh) Typical heat demand 12,870 12,870 Cost to heat home ( ) Simple Payback EDF Energy believes that the ECO and can be designed so that assistance is provided to vulnerable householders, in addition to increasing the levels of installation of higher cost measures such as solid wall insulation. It is important that the ECO seeks to meet policy objectives in the most cost effective way, while considering the wider distribution of impacts of providing high cost measures to a few, with the costs borne by all. As all consumers carry the costs of the ECO then all demographic and geographic groups should have the ability to benefit from the resultant measures. Therefore, providing support to vulnerable householders who can not access the gas grid is a key aspect of delivering affordable warmth and an important tool to help tackle fuel poverty in rural areas and should be considered in the policy design of the ECO. As the ECO will provide free or subsidised heating measures to households, then it should be a policy requirement that heating solutions are provided to off gas properties on an equitable basis. 14. We fully support Government s aspirations to improve energy efficiency and reduce customers carbon emissions. This is something that both EDF Energy in the UK and EDF Group are working on in many countries and is an important part of building a low carbon economy. Building a commercially robust Green Deal to promote the provision of energy efficiency will be a key policy in this regard. Ensuring the low carbon transition is achieved at lowest cost is important to ensure that any cost impacts on energy bills is minimised. 15. EDF Energy also recognises a co-ordinated approach between energy efficiency and reducing demand and low carbon heating solutions is required. d Given that the OFT found no evidence of a competition problem in the heating oil market, what (if anything) can be done to prevent a repeat of the situation in December 2010 when households were faced with high energy costs during a spell of particularly cold weather? 16. EDF Energy recommends that the heating oil market should be regulated by Ofgem. Heating oil is a key resource and requires independent management and regulation as per other key fuel resources used in the domestic market. e How could DECC s policies for tackling fuel poverty in the private rented sector be improved? 17. EDF Energy believes that DECC s polices for tackling fuel poverty in the private rented sector will work effectively through the widespread and successful implementation of the Green Deal and ECO programmes. These policies should be designed a manner which ensures that the private rented sector benefit equitably from any interventions. f How could DECC s policies for tackling fuel poverty among off-grid consumers be improved? 18. As outlined in our response above to point c, we believe that the ECO can provide valuable support to vulnerable householders. It should enable assistance through providing affordable warmth using a range of heating solutions on an equitable basis. Therefore, the higher capital costs of heat pumps compared to gas boilers should be recognised in the policy design to ensure that non gas heating solutions for those householders off the gas grid and more vulnerable to higher fuel costs are able to benefit from such measures. Some households could benefit from subsidies available to deploy renewable heating solutions, including those off the gas grid and result in lower or similar heating costs for these households to those with gas heating. This will allow a fairer allocation of costs across all customers. December 2011 Page 83

84 Memorandum submitted by West Sussex Local Authorities (FP 16) 1. What are the barriers to tackling fuel poverty in the private rented sector? Insulation measures for private sector flats have to be carried out to the whole block which often involves complex issues and can discourage works, resulting in persistent fuel poverty amongst tenants. These issues include arranging access and gaining permission from the different occupiers and owners with varying lease agreements. Also blocks of flats are at a disadvantage because they are treated as commercial by energy suppliers, therefore commercial rates for VAT are applied, which may contribute further to fuel poverty. The benefits of whole block measures can vary depending on the position of the flat within the block, and the size of the flat. This effectively means that some residents will be less able to benefit from the same measure than others, potentially resulting in them remaining in fuel poverty despite this measure being installed. Attitude of landlords can be a particular problem to installing insulation and other energy efficiency in private rented properties. The only means of doing this from a local authority perspective is through talks at landlord forums and other proactive targeting where resources allow. Knowledge amongst private rented tenants of how to improve energy efficiency and the benefits of these measures, and lack of enablement to take action for themselves to reduce fuel poverty and make their home warmer and healthier. Lack of knowledge amongst both private rented tenants and landlords of tools to help combat poor energy performance such as Energy Performance Certificates that must legally be provided. Local authorities have limited communication avenues with private rented residents, which is a barrier to educating on energy and facilitating access to measures which can alleviate fuel poverty. Knowledge amongst private rented tenants of their rights to request measures and protection, or lack of, for them as a private tenant. Park homes and Houses of Multiple Occupation (HMO s) are especially vulnerable to fuel poverty, due to these dwellings not having individual energy accounts. These types of properties are to be excluded from Government assistance, such as the Warm Home Discount, and it is yet to be seen how this will addressed as part of the Green Deal and Energy Company Obligation. A recent West Sussex flats project led by Arun District Council threw up some of these issues, including difficulties around leases, and different views to having insulation works completed. Jo Brooks, the Energy Efficiency Officer at Arun DC, recently completed a thesis researching the barriers and solutions to improving the thermal efficiency of private sector blocks of flats through insulation. 2. To what extent will the recent measures in the Energy Act 2011 (to introduce minimum energy efficiency standards in the private rented sector) help the problem? The extent to which this standard will help the problem will depend largely on the response from private landlords, and level of information available to private rented tenants. Landlords will firstly need to acknowledge this law, show want to abide by it and therefore actively arrange for the necessary works to be carried out. Prospective tenants should be equipped with the knowledge to expect a minimum standard when considering a tenancy, and to ask for evidence of this from the landlord. The level to which this helps the problem will also depend on the capacity within the local authorities to enforce this standard. If this is resourced adequately there is potential for this to work well. There is also unfortunately potential for illegal marketing networks of un-decent private rented properties. 3. To what extent is fuel poverty in rural areas driven by a lack of access to the gas grid and to what extent are other factors (such as housing condition and income levels) responsible? Lack of access to mains gas is a huge issue in rural areas, as other sources of fuel and alternative technologies are all ultimately more expensive. Even if a rural household is able to source biomass as heating fuel, the efficiency of using this in an open fire can be up to 70% less efficient than a condensing wet central heating system. The way forward with rural households may not necessarily be to connect them to the gas network however, but to assist them with capitol cost and running of alternative and renewable source heating systems. Housing condition and income both have a part to play, however one could argue these aspects are changeable and could result in transient fuel poverty, unlike lack of gas which contributes to persistent fuel poverty. Page 84

85 4. How could DECC s policies for tackling fuel poverty in the private rented sector be improved? Future policies would benefit from taking into account the practical on-the-ground issues that frontline organisations are experiencing and raising as part of the Green Deal and ECO consultation. If these issues are investigated now, this would remove barriers that would otherwise reoccur within future and related policies. National regulation for blocks of flats and lease agreements in general, in order to allow for ease of related Government schemes such as the upcoming Green Deal and Energy Company Obligation. Include policies for how non-traditional builds and uncommon set-ups (ie. Park home sites) can be alleviated from fuel poverty, as they should have a right to be included in any schemes that offer assistance no matter how large or small (i.e. Warm Home Discount). 5. How could DECC s policies for tackling fuel poverty among off-grid consumers be improved? Regulation of oil and LPG markets for domestic heating fuel. Facilitation of information to off-gas households to enable them to make informed decisions on what fuel type to use. Education and enable them to make informed decisions. Provision of financial assistance to enable fuel poor rural households to consider alternative technologies for heating. National regulation for uncommon set ups such as off-gas park home sites, in order to allow for ease of related Government schemes such as the upcoming Green Deal and Energy Company Obligation. December 2011 Page 85

