Memorandum submitted by Eaga Partnership Limited
1.00 Eaga welcome the opportunity to provide written evidence to the Trade and Industry Select Committee on their inquiry into Fuel Poverty.
1.02 In order to put our comments into context, it is necessary to briefly outline Eaga's role in the provision of energy efficiency across the United Kingdom.
1.03 The Eaga partnership is an employee-owned organisation, we also support the work of the Eaga Charitable Trust who sponsor research into the area of fuel poverty.
1.04 Eaga have been involved in the delivery of energy efficiency and demand side management programmes nationwide over the last 10 years, primarily in our role as managing agents of the Home Energy Efficiency Scheme (HEES). To date approximatley four million households have received assistance from Eaga through HEES and other programmes of work. In February 2000, Eaga were appointed as the Scheme Manager in three of the four designed Scheme Manager Areas for the management of the New Home Energy Efficiency Scheme, which has subsequently been re-branded as the Warm Front Team as part of the UK Fuel Poverty Strategy.
1.05 Eaga Partnership also deliver the Warm Deal and Central Heating Programme on behalf of the Scottish Executive, and have also been appointed by the National Assembly for Wales to manage the New HEES in Wales, and by the Northern Ireland Assembly to manage the Warm Homes Scheme in Northern Ireland. Eaga developed and proposed the introduction of the ``Warm Zones'' concept, which is discussed within the UK Fuel Poverty Strategy. Warm Zones provide a joined up delivery mechanism to tackle the problem of Fuel Poverty.
1.06 However, during this time we have also worked in partneship with over 100 Local Authorities, and 10 Public Energy Suppliers providing energy efficiency measures to domestic households under the existing Energy Efficiency Commitment.
1.07 Our experience in delivery demand side management to low income and vulnerable domestic households across the United Kingdom has provided Eaga with a wealth of experience in the implementation and delivery of these policy instruments. We therefore feel that we are able to provide worthwhile, practical and valuable comments on the delivery of Fuel Poverty initiatives.
1.08 Eaga would particularly like to applaud the Committee on carrying out this follow-up to the initial inquiry on the security of energy supply, and hope that the inquiry brings into clear focus the benefits which would accrue from an effective, co-ordinated approach to the problem of Fuel Poverty. It is important to recognise that the issue of Fuel Poverty must be addressed before many of the broader fiscal and economic instruments considered by the PIU report on UK Energy Policy could be implemented without affecting the disadvantaged.
1.09 Eaga would like to draw the Committee's attention to several areas of interest, which may provide interesting background information to the inquiry on Fuel Poverty. We have initially detailed some general comments on the area of Fuel Poverty, followed by some input into the more specific areas requested by the Committee.
GENERAL COMMENTS ON THE DELIVERY OF THE GOVERNMENT'S FUEL POVERTY INITIATIVES
1.10 Eaga Partnership manages the delivery of the Warm Front Team within three of the four Scheme Manager areas. Warm Front delivers a comprehensive package of both insulation and heating measures to low income and vulnerable households in receipt of a range of qualifying benefits.
1.11 There are however a number of issues currently affecting the delivery of the measures available under the Scheme, particularly in the provision of new and replacement heating systems which are subject to a degree of delay. In essence, this delay is due to the nationwide shortage of qualified heating engineers who are available to carry out work at affordable rates under the Scheme. This problem has been recognised within the Fuel Poverty Strategy published by the Government in November 2001. The Fuel Poverty Strategy illustrates the scarcity of resources in this field stating that during 1999 there were only 124 new entrants to the CORGI register. This should be an attractive career opportunity. The blue-collar image of the heating industry can be deceptive as it is one where a qualified gas engineer can earn up to £50,000 per annum.
