The Green Deal and Energy Company Obligation...

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The Green Deal and Energy Company

Obligation consultation.

Please use the table below as a template to respond to the consultation. It will

help us to record and take account of your views.

Also, please provide evidence for your answers and comments where

possible.

PERSONAL DETAILS

Respondent Name: Pippa Read

Email Address: [email protected]

Contact Address: Lion Court

25 Procter Street

London

WC1V 6NY

Contact Telephone: 020 7067 1092

Are you responding as an individual or on behalf of an organisation: Organisation

Organisation Name: National Housing Federation

How were members’ views assembled? We held face-to-face sessions with our member environment advisory group and with the DECC social housing subgroup, on which both housing association and local authority social landlords are represented. We also held a one day breakout workshop with interested parties from the DECC subgroup to further explore areas where policy changes are needed to cater for and take advantage of the circumstances of social housing. In addition, we also encouraged Federation members to provide commentary and evidence for specific questions by email.

Would you like this response to remain confidential? Yes/No

If yes, please state your reasons:

CHAPTER 1: Assessment

Q1: Do you feel the proposed requirements on Green Deal assessors set out in the main body and at Annex A of the Code of Practice are clear and robust enough to support the Green Deal assessment?

Yes/No/I don’t know for the owner-occupied/retail scenario, but they need further development to cater for the different situation of multi-property programmes instigated by

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social landlords.

Please explain:

From the information available, the proposed approach seems sensible and workable for individuals seeking a retail Green Deal assessment, typically owner-occupiers. The process is designed around the key features of this scenario: that the occupier is also the owner of the property and that they are unlikely to have an expert understanding of its characteristics, condition and options for energy efficiency improvement.

It would not be sensible to employ the same approach in social housing, where the scenario is very different:

The occupier and the owner are different

Social landlords generally own large volumes of stock (into the tens of thousands in some cases), often flats or concentrations of houses of similar build type

Social landlord organisations employ competent professionals and manage the condition of their assets in a comprehensive and rigorous way. They are likely to understand well the characteristics of their stock, and options for improvement

Social landlord organisations have strong, familiar and trusting existing relationships with their tenants.

Our specific comments (references to Annex A of the draft Code) are:

4 (requirement for indemnity insurance). Where assessors are housing association employees or contractors, and the landlord is taking responsibility for deciding what measures are appropriate, it may take a view that such insurance is unnecessary or duplicates other mechanisms for managing the risk in the assessment. We propose that this requirement not apply to the assessment of properties by registered providers of social housing’s employees, or assessors carrying out the work under contract with the landlord

6 (explanation to customers). The content appears sensible but we would want to be sure housing associations can convey it through their normal tenant communication channels rather than being forced into a particular process

7 (notification of assessments to certification body). We would question why this is necessary. We feel it would be enough for the assessor to be required to keep records of assessments and make them available on request to a certification body. In particular we would argue that where (see comments on section 17 of Annex A and Q3) desk top studies or cloned data are used to produce assessments for similar multiple properties only representative assessments should be notified to the certification body rather than lots of unnecessary duplicates

10 (assessor skills and qualifications). The Federation recognises the need for assessors to meet appropriate standards and as such we have been commenting on the various iterations of draft NOS. We are concerned that they primarily consider the individual retail/owner-occupier Green Deal scenario (see Q2). In addition, given the experience and expertise housing association staff and contractors have in carrying out detailed energy efficiency assessments on their stock, we would expect

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their GDAs to be assessed at minimum cost via an APEL route in most cases (see Q2)

15 (directing customers to the independent Green Deal Advice Service). This is predicated on the individual retail/owner-occupier scenario and would not be appropriate for assessments carried out as part of an organised programme by a social landlord because the remote advice service would not be familiar with the details of such a programme and so might provide inappropriate or conflicting advice

16 (advising the customer about need to obtain consent). This is not applicable where the assessment is being carried out by the housing association or their contractor. However (see Q3), we propose there should be a requirement for the assessor to ensure the landlord is notified before they carry out an assessment

17 (specific requirements for qualifying assessments of dwellings). If the Green Deal’s potential is to be maximised, assessment burdens on large scale schemes which apply the same measures to multiple properties of the same type should be kept to a minimum. Individual fabric assessments should not have to be completed in these instances by organisations like housing associations, which often have excellent stock data already at their disposal. Desk stop studies and cloned data should be able to be used to develop proposals. These would be followed up by validation exercises and occupancy assessments to ensure residents would be making savings after improvement works. With regard to the proposed occupancy assessment, we remain concerned that, despite repeated requests, detailed thinking is not being shared with the Federation and practitioners. The social housing sector has significant levels of under-heating and self-disconnection and these needed to be factored into thinking around the occupancy assessment to ensure occupiers are not given a misleading view about savings

19 and 20 (notifying the customer of the availability of Home Heating Costs Reduction ECO). If this were available in the social sector, housing association assessors could efficiently use this opportunity, and their established relationship of trust with their residents, to seek the necessary information on benefit status to judge whether the property could benefit from subsidy. Notifying the customer of the option to seek subsidised measures through another provider would not be relevant in the case of landlord-managed programmes

26 (complaints). Any complaints about assessors and assessments should be dealt with in the first instance by the landlord organisation, and only directed to the certification body if not resolved

Standards for assessment also need to cover the identification and specification of making good works. For example, some Green Deal work will involve normal building work not directly related to energy efficiency measures, such as re-plastering and re-fixing skirting after internal wall insulation. This is not currently covered by the PAS 2030. Such work will incur a cost and its quality will be important to residents, even though it may have no bearing on the performance of the Green Deal works or the savings achieved. To address this deficiency the Federation proposes that any initial Green Deal assessments should identify any special features, such as historic cornices or skirtings or satellite dishes, that need to be protected and re-instated

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following Green Deal work.

Q2: Can you think of any requirements that Green Deal assessors will need but that may not be covered by the suggested approach, combining National Occupational Standards (NOS) and Accreditation of Prior Experiential Learning (APEL)?

Your answer:

The Federation is represented on the NOS steering group and has commented on the various drafts to try and ensure they will be suitable for assessment work in the social housing sector. We have not however seen any detail on APEL and understand from the consultation that DECC are in the early stages of considering how such a process of mapping existing skills and knowledge against the NOS would work in practice. We strongly suggest the Federation and practitioners in the sector be involved in this work to develop APEL because we see this as the most appropriate route for GDAs employed or contracted by social landlords to take advantage of the their existing skills and experience. This approach should be further developed without becoming unnecessarily burdensome.

With regard to the NOS, we remain concerned that it almost exclusively caters for the retail/owner-occupier model with not enough regard for the different needs of the social housing sector, low income and vulnerable tenants and those in less standard settings. Further consideration needs to be given to the following assessor requirements:

The ability to recognise the difference between housing tenures at the outset and provide appropriately tailored advice, such as directing social housing tenants to their landlord in the first instance (see Q3)

A sophisticated understanding of the reasons why actual consumption and savings may depart from the models, including the way households on low income make energy choices, and the ability to communicate this effectively to residents

Advanced people skills, including the ability to identify where an occupier is vulnerable in some way, and to ensure the assessment takes account of this

Specialist understanding about what measures are suitable, and how they work in practice, in less standard settings such as off-gas grid areas.

Q3: In proposing to allow for the market to determine payment of assessors and cost of assessment, are there any further requirements we should be placing on assessors or providers in relation to (a) payment of assessors, (b) the cost of the assessment, or (c) declarations from the assessor?

Your answer:

Assessments commissioned by a social landlord

Social landlords should be able to specify what they require employees or contractors to do and the approach to payment. Among other things, this should be able to include the use of cloned data to eliminate unnecessary assessment costs in homes of similar characteristics (see Q1).

Assessments commissioned by individual occupiers

Especially if the occupier is going to be charged for an assessment, it is vital, to prevent mis-

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selling of assessments (e.g. because the landlord is planning to carry out an assessment at no cost to the occupier), that the assessor seeks the landlord’s consent before carrying out an assessment. There should be strong sanctions on assessors who carry out assessments and charge tenants for them without notifying the landlord, including a requirement to refund the charge.

Q4: Do you agree with our proposed approach to third party assurance and enforcing compliance for those providing Green Deal assessments?

Agree/Disagree/I don’t know in relation to assessments carried out by or on behalf of registered providers of social housing.

Please explain:

The arrangements proposed appear sensible in relation to individual assessments (owner-occupiers, properties belonging to private landlords, and assessments in social housing initiated by tenants individually) because of the likely lack of expertise of those commissioning assessments and the lack of alternative practical remedies if something goes wrong.

Housing associations may choose to make use of the proposed mechanisms in contracting for assessment work, but we suggest they should not be mandated to do so. As professionally managed organisations, part of whose core business is property management, assurance of the standard of assessment work should be a matter for contract negotiation between them and contractors.

Q5: Should the current EPC validity period for property transactions be used for Green Deal purposes or is a shorter validity period more likely to meet the needs of the Green Deal process?

Your answer:

We propose that the current EPC validity period of 10 years for property transactions should be used for Green Deal purposes. Any changes to the energy efficiency of the home, such as following Green Deal works, would be recorded in a new EPC and would provide an accurate and up to date record of a building’s energy performance. There is no justification for a shorter period if the energy performance is unchanged. Producing an EPC on a more frequent basis would be unnecessarily expensive, particularly for social landlords with large numbers of homes.

The Federation proposes that EPCs and Green Deal assessment reports should state the energy efficiency of the home by the annual (SAP) predicted space and water heating usage because fuel costs are time-limited and quickly become out of date. Current heating costs could be updated using an annual table of current average energy prices.

The consultation document does not explain why RdSAP needs an annual update (1.23). Cost information for both energy prices and energy efficiency measures will, of course, change over time. Yet this could be catered for without the expense of a full update through simple mechanisms like using an annual table of current average energy prices and average costs for energy efficiency measures.

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Q6: Do you think that this approach to identifying and assessing non-domestic buildings, based upon the requirements and tools for Energy Performance Certificates, will capture all non-domestic buildings and business sectors for which the Green Deal is relevant?

Yes/No/I don’t know

Please explain:

No opinion (non-domestic).

Q7: Are there alternatives to the simple approach to providing running cost savings in the non-domestic assessment that we should consider?

Your answer: No opinion (non-domestic).

CHAPTER 2: Measures, products and systems

Q8: Which measures should be added to the list of qualifying measures in Annex 1 for non-domestic properties, and what evidence is there that these measures improve the energy performance of buildings?


Q9: Will the existing Appendix Q process, which will allow new measures to be added to the Green Deal assessment tools, and to the list of qualifying improvements, support innovation in the market and how could the process be improved? In particular, what support could SMEs benefit from?

Your answer:

Practitioners advise that the Appendix Q process is burdensome, and the costs and timescales involved in going through it may inhibit the development and adoption of new technologies. On the other hand, the inclusion of new technologies which have not been properly tested could create practical and reputational risks for the Green Deal. In addition practitioners report that understood and approved measures are available in almost all cases, and the emphasis in the initial stages should be to proceed with installing such measures rather than waiting for possible innovations.