86 Memorandum submitted by Islington Council (FP 17) Islington Council welcomes this opportunity to contribute to the Hills Fuel Poverty Review. Fuel poverty is a council priority and we have dedicated significant resource to tackling this problem in our borough. More than 1 in 4 homes are privately rented in Islington and the most recent local statistics, from 2008, suggest that 33% of private tenants in our borough are in fuel poverty. 1. What are the barriers to tackling fuel poverty in the private rented sector? 1.1 Many homes in the private rented sector in Islington are older properties with solid walls and these are expensive to treat. 1.2 Compared to the social housing stock we have relatively little information on private sector tenants and the transient nature of the population makes them difficult to engage. Tenants may be more likely to move than confront their landlord about poor energy efficiency standards. 1.3 Significant number of private tenants in the borough are prepayment meter customers and unable to take advantage of direct debit discounts. 2. To what extent will the recent measures in the Energy Act 2011 (to introduce minimum energy efficiency standards in the private rented sector) help the problem? 2.1 Any minimum standards that are introduced will help to improve overall standards in the sector but it is important that it is properly enforced otherwise the landlords renting the poorest properties may be able to find ways around the system. Adequate funding must be available to local authorities to enforce standards. 2.2 Any improvement in the efficiency of a property will lead to occupiers having more confidence that bills will be lower. This will have a knock on effect that a higher average temperature will be maintained. 2.3 We are concerned that energy efficiency improvements to private rented homes will lead to rent increases. Since we take into account the cost of housing in calculating levels of fuel poverty we are concerned that such rent increases will keep or plunge tenants into fuel poverty. Even small increases in the average London rent will offset savings from energy efficiency improvements. 3. To what extent is fuel poverty in rural areas driven by a lack of access to the gas grid and to what extent are other factors (such as housing condition and income levels) responsible? 3.1 Fuel availability is a factor but housing conditions can also be poor. More attention needs to be directed at alternative properties such as mobile homes. 4. Given that the OFT found no evidence of a competition problem in the heating oil market, what (if anything) can be done to prevent a repeat of the situation in December 2010 when households were faced with high energy costs during a spell of particularly cold weather? Page 86

87 4.1 Although steps are being taken to simplify the tariffs on offer something needs to be done to reduce the cost of the most expensive tariffs that are often relied on by the most vulnerable in society (i.e. prepayment meters). Consideration should also be given to widening eligibility for the Cold Weather Payment. 5. How could DECC s policies for tackling fuel poverty in the private rented sector be improved? 5.1 Energy inefficient homes should be removed from the market sooner than the 2018 deadline given in the Energy Act. 5.2 Either improve enforcement of EPCs through the minimum standards outlined in the Energy Act or create minimum standards for heating and insulation that have to be met. i.e all heating (whether gas or electric) has to have a thermostat and programmer. 5.3 Any strategy has to focus on finding the most vulnerable and improving their properties. Links between the NHS and local authorities are essential to stop the cycle of vulnerable people returning to poor properties. 5.4 The number of properties that failed the decent homes standard due to category 1 HHSRS hazards is high (excess cold is likely to have played a large part in this). More of these properties need inspecting and enforcement action taken to bring them up to acceptable standards. December 2011 Page 87

88 Introduction Memorandum submitted by Consumer Focus (FP 18) 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. We have specific responsibilities for the energy and postal sectors. 1 Executive summary Energy efficiency improvements needed to tackle fuel poverty in the private rental sector are not happening due to the problem of split incentives between landlords and tenants, the rental market not fully valuing energy efficiency measures, and tenants lacking the information and market power to request improvements. Going further than Government s proposals and introducing a minimum energy efficiency standard for private rented properties of band D could lift twice as many households out of fuel poverty. Government can support energy efficiency, especially in hard-to-treat homes, by recycling proceeds from the EU Emissions Trading Scheme to complement Green Deal and Energy Company Obligation (ECO) funding, and by an extension to Landlords Energy Saving Allowance, as well as improved information measures. Fuel poverty among rural off-gas consumers is a result of both high fuel prices and energy inefficient housing. Government can support this group through early winter fuel payments, integrated support for energy efficiency and renewable heat, and supporting connection to the grid where possible. What are the barriers to tackling fuel poverty in the private rented sector? 1. Along with high energy prices and low incomes, poor energy efficiency is one of the primary causes of fuel poverty. Our research, Raising the SAP 2, shows the strong correlation between poor quality housing and fuel poverty: 50 per cent of fuel poor households in England live in EPC F and G homes, compared with 23 per cent of all households. These homes are expensive to heat and particularly prone to cold and damp conditions. 2. Poor energy efficiency is a particularly common problem in the private rented sector (PRS). Among the four main types of tenure, the private rented sector has the highest proportion of EPC band G homes (9 per cent or 218,000 PRS homes are in this band) and the second highest of EPC band F homes (18 per cent or 423,000 PRS homes). 3. Our research A now cast of fuel poverty in showed that 28 per cent of PRS tenants in England were in fuel poverty in 2010, compared with 20 per cent of all households, according to the basic income definition of fuel poverty. The corresponding figures on the full income definition were 23 per cent and 18 per cent respectively 4. It 1 For further information on our role and duties, see 2 Consumer Focus. Raising the SAP. Consumer Focus. [Online] 13 May p11 3 Preston, I and Brigeman, T & Moore, R. A 'now cast' of fuel poverty in Consumer Focus. [Online] The full income definition includes benefits received for housing costs as income and is the Government s preferred definition of fuel poverty. The Government also provides fuel poverty data according to a basic income definition, which does not include benefits received for housing costs as income. Page 88

89 should be noted the private rented sector is very diverse and also includes many properties with a high level of energy efficiency. 4. Energy efficiency improvements in the private rental sector are not happening due to the problem of split incentives, that it is landlords who make the investment in improving properties but tenants who largely get the benefit. The Green Deal and ECO should help address this problem since they create a mechanism by which landlord investment is minimised. However, there are still problems with the new arrangements which are outlined later in this briefing. 5. The property market fails to recognise the value of energy efficient homes, with the costs of the resultant ill-health externalised to consumers and the taxpayer. This is also the case in the owner-occupier market but is a particularly significant issue in the private rental sector. 6. Prospective tenants do not have information on energy efficiency. Information on the energy performance of a property should be provided to consumers at the point of rental or sale through an energy performance certificate (EPC). However, our research on the impact of the EPC on decision-making 5 showed that only 31 per cent of tenants who moved in the past two years received the EPC or other information on energy efficiency (compared to 79 per cent of owner occupiers). Landlords have also told us that tenants never ask to see the EPC 6. Furthermore, homes of multiple occupancy (HMOs) are exempt from the requirement to produce an EPC, except in cases where the whole building is being let or sold. 7. Our work on tenants rights identified issues relating to tenant security, the information available to tenants and tenant s market power 7. Landlords are far more likely to have information about the condition of their property, and tenants themselves, than tenants will about the property and the landlord. They also have the threat of retaliatory eviction against tenants. As a result tenants in the sector are unlikely to demand energy efficiency improvements from their landlords. 8. Lack of enforcement of existing standards is another barrier. Over 400,000 private rental homes 15 per cent of the total - are classified as a Category 1 excess cold hazard under the existing Housing Health and Safety Ratings System (HHSRS). However, the current system for enforcement is not designed to improve standards on a large scale. To what extent will the recent measures in the Energy Act 2011 (to introduce minimum energy efficiency standards in the private rented sector) help the problem? 9. Consumer Focus has consistently argued for minimum energy efficiency standards in the private rental sector. Our report A private Green Deal looks at the impact on fuel poverty of introducing minimum EPC standards in the private rental sector 8. This found that a minimum standard of band E would reduce fuel poverty by around 25 per cent, while raising the minimum standard to band D could lift over 50 per cent of fuel poor tenants out of fuel poverty see Table 1. As such we advocated a minimum standard of band E by 2015, with a gradual tightening of the standard over time to ensure the continued reduction in fuel poverty. Table 1: Impact of minimum standards on fuel poverty 5 Consumer Focus, Room for Improvement The impact of EPCs on consumer decision-making [Online] February National Landlords Association. Interview. August Consumer Focus, Opening the door Examining the potential for reputational regulation of private rented sector landlords 8 Consumer Focus. A private green deal. Consumer Focus Page 89

