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Fuel Poverty Forum – Policy Brief

Over the last quarter, there have been 4 main policy developments.

This brief intends to simply explain these developments and

articulate what this means for fuel poor and vulnerable customers.

The topics that it will cover are:

• The Upcoming Comprehensive Spending Review

• Ofgem’s Decision on RIIO 2 for Gas Distribution Networks

• Updates on regulation for customers in vulnerable situations

• The climate change agenda

The presentation will also briefly cover water policy.

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Comprehensive Spending Review

What has happened:

1. In order to ensure that budgets are kept relevant and spending

in control, the Government conducts comprehensive spending

reviews every 2-5 years. These reviews look at the allocation of

money for each Government department, ensuring that

strategic objectives can be met with the money available.

2. We expect there to be a spending review over the summer. The

results should be announced on or before the autumn budget

in October/November

3. ##This is what the embedded video shows##

PAUSE & PLAY VIDEO

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As you can see, NEA is actively campaigning for the spending

review to fund several things:

1. A £1bn fuel poverty energy efficiency fund to meet the

2020 fuel poverty milestone

2. The continuation of the Warm Home Discount and

ensuring that all households that qualify as part of the

compulsory broader group receive it automatically

3. The reintroduction of LESA/ a broader tax exemption for

landlords that are investing in the energy efficiency of

their properties

4. The reintroduction of a telephone energy advice service

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5. Ensuring that the better care fund is explicitly available to

fund energy efficiency improvements in fuel poor homes.

4. We are actively engaging with Government on all of these

issues across BEIS and the treasury. We have been attempting

to get meetings at a ministerial level at BEIS, but Claire Perry

has left her post for a short period of time to care for a relative,

meaning that organising meetings has been difficult.

We nevertheless believe that we will be successful in speaking

to BEIS and will be meeting with Treasury officials and ministers

this month.

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We will also be carrying out ministerial level workshops

regarding fuel poor households

5. We will be working with several industry big-hitters in a big

lobbying attempt, including Energy UK, the National

Infrastructure Commission, E3G and the Energy Efficiency

Infrastructure Group. We will use a “hand and heart” approach

in order to put forward a representation that is both

economically sound, and that can win over stakeholders

emotionally.

6. We are keen to work with our wider networks (i.e. forum

attendees) to ensure that we have as big a voice as is possible.

Please ask attendees to get in touch with me if they would like

to be involved with our campaigning.

SO, What does it mean?

7. If we manage to reach all of our CSR goals, then we would have

secured funding to meet the 2020 fuel poverty target. This will

be a triumph and keep the government on track to meet the

2030 target.

What Next

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8. We are currently assuming that the timescales for the CSR will

remain unchanged, and that they will be looking for

representations to be submitted before summer.

However, a new PM could move timescales, as a new cabinet

and other ministers may be appointed. This might delay

things

ALSO…..It is likely that it will be a short, 1-year spending review.

The cabinet secretary has suggested that it is likely that the

process will be delayed until next year.

9. We will continue with our original plan of being ready for an

early submission to Treasury, setting out exactly what we are

asking for, including a cost benefit analysis and suggesting ways

to fund each of the proposals.

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Ofgem Network Regulation – RIIO 2 Proposals

What has happened:

10. Ofgem has set out initial proposals for how gas networks

will be regulated in the coming years. They call this “RIIO-2”

(the current regulatory period has been called “RIIO”).

11. The overall purpose of the new price control is to build on

the good work that Ofgem have been doing in areas such as

vulnerability, safety, efficiency and decarbonisation whilst

trying to ensure better value for money for consumers.

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12. Whilst one of the big aims of the price control will be to

limit network profits (after Citizens Advice campaigned against

the level of profits that networks have made over the last 10

years), NEA will leave decisions on how to finance the network

to the regulator.

Our focus remains on vulnerability and fuel poverty. In these

areas,

NEA was successful in encouraging Ofgem to propose:

1. To continue the Fuel Poor Network Extension Scheme

(FPNES)

This will help more off gas customers to get access to a

cheaper fuel in gas.

NB:

We did want to see incentives to improve the energy

efficiency of connected homes through referrals to other

schemes e.g. ECO, although this has not been included.

Energy efficiency improvements funded by networks is

something that NEA has campaigned for over several

years, but this proposal of incentivising referrals is much

better than the current scheme. We would like to see this

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incentive stretch to installation of a gas boiler so that the

household can make use of the connection.

I mean, what’s the point of having a gas connection if

you can’t afford a gas boiler??