Our view is therefore that the Appendix Q process should be adopted for the initial phase of the Green Deal while detailed discussion takes place on whether it could be possible to develop an improved system which assured the performance of new technologies in a quicker and less burdensome way.

The membership of the proposed modifications committee should include professionals from the social housing sector so judgements about new technologies can take into account distinctive characteristics and needs of the sector.

Q10: What innovative ways can the government use to encourage uptake of a package of measures and could our existing proposals support this.

Your answer:

Uptake of a package of measures will be maximised if the Green Deal and ECO are designed to make them workable and accessible for social landlords. In other parts of this response

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we set out our views on the key issues which are relevant for this, in particular access to both elements of ECO, and ensuring the assessment, consent, installation and payment process can work in the distinct circumstances of social rented housing. In addition, we suggest DECC needs to:

Embark on a much more extensive and considered programme of communication and engagement with opinion-formers in the social housing sector, to convince them of the potential of the new approach in the sector and to overcome the damage which has been done to DECC’s reputation by the Solar PV Feed-in tariff Phase 1 consultation. The Federation would be keen to work with DECC in designing and facilitating such a programme

To the maximum extent it is able, ensure that finance is available at a cost which makes the Green Deal deliverable. While the establishment of the Green Deal Finance Company is a helpful development, there is still widespread uncertainty about the availability and cost of finance. While this is ultimately a matter for financing institutions, we suggest it should be a very strong priority for the Government to use its influencing and brokering role to promote productive discussions between the different parties and to overcome challenges

Assisting social landlords and their trade bodies in troubleshooting any unexpected problems which may emerge. For example, the unexpectedly cautious attitude of housing associations’ lenders to the installation of solar PV on mortgaged property resulted in considerable delay, cost and uncertainty for social landlords

Allocating a significant proportion of the £200m start-up funding announced on 24 November to the social housing sector, and listening to the sector’s advice on the ways this would best promote early uptake in the sector and momentum and scale for the Green Deal as a whole. The Federation has given DECC views on this, which coincide very closely with the views of the LGA on behalf of council landlords. Early announcements on this could be a good springboard for the engagement programme we suggest above.

Across all sectors one option to consider is providing access through web and other means to information on energy bills in a neighbourhood. While the privacy of addresses and names has to be maintained, just as some comparison websites provide information on broadband speeds in a neighbourhood, it might be possible to allow people to see the EPC ratings (where known) and fuel consumption of a range of anonymised nearby properties. This might lead them to take the case for energy efficiency work more seriously.

Q11: Please provide views on the potential inclusion of hard-to-treat cavities (and potentially other measures of a similar type), and proposals for how properties might be accommodated in the ECO without excessive complication or perverse consequences.

Your answer:

The quantity of homes in the social rented sector in identifiable hard-to-treat cavity categories is comparable with the number of solid wall homes – around 780,000 each across the UK.1 While practitioners advise that in some cases solid wall insulation may be the 1 Figures supplied by Energy Saving Trust

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most appropriate and cost-effective approach to improving energy efficiency that is not the case universally. We therefore suggest it is perverse, unnecessary and potentially inequitable to define access to subsidy by limiting it to a potentially unsuitable or unnecessarily costly approach.

While we argue for an approach to eligibility which does not pre-define the stock types or measures eligible, the argument in the consultation document that such stock may be difficult to identify in advance is not valid. The main types are known (Concrete Frame, Lath and Plaster, Timber Frame, Metal Frame, Narrow Cavity, Partial Fill, Random Stone2) and feedback from practitioners in the sector confirms they will typically have good data about such stock in their ownership, indeed many have identified it as a priority in their energy efficiency programmes.

Our membership are also concerned that a proportion of homes included in conventional cavity programmes may turn out to be costly to treat because of problems or defects. These typically only become apparent when work starts. In the Green Deal context, they are problematic because a property which appeared, at the point of assessment, to be treatable through measures meeting the Golden Rule would turn out to be more costly. The only options for dealing with this where occupiers are predominantly on very low incomes would be to abandon the installation and the benefits it brings to the occupier, or find funding to meet the extra cost. One way of dealing with this, which we suggest should be discussed further by DECC with social landlords and other interested parties, would be to enable property owners to bid retrospectively for Carbon Saving ECO for funding to meet the additional cost.

For wider arguments about Carbon Saving ECO, see our response to Q12, 13 and 33.

Q12: We propose that the ECO Carbon Saving obligation should be achieved primarily by promoting and installing solid wall insulation. Should any other measures be supported, and how would these be defined?

Your answer:

We understand and support the Government’s basic proposition that Carbon Saving ECO should operate alongside the Green Deal so it is reducing the total cost of measures installed to a level financeable through the Golden Rule, rather than meeting the whole cost of a package of measures. Across the nation’s housing stock as a whole packages including solid wall insulation are likely to be the principal beneficiaries of such a subsidy mechanism. However, in putting this into effect, the Government needs to take into account the following points:

Especially if the Affordable Warmth element of ECO is not available for social rented homes, there needs to be a way in which the Green Deal charge or an equivalent payment by the occupier for more expensive packages of measures can be brought significantly below the level which just meets the Golden Rule (see answer below to Q33)

While solid wall insulation is likely to form part of socially cost-effective packages for

2 Ibid

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solid wall stock in the social housing sector, and for some other ‘non-traditional’ stock, as noted in our response to Q11 above, there is a considerable amount of hard-to-treat cavity stock in the social sector for which solid wall insulation may not be suitable. Ruling out packages which do not include SWI risks subsidy being diverted from more to less socially cost-effective packages. Furthermore, given the concentration of non-traditional hard-to-treat stock in the predominantly low income social housing sector it may worsen the risk that ECO will be distributionally unfair or require extremely complex and operationally challenging mechanisms to ensure distributional equity (see Q33)

There needs to be a target performance for solid wall insulation. It would be impractical and foolish to return to a solid wall that had been treated using ECO subsidy to try and improve its thermal performance at a later date. The incremental cost of more insulation is minute in comparison with the overall cost of the measure. The optimum performance will have a cost range. That cost range for a given performance can then be used, like the Golden Rule, to establish the viability of other measures by comparison.

See our response to Q33 for proposals on a more open approach to the types of properties and measures eligible for support.

Q13: For the ECO carbon saving obligation, we propose that any other carbon saving measures should only be eligible when delivered as part of a package with solid wall insulation. Do you have any suggestions for the criteria by which eligibility within packages should be restricted, explaining why you think any such restrictions should be included?

Your answer:

One of the main reasons for making use of a supplier obligation mechanism is to permit providers and energy companies to find the most cost-efficient ways of delivering carbon saving outcomes. Neither DECC nor anyone else has sufficient knowledge at this stage to understand how the Green Deal marketplace will develop. In principle, therefore, constraints on the content of qualifying packages should be kept to a minimum, as they both vitiate the economics of a supplier obligation mechanism and add to regulatory complexity.

In our answer to Q33 we make proposals on a less restrictive approach to defining eligibility for this element of ECO.

Measures which do not in themselves secure energy saving, but are necessary for the performance of buildings, the health and comfort of residents, and the restoration of properties to good functioning and decorative order following works, should also be able to attract ECO subsidy. Examples would be where thermal insulation and draught-proofing are included in a package and a condensation-risk assessment shows that managed ventilation should also be included, or where the reinstatement of skirting and fittings followed installation of internal SWI. This could be achieved through ECO being able to support such measures up to a maximum percentage of the total package cost.

Q14: We propose that any measure should be allowed under the Affordable Warmth obligation, provided it allows eligible households to heat homes more affordably. If you

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disagree, or feel there are risks to this approach, please explain and set out any restrictions you believe should be put in place.

Your answer:

We agree. Subject to our concerns about eligibility (see Q31) we believe the Government should leave it to the market to determine the most cost-effective measures which deliver improvements in affordable warmth.

However, there needs to be some clear and workable test to avoid spending on measures which are disproportionately costly in relation to the benefits. One possible approach would be to require packages to be funded by ECO’s Affordable Warmth criterion to meet the Golden Rule and deploy the subsidy so that the household does not need to pay the resulting Green Deal charge. If a package does not meet the Golden Rule, that suggests it should be categorised as a hard-to-treat property and should be funded by the Carbon Saving element of ECO.

Q15: Do you have any suggestions for whether and how we should score, boiler repairs under the Affordable Warmth obligation, such that where repairs are more cost-effective than replacement systems, without significant impact on efficiency, these can be promoted?

Your answer:

We have the following comments:

It would obviously be inappropriate for ECO to pay for routine maintenance and renewal which is required simply to maintain the boiler’s normal operating efficiency. In rental properties, this is clearly part of the responsibilities of the landlord. One way of doing this would be to rule out ECO paying for consumable parts, components and labour costs for servicing

The term ‘repair’ is too ambiguous and we propose that any ECO support should be limited to the upgrade or alteration of a boiler which produces a significant improvement in its operating efficiency, for example gas saver flue units or devices designed to remove air from the system

For older systems, because of the availability of parts and poor operating efficiency, replacement will be a more cost-effective option. We would suggest that there should be no subsidy for alterations to boilers over 15 years old. Boilers that are no more than five years old could be cost-effective to upgrade and so could be eligible, subject to comments about repairs above. Boilers between 5-15 years old should only be eligible for upgrade or alteration that will produce a significant improvement in their operating efficiency and are cost-effective compared with replacement

Subsidy should be available for upgrades or alteration of communal heating systems that produce a significant improvement in their operating efficiency, for example biogas conversion, boiler optimisation or large scale gas saver.

Q16: We are proposing that any heating measures should be allowed under the Affordable Warmth obligation, including for households off the gas grid, and extra incentives should not be put in place for air or ground source heat pumps. Do you have

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any evidence to bring to bear on the performance of heat pumps to improve the ability of vulnerable households to heat their homes affordably?

Your answer:

Based on the experience of housing associations improving stock to reduce fuel poverty in off-gas grid areas, heating and insulation needs to be considered together to identify the most appropriate measures. While improvements to the fabric energy efficiency and reducing heat loss from excessive air leakage (infiltration) are accepted as the best starting point for reducing energy use, heating costs and carbon emissions, there will be practical limits on what is appropriate and affordable. In these areas, once practical fabric improvements have been identified, more efficient and lower cost heating systems will be required to provide affordable warmth. Installing a biomass boiler or a heat pump combined with mechanical ventilation heat recovery (MVHR) would potentially be appropriate measures to provide affordable warmth and to reduce carbon emissions. As is implicit in the consultation, while any measures should be eligible, a package approach should therefore be incentivised in off-grid areas as in other areas.

While there have been problems of poor performance and high running costs associated with heat pumps, some housing associations have considerable experience of successfully installing them in off-gas grid areas and have carried out detailed monitoring to ensure they perform as designed. Good quality heat pump installations require experienced practitioners to design, specify, install and commission them, as well as monitor their performance. In addition, residents need to understand how to use them correctly to achieve the predicted savings and monitoring can help identify where this may not be happening. Monitoring experience from one association that has been installing ground source heat pumps for over 10 years has shown running costs over 60% less than with fossil fuel alternatives, such as electric heating. The Federation therefore proposes that good quality heat pump installations should be eligible for the Affordable Warmth obligation but agrees that they should not receive extra incentives.