90 No change Lifted out of fuel poverty Band E 464, ,000 Band D 302, , We welcome the Government s intention to introduce a minimum standard for private rented properties as part of the 2011 Energy Act. However, given the current scale and severity of fuel poverty, and the UK government target to eliminate it by 2016, we consider the standard should apply from 2016 and not 2018 as the Government proposes. 11. We also consider the government should gradually raise the minimum standard beyond band E in future. Our analysis shows that raising the minimum standard to E will not lift the majority of fuel poor tenants out of fuel poverty. 12. We do not support the Government s intention to allow landlords to continue to let homes below EPC E if they install all measures that can be funded through the Green Deal finance mechanism. We consider further investment is required to ensure more extensive measures are installed that would allow homes to be brought up to EPC E or better. Landlords should be expected to provide some of this finance themselves an improved Landlords Energy Saving Allowance (LESA) would help facilitate this. 13. Only 28 per cent of PRS homes (i.e. those in bands F and G) require investment to meet the minimum standard. Our analysis found that 39 per cent of these homes could be improved to band E for less than 1500 per property and a further 16 per cent for less than 3000 per property. The very act of taking action to meet a band E standard will enable a significant number of private rented properties to meet band D due to the nature of measures installed. 14. For the 20 per cent of hard to treat PRS homes (those requiring more than 3000 per property to meet band E), further support is required. We consider the Government should recycle proceeds from the EU Emissions Trading Scheme (ETS) and Carbon Floor Price to fund an energy efficiency programme that complements the Green Deal and ECO programmes and is focussed on low income households in all tenures. Such a programme could help private landlords go considerably beyond the minimum standards required by regulation. How could DECC s policies for tackling fuel poverty in the private rented sector be improved? 15. Consumer Focus considers minimum energy efficiency standards in the private rented sector should gradually be increased over time as part of a strategy to improve standards in all housing sectors. This is essential if the Government is to meet both its carbon and fuel poverty targets. Our Raising the SAP research found that a programme to improve homes to an EPC B standard, where practical, would remove 83 per cent of fuel poor households in all tenures from fuel poverty. This will require considerably more resources than those released through Green Deal and ECO hence our call for the recycling of EU ETS auction proceeds. Germany, Hungary and Poland have already agreed to recycle revenues to energy efficiency programmes. The Australian government has taken a similar stance with respect to its nascent carbon trading scheme. 16. We consider the current LESA, which provides a tax allowance for energy savings measures up to 1,500 in value, should be raised to 10,000 and more extensively promoted (in 2007/08 LESA was only taken up by 0.2 per cent of private landlords) 9. 9 Fuel Poverty Advisory Group. Eighth annual report. s.l. : DECC, Page 90

91 This would help those landlords to meet minimum standards, particularly those with hard to treat properties. 17. We consider all private rental properties in EPC band F and G should be classed as a Category 1 hazard for excess cold under the Housing, Health and Safety Rating System (HHSRS) 10. The government already recognises that properties with a Standard Assessment Procedure (SAP) below 35 are excessively cold. This provision would formalise the association since band F ranges from SAP 21 to 38. The provision will reduce the costs of risk assessment for local authorities due to, for example, having to spend much less time on inspection of properties. 18. We consider the Government should provide guidance to local authorities on appropriate action under HHSRS so that they can advise landlords with low rated properties on the measures required to improve homes to the minimum standards. Government should also require local authorities to keep registers of private rented properties in their area many local authorities already do this. The Government intends to make all EPC ratings publicly available. 11 Local authorities could combine F and G data with registers and provide information to landlords about their legal requirements, advice on the measures needed to improve homes and the support available. 19. We consider the Government should require landlords, and their agents, to provide an up-to-date EPC at the point of marketing a property to help prospective tenants compare the energy performance of properties. This should include HMOs. 20. Our report on tenants rights in the private rented sector 12 proposes introducing a system of reputational regulation, in the form of a landlords register with a landlord rating system, to address the asymmetry of information between landlords and tenants. We consider such a system would help empower private sector tenants, reward good landlords and over time improve the quality of properties offered (including energy efficiency standards) and their management. To what extent is fuel poverty in rural areas driven by a lack of access to the gas grid and to what extent are other factors (such as housing condition and income levels) responsible? 21. Our recent report 13 provides detailed information on the circumstances of off-gas consumers in England, Scotland and Wales: where they live, the type of homes they live in and their household characteristics. 3.9 million homes (16 per cent) in Britain are heated by sources other than mains gas. Of the latter group, 2.3 million homes in Britain are heated by electricity (9.3 per cent of the total), 1.1 million (4.4 per cent) by heating oil, 310,000 (1.2 per cent) by solid fuel and 170,000 (0.7 per cent) by liquefied petroleum gas (LPG). 22. While electricity is the second most common heating fuel after gas in England and Scotland (9 per cent and 15 per cent of homes in each country respectively), heating oil is the second most common heating fuel in Wales (11 per cent). 23. The proportion of homes using fuels other than mains gas is higher in rural than urban areas. Heating oil is the most common fuel alternative fuel in remote rural areas, accounting for 34 per cent of such homes in England, 46 percent in Wales and 32 per cent in Scotland. 10 Very brief overview of HHSRS 11 Communities and Local Government. DCLG. Making better use of energy performance certificates and data. [Online] 30 November Consumer Focus, Opening the door [Online] 26 February 2011, 13 Consumer Focus, Off-gas consumers Information on households without mains gas heating [Online] October 2011 Page 91

92 24. The prices of off-gas fuels are more volatile than alternatives; this is particularly the case for heating oil, which increased in price by more than 50 per cent over the autumn of Although prices subsequently fell, they remain high by historical standards, and fuel poverty even among consumers not on the lowest incomes is higher for off-gas households as a result. 25. Homes reliant on non-gas heating fuels have much lower energy efficiency standards than gas heated homes. 60 per cent of non-gas heated homes in Wales, 49 per cent in England and 22 per cent in Scotland are F and G rated on the EPC scale, compared to less than 10 per cent of gas-heated homes. While this reflects the higher heating costs associated with these fuels it is also a result of the condition of off gas homes. 26. Off gas homes have a greater likelihood of being older, detached and built with solid walls. Detached homes and bungalows account for 60 per cent of all homes with oil heating in England, 52 per cent in Wales and 71 per cent in Scotland, compared to 31 percent of all homes in Britain. Homes heated by oil and solid fuel are more likely to have solid walls than homes using other heating fuels. 33 per cent of oil-heated homes in England, 47 per cent in Scotland and 35 per cent in Wales have solid walls, in comparison to 25 per cent of homes in Britain as a whole. Homes using oil and LPG as their main heating fuel are also much more likely to use secondary heating compared to homes using other fuels. 27. Fuel poverty is higher among users of all off gas fuel types than it is among mains gas customers see Table 2 below. Among electric and solid fuel heating consumers this to be expected given the association of these fuels with low income. However, among heating oil consumers the level of fuel poverty is more surprising, given its association with higher income. It appears that high heating costs and the type of homes associated with oil (larger, solid walled, detached) pushes many better off oil consumers into fuel poverty. Table 2: Fuel poverty by heating fuel, England, Scotland and Wales in 2008 Thousand households/ row percentage/ column percentage Mains LPG & Heating Solid Electric Com- Total gas Bot gas Oil Fuel heating munal England 2, , Scotland Wales Notes: 1 The definition of fuel poverty is slightly different in Scotland than England and Wales, eg Scotland uses a higher temperature standard than England and Wales. 2 Table 2 uses the full income definition of fuel poverty, ie the benefits households receive for housing costs are counted as income. Page 92