2. A new vulnerability license condition. This means that

treating vulnerable customers properly would no longer

be based on incentives but would need to become

business as usual for GDNs. This would embed

vulnerability more deeply in GDN’s business plans and we

hope it would result in better outcomes for the customers

that need them the most

3. A £20m-£30m “use it or lose” it allowance for projects

that help vulnerable customers. This can be used in a

scheme similar to some current GDN schemes to help

replace condemned boilers in fuel poor households.

What does it mean?

13. On the whole, NEA are happy about the decisions and

they present a good step forward for how network companies

contribute to eliminating fuel poverty.

14. However, we continue to believe that networks should

have a greater role in helping the government meet its

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statutory fuel poverty targets and milestones. This would mean

network funded energy efficiency improvements.

15. Ofgem have made it clear to us that they will not take this

step in the price control as they have not been directed by

government to do so. Our focus therefore switches to the

Government, and an expected fuel poverty strategy in order to

ensure that networks play their part.

16. On the proposal for minimum standards, we believe that

there should be something to ensure that when an FPNES

connection process is in place, energy efficiency advice is given

to the customers in receipt. This could work similar to the

SMICOPS scheme (energy efficiency advice when a smart meter

is installed).

What Next? We will be working with Ofgem to ensure that

each of the three new policies are fit for purpose. For the Fuel

Poor Network Extension Scheme (FPNES) in particular, we will

draw on our experiences of delivering the scheme with NGN

(Northern Gas Networks) in our recent “Connecting Homes for

Health” project to ensure that we can take our learnings into

the next version of the scheme.

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Regulation for Vulnerable Customers

What has happened:

17. The ‘Commission for Customers in Vulnerable

Circumstances’ took evidence from NEA and other national and

local organisations

They have now published their final report, with numerous

(about 50) recommendations for how suppliers, Ofgem and

BEIS can improve their treatment of vulnerable customers. This

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by the way gives weight and support to the work that NEA is

and has always been engaged in.

18. Amongst many other things, key recommendations

include:

1. Keeping Social Tariffs in Scope – ie using social and

safeguarding tariffs to protect vulnerable people

2. A new, independently monitored vulnerability Code of

Conduct for energy suppliers which goes further than the

current Ofgem licence conditions

3. A more consistent approach to helping vulnerable

customers across the industry- for example ending a

postcode lottery when it comes to supporting vulnerable

people

19. We agree with each of the recommendations that the

commission makes, having engaged fully with them as they

conducted their call for evidence. It is clear that they have

listened to stakeholders and come up with lots of achievable

recommendations. WHICH IS BRILLIANT

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20. In addition to this report, Ofgem are consulting on their

own consumer vulnerability strategy, which sets out how

regulated energy companies should treat vulnerable

customers. We will be asking Ofgem to consider each of the

commissions relevant recommendations.

In addition to this, Ofgem have said that they will, amongst

other things:

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1. Encourage energy companies to better use data to

identify vulnerabilities, including by proactively updating

their PSRs, helping vulnerable customers self-identify and

then using this data to target support

2. Support customers who struggle with bills by making bills

affordable (within their powers), encouraging better

support for self disconnecting customers, ensuring that

debt repayment plans are affordable and continuing

FPNES

3. Drive significant improvements in customer service for

vulnerable customers. This means that they will be

pushing energy companies to:

• have a corporate culture that supports vulnerable

customers,

• ensure that companies have the systems that can

better target their customer service offer to

consumers with specific needs

• ensure that new suppliers entering the market can

offer an adequate level of customer service to

vulnerable customers

how often do we see smaller new companies offer

cheap deals then come down heavy when folk get

into debt?

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• And ensure that customers have information on

how well energy suppliers support consumer needs

4. Ofgem will also encourage positive and inclusive

innovation from both suppliers and networks through

regulatory reforms and hosting “innovation days” for

suppliers to showcase their work

5. Work across multiple sectors, including other utilities and

also the third sector, to ensure that Ofgem is truly

performing as good as it can and should do.

21. We’ll be asking Ofgem to:

1. Institute a consistent approach to distributional analyses

to ensure fair decisions for all customers – something that

they have said they will do this year. Essentially this

means that when decisions are made, the effect on

vulnerable customers is evaluated. AN EXAMPLE: network

charges- effect of these in the past has always been

expressed in “average” terms which fails to acknowledge

the experiences of those on the bottom of the pile.

2. Enforce non-compliance of the vulnerability licence

condition

3. Make better use of its powers to require information

from all suppliers on how their service meets the needs of

customers in vulnerable circumstances

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What is next

22. We will be responding to the Ofgem consultation in due

course. We expect that the strategy will be finalised by late

autumn.

MORE ABOUT THAT FROM OFGEM AFTER THE BREAK!