The consultation (2.55) notes the potential benefits of promoting lower carbon heating sources as an alternative to more traditional off-grid heating fuels but offers no proposals on how low carbon or renewable heating should be encouraged. While initial costs might suggest that LPG or oil-fired heating would be appropriate replacements for solid fuel heating for more affordable warmth, neither is a really sustainable solution because fossil fuels are finite and also produce carbon emissions. It is not clear how renewable heat will be supported under the Green Deal and whether RHI will be allowable under state-aid rules when ECO funding has been used. Yet, for off-gas grid households, RHI would make a significant contribution to the affordability of energy efficiency improvements that cannot be funded under the Green Deal, even with ECO subsidy. It is essential that the position of RHI under the Green Deal and ECO is clarified urgently to enable social landlords operating in off-gas grid areas to develop fuel poverty reduction/Affordable Warmth programmes.

Q17: To what extent can existing product lists, such as the list of Microgeneration Certification Scheme compliant products be used as the starting point for the Green Deal Products list?

Your answer:

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New product lists should not be produced just for the Green Deal that take no account of existing specifications used by housing associations and other construction professionals who are already undertaking energy efficiency work at a high standard. Using existing product lists will enable housing associations and others to use established supply chains that are used to meeting these specifications and required standards of workmanship. This will be particularly important in the early days of the Green Deal, in order to stop supply chains atrophying and to enable social landlords to deliver at scale from the outset. Any proposals for product lists should also take account of Building Regulation 7: Workmanship and Materials.

Q18: Do you agree that allowing enhanced product performance to be recognised in the Green Deal financing mechanism is useful? Do you have any specific views on how this approach could be implemented?

Your answer:

We agree that enhanced product performance should be recognised in the Green Deal where there is clear evidence that enhanced performance can be achieved in use, not just through laboratory testing. In such instances, special attention needs to be made to providing assurances that the product can be installed correctly (i.e. allowing maximised performance) in the given circumstances.

An example of how this might work can be seen in how Part L of the Building Regulations deals with thermal bridging, where default values for thermal bridges must be used in SAP unless proven construction is undertaken, such as accredited details or established test results.

The Federation proposes that any approach to allow for enhanced product performance should be considered alongside the proposals to tackle the gap between theoretical and actual savings (2.80-2.83). To deliver the estimated savings the Green Deal must be based on reliable energy efficiency performance that takes account of materials performance and workmanship. It should be possible to devise an evidence-based approach for adjusting theoretical performance and associated savings through an ‘in-use factor.’ We strongly advise that there should be participation by Federation and social housing sector practitioners in the task group of experts DECC intends setting up to look at this issue, to ensure the specific characteristics of social housing are taken into account.

CHAPTER 3: Green Deal provider and plan

Q19: Are surety bonds the most effective, efficient way to ensure customers are protected in the event a Green Deal provider becomes insolvent or has their licence revoked? What should be the minimum requirements of a Green Deal surety bond be and how much should Green Deal providers be required to insure?

Yes/No/I don’t know where the Green Deal provider is a registered provider of social housing or has commissioned a Green Deal provider to carry out bulk installations on its stock.

Please explain:

There is a strong system of regulation of housing associations, with a particular focus on financial viability and governance. One of the most important objectives of this regulatory

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system is to minimise the risk of financial difficulty or insolvency which could harm the interests of tenants and leaseholders. In the extremely rare instances where associations have experienced financial difficulties which threatened their viability, the regulator has been able to arrange the transfer of their assets and liabilities to another provider, without financial or other detriment to residents. We therefore argue strongly that housing associations who are Green Deal providers do not need to provide a surety bond to customers who are also their tenants. Where housing associations are undertaking neighbourhood schemes on owner-occupied stock we would equally contend that the robust regulation and remote risk of insolvency would make the need for surety bonds disproportionate and unnecessarily bureaucratic.

The other main model likely for the operation of the Green Deal at scale in social housing will be where the provider is an organisation other than the landlord (including potentially another housing association) operating under contract with the landlord. We would argue that, in this instance also, there is no need to mandate a surety bond. Rather, the issue of risk in the case of the default of the provider should be settled as part of the contract negotiation. Housing associations are well used to assessing the financial soundness of commercial counterparties and adopting contractual and other mechanisms to ensure risks to them, and their tenants and leaseholders, are minimised.

Q20: Does our proposed approach to authorisation and oversight of Green Deal providers ensure the necessary standards of consumer protection and proportionate redress without creating barriers to entry into the market?


Q21: How much weight should be given to the argument for placing financial responsibility for late payment with the payee?

Your answer:

Even if feasible, we see little attraction in setting up a system to levy interest on late payments via the energy bill. There seems little option but to make this the responsibility of the finance provider, with an assessment of the likely loss over the lifetime of their portfolio of Green Deal Agreements being priced into the cost of finance. We assume, in any event, that the risk of a proportion of Green Deal charges not being paid at all is likely to be a more significant item in the overall assessment of risk in a provider or finance portfolio.

Q22: What are your views on the government’s proposal of requiring Green Deal providers to offer insurance-backed warranties for the entire repayment period? Please provide evidence to support your views.

Your answer:

We agree it is important that consumers are not left paying for equipment or measures which have ceased to work. However, in considering how to ensure this is achieved in the specific circumstances of the social housing sector, we would invite the Department to consider whether the proposal for an insurance-backed warranty for the full term is in fact appropriate for installations carried out by social landlords or providers working in partnership with them:

In contrast to the owner-occupier sector, social landlords take responsibility for the

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state of repair of the structure and equipment (like boilers) necessary for its habitability. Were a measure to fail during the term of the Green Deal Agreement it would be the landlord’s responsibility to put it right. If they failed to do so, the tenant has normal processes of redress (internal complaint, the Housing Ombudsman, ultimately legal action) to require them to do so. Housing associations are durable organisations: even if the ownership of a property changes during the lifetime of the agreement, for example through acquisition or merger, there will be a clear legal successor who will assume the responsibilities of the organisation which installed the measures

Housing associations are professionally managed organisations, a major part of whose competence is the procurement and contract management of construction works. They are well used to minimising risks through their decisions on the works, the materials used and the competence and reliability of contractors. We suggest they are well capable of applying this capability to the design of Green Deal packages and the procurement of contractors or Green Deal provider commercial partners. As with other construction and maintenance work, it should be a matter for contract negotiation how far the risk that measures may fail, beyond that covered by manufacturers’ and installers’ guarantees, is carried by the contractor, including through any warranty they may be required to provide

We observe that warranties with terms as long as 25 years are seldom currently available. We would be concerned that if housing associations were required to offer such warranties, even if they were available, the cost of doing so could be very high. This is another reason for leaving it to housing associations to make prudent judgements about how to deal with the risk that measures may fail.

One issue this section of the consultation does not appear to address is that some energy efficiency measures have a design lifetime less than the maximum 25 years envisaged for a Green Deal Agreement (replacement boilers would be a good example). How this should be addressed for owner-occupiers is not a matter for us, but it reinforces the argument for leaving decisions about the maintenance, repair and replacement of measures to the landlord in the social housing sector. Housing associations will make provision for the replacement of components at the end of their design lifetime as part of their asset management plans. They should be left to make decisions for themselves about whether this is financed through the pricing of the Green Deal charge including an allowance for such expected replacement, or by other means.

Q23: What are your views on the government’s proposals regarding changes to the Consumer Credit Act for Green Deal Plans?

Your answer:

We agree that consumers should be permitted to make early repayment of their plan if they wish, and with the proposals in the document for permitting providers to require payment of reasonable compensation for actual losses where this happens. We agree with the proposals about providing regular statements to consumers. There appears to be nothing in the proposals to stop such statements being sent out as part of landlords’ regular communication with tenants about rents and service charges, but we would seek

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confirmation that this would be feasible.

Q24: What are your views on the Government’s proposals regarding consumer protections for those Agreements which do not fall within the scope of the CCA?


CHAPTER 4: The Golden rule

Q25: Is it necessary to afford consumers additional protections and extra comfort where they take out green deal plans in excess of £10,000? If so, is the proposed protection of reducing the saving estimate appropriate and is the 5% figure the correct adjustment?


Please explain:

We agree with the general principle underlying these proposals that, the higher the plan value, the greater the risk to consumers and hence the greater the need for caution in the savings estimate.

Our concern about basing the year 1 estimate on modelled savings (see response to Q26) would clearly be greater, the higher the value of the plan.

However we suggest that where programmes are delivered or commissioned by a housing association these risks are best dealt with by the landlord, in discussion with tenants. Housing association led schemes, due to their natural inclination to protect their more vulnerable client base, will always put concerns about modelled savings at the forefront of their considerations. An approach is therefore needed which balances the risks of savings being overstated with the risk that too much caution will make beneficial improvements unfinanceable. We feel this is best determined by the organisations that have a long-term interest in the comfort and satisfaction of their residents.

But for retail installations, including those commissioned individually by social housing tenants, we suggest a more cautious approach. For example applying the 5% adjustment to measures over £3,000 in value, with a 10% adjustment to measures over £10,000.

Q26: Do you agree with the approach to the Year One charge that can be used in a Green Deal Plan?

Agree/Disagree/ I don’t know

Please explain:

We have strong concerns about the proposal in paragraph 14 to base the estimate of year 1 savings on standardised assessment. It seems to us essential that the occupier be given clear advice as to the likely savings they individually are likely to achieve, so far as these can reasonably be estimated in the light of information available to the provider offering the Green Deal plan. In the case of occupiers whose usage is higher than the modelled standard, this may provide an additional incentive to proceed (though we would emphasise we agree that the year 1 charge should always be capped at the standard modelled savings, to protect future occupiers with lower usage). In the case of occupiers with lower than modelled usage, it is absolutely vital that they understand that a year 1 charge which meets

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the Golden Rule may not produce savings for them individually.

Q27: What would be the benefits of allowing Green Deal providers to vary the interest relating to a Green Deal plan in line with the most appropriate component of the fuel and light index?

Your answer:

We agree about the importance of avoiding mis-selling, especially where the consequences may fall on future occupiers of a property. We therefore agree that any allowance for future energy costs increases should be limited to 2% per annum, and the potential rise in rates for variable rate plans should be limited to the rise in the most appropriate element in the fuel and light index.

Q28: Do you agree with the proposed approach to how the Green Deal charge can vary in subsequent years of a Green Deal Plan?

Agree/Disagree/I don’t know

Please explain:

This question relates to non-residential installations.

Q29: Is £150 or 5% of the total Green Deal package (whichever is the least amount) an appropriate limit on the amount of cash incentives which can be offered by Green Deal providers?