93 Given that the OFT found no evidence of a competition problem in the heating oil market, what (if anything) can be done to prevent a repeat of the situation in December 2010 when households were faced with high energy costs during a spell of particularly cold weather? 28. Consumer Focus commissioned GHK consultants to assess options for improving the circumstances of off-gas consumers (publication forthcoming). The analysis found that there would be significant practical difficulties in introducing formal price regulation in the off-grid market, as prices are linked very closely to the price of crude oil. There is reasonably healthy competition in the off-grid markets with a large number of suppliers, although there is evidence of reduced competition in certain local markets. 29. In the cold weather of December 2010 many suppliers made efforts to minimise the impact on consumers, particularly vulnerable consumers. A voluntary code of conduct by suppliers could formalise these examples of good practice and make sure they apply across the board. 30. The GHK analysis found that while there was only limited potential for improving the off-gas markets, there was considerable potential for re-designing existing and forthcoming Government initiatives so that they better support off-grid consumers. The proposals below focus on short term initiatives that could provide immediate help to off-grid consumers. Our proposals on longer term initiatives to provide affordable heating alternatives to expensive oil, LPG and solid fuel are outlined in our response to the next question. 31. Winter Fuel Payments: Heating oil costs are generally lower in late summer and early autumn; however winter fuel payments are typically made in December. Early payment of the payments by the Government (DWP) could help facilitate improvements in consumer energy planning and therefore reduce energy bills for vulnerable elderly consumers; 32. Warm Home Discount: The Government should consider providing a higher level of Warm Home Discount (WHD) to eligible households off the gas network. Consumer Focus continues to advocate extending the mandated WHD to all Cold Weather Payment eligible households and low income families. 33. Supply side improvements: Require the heating oil sector to improve the quality and reporting of price information, particularly with respect to price transparency, e.g. distinguishing delivery costs from unit costs. Heating oil and LPG suppliers (with Government support) should introduce alternative payment methods for low income consumers to facilitate budgeting and planning. 34. Improving information on off-gas consumers: The Government should map offgrid homes with respect to proximity to the gas network. As a minimum, the UK Government and Welsh Government should develop a distance-based indicator of gas network proximity for the English Housing Survey and Welsh Living in Wales Survey to give a better understanding of homes that might conceivably be connected to the gas network and those which cannot. The Scottish House Condition Survey already includes a distance-based measure. 35. The Government should also further develop the National Energy Efficiency Database (NEED) to help improve Government and industry targeting of energy efficiency, renewable and other initiatives to off-gas homes. How could DECC s policies for tackling fuel poverty among off-grid consumers be improved? 36. Consumers with a gas supply without gas heating - our analysis of off-gas consumers found that over half a million households in Britain have a gas supply in Page 93

94 their home but do not have gas heating. 35 per cent of these households are fuel poor and 43 per cent are in the lowest three income deciles (England only). The installation of gas heating in these homes would be cost effective and potentially transform the circumstances of the households living in them. Policy should focus on these low hanging fruit as a priority. 37. Consumers in close proximity to the gas network our analysis also found that a further 1.3 million homes are located in gas postcodes but do not have a gas supply. Many of these homes could cost effectively be connected to the gas network and have gas heating installed. It is not possible to establish the exact proportion of homes for which this is a viable option in England and Wales, unlike Scotland, due to the lack of a distance-based measure of gas network proximity. The Government should facilitate community partnerships to expand mains gas connectivity, involving industry and communities working together, to fund connection particularly for low income communities. 38. Renewable heat - many rural, off-gas homes could have renewable heat measures installed. In combination with insulation measures, this could improve affordability considerably. The renewable heat incentive (RHI) can help make these measures attractive for consumers who are able to finance the upfront costs of measures. However, this is not viable for low income off-gas consumers. 39. Green Deal and ECO the recently published consultation document says very little about how Green Deal, ECO and RHI might work together to provide whole house solutions to off-gas homes that include renewable heat measures. The consultation states that suppliers can offer heat pumps and other low carbon heating sources to low income off-gas households under the Affordable Warmth element but does not intend to provide any additional incentives for suppliers to do this. 40. Consumer Focus notes that Warm Front is similarly not able to offer affordable heat options to off-gas consumers. Currently electric storage heaters or oil central heating systems are the only measures on offer, neither of which offer affordable heat. We also recognise that heat pumps only provide an affordable option if they are installed alongside substantial insulation measures. For many rural off-gas homes this will require solid wall insulation. 41. Integrated policies Consumer Focus considers DECC should consider how Green Deal, ECO and RHI can be combined so that renewable heat and substantial insulation are offered to low income off-gas consumers as an integrated package. Options might include: - additional uplifts within both the Affordable Warmth and Carbon elements of ECO for renewable heat, including biomass (which is generally suitable for healthy adults but less so for older and disabled consumers), as well as heat pumps - combining the revenue stream from the RHI with ECO subsidy to finance the up-front costs of renewable heat - introducing a publicly funded grant system that is integrated with ECO for low income off-gas consumers, as is currently the case in Wales and Scotland where the NEST and Energy Assistance Package are integrated with the Carbon Emissions Reduction Target (CERT). 42. Delivering energy efficiency in off-gas areas - CERT schemes have disproportionately addressed urban areas (with the exception of London), where cost of installing measures are often lower, due to the potential for economies of scale and lower travel costs. The Green Deal/ECO consultation suggests this may be less of a problem with ECO because it is designed to provide measures to hard to treat homes (primarily solid wall insulation). It also suggests that ECO could give greater recognition to the potentially larger carbon savings that can be achieved in off-gas, rural homes. This will therefore also help direct activity towards these homes. The Page 94

95 Government therefore does not intend to make geographic equity a requirement of ECO. 43. Consumer Focus considers that there is a substantial danger off-gas, rural homes will miss out from both the carbon and affordable warmth elements of ECO. Large concentrations of social housing provide the greatest potential for suppliers to meet the carbon target of ECO through solid wall insulation, particularly if also delivered to private housing in adjacent areas (although there are still substantial barriers 14 ). However, these concentrations are predominantly found in urban areas. Similarly, suppliers are more likely to focus affordable warmth activity on cost effective delivery of gas heating and simple insulation measures in urban areas, at least in the initial phase of ECO. 44. Recognition of the more severe climate in rural Scotland (and thus the greater potential carbon savings) in the ECO metric may help direct some activity towards these homes. However, there are other factors such as higher travel costs and dispersed settlement patterns that will militate against this. 45. Consumer Focus therefore considers geographic equity should be recognised in the delivery of energy efficiency programmes. We are concerned that the market-based nature of the ECO mechanism will not do this. However, a national, Governmentdirected energy efficiency scheme that complements Green Deal and ECO would be more able to address geographic equity and provide measures suitable for off-gas homes. 46. Consumer Focus considers such a programme could be funded through the recycling of ETS and Carbon Floor Price funds. This should be specifically designed to focus on hard to treat and off-gas homes that cannot easily be helped by Green Deal and ECO. December See the recent report we commissioned from ACE. Scaling the solid wall Page 95 8