1.12 Initiatives are currently in place to provide training opportunities to increase the number of qualified engineers available to carry out work, but it will take time before this additional capacity is available. Eaga has worked with the Department of Work and Pensions and GWINTO to train around 400 new engineers. These newly qualified engineers have entered the Scheme during December 2001, after successfully completing a six-month training course held at 40 colleges across the country. This will help alleviate the delays being experienced but the Government needs to continue to fund this essential training initiative. This issue has been raised with the Fuel Poverty Advisory Group and the Energy Efficiency Partnership for Homes and we anticipate the training debate will progress.
1.13 It should also be recognised that due to the nature of the client group who suffer from Fuel Poverty, many of whom are elderly or vulnerable, it is important not to equate a CORGI or other professional qualification with the customer service skills which are essential when working in this field. This requirement has the effect of restricting the available pool of labour even further.
1.14 Although all newly qualified engineers from this training initiative must agree to work on the Scheme for a minimum of 12 months, it must be recognised that the lure of the private sector is more lucrative when compared to the cash limited work available under the Warm Front Team. This underlines the need to secure long-term funding to continue this training initiative. Inevitably, the more lucrative Local Authority and private work, both of which pay much higher prices than those under the Warm Front Team, will make demands upon available labour resources. The appeal of the work available under the Warm Front Team is that of high volume, continuous work and secure cashflow. Stability in this area is therefore essential to retain the limited pool of labour that will be attracted by this option.
1.15 Another area of concern which has arisen during the delivery of the Warm Front Team is that of the standard of work carried out under the Scheme. This does not reflect the quality of work carried out under the Scheme, remedial work is required on only one in every 14 installations carried out. This record is underlined when it is considered that only three jobs in every 10,000 installations are found to require immediate remedial work to overcome any safety concerns. All heating work completed under the Scheme is subject to a quality inspection; this has not been the case in what has historically been a self-regulating industry.
1.16 Client concern has however been levelled at the specification of work stipulated by the Scheme. The measures available under the Warm Front Team are designed to provide long-term heating solutions; they have therefore been designed to be safe and functional. They may not necessarily be aesthetically pleasing. Issues such as exposed pipework or other cosmetic features are not currently included within the specification of the Scheme and this has been subject to some understandable criticism from applicants. However, the "trade off" is whether to maximise the number of homes treated or to improve fewer to a higher specification.
1.17 Despite these problems however, it is important to realise that, in the areas managed by Eaga, the Warm Front Team is currently exceeding the initial targets for delivery set by Government. It was originally expected that around 22,000 households would benefit from an improvement in the heating within their homes during 2001-02. This target has now been exceeded by around 3,000 households.
Is the Government target of ensuring that no one is at risk of a cold home by 2010 achievable?
1.18 The target is achievable only if resources are continually reviewed. Particular attention should also be focused towards Hard to Heat homes and those households currently in Fuel Poverty but who are not eligible for assistance. There are two further factors to consider when assessing the likelihood of the Government being able to meet their stated target of ensuring that no one is at risk of a cold home by 2010, namely the capacity in both the insulation and heating industries and the level of funding available.
1.19 The problems experienced in the heating industry have been detailed above in paragraphs 1.11 to 1.14. Capacity within the insulation industry has historically reduced quickly when demand for installations has fallen away. This capacity can be replaced more quickly than the heating industry, but in order to allow effective capacity planning, long-term plans for expenditure must be outlined. If the Government wishes to eradicate Fuel Poverty by 2010, and the size of the problem is known, funding plans should therefore be published to allow the heating and insulation industries effectively to plan the necessary capacity needed to meet this target.
1.20 The level of grant funding available under the Warm Front Team has recently been revised, the maximum grant has been increased to £2,500 from £2,000. The annual budget however has not been increased which means that fewer homes will benefit from the Scheme over the next year. This reduction will obviously affect the speed at which Fuel Poverty will be eradicated and underlines the capacity planning problems which may be experienced by some sections of the insulation and heating industries. In short, current waiting times are set to increase further.
It is also important to recognise the advantages gained by a national delivery mechanism for mandatory programmes targeted at Fuel Poverty. Our approach of national support, regional management and local delivery enables benefits from resilience nationally to be co-ordinated with local delivery networks. Capacity planning requires "joined up delivery" at every level otherwise competition between Schemes could exacerbate the pressures on price and capacity which already exist.