Your answer:

We are, as a matter of policy, dubious about the appropriateness of cashback incentives in any tenure which are funded from the lifetime costs of the plan. Including the financing costs, the net present value to the occupier over the lifetime of the plan is likely to be negative. We consider that consumers, especially those who are less sophisticated financially, are likely to be misled by a cashback offer into signing up to a plan. They should be making this significant decision on the basis of the impact on their net bills into the medium to longer term. However, in the case of unsubsidised offers to owner occupiers, we are content for others to resolve this question. The rest of the response to this question deals with offers in rental properties, and those supported by ECO.

We would argue that cash incentives should not be permitted for occupiers who are tenants (in any tenure). Cash incentives have to be funded out of the lifetime costs of the Green Deal plan. Even if limited to £150 they could unduly influence low income occupiers who may perceive themselves as unlikely to be responsible for meeting the Green Deal charge for a significant part of the lifetime of the plan, and result in higher than necessary costs being passed on to future tenants of the property. This may worsen the risks to landlords of not being able to relet properties.

While there is arguably a similar risk that owner-occupiers may be unduly influenced by such incentives, the important difference is that they carry the risk that the Green Deal charge may reduce the saleability of their property. In the landlord/tenant situation it is the landlord who bears the risk that a property is less attractive to potential tenants when it becomes vacant.

We would also argue strongly that cash incentives should not be permitted for installations

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supported by ECO. Funding which is derived from a levy on all bill payers should be strictly limited to paying for measures which will reduce energy use, not a windfall benefit to the household which happens to be in occupation of the property at the time of installation. It would also be wholly unacceptable for low income bill payers indirectly to pay for a windfall benefit for better off households receiving subsidised measures under the Carbon Saving element of ECO.

Q30 : Do you agree our proposed approach to the Golden Rule principle strikes the right balance between ensuring the necessary consumer protection mechanisms are in place whilst not unduly stifling ambition and investment in the Green Deal?


Please explain:

While we agree with much in this chapter, our responses to Q25, Q26 and Q29 argue for a more cautious approach to consumer protection, and extreme caution about permitting cashback. While it is right to embrace innovation by providers, including in the way they persuade consumers to undertake insulation measures, this should be focused on the quality of installation and ensuring medium to long term benefits. It should not be tempting short cuts with adverse implications both for current and future occupiers of individual properties, and the reputation of the Green Deal and domestic energy saving measures.

CHAPTER 5: Delivering equitable support and tackling fuel poverty through the Green Deal and ECO

Q31: Do you agree that eligibility for Affordable Warmth measures should be restricted to households who are in receipt of the benefits and tax credits similar to the CERT Super Priority Group and who are in private housing tenures?


Please explain:

Exclusion of social housing

The consultation document puts forward five arguments for excluding social housing. All of them were explored in discussions before the publication of the consultation and substantial arguments and evidence were put forward that they are incorrect:

Social housing has benefited ‘disproportionately’ from previous subsidy regimes. The consultation document neither says what it means by ‘disproportionately’ nor refers to evidence supporting this assertion. DECC officials have pointed us to figures in monitoring reports which indeed show high take-up of some programmes by social landlords, but in our view that shows nothing more than the subsidy system correctly operating to deliver benefits where they are most cost-effective. Of course, it could be argued that private tenures have benefited ‘disproportionately’ from Warm Front since it is available only to them

The vast majority of fuel poor people are in private tenure housing. This is not surprising, given that 80% of housing stock is in private tenure however. It is not

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fair or balanced to omit from the consultation that a higher proportion of social tenants are fuel poor on the current standard definition than occupiers in other tenures. General poverty, as well as fuel poverty, is very considerably concentrated in social housing. Social tenants will pay for the Affordable Warmth obligation through their bills, and on the Department’s own analysis, it will have a bigger impact on their disposable income than on higher income groups. There is substantial further scope for measures to tackle fuel poverty in social housing. 3.4 million social homes require further work to bring them to SAP79 or better, the level generally accepted as substantially eliminating exposure to fuel poverty. Of these, even with very optimistic assumptions, over 1 million would not meet the Golden Rule and would require subsidy to reach SAP79.3 DECC officials have told us that on an alternative definition, with lower income thresholds, a lower proportion of social tenants are in fuel poverty than other tenures. However we have not seen these figures or the justification for adopting something other than the current standard definition

Social homes are on average more energy efficient than private homes. This is true, but of course is not the same thing as saying all social homes are more energy efficient than all private homes. Because fuel poverty is a function of income as well as energy consumption and prices, a very low income household can be fuel poor even if they live in a relatively energy efficient home. A third of fuel poor people live in homes with SAP above 514

Social housing is largely at the Decent Homes standard and has received public subsidy to be so. The Decent Homes standard is a lot less ambitious than current Government aspirations, extending only to efficient heating plus cavity wall or loft insulation. For the current spending review period, funding is only available for council landlords with less than 90% of their stock non-decent. Decent homes work in the housing association part of the sector has been funded by landlord borrowing supported by tenants’ rents and service charges, i.e. with no public subsidy at all

Private registered providers of social housing are ‘responsible’ for financing improvement to the Decent Homes standard. This argument disregards the difference between Decent Homes and an appropriate and up-to-date level of ambition for energy efficiency and fuel poverty reduction. Also the fact that, without subsidy, the only way housing associations could subsidise energy efficiency work which does not meet the Golden Rule is through investment from their own balance sheet, which would have to be supported by higher rents or service charges paid by their tenants. Nor is it clear why housing association landlords, uniquely, are ‘responsible’ for energy efficiency improvements to a greater extent than landlords in other tenures. Even if social landlords were immediately deemed to have the same ‘responsibility’ as private landlords will effectively have from 2018 to ensure their properties are E rated or better, they would already be achieving that standard

3 Camco for National Housing Federation, October 2011

4 Fuel Poverty 2008 – Detailed Tables, DECC, 2010

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on more than 95% of their stock. Yet, as already discussed, such a ‘responsibility’ would fall a long way short of guaranteeing freedom from fuel poverty.

Additionally, DECC officials have suggested they have a concern that, without a tenure limitation, much of this element of subsidy would be spent on boiler repairs in the social sector. While we are unclear what evidence or analysis lies behind this concern, we agree (see response to Q15) that boiler repairs by landlords should not be eligible for subsidy and would be content to see this ruled out of eligibility.

We suggest that there are two further very important sets of arguments for making social homes eligible for this element of ECO:

Policy design needs not only to ensure that ECO does not operate regressively as between income groups, but that it does not unfairly and arbitrarily redistribute income between other groups in society. Social tenants will pay through their energy bills for the Affordable Warmth element of ECO. It would be no fairer for them to pay for the upgrade of properties occupied by low income households in other tenures than for them to pay for the upgrade of properties occupied by households on higher incomes. This puts Affordable Warmth ECO in a very different position from tax-funded programmes like Warm Front, since general taxation is much more progressive distributionally than ECO

A very important benefit of investing in fuel poverty reduction in social housing is that energy savings are much more likely to have a continuing benefit for future occupiers than measures installed in other tenures. Around two thirds of social tenants are retired, economically inactive or in full time education, compared with 30% of private tenants and just 10% of people buying with a mortgage. So it is much more likely that when occupancy of a social home passes from the household occupying it when the measures were installed, other low income and vulnerable households will continue to benefit.

We should emphasise that our counter-proposal is that there should be no tenure limitation on this element of ECO. We would be happy to see it open to all tenures on an equal basis.

Qualifying benefits

The consultation on this point has generated a range of views among our members:

Basing eligibility on a list of qualifying benefits can result in fairly arbitrary distinctions between households. For example between one in which the youngest child is five and one in which the youngest is six. Landlords have at best limited knowledge of benefit status and there are obvious privacy, data protection and data accuracy concerns about asking tenants for it

Basing eligibility for CESP on an area basis defined by the Index of Multiple Deprivation has also produced unsatisfactory results, due to the arbitrary boundaries of Super Output Areas.

On balance, we favour an approach based on benefit eligibility, but urge DECC to work with DWP, energy suppliers and organisations concerned with tackling fuel poverty to look at the potential for sharing of DWP data. We also suggest further examination of an approach which would attach varying numbers of points to different combinations of benefits,

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avoiding the cliff edge effect of the current yes/no approach.

Q32: We propose seeking a voluntary agreement with ECO obligated companies as to how they commit to following up referrals. Do you have any suggestions as to what this commitment should consist of?

Your answer:

We strongly agree with the objective these proposals are trying to achieve, that there should be the most effective mechanisms possible to ensure that energy companies and others who could help low income and vulnerable households have access to as much information as possible to help identify who could qualify for measures. The Federation would be very willing to participate in further discussions about this, though how strong a part housing associations will be able to play in implementing such an approach will depend on the decisions Government takes on other issues in this consultation, especially eligibility for ECO. Housing associations have potential to play a big part in delivery of the Green Deal, including subsidised installations, in private sector as well as their own stock, but are only likely to do so if they operate in ways which make sense for them as social businesses. Above all they must enable them to anchor any wider community activity in programmes delivering improvements to their own stock.

We are not convinced that the specific ideas floated in this section of the consultation would work for the following main reasons:

Any mechanisms which collate and pass on information on households who identify themselves as potentially being eligible for help need to be complemented by mechanisms to identify households who do not, for example through lack of awareness or reluctance to seek help. To a considerable extent, it is likely that many of those who most need help are also the least likely to come forward. In part this could be achieved by finding a sensible balance between data privacy and the potential benefit to households of energy suppliers and others who could provide assistance having better information about them. This could be derived from records held by DWP, local authorities and other statutory agencies

We are sceptical that, by itself, energy companies having access to information about individual vulnerable households scattered round the country will enable them to deliver help effectively. Energy companies have told us that they need capable partners to follow up on referrals and organise the installation of measures. Many of the kinds of households whom the Affordable Warmth element of ECO is intended to help will need assistance to move on from an enquiry or referral to signing up for measures

We suggest DECC should think further about the potential for organising these kinds of mechanisms on an area basis, with the assistance of large social landlords, local authorities or trusted local voluntary organisations. Such organisations are likely to have the local knowledge and reputation to be able to maximise the proportion of initial referrals which translate through agreement to proceed into installed measures. Also to assemble eligible households into geographically concentrated ‘bundles’ with economies of scale for providers and obligated energy suppliers

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Careful consideration needs to be given to managing the expectations of households at the point of initial self-identification or referral by a third party. We do not see how it would usually be possible at this stage to guarantee that subsidised measures will be available. Even if it is possible to be certain that a household qualifies, it may still be that they cannot receive subsidy because none of the obligated energy companies sees them as a cost-effective destination for subsidy. If the communication is not managed carefully, there could be significant reputational damage to the Green Deal brand, Government, providers and energy suppliers alike. This constitutes yet another good reason for looking at a potential role for area and neighbourhood intermediaries.

Mechanisms for identifying eligible households and supporting them through the process need to be resourced. The most obvious way of doing this is through the costs of this process being supported through what is paid for the installed measures, but providers and intermediaries will need a reasonable degree of certainty that resources invested in setting up mechanisms will be recovered.