96 Memorandum submitted by Carillion Energy Services (FP 19) Carillion Energy Services Background Carillion Energy Services (CES) welcome the opportunity to respond to this call for evidence in the private rented and off-grid sector. In order to put our comments into context, it may be helpful to outline briefly our role in the provision of energy services across the UK and Ireland. Carillion Energy Services was formerly Eaga plc prior to its acquisition by Carillion in April Carillion is one of the UK s leading support services companies with a substantial portfolio of Public Private Partnership projects and extensive construction capabilities. The Group has annual revenue of over 5 billion, employs around 46,000 people and operates across the UK, in the Middle East, Canada and the Caribbean. Carillion Energy Services, a division of the group are a leading independent energy services provider and one of the largest installers of renewable technologies and domestic heating services in the UK. We currently manage Warm Front on behalf of Department of Energy and Climate Change and we also have experience of working for the Welsh Assembly Government on the Home Energy Efficiency Scheme, the Warm Homes initiative in Northern Ireland and the Central Heating and Warm Deal programme in Scotland. We also worked closely with Utilities and Local Authorities in managing the delivery of energy efficiency programmes. Carillion Energy Services are committed to helping the environment and combating climate change; we provide renewable energy solutions to private housing, specifically through the installation of solar thermal panels and air/ground source heat pumps. Our Clean Energy Programme works in conjunction with the Government s Feed-in-Tariff to install solar photovoltaic panels on social housing properties, we are working with a number of social landlords to provide free electricity to social tenants and have completed over one thousand installs to date. Over 1000 properties have benefited from the Clean Energy Programme due to our partnership with social housing properties. Within our Carbon Services team, we support the largest number of area-based programmes in the UK, leveraging multiple funding sources to accelerate delivery against policy objectives and drive the Government s climate change and carbon reduction agendas. Our work with the UK s major utilities and energy suppliers allowed us to deliver a carbon saving of 11.9 million tonnes of Carbon Dioxide and 1.7 million innovative energy saving products in the financial year 2009 / 10. For further information on Carillion Energy Services and our work across the principal market sectors of Defence, Education, Health, Facilities Management & Services, Rail, Roads, Building, Civil Engineering and Utilities Services please visit - Page 96

97 1. What are the barriers to tackling fuel poverty in the private rented sector? 1. Carillion Energy Services recognise multiple barriers to tackling fuel poverty in the private rented sector, including average tenure lengths, high demand for rental properties, high costs faced by landlords to enact improvements, and lack of tenant and landlord awareness and engagement. 2. Firstly there are reduced incentives for private tenants and landlords to install energy efficiency measures compared to other tenure types. Tenants may be unwilling to pay for upgrades where the landlord gains from value added to the property and landlords may be reluctant to install measures that initially benefits only the tenant (though measures may allow the landlord to command a higher rental price in future). On the part of tenants, the average duration of a tenancy demonstrates that private rental accommodation is viewed in a less permanent manner than other tenures - The average duration of private sector tenancies is only 1.7 years, compared with 8 years in the social housing sector and an average of 12 years in the same property for owner occupiers 1. As the benefits of most energy improvements are measured over a long period of time, tenants are less likely to see the long-term rewards of a more efficient property and are more likely to utilise the flexibility and mobility of the market to move to another property if they are concerned about fuel costs. 3. DECC research has shown that domestic private sector tenants generally have a very short-term attitude to their property and feel little attachment to it compared with those in other tenures. 2 The Green Deal has the potential to overcome this, as the Green Deal charge should, assuming similar levels of usage, be at worst cost neutral on bills the overall bill would be no different but the composition of the bill will change as the fall in energy use would be offset by the Green Deal charge. 4. On the other hand, increased demand for rental property has pushed up prices for tenants who may consequently have low expectations for landlords to maintain or upgrade the property. As a Guardian case study of a family living in a damp home in a poor state of repair illustrates: "We did ask about repairs to this house and the landlord is paying for paint, but she has been told she could rent the house out to students for 1,650 a month and already thinks she's doing us a favour." 3 Indeed, in areas of acute housing shortage such as Lambeth, Environmental Health Officers acknowledge that enforcing higher energy efficiency standards becomes difficult as any home is better than no home. 4 Referring specifically to rural private rented properties, NEA report that many 1 The UK private rented sector as a source of affordable accommodation Ball, M University of Reading and The Joseph Rowntree Foundation. 2 Green Deal and the private rented sector :consumer research among tenants and landlords Quadrangle, Tackling fuel poverty in the private rented sector using the Housing Health and Safety Rating System (HHSRS) Impetus Consult, NEA and Eaga Charitable Trust. Page 97

98 tenants, on private estates for example, pay nominal peppercorn rents and are averse to asking their landlord for improvements in case rents increase Evidence suggests that landlords are also unaware of measures available to help them upgrade their properties; according to research conducted by the Energy Efficiency Partnership for Homes only 2% of landlords were aware of the Landlord Energy Saving Allowance (LESA) 6. Similarly both landlords and tenants may be unaware of their duties and rights regarding housing conditions, particularly regarding Excess Cold Hazards. 6. Furthermore those tenants who do pursue their rights via the enforcement process may risk higher rents or retaliatory eviction a pilot study on implementation of the Housing Health and Safety Rating System (HHSRS) in Cumbria estimated that around 25% of tenants who had taken enforcement action through a Residential Property Tribunal had faced retaliatory eviction A further barrier to improving energy efficiency in private sector housing is the higher initial cost faced by landlords relative to the average spend required across tenure types. Across tenures, 80% of F and G rated homes can reach the a band E rating of SAP 39 by spending around 3,000, with the remaining 20% needing to spend between 5,000-10,000. However, as a higher proportion of the most inefficient F and G rated stock is in the private rented sector; landlords are proportionally affected, with 40% needing to spend between 5,000 and 10,000 to reach SAP To what extent will the recent measures in the Energy Act 2011 (to introduce minimum energy efficiency standards in the private rented sector) help the problem? 8. Carillion Energy Services welcomes the decision to introduce a mandatory minimum energy efficiency standard for privately rented homes; however, we would echo other stakeholders comments regarding the application date of 1 st April We would have preferred a commencement date of 1 st April 2016, with the date from which landlords must grant permission for Green Deal and ECO financeable measures also being brought forward. An earlier date would have stimulated demand for the Green Deal and the 7 year period before regulation takes effect could negate some of what Friends of the Earth, the Association for Conservation of Energy (ACE) and the Citizens Advice Bureau (CAB) term the announcement effect 9 whereby landlords are encouraged to take Tackling fuel poverty in the private rented sector using the Housing Health and Safety Rating System (HHSRS) Impetus Consult, NEA and Eaga Charitable Trust. 7 Tackling fuel poverty in the private rented sector using the Housing Health and Safety Rating System (HHSRS) Impetus Consult, NEA and Eaga Charitable Trust. 8 Tackling fuel poverty in the private rented sector using the Housing Health and Safety Rating System (HHSRS) Impetus Consult, NEA and Eaga Charitable Trust. 9 Minimum energy efficiency standard for private rented homes. 2011, Friends of the Earth, ACE, CAB joint briefing. Page 98

99 voluntary action through coverage of the proposals. Given that the cost to the NHS of private tenants living in cold homes is calculated at 35 million annually 10 bringing the standard forward could benefit the Exchequer in addition to offering a vital boost to jobs. 9. A commencement date of 2016 would necessitate earlier installation of energy efficiency measures which would have a positive effect on reducing fuel poverty, assisting Government to meet its statutory obligation to eradicate fuel poverty by Having a static threshold of SAP 39 also fails to future-proof the legislation. If the Government s Green Deal programme is successful and the average SAP rating of a property rises significantly, it would be logical to raise the standard private rented property must meet to ensure the sector is improving in line with the other types of housing. 3. To what extent is fuel poverty in rural areas driven by a lack of access to the gas grid and to what extent are other factors (such as housing condition and income levels) responsible? 11. Lack of access to the mains gas is undoubtedly an important driver of rural fuel poverty; however, a number of other factors must be taken into account. 12. Firstly, households in rural areas face increased costs compared with their urban counterparts and consequently they have less income with which to heat their homes. The Joseph Rowntree Foundation reported in 2010 that a working couple with two children living in a hamlet required an additional 12,550 annual income to achieve an acceptable minimum standard of living than an urban family of the same composition. This figure decreased to 10,346 for the same household living in a village and 8,114 if the household lived in a rural town, however, the level of difference remains stark This poses further difficulties in identifying the rural fuel poor using the current fuel poverty measurement, as there is no recognition made of the additional costs faced by rural dwellers therefore they may be underreported in fuel poverty statistics. This is in much the same way that fuel poor households in London may be under-reported due to failure to account for their high housing costs. 14. According to the Commission for Rural Communities (CRC) State of the Countryside 2010 report households in rural areas enjoy a slighter higher household income on aggregate than urban dwellers, though households living in rural areas in the most sparsely populated parts of England such as Northumberland, Cumbria, Norfolk, Devon and Cornwall, have a median household income below both urban dwellers and rural dwellers living in more densely populated areas of the country. 12 In addition to 10 The Health Costs of Cold Dwellings BRE and CIEH, A Minimum Income Standard for Rural Life Smith N, Davis, A, Hirsch, D Published by the Joseph Rowntree Foundation. 12 State of the Countryside Commission for Rural Communities. Page 99

