On 30th March, the government finally issued its long awaited consultation on the future of Warm Home Discount (WHD). The consultation is a “quickfire” one, with responses due by 29th April. This is good news as it will enable regulations to be laid before parliament quickly, and therefore enable energy suppliers to clarify funding levels for initiatives such as our vulnerable outreach (LEAP) and emergency boiler (ECHO) initiatives. Helpfully, the government proposes that any spend on Industry Initiatives (“II”) from 1st April can qualify for the forthcoming scheme year, even though the legislation is unlikely to be ratified until July.
Three key highlights of the consultation proposals are:
- A significantly increased budget available for industry initiatives such as LEAP and ECHO
- Regulations covering the whole three remaining years of WHD, enabling greater funding certainty and reducing the current annual “stop-start” cycle
- Including “financial support to be spent on energy bills” (such as prepayment top-ups) as qualifying spend.
Here are some more details on what’s proposed through the consultation:
- The spending target will receive its usual inflationary increase, up now to £340 million overall.
- In relation to II, the description of the current scheme says “In recent years … more innovative projects providing a more holistic, longer-lasting help to households have been funded. We will continue to work with Ofgem, energy suppliers and third parties to encourage more such projects under Industry Initiatives.” We are aware that government has been particularly impressed with AgilityEco’s LEAP initiative, and has used it as a “case study” of where it would like to see II going in future.
- In recognition of the increased good work being done under II such as LEAP and ECHO, the II cap is to be increased from £30m to £40m. Ofgem can still consider requests from suppliers to transfer further Broader Group spend into II, and introduce some extra flexibility (later notification deadlines) in that regard.
- Anyone receiving a Declaration under the ECO Flexible Eligibility rules will automatically be considered as “wholly or mainly in fuel poverty” for the purposes of II. This will strengthen the links with ECO and enable Local Authorities to play a bigger role in targeting residents. This strongly supports the expansion of services such as LEAP and ECHO, which are delivered in close partnership with Local Authorities.
- Writing off energy debt by energy suppliers was the main form of II supported in the early years of WHD. Government previously signalled its intention to see this reduced, by imposing a cap on the share of II that could be spent on debt write-off. The debt cap was set to reduce from 40% of II spend to 30% in the next scheme year. Given the proposed increase in the size of II, this will now reduce to 25% (or £10m maximum). This is good news as the funding available for initiatives such as LEAP and ECHO could increase to £30m or more. Government further proposes that this should fall to £8m in 2019/20 and £6m in 2020/21.
- Government proposes to include “financial assistance to be spent on energy bills” as a qualifying activity. This will be limited to: i) those living off the gas grid; ii) those with long term health problems and/or a disability; iii) communities where residents are wholly or mainly in fuel poverty; iv) customers on a pre-payment meter. This will be capped in two ways. First, they propose an overall cap of £5m of II spend in this area. Second, support given to any one household is to be capped at £140 - equivalent to the amount of the WHD rebate. BEIS have since confirmed that this is intended to be only for customers not receiving the WHD rebate. This is good news for our existing outreach services LEAP and ECHO, where we will look to include services such as “emergency top-ups” in the forthcoming year.
- Scottish Government may use its powers to create a separate WHD scheme in Scotland, subject to responses to the consultation, but from the language it appears that this is unlikely for at least the forthcoming year.
- Government is considering issuing regulations covering the whole period to 2020/21 and the draft regulations cover the whole period. This is great news, as it will enable us to work with our energy company partners on multi-year schemes covering the whole remaining three years of the WHD primary legislation and remove the “stop/start” cycle we currently experience on our initiatives.
- Only small changes are proposed to eligibility in relation to Core Group and Broader Group, most notably the inclusion of Universal Credit as a qualifying benefit. The WHD rebate is to remain set at £140 per customer.
- The threshold at which smaller energy companies become obligated to operate the WHD scheme is to remain at 250,000 domestic accounts. Interesting to note that non “big six” energy companies now supply 24% of the market, but because most of the “independent” suppliers are above the obligation threshold, only 7% of customers are served by suppliers that are not obligated. We’re pleased to say that several of the independent suppliers, alongside “big six” suppliers are partners for both our LEAP and ECHO initiatives.
- Longer term, the government is looking at using further eligibility criteria, government datasets, and its data sharing powers under the Digital Economy Act to better target WHD on those that need it most.
NEXT STEPS FOR OUR PARTNERS:
We strongly urge our partners to respond to this important consultation, as we of course will do ourselves! In particular, we would suggest you:
- Support the increased II cap of £40m (Q1)
- Support including LA Flex declaration as a qualifying criterion for II (Q2)
- Support the reduced debt cap in the forthcoming year (Q3) and in later years (Q4)
- Support the inclusion of rebates (Q5) but sensibly capped (Q6 and Q7)
- Support multi-year regulations out to March 2021 (Q8)
- Support energy suppliers being allowed to fund II from April in advance of legislation being in place (Q19)
If you have any questions or require any further guidance on next steps, please contact the AgilityEco team .