Q33: Do you have any evidence or views to put forward on whether the benefits of ECO as a whole, or of the carbon saving obligation within it, are or are not likely to be distributed equitably to all income groups? If so do you think regulatory intervention is necessary to ensure a more equitable pattern of delivery and, in particular, do you have any comments on the likely effectiveness of setting a ‘distributional safeguard’ as a means of achieving this?

Your answer:

Access to the Green Deal

Section 4.1.2 of the Impact Assessment advances an argument that the introduction of the Green Deal is likely to increase take-up of energy efficiency measures because low income households will not need access to upfront resources from savings or costly, and in some cases unavailable, unsecured credit. While it is undoubtedly true that the Green Deal removes one important barrier to the uptake of energy efficiency works, whether or not low income households benefit from the Green Deal also depends on three other sets of decisions:

What view finance providers take of the risks of financing Green Deal plans for low income households. Discussions between the social housing sector and potential finance providers suggest a level of caution about financing plans to low income households in the rental sector where turnover is more rapid than in owner-occupation. This may presumably translate itself into a higher rate of interest, or, in some cases, the exclusion of such households from access to Green Deal finance

The attitude of low income households to taking on a Green Deal charge. The Golden Rule should ensure that households with a Green Deal Agreement are no worse off net than they would be without one, and with an expectation of being increasingly better off over time. However, we suggest low income households are likely to remain cautious for four reasons. First, substituting a fixed Green Deal charge for part of an energy bill does have a significant disadvantage for low income households: energy bills can be reduced by lowering consumption of energy,

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whereas a Green Deal charge is a fixed commitment. Second, since the Golden Rule can only provide a reasonable expectation that net bills under a Green Deal Agreement are no more than without, households will need to assess the risk that they could end up paying more. Higher income households are more likely than low income households to perceive that they have headroom in their disposable income to take this risk. Third, this attitude to risk is likely to be reinforced by the greater tendency of low income households to under-heat their homes, reducing the net savings in practice achievable from energy efficiency. Fourth, the Green Deal policy model, combined in some cases with ECO subsidy, replaces a policy model in which low income households have generally received measures at no cost at all, financed through landlords’ own balance sheets, supplier obligation or Warm Front. This is likely to have an impact on the decision-making of low income households too. Social tenants in particular may take the view that their landlord should finance improvements of the kind they perceive have been financed by landlords in the past

The attitude of landlords to the Green Deal. While social landlords want to reduce their tenants’ energy bills wherever possible, participation in the Green Deal does expose them to risks and costs. For example the payment of Green Deal charges during void periods, and possible complications in re-letting vacant properties if potential incoming tenants do not wish to take on a Green Deal charge.

We accept that, set against these arguments, social landlords with their scale and professional approach to property management and procurement, may be able to secure economies of scale which place them at an advantage compared with other providers and property owners. However, this would not be be sufficient to challenge the accurate conclusion in section 4.3 of the Impact Assessment that a ‘no ECO’ option would lead to inadequate take-up of energy efficiency measures by low income households. We therefore support the Government’s position that a subsidy mechanism is required for reasons including distributional equity.

ECO and distributional equity

However, for this distributional equity objective to be achieved, ECO must function in a way which ensures that a high proportion of subsidy expenditure reaches low income households. In part, the Government is seeking to achieve this through defining a third of ECO for Affordable Warmth which, by definition, will only benefit low income households. However, since two thirds of ECO is for Carbon Saving, we agree with the Government about the importance of securing distributional fairness in this element also.

We think it is extremely unlikely that, without explicit measures to secure it, the Carbon Saving element of ECO would operate in a distributionally fair way:

As we argue above, we would be more cautious than the Government about the extent to which the introduction of Green Deal as a financing mechanism will result in a significant increase in uptake by low income households. However, even on a more optimistic analysis, we see no reason to suppose low income households would ever spontaneously take up Green Deal in greater numbers than higher income households. As DECC proposes, ECO will not reduce the cost of measures below that consistent with the Golden Rule, rather it will make affordable within the

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Golden Rule packages which would not be affordable without subsidy

So far as we are aware, there is no data linking the types of property most likely to be able to benefit from Carbon Saving ECO to household income. However, taking the non-cavity definition in EHS as a rough proxy, we know that a much higher proportion of the owner-occupied and private rented stock is non-cavity than the social housing stock. Just 12.8% of English non-cavity stock is social rented, compared with 64.7% and 22.5% owner-occupied and private rented.5 Yet households on low incomes are very significantly concentrated in social rented stock, with nearly half of people living in social homes below 60% of median income compared with just 13% of owner-occupiers.6 It is not therefore likely that the proposed focus on solid wall would lead to a natural bias towards lower income households, if anything the reverse

In addition, we argue in our response to Q31 that distributional fairness is not just about equity between income groups, but fairness is needed between tenures. It is not really any fairer for low income households in social housing to subsidise low income households in other tenures than for them to subsidise better off people in other tenures.

Proposed alternative approach

We suggest that, to secure distributional fairness, the Carbon Saving element of ECO needs to operate as follows:

It should not be limited to, or biased towards, stock types less prevalent in social housing and measures which are relatively less likely to be feasible in social housing

Energy companies should be obliged to deliver a significant proportion of their subsidy to households (in any tenure) in low income groups, using eligibility for defined benefits as a proxy for this

For schemes delivering improvements to stock with more than a set threshold of low income households, the subsidy should enable the Green Deal charge to be set at a significant level below (we suggest 10-20%) that which just meets the Golden Rule

Energy companies should be obliged to secure a distribution of subsidy which is broadly fair as to tenure, for example with at least 20% of subsidy being deployed in social housing.

These propositions go together: it will be impossible for social housing to have good access to this element of ECO, and hence for distributional fairness to be achieved, unless social landlords are able to bring forward stock which is expensive to treat, whatever type it is and whatever the measures required.

Our suggested approach would not involve any limitation on eligibility according to property type or measures. Rather, it would be for the operation of the subsidy market to identify the most cost-effective programmes of activity. The design of the mechanism could ensure

5 EHS 2009

6 HBAI 2009-10

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that the intention that ECO should top up, not substitute for, Green Deal finance, by setting a floor cost per unit of carbon saving. This could be set at a level which would exclude conventional insulation and other lower cost and highly cost-effective measures.

However, if this is not possible, the other possible approach would be to include in the definition of eligible measures the types of hard-to-treat cavity stock identified in our response to Q11 above. This would not specify solid wall insulation as the preferred measure and leave it to the obligation market to determine the most cost-effective treatment for these kinds of stock.

CHAPTER 6: Consent, disclosure and acknowledgement

Q34: Do you think the framework for consent for the Green Deal charge and measures provides effective protection for the parties involved.


Your answer:

Although we expect most activity in the social housing sector to be through bulk programmes planned and delivered by the landlord, and therefore clearly carrying their consent, it is important that social landlords are able to take a view on the appropriateness of tenants entering a Green Deal Agreement individually. Aside from this being necessary to protect the landlord’s interest in the property (and their obligations to lenders with a charge on it), this is also an important protection against mis-selling. For example in cases where the landlord may be planning a programme of energy efficiency work, through Green Deal or another mechanism, which could be better value, or even nil cost, for the tenant. Landlords will also take on responsibility for payment during voids, and early repayment of the charge when a property is demolished or subject to significant alteration (see our answer to Q39 below), so it is vital that they are content for a Green Deal Agreement to be concluded.

The document places liability for failure to gain consent solely on the occupier. We would have concerns that this could leave landlords exposed to loss, where the existence of a Green Deal Agreement and measures come to light only on a change of tenancy, and the former tenant cannot be traced, or is not in a financial position to compensate the landlord. We would prefer to see an obligation placed on the Green Deal provider to secure the landlord’s consent, or to have verified that the tenant has secured consent, and to be liable to compensate the landlord if this has not been done.

Landlords will also need to have information about Green Deal Agreements in their property records so they can include them in the details they provide to potential new tenants. Green Deal providers should be obliged to send landlords copies of Green Deal Agreements relating to their properties.

Q35: What is the best way to draw the future bill payer’s attention to the acknowledgement wording?

Your answer:

In the case of social rented properties, the obvious mechanism is through information presented to potential future tenants, including that included in choice-based lettings

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systems. When an incoming tenant is at the point of agreeing to take on the tenancy, we would expect social landlords to include in the information they provide the key facts about the Green Deal Agreement and charge.

However, for this to happen, landlords must have access to the necessary information. Where they have been involved in commissioning or providing the Green Deal this will be straightforward, but they will need information about Green Deal Agreements and charges resulting from tenants’ individual transactions with third party providers (see Q34 above).

Q36: What will property professions need to do to assist with the effective discharge of the disclosure and acknowledgement obligations? If property professionals assume a duty to discharge these obligations on behalf of property owners, should they face the same consequences as the owners, where they fail to do so?

Your answer:

Subject to our response to Q35, this question is not hugely relevant in the social rented sector. Housing associations, alongside their local authority partners, effectively act as their own agents and third party property professionals are not ordinarily involved in advising either party or in the letting process.

Social landlords often participate in ‘choice-based lettings schemes’ with councils and other landlords. These provide a ‘shop window’ in which tenants can look at available properties and bid for them. It will be important that the existence of an Agreement and charge is disclosed in the property details shown in these systems. But social landlords are capable of ensuring this happens without action by DECC.

Q37: Are there any other situations in which disclosure and acknowledgment should be required which might fall outside the proposed framework?

Your answer:

The main situation in the social rented sector in which this might apply is the transfer of the tenancy from one person to another. For example through the ‘succession rights’ some relatives of tenants hold to take over the property following the death of a previous tenant. However we see no particular difficulty in catering for this. Landlords will disclose the existence of Green Deal Agreements and charges at the point where the person with such rights takes a decision whether or not to take on the tenancy.

Q38: Do you think 30 days after receiving the first electricity bill is an appropriate time limit within which someone can dispute disclosure of the Green Deal?

Your answer:

Yes.

Q39: Do you agree with the Government’s approach to allowing Green Deal providers to require early repayment in certain circumstances?

Your answer:

Yes. The proposals seem broadly sensible. We accept that housing associations would need to factor into decisions about demolition, or major structural alterations, a liability to pay off any balance on Green Deal Agreements.

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This does, however, raise an issue the consultation document does not consider: the need to include in the landlord’s consent for a Green Deal Agreement an acknowledgement of their liability. If they do not accept this liability legally a tenant could theoretically be liable for the early termination of an agreement resulting from decisions taken by their landlord.

CONSENT CALL FOR EVIDENCE

How significant do you think consent barriers might be for uptake of the Green Deal in the domestic property sector?

We are very concerned that, unless suitable solutions are adopted, the consents issue could prevent the majority of intended Green Deal work on blocks of flats. Without a suitable mechanism for dealing with this the result will be that individual tenants/leaseholders will have a veto to stop improvements that can greatly benefit, and are supported by, the majority. This will mean work which could contribute to the Government’s carbon and fuel poverty objectives will not take place. We believe there are workable and appropriate solutions which follow closely established and accepted legal approaches to managing work in flatted properties, and have set them out in our answer to the final question in this section.