100 sparse rural dwellers being more susceptible to fuel poverty as a result of lower incomes, they are also the most hard to reach households as they are insufficient in number and proximity to one another to benefit from area based approaches which are unlikely to be cost effective. 15. Rural households often face the dual disadvantage of being both hard to reach and hard to treat. Of 9.2 million dwellings in England that are classed as hard to treat the largest component are off the gas network and have solid walls, representing 72% of the total. 13 In addition to the higher costs of more complex measures, such as solid wall insulation, rural hard to treat properties are more likely to face aesthetic restrictions or covenants, if situated in a National Park, conservation area, or on a private estate for example. Unfortunately the higher cost of installing specialist products to overcome such barriers is likely to be prohibitive to most households, especially the fuel poor. 16. There is some evidence to suggest that rural pensioners may also be excluded from fuel poverty interventions such as the Warm Homes Discount that automatically matches benefit data with the DWP to identify the core group that receive Guaranteed Pension Credit. This is because take-up of Pension Credit among eligible households is lower in villages, hamlets, and isolated dwellings with up to 54% of eligible pensioners classed as non-recipients compared with 35% in urban areas. 14 It is unclear, however, whether this is due to less awareness of benefit entitlement, stigma associated with Government assistance, or that rural dwellers have specific characteristics that mean they do not need to claim additional benefits. 17. In addition to the fuel poverty drivers discussed above, reliance on alternative heating fuels does of course present a challenge, not only in higher unit costs, seasonal and daily price fluctuations but in a number of other unique ways that can be disadvantageous to fuel poor households. 18. Action with Communities in Rural England (ACRE) reports that households reliant on oil often receive a discounted price when ordering more 1000l of oil; however, such large orders are likely to be vastly beyond the means of low-income households when the current price of oil is around 60p per litre (GB average 2 nd December 2011). Additionally, ACRE cites an example of more modest properties in rural West Durham, such as terraced housing in former mining villages, which are unable to accommodate a larger oil tank to take advantage of high volume orders even if the obstacle of high upfront cost was removed. 15 Heating oil suppliers generally have payment plans in place to allow customers to pay for oil in monthly instalments, however, they often charge interest for this payment method, again disadvantaging customers who are unable to make payment in full. This is in contrast to the on-grid sector where payment via monthly direct debit attracts a discount. 19. In the LPG market, customers should in theory benefit from changes introduced by the Competition Commission, effective from 2008 and 2009, limiting the maximum contract term to be tied to a specific supplier 13 Understanding the real depth and impact of fuel poverty in rural England Rural Services Network Pension Credit take up in rural areas Commission for Rural Communities Off-grid energy market study OFT consultation response ACRE Page 100

101 to two years and by preventing suppliers and amending tank transfer rules. In practice, however, the OFT accepts that it remains difficult for bulk LPG customers to switch supplier. For the 91% of the market with an individual tank, this is largely due to new suppliers refusing to take on non-compliant tanks and costs to consumers of re-siting such tanks (if possible) are higher than any benefits to be gained from switching. For the 9% of the market that is part of a metered estate, switching is almost impossible as all households within the estate must agree to switch to the same supplier and coordinating a switch can be difficult if different residents are all at different stages of a standard two year exclusivity of supply contract. This difficulty perhaps reflects why only 0.5% of metered LPG customers switched supplier in Though these problems are undoubtedly experienced across the bulk LPG customer base, consumers inability to reject high prices by sourcing a cheaper supplier will have the most detrimental effect on lower income fuel poor households. 20. Finally, some 200,000 households in Great Britain rely on cylinder LPG; many of these people are park home residents in rural areas. These residents are charged a higher price per litre for cylinder supply versus bulk supply, and face similar limitations switching due to paying deposits on cylinders and suppliers refusing to collect empty cylinders if a customer intends to switch. Residents often also have few other fuel options due to space constraints for siting tanks. These issues are compounded by park homes being notoriously hard to treat, as NEA notes, and they risk exclusion from the fuel poverty dialogue due to not being classed as dwellings by the English House Condition Survey Given that the OFT found no evidence of a competition problem in the heating oil market, what (if anything) can be done to prevent a repeat of the situation in December 2010 when households were faced with high energy costs during a spell of particularly cold weather? 21. We appreciate the reasoning behind the OFT s judgement on competition within the heating oil market, which notes that the market is working reasonably well over the longer term and that seasonal price fluctuations have long been a market feature as suppliers take around a 10 15% profit margin in winter to offset very low or negative margins in the summer months of low demand. 22. The response will, however, do little to address the concerns of oil consumers affected by last December s price increases, shortages, and failure of some suppliers to adhere to consumer law. 23. Whilst the OFT explains it would not be appropriate for off-grid fuels to be price-regulated by Ofgem as competition in these markets is not constrained by the natural monopolies of the mains gas and electricity 16 Off-grid Energy: An OFT Market Study, Page 101

102 transmission networks, it seems somewhat unjust that customers are afforded a lesser degree of consumer protection simply by virtue of living off the gas grid. This is a concern for vulnerable customers especially as respondents to the OFT criticised suppliers responses to priority cases. 24. It is encouraging that the Federation of Petroleum Suppliers (FPS) has drawn up a voluntary code of practice for abnormal weather conditions which indicates how suppliers can prioritise deliveries and also recommends referring vulnerable customers to local authorities for further assistance. It would be welcome, however, for this incipient recognition of consumer safeguards to be implemented on a statutory basis with penalties for non-compliance from suppliers. 25. Though important for suppliers to react better to high-demand scenarios, they must also be encouraged to work proactively with stakeholders to prevent high-demand situations escalating to become unmanageable. In the bulk LPG sector, Calor are leading the way in this respect by writing to customers in winter advising them to re-fill theirs tank when they remain 60% full to avoid running out of gas if deliveries cannot be made in adverse weather conditions. Oil suppliers could learn from this example. Oil suppliers also appear to be generally less engaged with consumers and stakeholders compared to LPG providers, such as Calor, who run a rural energy advisorship campaign with NEA and ACRE called the Future of Rural Energy in Europe (FREE). Whilst we accept that oil suppliers are unlikely to engage in activity to reduce carbon emissions given their position as suppliers of a relatively high emission fuel, they could work much more proactively with their vulnerable customers to offer more payment flexibility and to raise awareness of fuel poverty initiatives such as Warm Front. 26. Following the supply problems, communities appear to be implementing their own proactive solutions, primarily in the form of oil buying cooperatives such as Oxfordshire Rural Community Council (OCCR) s county wide cooperative. In addition to the syndicated approach reducing congestion on rural roads and lowering the carbon footprint of the average delivery, members save an average of around 50 on a 1000l delivery In the longer term, off-grid customers should be encouraged to consider microgeneration renewable heating sources which would reduce overall energy costs for off-grid consumers but would crucially offer a secondary source of supply during periods of abnormally high demand. This should be targeted through the Renewable Heat Incentive and Green Deal, though the relatively high install costs may not initially be Green Deal financeable without additional subsidy. Consumers may also be reluctant to take up such measures in the absence of consistent policy from DECC having witnessed the impacts of the sudden changes to the feed-in tariff programme for solar PV. 18 Off-grid energy market study OFT consultation response ACRE Page 102

