Warm Home Discount Consultation: Briefing on the Government's response

05/04/2022

In this bulletin we review the long-awaited Government response on WHD and set out the key elements for AgilityEco and our partners.

Although there is going to be a delay in the WHD Regulations coming into place for winter 2022/23 and the three following winters, the good news is that energy suppliers can now plan for the next iteration of the scheme.

What we have in the Government response is confirmation of a four-year scheme to March 2026 with a budget increased from £354m a year to £475m. This will allow rebates to be increased to £150 and they will be received by an extra 750,000, with just under 3 million households receiving them in total. Rebates will be issued automatically to a Core Group 1 (formerly the Core Group, comprising low-income pensioner households) and a new Core Group 2. The latter will be identified through a combination of income data (households on means-tested benefits with the response adding Housing Benefit to the original list) and property data from the Valuation Office Agency.

This will provide a much sharper focus on low-income households living in the homes that are most expensive to heat. It is still a challenge to get a really tight focus on households in fuel poverty and the fuel poverty targeting rate is only increasing from 39% to 47%. But we would argue that the other households being supported are still struggling on the margins of fuel poverty and WHD provides them with essential support.

This is all important stuff at a time when people need all the help they can get with their energy bills. But the critical bit of WHD for AgilityEco and our partners is Industry Initiatives (IIS). And there are sensible outcomes with regard to Industry Initiatives:

  • The Government response confirms that IIs will now be mandatory for suppliers.

  • The budget for IIs will increase significantly over the 4 years from a starting position of £40m in 2022/23. This is possible because the total WHD spend will receive inflation increases but the rebate will remain at £150.

  • IIs will still act as a ‘buffer’ (or balancing item) in the event of over (or under) spending on rebates. We weren’t alone in expressing concern that this combined with quite a complex data matching process would leave suppliers uncertain as to their budget for IIs for too long. The helpful change here is that the proposal to have both a pre-year adjustment and then an in-year adjustment has been changed to a process that only involves the former (although the total level of adjustment from year to year that will be allowed is still +/-£10m). As the first new scheme year has started, the only change to the allocated £40m will be if there are over or under spends from 2021/22 to be reflected. We would expect these to be marginal.

  • BEIS is proceeding with plans to exclude households from receiving rebates solely because they are in receipt of non-means tested disability benefits. This is in order to focus support on households with lower incomes. But clearly it is a sensitive element of WHD reforms and BEIS had originally proposed to alleviate concerns by establishing a new £5m disability Industry Initiative. We think it is sensible that they have dropped this idea in favour of more flexible support to disabled householders through the main IIs funding. BEIS will be monitoring the level of support that suppliers provide to disabled customers and we will work with our partner suppliers to ensure they can capture the required data.

  • As a point of principle, we are of the view that customers are best helped through actions that will provide long term and sustainable bill savings rather than one off cash disbursements. We believe energy efficiency measures and advice are much more helpful. So a minor disappointment is that the cap for debt write offs has been set at £6m rather than £5m (£3m of the total being for customers with Pre Payment Meters who are self-disconnecting or at risk of it). The maximum debt write off for a household is set at £2,000. Financial assistance will have a minimum spend of £5m and a maximum of £10m.

  • Boiler replacement spend has been capped at £8m and it looks like the eligibility criteria will be more restricted going forward. We note that boiler repairs are not capped and will be considering with our partners whether we should be looking at supporting more repairs as well as making sure we fully understand the eligibility criteria for repairs.

Finally, a few more thoughts on WHD generally:

  • There is little in the response on implementing the separate scheme required for Scotland. We anticipate the Westminster and Holyrood Governments having to work exceptionally hard if they are to get it up and running for next winter! A number of respondents expressed concerns around the administrative costs of a separate scheme for Scotland and we will be scrutinising the proposals when they emerge to see how costs are to be minimised.

  • The obligation threshold level for suppliers will be reduced to 50,000 accounts from April 2022 and 1,000 accounts from April 2023. The new automated processes should minimise the burdens on smaller companies.

  • BEIS have confirmed that they will not be requiring Supplier of Last Resort to take on a failing supplier’s WHD obligations. This is disappointing but we don’t believe this will have a major impact given the number of small suppliers that have already exited the market.

Overall we are very excited about what is planned for WHD and look forward to working with all our partners on delivery.

For further details, please contact enquiries@agilityeco.co.uk