Past experience indicates that a significant proportion of residents refuse even improvements which result in no additional cost to them. The Decent Homes Programme is a scheme to provide social housing residents with a warm, weather proof home with reasonably modern facilities such as a kitchen and bathroom. To date housing associations have contributed £20bn from their own resources to this programme. Data from both the HCA and individual housing associations indicates an average refusal rate of around 9%. As the Green Deal will normally require the occupier to consent to an additional payment (albeit on the premise of the net effect on household spending being neutral or better) the refusal rates are likely to be higher. The Energy Saving Bundle, a partnership project between housing association Gentoo and British Gas, mimics a Green Deal style mechanism. Of the properties approached to take part to date Gentoo report a 16% active refusal rate, with an additional 10% of tenants being uncontactable and therefore also withholding consent. While the refusals encountered to date have only blocked energy efficiency installations in individual units and have not impacted on common parts, this shows that in a scenario almost identical to the Green Deal there is a significant risk of refusal.

Typically, in blocks of flats, Green Deal work will have to be planned and delivered for the block as a whole. Individual refusals have the potential both to stop the work being done and to get in the way of its financeability. Especially in larger blocks, based on past programmes and recent similar products, it is virtually certain that at least one tenant or leaseholder will refuse.

One category of occupier not explicitly considered in the consultation is leaseholders (people owning properties in social housing blocks on long leases, they may be owner-occupiers or letting their property to shorthold tenants). Current property law requires social landlords to consult leaseholders ahead of programmes of work and secure their consent to alterations affecting the whole block, as will frequently be the case for energy efficiency works on blocks of flats. So, in addition to tenants, small numbers of leaseholders may be able to stop work on a whole block.

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Landlords will also typically have to obtain consent from bank lenders with a charge on the property for major works (those requiring planning consent). Some works (e.g. external SWI) may well fall into this category. Experience with solar PV suggests this can be a significant source of delay, cost and obstruction, and we urge DECC to work with us to influence the banking community to take a sensible, proportionate and timely approach to dealing with this kind of consent.

How significant do you think consent barriers might be for uptake of the Green Deal in the non-domestic property sector?

Your answer:

No opinion.

Is there any relevant evidence from past or current retrofit schemes, or improvement/maintenance works suggesting that consent may be a problem under the Green Deal?

Your answer:

Yes. Please see answer to the first question in this section.

Are you able to propose any practical solutions to potential consent barriers, particularly drawing on voluntary and non-regulatory mechanisms?

Your answer:

The proposals below have been developed in consultation with our membership and with legal practitioners with extensive experience of advising on large scale works programmes in social housing. We believe they form a good basis for an approach which balances the protection of individuals against the potential benefit to other residents and the Government’s intention of facilitating improvements. Of course, we are only proposing these mechanisms apply in situations, such as would apply typically in blocks of flats, where it is impossible simply to leave out of programmes of work properties whose occupiers have refused consent. To do so would render impractical or unfinanceable works on a large number of other properties whose occupiers have consented.

Some housing associations are likely to carry out energy efficiency works outside the Green Deal, financing the work from borrowing and servicing the debt from an additional service charge on tenants and leaseholders. While the principles and financial flows in this model are very similar to Green Deal, it is not Green Deal in the strict sense of the term. There is therefore no need to make any provision in Green Deal legislation for this scenario, which would use established legal mechanisms for consulting tenants and leaseholders, and among its advantages would be that the withholding of consent by small numbers of occupiers could potentially be overridden.

However, many housing associations will want to make use of the Green Deal in flats. For these housing associations a reliance on existing arrangements could severely limit the potential of the Green Deal. Failing to provide specific provisions in legislation will mean some landlords, in particular those whose balance sheet position does not permit them to finance work through the model described above, will not be able to carry out energy efficiency work on flatted property.

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The Federation has been an active participant of the DECC Consent Barriers and Retaliatory Evictions working group and has worked with sector and legal experts to formulate proposals. These mimic closely existing mechanisms to ensure that necessary maintenance and refurbishment of all kinds can be carried out, and the costs recovered, in blocks of flats. The normal arrangement is that the freeholder has the obligation under the lease to carry out works and recover the cost through a service charge. For costs above a certain threshold, statute requires that service charge payers must be consulted before the works are put in train. Yet, the freeholder remains ultimately responsible and can proceed with the works if in its reasonable opinion it is appropriate to do so, even if the service charge payers objected. We strongly suggest that some corresponding mechanism - based on consultation rather than consent - be introduced in relation to Green Deal and ECO funded work in flats. This could be done in one of two ways:

Deemed variation of leases: Legislation could provide that leases automatically include a power for freeholders to carry out Green Deal work, after consulting service charge payers, and recover the cost through service charges, or a Green Deal charge, as if it were a repair. There is something of a parallel for this in s11 of the Landlord & Tenant Act 1985, which writes into many types of residential tenancy a repairing obligation on the landlord. Or, a subtly different approach that would have much the same effect would be to provide that the word ‘repair’ in leases includes work of a Green Deal nature and should be interpreted accordingly by courts and tribunals.

Easier variation mechanism: A less satisfactory alternative would be to allow leases to be varied to allow for Green Deal work and the recovery of associated costs (similarly through service charges or the Green Deal charge). This would be similar to the variation mechanism in s37 of the Landlord & Tenant Act 1987 but the thresholds in that mechanism are far too high (75% must agree and no more than 10% object). For Green Deal purposes the ratios could not exceed 50/20 but more appropriate still would be to remove the consent threshold and say the variation would be effective unless objected to by more than a certain percentage (at least 20).

For both proposals the building as a whole should have been assessed by an accredited Green Deal assessor and their report should make recommendations for works for the building as a whole. The Green Deal provider should demonstrate that the charges for the building are reasonable.

The Federation suggests there should be further discussions involving DECC, DCLG, social and large scale private landlords, and legal practitioners with experience in property maintenance and refurbishment, to develop the proposed approach further and formulate the necessary provision in the legislation on consent.

Chapter 7: Installation

Q40: Are there any government backed and accredited scheme standards which operate at present (in addition to the Microgeneration Certification Scheme and Gas Safe), that could be considered as meeting the new Green Deal standard already?

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Your answer:

There are schemes which regulate how construction and building services work is done, ensuring it is at an approved standard that should be suitable for use under the Green Deal. For example, the competent persons and self-certification schemes used to demonstrate compliance with Part L of the Building Regulations, such as FENSA for double glazing. The Federation recommends that as many existing industry standards as possible be used to pre-qualify for the Green Deal. We support the way this approach is implicit in how the new PAS 2030 has been drafted.

Housing associations are already adhering to very high standards as part of their asset management programmes and, in addition to industry standards, have established practices to achieve quality assurance, value for money and resident protection. Consequently, the Federation does not consider that totally new Green Deal accreditation schemes are required for Green Deal work being carried out by social landlords. We therefore propose that social landlords should be exempt from any new schemes introduced to protect individual home owners under the Green Deal. Any new schemes designed for individuals are likely to add unnecessary administrative costs to Green Deal works carried out by landlords, adding to costs for tenants or reducing the volume of activity.

Q41: It is not yet clear what the accreditation requirements for GD/ECO will be and how they will impact on incumbent firms in the market. Further work is being carried out to understand and quantify the nature of the impact of these, particularly for those firms that are micro-businesses. We welcome views from incumbent CERT installers on what the potential implications of changes to accreditation would be.

Your answer:

While housing associations are not normally CERT installers, the Federation proposes that existing accreditation requirements should be used as far as possible for the Green Deal and that new requirements should not be introduced for Green Deal unless there is a clearly demonstrable need. We believe this to be particularly the case for social landlord led Green Deal schemes (see Q40).

In the long term, it could be helpful to have a single membership and accreditation for broader processes, rather than add to the plethora of memberships and accreditations that are currently required and make multi-skilling, especially in the building services sector, particularly costly and therefore prohibitively expensive. For example, Gas Safe should be in a position to certify electrical engineers for 17th edition electrical installations and NECEIC should be able to certify gas fitters for explosive gas installations and gas under pressure. Diagram 7.1 illustrates the importance of this: a customer or landlord separately employ a heating engineer and a solar water heating system installer who interface at the heat store and controls. Subsequent problems may result in disputes as to where faults lie as a result of these split responsibilities. A Combined Heat and Power system could be potentially more problematic with responsibilities split between a heating engineer, a gas fitter, an electrical engineer and a motor mechanic. These could all refuse to accept responsibility for a failure. Demarcation problems of this kind could cause severe practical and operational problems for Green Deal.

Chapter 8: Payment collection

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Q42: Do you agree with our proposed debt thresholds? If not, please suggest alternative thresholds with appropriate supporting evidence.


Please explain:

It seems sensible that a provider should be aware, and be able to make a decision about proceeding, if existing debt stands at more than £200.

However, this does leave us with a concern that fuel-poor consumers may be left in a catch-22 of having substantial energy debts but not being able to access the Green Deal. This underlines the importance for our sector of workable and equitable access to ECO subsidy (see answers to Q 12, Q13, Q14 and Q41).

Q43: Do you believe that electricity suppliers as well as Green Deal providers should have the right to prevent customers from taking out a Green Deal finance arrangement if these thresholds are exceeded? Please give reasons for your answer


Please explain:

The provider carries the default risk. We would be concerned about the possible impact on bulk programmes of installations on properties supplied by a number of electricity suppliers of blanket or inconsistent withholding of consent.

Q44: Do you think additional infrastructure is required to facilitate payment remittance?

Your answer:

No opinion.

Q45: Do you agree with the proposed 72 hour period for the transfer of payments? If not, please suggest an alternative with appropriate supporting evidence.


Q46: During this 72 hour period, should the electricity supplier maintain an account balance at least equal to the total value of Green Deal payments being held?

Your answer:

No opinion.

Q47: Do you have an alternative suggestion for reducing the burden on smaller suppliers that would not lead to a potential reduction in the number of electricity suppliers available to Green Deal customers?

Your answer:

See answer to Q48 below.

Q48: Do you agree with the proposed threshold for the smaller supplier opt in? If not, please suggest an alternative threshold with appropriate supporting evidence.


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Please explain:

We are concerned about the potential impact on the viability and administration of multi-property programmes delivered or commissioned by social landlords caused by a small number of tenants being customers of small suppliers, or switching to them at some point after installation.

We would question whether there should be any exemption for small suppliers, since even they are likely to have automated billing software which can be altered to cater for the Green Deal charge.

Q49: Do you agree with the proposed level of the annual administration fee? If not, please give reasons for your answer and, if relevant, provide additional evidence of likely cost impacts.


Please explain:

The analysis in the Impact Assessment on this point seems reasonable. However, we would question whether it makes sense to bill customers separately, as opposed to billing Green Deal providers who would include the cost in the annual charge.

Q50: Do you agree with retaining the existing £200 arrears limit (including Green Deal repayment arrears) for prepayment customers with a Green Deal plan? If not, please suggest an alternative limit with appropriate supporting evidence.


Chapter 9: Delivering Green Deal and ECO

Q51: Do you agree that stipulating strict regulatory quotas for partnering with specific types/numbers of third party delivery agents might be unduly burdensome, and the development of a brokerage model may be a more effective means of achieving the desired outcome?


