Electricity and Gas (Community Energy Saving Programme) Order 2009

My Lords, these two orders implement an important part of the home energy saving programme announced by the Prime Minister in September last year. They are aimed at helping households permanently to cut their energy bills and contributing to permanent CO2 reductions. Both orders have been developed closely with stakeholders and were warmly received and supported through formal public consultation. I shall speak to the CERT order first. CERT is a programme that, alongside its predecessor—the energy efficiency commitment—has already demonstrated its effectiveness. Over 6 million households have been helped with energy-saving measures such as insulation since 2002, with around 1 million households assisted in the past year alone. However, we need to keep increasing our efforts if we are to help the most vulnerable in society and to meet our security of supply and climate change goals. As part of this, we consulted earlier on a proposal to increase the CERT obligation on energy suppliers. This consultation received substantial support for an increase, and the order gives effect to this by increasing the suppliers’ target by 20 per cent—from 154 million lifetime tonnes of CO2 to 185 million tonnes—which will mean making annual savings of more than 5.6 million tonnes of CO2 by 2011. This makes it the biggest household carbon-saving programme by some distance. The effect of this will be that an extra £600 million is likely to be invested by energy suppliers in helping households to install energy-efficiency measures, bringing total support under the programme between 2008 and 2011 to an estimated £3.2 billion. Of this, we estimate that around £1.9 billion will be directed at vulnerable households in the priority group of customers who are 70 years and over, and those on qualifying benefits. Alongside the increased target, we consulted on a number of specific changes to the design of the scheme. We consulted on the principle of including behavioural measures, namely home energy advice and real-time displays, as eligible measures within the scheme. This will help people better to understand their energy use and, we hope, empower consumers to take informed decisions on reducing their energy use. We received many responses on this point—not all of the same view—but on balance we have decided to include these measures within CERT. We have recognised the risks raised by some stakeholders that, as real-time displays are novel, long-term studies of the carbon-saving effects are not yet available. However, we believe that we should use behavioural measures and that they will reinforce the take-up of traditional measures. Given that they are new measures, suppliers will be able only to promote behavioural measures of up to 2 per cent of their carbon-saving target. We proposed in the consultation to curtail the number of compact fluorescent lamps directly mailed to households, in recognition of the high number of high-efficiency lights distributed early in CERT. Many households have been able to save energy with CFLs, and while we recognise the risks of non-use from continuing such high levels of distribution, we are, therefore, working with Ofgem to ensure that a broad range of bulbs are promoted by suppliers, whereby consumer choice is respected as far as possible in terms of the light fitting, lamp design and wattage output promoted. We have also decided that, as from 1 January 2010, only those schemes which result in a direct purchase of a CFL through a retail outlet will be eligible under CERT—thus excluding direct mail and other "give away" schemes. I now turn to the community energy saving programme. This order places a new carbon-reduction obligation on energy suppliers and, for the first time, on electricity generators, to deliver an estimated £350 million of energy-efficiency measures to homes. These measures will reduce CO2 emissions and permanently reduce fuel bills. CESP places a carbon-reduction target on obligated energy companies, which they discharge by delivering carbon-abatement measures in homes. They will achieve this by offering a range of energy-efficiency measures, similar to CERT, which count towards their targets. The distinction between CESP and CERT is, first, that CESP will aim wherever possible to provide a package of several different energy-efficiency measures to each home that it targets, with a particular focus on some of the more expensive measures, such as solid wall insulation, geared towards hard-to-treat homes. CESP should, therefore, make a significant difference to the carbon emissions, and the fuel bills, of the homes it targets. Another important difference is the community approach which CESP will deliver in deprived areas. It is an ambitious and innovative programme. We expect it to make a big impact in the areas which it supports. The aim is to deliver up to 100 schemes, benefiting some 90,000 households across Great Britain and, by December 2012, delivering measures which will save nearly 2.9 million tonnes of CO2. We estimate that CESP will deliver lifetime fuel bill savings in excess of £600 million. However, CESP will also be important in informing the longer-term strategy on energy efficiency. It will provide evidence on the benefits of using a community-based approach to deliver energy-efficiency measures, particularly in hard-to-treat homes. This community approach is one of the key features of CESP. Energy suppliers and generators also will benefit from working in partnership with local authorities and community organisations to help promote and deliver measures. This approach is important to enable CESP to be implemented in a way that is best suited to individual communities, bringing people and groups together to deliver shared objectives. It is also, importantly, specifically designed to deliver whole-house packages of measures in individual homes, with the aim of improving energy efficiency and lowering energy consumption for each household. This will enable householders to make a single decision about which measures are installed. It is important to note that we expect these measures generally to be free to householders. This, coupled with the fact that CESP will specifically incentivise high-cost measures, such as solid wall insulation, will therefore have a major impact not only on a household’s carbon emissions but on its future fuel bills. I am grateful to the Merits Committee for its helpful consideration of both orders. I assure noble Lords that the orders are fair, complement each other, and form part of a cohesive approach. The consultation was very positive towards CESP, but we have made some changes. We have expanded the list of eligible measures to include draught-proofing and high-efficiency glazing, to strengthen CESP’s whole-house approach. Also, in response to consultation, some respondents raised concerns that independent electricity generators would bear disproportionate costs when compared to energy suppliers—particularly where they had no experience of delivering CERT. We recognised through the consultation that the costs for these companies might be particularly uncertain. To address these concerns, many consultees believed that obligated parties should be able to trade up to 100 per cent of their obligation and not just the 75 per cent that was proposed in the consultation. They argued that this would assist independent electricity generators and other new parties under CESP by enabling them to trade their obligation to companies whom they believed could potentially achieve the same carbon saving more easily and cost effectively. This would also give these companies upfront certainty as to their total financial commitment. On the basis of these views, we have decided that all parties with obligations under CESP will be able to trade up to 100 per cent of their obligation. Consultation has demonstrated considerable support for the amendments to CERT and encouragingly for the new CESP scheme. I commend the orders to the House and look forward to the debate. I beg to move.