103 5. How could DECC s policies for tackling fuel poverty in the private rented sector be improved? 28. From 2013 the current DECC suite of polices of CERT. CESP and Warm Front will be replaced by the Green Deal and ECO, which will be the only policy for improving energy efficiency in the private and private rented sectors. 29. The introduction of Green Deal and ECO should stimulate demand for improving private rental sector properties, provided the golden rule can be met reliably and the default risk remains low, as anticipated. However, as discussed in question 1, the high percentage of privately rented homes requiring a high level of investment may mean that not all of these measures are financeable through Green Deal alone. If the affordable warmth element of the ECO is set to deliver mainly heating systems and basic insulation measures only, as currently envisaged, many fuel poor households in private rented properties could miss out based on their need for more expensive measures like solid wall insulation and double glazing. 30. In order to really engage private landlords and tenants, as discussed in Question 2, we also believe it would be beneficial for DECC to reconsider bringing forward the 2018 deadline and to investigate introducing a staircasing minimum efficiency standard that increases in line with improvements to the housing stock generally. 31. We welcome DECC s proposal to make Energy Performance Certificates (EPCs) available to the public from 2012, unless the holder chooses not to disclose this information. If the holder is classed as the landlord rather than the tenant, landlords could be disinclined to publish the information on the energy efficiency of their stock if the results are unfavourable. DECC could avoid this by placing a mandatory requirement for landlords to disclose EPCs to select groups, like local authorities, who can then focus their awareness campaigns and HHSRS activity on the most inefficient properties. 32. It is our belief that a higher proportion of the ECO funding should be directed to the alleviation of fuel poverty, to avoid the bulk of additional funding being utilised for solid wall installations for households who can potentially fund any Green Deal shortfall themselves. As ECO funding will be recovered through all customers energy bills, it would be regressive for the fuel poor to fund improvements for those who are able to pay. 33. Finally, we would re-affirm our belief that the only practical long term solution to the eradication of fuel poverty is to invest in the improvement of the housing stock. We do not argue against the fact that for some low income households, the Winter Fuel Payment and Warm Home Discount will make the difference between that household being able to turn the heating on or sitting in a cold home. However these payments, whilst potentially making a difference to a household for one year, do not address the most important underlying cause of fuel poverty; the poor energy efficiency of the housing stock where occupants lack the capacity to invest in energy efficiency measures to deliver permanent solutions. Page 103

104 6. How could DECC s policies for tackling fuel poverty among off-grid consumers be improved? 34. Although the OFT appear to suggest there is limited scope to reduce costs for off-grid heating oil customers, there may be scope for DECC to work with the off-grid fuels industry to draw up mandatory protections for vulnerable customers building on the current voluntary provisions. Additionally, DECC could directly engage with heating oil suppliers to raise awareness of wider energy efficiency and fuel poverty policies that could benefit their customers with a view to developing supplier led projects in a similar vein to the Calor FREE project. Currently, however, there may be limited incentives for oil suppliers to participate in similar schemes. 35. Benefit Entitlement Checks (BECs) for rural pensioner households could be reintroduced on a smaller scale targeted basis during a range of interventions such as through the Warm Front Scheme. This would potentially increase take-up of Pension Credit among eligible rural groups meaning they would receive the Warm Homes Discount and would become eligible for Warm Front, and potentially ECO in the future. Particularly as BECs can be a passport to receiving assistance for installing energy efficiency measures, as well as to receiving rebates such as the Warm Homes Discount, we would recommend that this service is incorporated into future programmes to target hard to reach customers. Carillion Energy Services previous experience offering BECs found that average weekly incomes among pensioner households were increased by an average of a week. 36. The carbon saving element of the ECO has the potential to benefit rural properties that are more likely to have solid walls, however, as with the private rented sector we have concerns that the funding will be utilised by households that could afford to fund any Green Deal shortfall. Instead, the funding should be prioritised on the basis of need and we would reiterate that we would like a higher proportion of ECO funding to be reserved for tackling fuel poverty, with a wider variety of measures to be offered under the affordable warmth element. 37. If it could be demonstrated that significant savings and greater thermal comfort could be achieved by installation of micro-generation technologies then these measures could be particularly targeted towards rural off-grid households as a means of protecting them from both massive cost fluctuations and from running out of fuel during periods of peak demand. December 2011 Page 104

105 Memorandum submitted by National Grid (FP 20) Key points We have considered the questions posed by the committee and whilst recognising the issues of Fuel Poverty in the private rented sector we limit our evidence and comments to the specific questions relating to Fuel Poverty in the off grid sector. National Grid manages gas distribution in the heart of England, delivering gas to 11 million homes, businesses and schools. We estimate there are around 2.5 to 3 million non-gas homes within our gas distribution area. Of these we believe up to 1.5 million may be fuel poor. The precise demographics of these households are not known, however our network areas include 5 of the largest 10 UK cities (population) in the country. This means it is likely that a large proportion of fuel poor households (up to 80-85%) live in high rise flat developments that may not be suitable for individual gas connections. Therefore we believe innovation is essential. As part of our price control process for gas distribution (RIIO GD-1) the majority of our customers and stakeholders told us to continue to focus on supporting Government s targets with respect to reducing fuel poverty. In line with this we have included a target of connecting 35,000 more fuel poor households to gas alongside exploring innovative solutions around heat networks. About us National Grid owns and manages the grids to which many different energy sources are connected. In Britain we run systems that deliver gas and electricity across the entire country. In the North East US, we provide power directly to millions of customers. We hold a vital position at the centre of the energy system. We join everything up. We all rely on having energy at our finger tips; our society is built on it. From the warmth and light we rely on at home, and the power which keeps our factories and offices going, to the mobile communications and other infrastructure technologies that are essential parts of our modern lifestyle. We at National Grid have a role to connect people economically to their fuel of choice. That puts National Grid at the heart of one of the greatest challenges facing our society; supporting the creation of new sustainable energy solutions for the future and developing an energy system that can underpin our economic prosperity in the 21st century. We fully embrace the opportunity to support changes in the energy industry that will be needed to achieve our climate change targets by We believe Page 105

106 that gas is likely to have a significant role to play in meeting these targets in a cost effective way by continuing to provide adequate heating to millions of customers in the long term. We welcome the opportunity to provide evidence to the Energy and Climate Change Committee. DECC s policies for tackling fuel poverty for those off-grid The current Ofgem Fuel Poor Mains Gas Extension Scheme is largely an effective way of helping to remove some of the causes of fuel poverty (both local and rural). We believe that scheme plays an important role in ensuring appropriate gas heating systems and other energy efficient services are delivered as a result of upstream investment by Gas Distribution companies (GDNs). We believe through our partnership with Affordable Warmth Solutions Community Interest Company (see later), we have developed an industry leading fuel poor delivery model. This has enabled a significant number of off gas community schemes to be connected through mains extension and subsequent service connections. In 2009 as part of Ofgem s publicly stated objective of connecting 20,000 fuel poor households to the gas network by 2013, National Grid agreed a target with Ofgem of providing new gas connections to 5,000 qualifying homes. Having met that target some three years ahead of schedule we have now reset the bar and are now aiming for 17,150 fuel poor connections by April This remains a challenging target but we are confident that with the continued support of our strategic partners we will deliver on our commitment and provide an efficient and economic solution to these energy inefficient and vulnerable homes. Future DECC Policies Connecting heat and power Given National Grid s demographic challenge with flatted properties we have been exploring whether we can fund and connect heat networks and/or Combined Heat and Power plants to the gas grid through the Ofgem fuel poor gas connections scheme. We believe the current scheme does not allow these heat networks to be adequately funded even though they are considered in most cases to be the most efficient and appropriate solution to multi occupancy dwellings. We would encourage DECC and Ofgem to support network companies who develop proposals to include such schemes into their charging methodologies, which would enable these fuel poor and vulnerable customers to benefit from the availability of gas. To further facilitate this Page 106

