UK: Green Deal And ECO Consultation Launched

Last Updated: 30 November 2011
Article by Jean-Pascal Boutin

The long awaited consultation on the Green Deal scheme has finally been published. The consultation seeks views on the details of the Green Deal and the ECO policies that are to be implemented in October 2012.

There will be a number of stakeholder-led events in England, Scotland and Wales during the consultation period as well as sector specific workshops.

Chief Secretary to the Treasury Danny Alexander announced yesterday that as part of the Autumn Statement the Government will provide £200m of funding for new and additional support to enable a special time-limited 'introductory offer' for the Green Deal. This is an offer that could save early adopters hundreds of pounds and is planned get the Green Deal off to a flying start.

There has been clarity provided on a number of different aspects of the Green Deal and ECO and also additional controls. Whilst this is very much welcomed, there are still a number of areas which require greater clarity and there are some notable absences of information.

Under the current proposals, it is far from clear whether customers who wish to install microgeneration technologies will be able to combine financial incentives such as the Feed in Tariff and Renewable Heat Incentive with Green Deal Finance.

Paul Williamson, head of customer markets controlling at npower said;
"npower is a partner in the Green Deal Finance Company. It is a vital initiative to better understand Government's Green Deal and its underpinning.

"Increasing the uptake of energy efficient and low carbon measures will play an important part in meeting Government climate change targets and helping households and businesses to use less energy and save money.

"Many questions of the Green Deal still remain unanswered, such as customer uptake, financing and implementation. This is why the Green Deal Finance Company trial is crucial to the Green Deal."

Consultation specifics:

We have detailed below some of the key areas which have been clarified in the consultation.

Commencement: it is proposed that the Green Deal and ECO should begin formally from October 2012, this is to ensure that there is no hiatus between the start of the Green Deal and ECO and the end of CESP and CERT

Controls: an independent body will be set up to monitor and oversee the activities of the Green Deal participants, namely, the assessors, suppliers, installers and providers. Green Deal participants will be obliged to be authorised and comply with the Green Deal Code of Practice. The British Standards Institute is developing standards for installers.

It is proposed that the Green Deal provider holds a surety bond to protect customers in the event of insolvency or if its loses its authorisation.

Golden Rule and the Green Deal charges: effectively the energy efficiency improvements are expected to pay for themselves. The Golden Rule principle is intended to ensure that under the Green Deal a customer's electricity bill should not be increased as a result of the Green Deal. This assumes that the customer's energy consumption patterns do not change since the Golden Rule is based on a snapshot of estimated electricity savings taken at the time of the assessment.

Whilst it is anticipated that many plans will involve fixed payments, it does entertain an ability to vary the charges in certain circumstances.

There is also the opportunity for customers to make advancements and for customers to receive cash advancements to incentive customers to sign up to the schemes.

Consents: as the financing is to be repaid through the electricity bill (not the gas bill), the consent of the bill payer will be required, if different from the owner of the property.

It is proposed that these consents do not include that of any mortgagee. Disclosure of the existence of a Green Deal Plan to subsequent buyers of the property will be made via a modified EPC. Secondary disclosure would arise through a Local Land Charges search.

Customer Protection: the Green Deal provider will be responsible for any complaints and claims, including those relating to the installation and assessment
(unless the Green Deal participant was not acting on its behalf in which case the Green Deal provider will merely assist). Compensation may be sought from the ombudsman up to a maximum of £100,000 per customer.

Warranties: the warranty will be for a minimum two period, however, it is open for the Green Deal provider to offer different warranty periods. The price for such warranties would be staggered over the life of the plan. The company providing the warranties will be required to be at least 'A' rate. The customer will be responsible for ensuring that the measures are properly maintained.

Green Deal plan: the Green Deal plan is essentially the contract with the customer. This will specify the warranty and payments, however, it must not restrict the ability of the bill payer to change the intervals at which they pay their electricity bills.

It may be possible to include a provision to charge interest for late payment, however, only after a specified period of time. There are concerns of the practicalities and costs for the electricity supplier of including this function.

Unexpected costs: Green Deal providers will be able to recover unexpected costs, provided always that the Golden Rule is still met.

Prepayment meters: Green Deal payments will be able to collected from prepayment meters using the arrears function.

Vacant properties and redevelopment: the owner of the property will be liable to pay the Green Deal payments when the property is vacant, even where there is no electricity being consumed.

The owner of the property will not be permitted to disconnect a property for redevelopment purposes without first paying off the Green Deal payments.

Early repayment: DECC are seeking to exempt the Green Deal from the Consumer Credit Act limitations on compensation for early repayment and allow Green Deal providers to recover the interest which would have been due for the period of the plan.

Electricity suppliers: the electricity supplier will pass on the Green Deal payments on a proporational basis with the electricity charge. It will act as agent and trustee of the Green Deal provider and must pass the payment onto the Green Deal provider or nominated financier within 72 hours. They will be able to charge the Green Deal provider an administration fee of £3 per Green Deal plan.

All existing obligations in relation to debt and disconnection placed on electricity suppliers via licence conditions are to be extended to cover the Green Deal charge in order to protect vulnerable consumers.

Interface of Green Deal with ECO: ECO is designed to focus on hard to treat households where the Green Deal finance would be insufficient without ECO. The administrator will need to be satisfied that the ECO contribution is material to the financing of the measures. Solid wall insulation is the key technology which ECO will be used to support and other measures will only be eligible if they are part of a package which includes solid wall insulation. As ECO is funded by all electricity bill payers, the intention is to maximise Green Deal financing and minimise ECO contributions.

Brokerage function: a brokerage function is being proposed which will match Green Deal providers with offers of additional financial support from ECO companies where needed. It is proposed that this is done on a blind basis i.e. based solely on price and without disclosing the identities.

Responses to the proposals and questions in the consultation are invited by 18 January 2012. We will update you once the responses to the consultation are in.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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