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Climate Change

This has certainly been big news recently

What has happened:

23. In the last quarter, climate has had significant airtime in

the news, with the extinction rebellion protests in London, and

the declaration of a climate emergency. This will all have an

impact on fuel poverty policies.

24. Throughout April, the Extinction Rebellion group

organised demonstrations in London to protest at a perceived

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lack of Government action on climate change. Due to the

nature of the protests, this garnered attraction from local and

national media, forcing several discussions in parliament and

even a visit from Greta Thunberg who started the “School strike

for the climate” protests. The UK opposition in UK parliament

forced a vote to declare “an environment and climate

emergency” which was passed.

25. Building on this momentum, the BBC released a landmark

documentary “Climate Change - The Facts” which highlighted

the dangers that could be presented by not doing enough to

tackle climate change. And if that wasn’t enough, the

Committee on Climate Change (CCC) released their report “Net

Zero – The UK’s contribution to stopping global warming”

which made recommendations as to how the UK could achieve

net-zero carbon emissions by 2050.

26. These are all exciting and important developments in the

energy world, but what does it mean for the fuel poverty

agenda?

Well, at NEA, we believe that such developments have the

potential to push the Government towards delivering policies

that can help both alleviate fuel poverty and reduce carbon

emissions. On the CCC (Committee on Climate Change) report,

NEA’s Chief Executive Adam Scorer said

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“We agree with the committee; ending fuel poverty and

ambition for our climate are indivisible, not inimical. There is

now a huge opportunity for the UK Government, devolved

nations, industry and campaigners to demonstrate how the

most vulnerable people in our society can be the first to

benefit from this necessary transition.”

27. Climate targets cannot be met without the fuel poverty

target being met – Government must act to centrally fund

energy efficiency measures for fuel poor households to address

both issues.

28. NEA will need to focus the climate debate, at least in part,

on how social inequalities can be avoided so that those who

cannot afford it do not pay for it. And further than that, we will

need to ensure that fuel poor households can benefit first from

the opportunities created from climate change. This includes

energy efficient housing, AND active participation in the energy

system where customers are financially rewarded for having a

flexible energy demand.

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Water Poverty

Now, it might seem odd that a fuel poverty charity is working on

Water Poverty. Well it’s not that strange as those in Fuel poverty are

well likely also to be struggling with water bills. To that end NEA now

has a Water Poverty Manager (based in the North East)

What has happened:

The water industry has a goal to reach zero water poverty by 2030

• By 2025 - 50% of the population will be living in an area of

water stress, potentially having a direct impact on bills.

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• Ofwat is addressing this in their ‘Future Vision for Water’ and

PR19 price review

https://www.youtube.com/watch?v=acOUYHS27EM&feature=youtu.

be

So that gives an idea of the issue and some of the steps we have

taken to date. Attention is being drawn towards affordable water

and a water poverty strategy and there are moves afoot to look at

ending water poverty by 2030.

Environment, resources, climate change, health, poverty are all

linked here.

Our key advocacy objectives are:

1. Define water poverty in law and to raise the profile of the

problem

2. Promote the improvement of water efficiency to both

reduce bills and improve the environmental situation

3. Linking the work of water and fuel poverty together to

provide holistic outcomes for customers

What Next

• We expect to start identifying pilot projects late 2019 and will

engage with the water companies across the UK to start work

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moving into 2020. Insights from these projects will determine

the future direction of the programme.

• We also will work with the other organisations working towards

the same goal, to expand our reach and raise the profile of the

issue.

What’s Coming Up?

There are three main things coming up:

29. Fuel Poverty Strategy

30. Consultation on the future of WHD scheme (Again)

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31. Comprehensive spending review (Again)

We have done work on each of these.

Fuel Poverty Strategy

• We are led to believe that BEIS hope to re-hash the fuel poverty

strategy before summer recess.

• The overall aim is to be more ambitious and to propose new

ideas for meeting the targets and milestones.

• Some things that will need to be addressed are:

o Lack of energy efficiency funding

o Roles and responsibilities – are suppliers best place to

deliver WHD/energy efficiency if there are going to be

more smaller suppliers?

• It is absolutely crucial that the current statutory target and

milestones are maintained. They are a crucial lever in delivering

the changes we want to see.

• Update – we will be engaging with stakeholders in order to

brief them on the consultation and to get views on our

proposed response. We will be in touch with attendees in due

course on this.

• We believe that the minister has now signed the draft strategy

off. Once the secretary of state has signed it off, we it should go

live.

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Vulnerability Strategy

o Already mentioned- Ofgem also later

Comprehensive Spending Review/Budget 2018

o Also mentioned