107 initiative we would request DECC support proposals that allow third parties to own assets funded by GDN s (e.g. downstream heat networks). Green Deal To help remove homes from fuel poverty and particularly rural fuel poverty we believe it is vitally important that fuel poor schemes are aligned with other Government initiatives in this area. With this in mind, it will be important to consider for the RIIO-GD1 review period how the Green Deal and Energy Company Obligation (ECO) proposals could be used to support the fuel poor to connect to gas. For example if Green Deal measures were to include gas connections, this might deliver a route for the GDNs to support delivery of a whole house efficiency arrangement by facilitating connection to gas to add to in house measures on heating and insulation. Innovation With regard to incentives for GDNs to invest in future schemes, we believe these should encourage network companies, and their in-house partners, to deliver them efficiently and allow for innovation. We believe that there are a number of technologies where fuel poor customers could benefit from lower fuel prices, which may not be directly connected to the gas supply network. National Grid supports the continued role for Ofgem s Discretionary Reward Scheme where such innovative solutions would be appropriately rewarded. Reviewing eligibility On a more detailed point we have identified a number of potential schemes in England where we believe homes would benefit from a network extension however because they fall outside the Index of Multiple Deprivation top 20% (IMD score 34.42) criteria they fail to qualify for support from a GDN. We accept that additional criteria could apply, however collecting this data is a time consuming and costly exercise that consequently increases the duration and cost of a project. National Grid would propose that the eligibility criterion (IMD) for schemes should be changed to include a home or community with an IMD score of 25 or greater (this was the criteria adopted for the original pilot programme delivered by the DTI Design and Demonstration Unit). In addition, we would encourage Ofgem to consider whether a GDN s economic test should be broadened to take into account the wider environmental benefits, such as reduction in carbon emissions or accrued lifetime energy savings - both we believe are accepted criteria for other industry schemes e.g. Carbon Emissions Reduction Target (CERT). Concessionary Fuel Scheme The National Concessionary Fuel Office (NCFO) administers the Concessionary Fuel Scheme on behalf of DECC. This scheme allows exemployees of British Coal Corporation (BCC) and their dependants to receive an entitlement of solid fuel or a cash allowance providing that they meet the Page 107

108 criteria of the qualifying agreement. The majority of the recipients are believed to be over 70 years of age and no longer in full term employment. Recipients of the scheme are able to receive cash in lieu of coal however National Grid s experience is that this incentive has not kept pace with the rise in alternative energy sources. We suggest that an increased cash payment or one off switching allowance would help those in receipt of concessionary coal to switch to an alternative less carbon intensive fuel. This initiative would also help reduce the administrative burden of government departments. National Grid support for energy efficiency initiatives Working with a number of organisations across the UK National Grid contributes to the policy debate on fuel poverty and is actively involved in supporting energy efficiency initiatives. In Scotland, National Grid is an established member of Energy Action Scotland Business Supporters Group. Through this network National Grid is a regular sponsor and supporter of Keeping Scotland Warm which aims to bring the issue of fuel poverty before the Scottish parliament and highlight solutions. National Grid also sponsor the annual SCARF (Save Cash and Reduce Fuel) school calendar campaign, which aims to encourage pupils to demonstrate ways to save energy at home and their awareness of gas safety. This year the event was supported by members of the Scottish Executive including First Minister Alex Salmond. In Wales, National Grid is on the Board of a regulated Community Interest Company, Warm Wales-Cymru Gynnes, which aims to bring a community centred approach to economic, social and environmental sustainability. Set up in 2004 by National Grid, Warm Wales has successfully offered support to individuals, local authorities and housing associations in Wales to reduce their energy bills through the introduction of renewable energy technology to homes and buildings. Warm Wales has delivered over 26 million of investment into Wales, with funding obtained from a range of areas including CERT and the Community Energy Saving Programme (CESP), creating energy savings in excess of 52 million. Looking ahead Warm Wales has recently announced the development of Co-Cymru a new community interest company focused on community regeneration services to customers, based on employment, training and community friendly procurement. Across England, National Grid plays an active role in helping to find solutions to tackle fuel poverty. In 2009 National Grid set up an independent Community Interest Company (CIC), Affordable Warmth Solutions. The company is chaired by the Rt. Hon Malcolm Wicks MP, with the aim of supporting the installation of new gas connections, gas heating systems and other energy efficiency measures to some of the most deprived areas of our gas distribution network area. Page 108

109 The Affordable Warmth Solutions approach is based on a whole community, whole house package of affordable warmth measures. At the 31 October 2011, on behalf of National Grid it has delivered 86 community schemes and connected 11,683 vulnerable homes to our gas distribution network. The scheme is not simply about providing new gas connections. In order to make a real difference to people s lives there also needs to be investment in new highly efficient gas heating systems. For community schemes alone the partnership between National Grid and Affordable Warmth Solutions has secured over 8.1million in investment for such heating systems. The Environmental and Social Impact Affordable Warmth Solutions measure the impact of their work on the environment. To 31 October 2011 they estimate to have helped reduce the lifetime environmental impact from old inefficient heating systems by some 950,000 tonnes carbon dioxide. In terms of potential financial savings for householders this generates some 38million lifetime energy savings. Customers are also recognising the impact that the work of Affordable Warmth Solutions is making on their lives with an increase in customer satisfaction levels, and 97% of customers saying their houses are now warmer and more comfortable following the installation of a new gas heating system. December 2011 Page 109

110 Memorandum submitted by London Borough of Newham (FP 21) Introduction Newham is an inner London borough to the east of Tower Hamlets. It is one of the most deprived boroughs in London (2 nd only to Hackney in the 2010 Indices of Multiple Deprivation). Newham has a high proportion of housing in the private rented sector currently estimated at approximately 35%, according to Newham Household Survey The latest fuel poverty statistics from DECC show that Newham has the highest level of fuel poverty in London 13.7%. However, if the higher cost of living in London is taken into account, it is estimated that this figure is more likely to be >20%. Summary of housing make up and population profile Figure 1.1: Tenure by household type 2009 (Newham Household Survey 2009) Ethnicity Newham London England White: British 33.78% 59.79% 86.99% White: Irish 1.32% 3.07% 1.27% White: Other White 4.31% 8.29% 2.66% Mixed: White and Black Caribbean 1.22% 0.99% 0.47% Mixed: White and Black African 0.68% 0.48% 0.16% Mixed: White and Asian 0.68% 0.84% 0.37% Mixed: Other Mixed 0.80% 0.85% 0.31% Asian or Asian British: Indian 12.14% 6.09% 2.09% Asian or Asian British: Pakistani 8.46% 1.99% 1.44% Asian or Asian British: Bangladeshi 8.80% 2.15% 0.56% Asian or Asian British: Other Asian 3.12% 1.86% 0.48% Black or Black British: Caribbean 7.35% 4.79% 1.14% Black or Black British: African 13.11% 5.28% 0.97% Black or Black British: Other Black 1.12% 0.84% 0.19% Chinese or other ethnic group: Chinese 0.96% 1.12% 0.45% Chinese or other ethnic group: Other ethnic group 2.14% 1.58% 0.44% TOTAL 100% 100% 100% Figure 1.2: Population ethnicity breakdown in Newham (Census 2001) Page 110