Please explain:

We agree that the obligation mechanism will work best where it is based on the delivery of measurable outcomes, and restrictions as to the type of work, properties, occupiers and delivery mechanisms are kept to a minimum. Excessive and unnecessary regulation will add to the cost of achieving given carbon saving or fuel poverty objectives.

This should include neutrality as to whether measures are delivered under Green Deal Agreements, or through other approaches to finance and delivery. For example, a landlord who finances installations from their own balance sheet, supported by a service charge paid by tenants, should not be disadvantaged or advantaged compared with a landlord who uses the Green Deal approach.

We welcome the proposed brokerage model, and the way DECC is working with stakeholder organisations to analyse different specific ways of putting it into effect. Subject to our point below about ensuring provider operations which are delivered in-house or through commercial partner organisations are not unfairly advantaged, we believe that a

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transparent market mechanism in which obligated companies can offer subsidy, and providers measures at a stated subsidy cost, will lead to benefits being maximised. There will be a given level of cost, open access for competent providers, and, especially if subsidy can be matched with work on a forward basis, a degree of stability and certainty for all players about the level of subsidy available over a period of time.

We have no objections to obligated companies becoming providers and drawing on subsidy from their own or others’ obligation. There should however be clear arrangements to ensure their provider operations or partners compete on an equal basis with other providers not linked to an obligated company.

Q52: Do you agree that it is desirable that energy suppliers should have to fulfil some or all of the (carbon) obligation by spending money promoting measures through those organisations who are able to provide the most cost effective delivery options?


Please explain:

See answer to Q51 above. Suppliers should be required to publish data on the subsidy allocated to providers, including unit costs. Ofgem should have the power to investigate where the unit costs of subsidy to suppliers’ provider arms, or commercial partners, appears out of line with that allocated to other providers. In addition in circumstances where most or all of a supplier’s obligation spend is through an in-house provider operation, or a commercial partner.

One important objective of the obligation mechanism is that the impact on consumer bills of achieving given carbon and heating costs reduction outcomes is minimised through suppliers seeking the lowest cost approach to delivery. However, in some instances it could be in the commercial interest of a supplier to pay a higher level of subsidy to an in-house provider, or a commercial partner, rather than a lower level to a provider who is not otherwise associated with them. If there are not safeguards against such an approach the impact of the obligation on bill payers is likely to be higher than it needs to be.

Q53: Do you agree that we should seek a firm commitment from the ECO suppliers that they will use brokerage for a defined and significant percentage (e.g. 50%) of their obligation? If so, what level do you consider this should be?


Please explain:

Experience of the broadly similar CERT clearing house mechanism for local authorities commissioned by the LGA in 2008-09 suggests that there is a significant risk that a brokerage mechanism would not gain the scale and liquidity needed unless there is a binding commitment on suppliers to deliver a high proportion of their obligation through a brokerage mechanism. This would require providers and landlords to get to grips with its operation and appropriate tactics to employ in securing subsidy for their activities. This is unlikely to happen without a guarantee that the brokerage would function at scale.

We suggest that the starting point for considering how much subsidy should go through such a mechanism should be 100%. If the brokerage mechanism is designed properly it

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should allow obligated companies to minimise the cost of meeting their obligation through being able to choose between providers and others offering carbon savings in a competitive marketplace. Equally, such a transparent and competitive mechanism allows providers and others to secure subsidy if their programmes of work are cost-effective, without the transaction costs and uncertainty of approaching obligated companies individually.

As proposed in the consultation, it may be determined that 50% is a reasonable starting point, ahead of there being experience of brokerage in operation. However, we suggest DECC should monitor the actual effectiveness (e.g. in terms of comparative unit costs) and perceived effectiveness of the mechanism from the perspectives of energy companies, providers and social landlords, with a view to adjusting the proportion of obligation delivered through the brokerage in the light of experience. This should include any evidence of subsidy being retained by energy companies for in-house provider operations or commercial partners.

Q54: Do you have any further comments on the detailed design of a brokerage, or any alternative mechanism that ensures the most cost effective delivery?

Your answer:

We suggest the following key principles:

As the document suggests, the marketplace should be ‘blind,’ i.e. obligated companies should post anonymously the volume and price they are offering, likewise providers and others the volumes and unit costs they require. Brief details of the work involved could be included on an anonymised basis, e.g. ‘social housing provider, two blocks of 100 flats’ or ‘commercial provider, 200 owner-occupied properties of a range of types.’ Once a deal is struck, the identities of the two parties can be revealed to each other and the necessary legal formalities undertaken. Among other things, the brokerage administrator should publish records of ‘trades’ (anonymously) in real time so potential ‘sellers’ can plan programmes of work with good knowledge of likely subsidy levels

Both ‘buyers’ and ‘sellers’ should be able to include timescales for delivery running through the obligation period. We believe transparency and stability in the market will be enhanced if there is trading for measures to be delivered in the medium, as well as the short term

Delivery of scale programmes by social landlords, which involve considerable upfront procurement and preparatory costs, will only be viable if subsidy can be secured in advance with certainty. We therefore favour the mechanism operating against measures planned for the future, rather than achieved already. This reinforces our point about the brokerage being able to support deal-making at a range of timescales. Among other things, this will enable social landlords to plan over the medium term with a reasonably secure understanding, derived from observing current prices in the brokerage mechanism. We accept it is reasonable, however, that payment should only be made on completion of work

A ‘blind’ operating model requires that providers and others seeking subsidy should only be able to participate in the brokerage if they have given assurance that they

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are in a position to deliver on measures. There will therefore need to be some sort of prequalification mechanism to ensure their financial and operational reliability. The finance and governance of registered providers of social housing is a matter of public record and subject to close monitoring by the social housing regulator (the Homes and Communities Agency from April 2012). So we suggest registered providers of social housing should automatically prequalify

Participation on the ‘seller’ side of the brokerage should not be limited to accredited Green Deal providers. While Green Deal accreditation (alongside demonstrated financial capacity and resilience) could form one route to prequalification, social landlords and others who wish to carry out residential retrofit programmes using other financing and delivery mechanisms, should be able to do so. If they, or their delivery partner, are not accredited Green Deal providers, we accept they would need to be able to show comparable operational and financial reliability to be able to prequalify. Yet, as suggested, a registration with the social housing regulator should enable them to do this

It should be possible for social landlords to participate in the brokerage on behalf of other landlords, and in relation to private tenure stock, as well as on their own account. If they do so, they would, of course, need to accept and manage the risk of non-delivery by partner organisations

The role of the administrator should be kept to a minimum: setting up and maintaining the open electronic platform on which trading takes place; setting, publishing and monitoring the rules under which participants trade; accepting or rejecting applications for entry on the ‘seller’ side; and suspending or terminating the access of ‘sellers’ who prove unreliable.

Chapter 10: Consumer protection

Q55: Do you agree the Energy Ombudsman should have a role in helping customers secure redress in the Green Deal? If yes, what further powers will the Energy Ombudsman need to investigate compliance by Green Deal Providers and householders? If no, please explain why not.

Yes/No/ I don’t know but see additional point on role of Housing Ombudsman.

Please explain:

The Federation agrees that the Energy Ombudsman should have a role in helping resolve customer complaints arising from the Green Deal. We also agree that a clear demarcation is needed between the roles of the Energy Ombudsman and Financial Ombudsman.

The role of an Ombudsman should not be seen simply as ‘securing redress.’ It is about bringing a complaint to a satisfactory resolution, a process that will often, but by no means always, involve some form of redress. While an Ombudsman should have full powers to investigate a complaint and recommend how it should be resolved (including redress where appropriate), we advise great caution in giving an Ombudsman powers to enforce a solution because the effect is likely to be to increase the formality of the Ombudsman's procedures, thus making them slower and less accessible and tending to diminish the advantages of an Ombudsman over court-based remedies.

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In addition to the Energy Ombudsman and the Financial Ombudsman, it should be recognised that in relation to Green Deal customers in social housing, the Housing Ombudsman should also be involved. We suggest the Housing Ombudsman should be invited to join in a suitable memorandum of understanding with the other two ombudsmen. Such a memorandum should reflect the fact that social housing tenants and leaseholders have a statutory right to take complaints to the Housing Ombudsman, who is therefore likely to receive some complaints that relate partly or wholly to Green Deal issues. Moreover, the Housing Ombudsman and his staff are familiar with both the nature of the sector and the way it is regulated. It is therefore important that the other ombudsman should be able to draw on this experience and expertise in dealing with Green Deal complaints arising from social housing.

Members have raised with us a concern that, on the basis of residents’ experience of dealing with energy suppliers, getting a complaint dealt with can be very challenging. This often leads to complaints being abandoned or issues left unresolved because residents give up. We therefore recommend that either the Green Deal oversight body or the Energy Ombudsman should monitor the performance of providers in relation to complaints.

Chapter 11: Setting the ECO and target metrics

Q56: Do you agree that targets of 0.52 million tonnes of CO2 per year saved, and £3.4 billion reduction in notional lifetime costs of heating by March 2015 represents the correct balance between ensuring high levels of delivery and minimising costs that could potentially be passed through to consumers?


Please explain:

Our key interest is in the relationship between the cost of ECO charged to the bills of predominantly low income households in the social housing sector and the benefit it achieves through supporting energy-saving installations in the sector. If ECO spending is fairly targeted on reducing carbon and fuel poverty in the social sector an obligation of at least the size proposed would be appropriate. However, as we set out in our answers to Q31 and Q33, we are concerned that the current proposals on ECO will impose costs on our residents’ bills with little prospect of them being able to benefit from subsidised measures. If that were the case the obligation currently proposed would be excessive.

Q57: Do you agree with the estimated costing of this scale of ECO at £1.3bn p.a. as set out in the Impact Assessment? Do you have additional evidence on the costs and benefits of the proposed targets for consideration in further analysis?


Your answer:

Cost of measures

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Analysis for us by Camco has produced the information in the table below for the costs of some typical measures.7 This suggests that the Impact Assessment costings may be on the low side for measures other than external SWI.

Green Deal Consultation

Social Housing Case Study 1

Social Housing Case Study 2

Internal SWI £3,830 - £5,806 £5,256 - £7,136 £3,962 - £11,139

External SWI £8,275 - £10,860 n/a - £11,036 n/a

Loft insulation n/a - £300 £335 - £366 £312 - £392

Cavity wall insulation

n/a - £500 (£2,000 for hard to treat)

£160 - £621 £356 - £1,845

Estimates we have seen from individual member associations are consistent with these.