Why has the number of households in Fuel Poverty fallen recently? Is this reduction sustainable?
1.21 The only sustainable method of ensuring the eradication of Fuel Poverty is to invest in the energy efficiency of the home. The recent reduction in Fuel Poverty may be due in some part to the reduction in the cost of fuel within the domestic sector. It is important to recognise that although this downward pressure is welcome it is by no means guaranteed that any reduction would be a permanent one. Several gas suppliers have already raised the cost of energy to the domestic market within the last few months. Sensitivity analysis should be performed to asess how many households may lapse into Fuel Poverty for each percentage rise in energy prices or interest rates.
1.22 It can also be envisaged that the low interest rates currently being experienced may be increasing the amount of disposable income available to households who may just be outside Fuel Poverty. If interest rates rise, so will housing costs, resulting in households who were not previously in Fuel Poverty finding it difficult to pay their utility bills.
1.23 It is also important to recognise that Fuel Poverty in rural areas can be particularly pronounced. These are areas which may not be connected to the gas network and may therefore rely on alternative sources of fuel such as oil, solid fuel LPG or wood. The price of these alternative fuels is not regulated in the same way as gas or electricity. The price of oil especially can be subject to fluctuation and is of particular influence in rural or areas not connected to the gas network.
1.24 Consideration should also be given to the definition of the number of households in Fuel Poverty. The UK Fuel Poverty Strategy utilises figures from the 1996 English Housing Condition Survey, which is compiled and published every five years. It does not therefore include over 1.2 million households who have received assistance from the Home Energy Efficiency Scheme and Warm Front Team since 1996, in addition to the other forms of assistance which are available to combat fuel poverty including those provided by utility companies and Local Authorities.
1.25 In order to improve reporting and to promote a regular and sustained approach to tackling the problem of Fuel Poverty, consideration should be given towards the publication of an annual Fuel Poverty "Balance Sheet". This could be produced by the National Statistics office and take into account the number of installations carried out on Fuel Poverty Schemes, changes in fuel price, changes in income level and other economic factors which affect the number of households in Fuel Poverty. This would provide a regular update on the size of the problem allowing funding and other commitments to be regularly assessed. It would also recognise that the number of households in Fuel Poverty is not fixed and the total can be subject to both positive and negative influences.
What is the relative significance of factors such as poor energy efficiency, low income or the cost of fuel?
1.26 The impacts of the cost of fuel have been outlined in paragraphs 1.21 to 1.23. The effects of a low income, in co-ordination with the level of interest rates, have also been touched upon in our previous remarks. The level of household income can be subject to change, both positive and negative, meaning that households previously in Fuel Poverty may find it easier to cope with fuel bills and that those households whose income was once higher may find it a struggle to keep their homes warm if their income is reduced.
1.27 Poor energy efficiency is therefore at the root of the Fuel Poverty problem. Investment in energy efficiency is a permanent change in the living conditions, of not just the current occupant, but of future occupants of the property.
How effective are industry-led initiatives?
1.28 Historically, initiatives provided by the Utility sector have not provided what is actually needed by each household in Fuel Poverty. For example, the biggest impact upon Fuel Poverty is the provision of an effective heating system. This option is not however offered as a part of any Utility-led initiative as it does not dovetail with the key drivers of energy saving and cost.
1.29 It is essential that any customer in Fuel Poverty trusts the message and the messenger. Utilities have become tarnished by the doorstep selling image and other horror stories. This "baton of trust" may therefore be lacking in many cases.
How can Government promote the take-up of energy efficiency measures in households whose income is just above benefit level?
1.30 The best method of ensuring the take-up of energy efficiency measures in families whose income is just above benefit level is to verify that they are actually unable to claim a benefit. Many applicants do not claim their full benefit entitlement, either through ignorance of the qualifying criteria or through a reluctance to claim what can still sometimes be seen as charity. Our experience has indicated that 20 per cent of applicants who go through the Benefits Health Check process are able to claim an additional benefit. This provides an average additional income of £25 per week, a welcome addition to the household budget.
1.31 The integration of a "Benefits Health Check" into any frontline contact with potential applicants, or as part of the delivery of existing energy efficiency schemes, would therefore help to bridge this perceived shortfall. Our experience in this area has indicated that this can be a welcome source of assistance for households who may find it difficult to cope with fuel and other monthly outgoings. This option is an integral part of the energy efficiency and heating schemes funded by the Scottish Executive.
How much could better co-ordination between agencies or fiscal measures help?
1.32 Historically there has not been a high degree of co-ordination between different Government departments in the fight against Fuel Poverty. For instance, encouraging the Department of Work and Pensions to become involved in publicising the Warm Front Team, where access to the Scheme is dependent upon receipt of a designated benefit, has been very difficult at an operational rather than policy level.
1.33 Another potential area for consideration is the Winter Fuel Payment. During 2000-01 over £1.7 billion was spent providing this welcome addition to the income of our pensioners. Whilst this is a welcome addition to many households who use it to help to pay their winter fuel bills, some households feel that they do not need the money and some will no doubt simply bank the cheque to spend on other things.
1.34 There is scope to continue the Winter Fuel Payment but to refocus the initiative. If the Winter Payment was split equally between a cash payment for fuel bills and an investment in energy efficiency, this would, on the basis of the last year of expenditure, release £850 million to be invested in improving the energy efficiency of the UK housing stock. This would assist greatly with the need for a long-term funding commitment, for both training to increase the capacity within the industry and to increase the number of jobs carried out, which has been outlined elsewhere within this response. The benefits from this approach would, however, need to be weighed against the political sensitivities which would surround the change of a popular initiative.
What contribution to the elimination of Fuel Poverty might be made by technological advances?
1.35 The potential of utilising Smart Metering should be fully assessed. Information from a trial carried out in Ireland has indicated that Smart metering can provide an energy saving of 10 per cent to low income families. It will also have the benefit of opening up the low income market to an improved range of tariffs and services from energy companies. However, thought must be given towards overcoming any issue which may occur over the ownership or maintenance of the meter.
1.36 The investigation of Solar or photovoltaic options as an alternative source of energy to assist with Fuel Poverty should be established. Solar energy has the advantage over CHP projects in that, once it is installed, it requires minimal input or operation from the household in Fuel Poverty.
1.37 The introduction of CHP projects has been suggested as a route to help to provide affordable power to households suffering from Fuel Poverty. Although this approach is a welcome development, it is important that any households which benefit from this initiative also receive a full range of insulation measures in order to reduce their energy consumption even further.
1. Long-term funding commitment from Government is essential. This will allow for essential training initiatives to be continued and also provide comfort that the Government's targets for delivery will be met.
2. Investment in improving the energy efficiency of the property is the most effective way of dealing with Fuel Poverty. Although lower fuel costs or a rise in income can mitigate the effects of Fuel Poverty, these can have a temporary effect and the problem can subsequently return should economic or market forces alter. Attacking the root cause of Fuel Poverty is the only way to ensure its elimination.
3. Consideration should be given to utilising a proportion of the Winter Fuel Payment towards the elimination of Fuel Poverty, which would allow the funding of additional training or additional installations from Government-funded Fuel Poverty programmes.
4. The publication of an annual Fuel Poverty ``Balance Sheet'' should be encouraged to provide an updated view on the size of the problem and the progress made in working towards the target of eliminating Fuel Poverty.
5. The level of national co-ordination provided by Scheme Managers is essential to enable the effective engagement of all national players.
6. Managing the aspirations of households in Fuel Poverty is also essential. All national targets established by Government for the delivery of assistance are currently being reached. It is therefore important that households who qualify for assistance from the Scheme are aware of the delivery issues and standards of work which will be involved.