Cost of assessment

Feedback from our membership suggests that the Impact Assesment’s estimate of £75 per property (calculated at three billed hours at £25/hour, including all on-costs) is considerably understated. Current EPCs cost around £90, for a product much less ambitious than a Green Deal assessment. Carrying out a proper occupancy assessment and working out its implications for variance from standard property models will demand both time and a high order of people skills. Our members suggest that a starting point of £400 (four hours at £100/hour including on-costs) would be a much more prudent assumption. Depending on the nature of the stock being assessed there may be some scope for economies of scale in social housing through use of existing information and cloned data on properties of similar type. These may very well be offset though by the need to spend extra time on the occupancy assessment for vulnerable tenants or those with limited English, both categories of occupiers who are concentrated in social housing. Skimping on assessment costs carries grave practical and reputational risks to the whole of the Green Deal. We are particularly concerned that, in a sector with large numbers of low income and vulnerable residents, assessment and advice is costed at a level which enables the occupancy assessment to be carried out very carefully, the upsides and risks associated with Green Deal explained properly, and advice given about behaviour which will maximise savings.

Q58: The division of the overall ECO between energy companies could be based on share of customer accounts, or sales volume. Do you have a preference as to which metric should be preferred, taking into account possible impacts on distributional equity? Please provide evidence for your views.

Your answer:

We suggest the apportionment should be through sales volume. This method will ensure as closely as possible that, subject to the potential variation between companies in the cost of meeting their obligations, the cost passed through to consumers is an equivalent proportion

7 Range quoted for consultation comprises flat and semi-detached properties. Camco costs do not include

VAT, it is not clear whether or not the Impact Assessment costs do.

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of the bill. If the basis were numbers of accounts, there could be distributional inequities arising from different mixes of customers and average bills.

Q59: We propose that savings calculated through the SAP-based Green Deal Assessment methodology be used as the basis for ECO targets and scoring. Can you envisage any undesirable or inadvertent effects, that this approach might result in? If so, please provide details and evidence

Your answer:

We have three sets of comments:

The SAP-based Green Deal Assessment methodology would be a reasonable basis for estimating savings for the CO2 element of ECO, but determining how best to measure the savings under the Affordable Warmth element of ECO is less straightforward. A simple cost metric would be very time specific, since fuel costs change/increase at least once a year and so could require revising metrics annually. Such a cost-based metric could be misleading, since measures would achieve higher cost savings with increased fuel prices even though the energy saved (i.e. kWh/yr) would be the same. An energy-based metric would not be so time-dependent, would provide greater clarity for monitoring and avoid the need for annual revisions and so allow ECO programmes spanning different periods to be planned consistently. An energy saved metric would still enable heating cost savings to be calculated to monitor the scheme

Assessment burdens on large schemes applying the same measures to multiple dwellings of the same type should be kept to a minimum. Very often social housing installations will involve similar work on large numbers of similar dwellings, or in blocks of flats. The cloned data (see Q1 and Q3) available to social landlords from their good quality stock information will enable them to assess and develop initial proposals for effective ECO programmes. It is important that there should be methodologies for calculating carbon savings and energy cost reduction which do not unnecessarily involve assessment of individual dwellings

The consultation document is not very clear whether the proposed basis for ECO targets and scoring is the initial modelled savings based on SAP, or takes into account offsetting effects like bounce back and ‘comfort’ take, i.e. where tenants can afford to adequately heat their homes. We agree that ECO cannot be based on individual property-by-property assessments taking account of the circumstances and energy use of individual occupiers because occupancy changes and for reasons of administrative complexity. However, if the document means that scoring should be based simply on the SAP building assessment, it is likely to overstate the carbon and fuel cost reduction impact of ECO-supported measures. We would therefore urge the development of a methodology for scoring ECO benefits which takes account of likely offsetting effects, estimated across volumes of stock of the same type.

Q60: Should targets and scores for the Carbon Obligation and/or the Affordable Warmth Obligation be expressed on the basis of the annualised savings of measures or the lifetime savings?

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Your answer:

We would favour lifetime savings. Annualised savings would incentivise the installation of measures with a short lifetime over those which are permanent or have a longer lifetime. The performance of some items (e.g. PV cells) changes over time. Measurement by lifetime savings enables appropriate trade-offs to be made, for example between short lifetime measures with a big annual impact, and long lifetime measures with a lower annual impact.

Specifically, we believe that if social landlords are eligible for Affordable Warmth subsidy (see answer to Q31), heating reduction cost benefits scored should reflect the significantly greater probability that they will continue to benefit low income households through the lifetime of the measures. Around two thirds of social households are headed by people who are retired, economically inactive or in full time education, compared with 30% of private tenants and 10% of people buying with a mortgage. So when one occupier of a social home moves out, it is far more likely than in other tenures that the new occupier will also be economically inactive and on a low income.

Chapter 12: Green Deal monitoring and evaluation and ECO administration

Q61: Is there other information the Government should collect in order to enable effective monitoring, evaluation and reporting on the performance of the Green Deal and ECO?

Your answer:

The relevant section 12.2 of the consultation document is extremely unclear. It refers to information ‘to be collected by different participants and passed to an appropriate body for collation and evaluation.’ Without being told who the ‘different participants’ or the ‘appropriate body’ are, it is impossible to assess how the proposals would work. However:

The table in section 12.2 includes ‘All information relating to the assessment and recommended measures’ and ‘All information relating to the Green Deal Plan, including any ECO subsidy and financial arrangements.’ This surely cannot be right. For information provision to be manageable for providers it needs to be limited to key factual information which could be quickly transferred using normal contract documentation to avoid creating an additional administrative cost/burden

We understand that the Government will want to collect information necessary to monitor and evaluate policy, but it is surely not necessary to collect ‘all information’ in the two categories listed in the table to do so. For example, for each property assessed, it would be reasonable for there to be summary data about the property type, tenure, occupancy at the time of assessment, the measures recommended, and if a Green Deal installation follows, the measures installed, their estimated carbon and heating costs impact, the cost of the installed measures and the payments due under the Green Deal Agreement. But it would be unreasonable, impractical and unnecessary to collect a very high level of detail about the property, precise ages of the occupants (as opposed to age bands), changes in benefit status of the household at the time of installation or subsequent occupiers, and bank account details

While policy monitoring would benefit from limited post-installation information, for

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example on defaults, early repayment, and serious failure of measures, information like the full repayment history is both well beyond what is required for public policy and could raise privacy and security concerns.

In summary, we suggest DECCC need to consider information requirements in much more depth, working with interested parties, including representatives of the social housing sector.

Q62: Should DECC be responsible for administering the ECO, with technical functions outsourced to the private sector, or should Ofgem administer the scheme? Please provide evidence to support your views

Your answer:

We have no preference about the organisational location of the administration function. More important is the approach adopted by the personnel responsible for this function. They need to seek out, and listen to, the informed views of large scale property owners, providers and energy companies about the practicality of approaches to delivering subsidy, and information requirements. Some Federation members feel that Ofgem’s current approach has at times been disproportionate, for example seeking dates of birth to verify the ages of children living in individual properties.

General comments

Q63: In addition to the specific questions asked throughout this consultation document, do you have any other comments on any aspect of our proposals?

Payment of the Green Deal charge

The payment of the Green Deal charge via electricity bills is a sensible mechanism for minimising payment risk for owner-occupiers, private landlords, and for retail installations in social housing (those at the instigation of tenants). In many cases it may also make sense for bulk schemes delivered by social landlords as providers, or in a commercial arrangement with a provider. However, social landlords have established mechanisms for collecting rents and service charges from tenants and managing non-payment and arrears. This means there is an alternative and highly reliable mechanism for collecting payment from social rented households, in contrast to other tenures. We therefore propose that, where a social landlord is the provider, or is working in a commercial arrangement with a third party provider, it should be possible to arrange for payment of the Green Deal charge alongside rent and service charges. This could be particularly beneficial in linking with our proposed legislative solution on consents for flatted blocks (see the consent call for evidence). We strongly suggest that DECC seek to explore both proposals further with the Federation and practitioners in the sector.

Communal heating

The consultation does not include any proposals about how the Green Deal might operate in properties (typically blocks of flats) heated by a communal system, often billed to residents through a service charge rather than individual utility bills. Improvements will benefit all residents served by the communal systems and will need to be paid for by all residents. How such improvements are agreed and carried out needs to be included in the discussion on

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consent to Green Deal work and charges. We suggest this scenario needs to be catered for in the final policy design, and there is no reason why broadly the same approach could not work, with the Green Deal charge replacing part of the service charge or service charges incorporating certain Green Deal charges. Of course, this scenario may also apply in some leasehold or short tenancy flats and therefore be of interest to private landlords and property management companies as well. We would be glad to support sector participation in a working group or similar mechanism to help develop policy on this scenario.

Write off of arrears

There is no consultation question on the proposals in Chapter 8 on electricity companies’ right not to pursue bill arrears, including the Green Deal charge. These could leave social landlords who are providers exposed to unpredictable and unnecessary losses. Since social landlords have frequent and trusted contact with tenants we strongly urge that electricity suppliers should be required to contact them if arrears reach a certain threshold level, as the landlord may be able to assist with money advice to prevent further escalation of bill and Green Deal charge arrears. It is unacceptable, in our view, for social landlord providers to be left exposed to write-off risks without a requirement on electricity companies to consult them first.

Voids

The consultation does not consider how void properties will be dealt with through the Green Deal process. This is particularly important in relation to assessment, where an occupancy assessment will not be possible. It is highly likely that housing associations and other professional property managers will want to take the opportunity to make Green Deal improvements when properties are void and we therefore suggest that DECC work with the sector to consider how best this could operate.

Consumer Demand

Energy efficiency improvements to homes remain a low priority for many consumers, particularly those on low income due to the associated risks. We feel strongly that insufficient attention has been given to the issue of consumer demand for the Green Deal. As part of the Green Deal Network we have been working alongside Asda, British Gas, B&Q, Carillion, Birmingham City Council, Energy Saving Trust, National Insulation Association, National Trust and WWF to further explore how the Green Deal needs to be constructed and presented in order for consumers to consider taking it up. This project, which is being co-ordinated by the social enterprise Behaviour Change, is combining consumer research, stakeholder engagement and creative thinking in order to develop proposals for collaborative ways of building interest/desire for the Green Deal. We will be presenting our findings to the Secretary of State, Chris Huhne, in February and would encourage the Department to consider how these can be taken forward.

Green Deal Arrangements Agreement

The document is (probably unavoidably) lengthy and couched in legal language. We suggest it would be helpful to produce a plain English guide to it, for the benefit of, for example, smaller housing associations and contractors.

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Interaction with Microgeneration and Renewable Heating Schemes

It is unclear how the Green Deal will interact with either the RHI or FIT. Under the Golden Rule the loan repayments must not exceed the deemed saving that will be made on the consumers’ energy bills. One possibility is that the tariffs under the RHI and FIT schemes could be taken into account in calculating such savings. However problems or complexities could be created with Golden Rule calculations as the Government is clear, and has demonstrated, that it is prepared to adjust rates in year with minimum notice.

See also the introductory section to our response and response to Q16.

Interaction with supporting GD standards

The Federation has been feeding into the development of supporting Green Deal standards, such as PAS 2030 and 2031. These refer to requirements, for example for indemnity insurance, that we have argued are not necessarily appropriate for social housing led Green Deal schemes. It is vital that, once the main Green Deal documentation is finalised, all supporting documents and standards reflect any changes to ensure the Green Deal will be workable for social housing.

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