Changes to ECO: Ofgem publications

Guidance
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ECO

On 2 December 2013 the government announced that they planned to make changes to the Energy Company Obligation (ECO) and to extend the scheme from April 2015 until March 2017. They consulted on their proposals on 5 March 2014 (see the response paper to that consultation: The Future of the Energy Company Obligation.)

The government is making changes to the Energy Company Obligation (ECO) in two phases, which we refer to as ‘ECO1.2’ and ‘ECO2’. As administrator of the scheme, Ofgem will publish guidance for energy companies to help them successfully deliver their obligations. We are consulting on changes to the scheme where we are exercising our discretion in administering new legislative provisions or where we are making further improvements to our current ECO policies.

What do the changes apply to?
  • ECO1.2 relates to the current obligation period, ending 31 March 2015.
  • ECO2 relates to the next obligation period, running from April 2015 to March 2017.
How will this affect ECO guidance?

The ECO1.2 and ECO2 changes detailed below will result in updates to our guidance for obligated energy companies. Before making these updates we will consult on aspects where we are exercising our discretion in administering new legislative provisions or where we are making further improvements to our current policies.

Changes under ECO1.2

The first set of changes relate to the current obligation period ending 31 March 2015. Amending legislation introducing these changes came into force on 5 December 2014.

The changes include:

  • A reduction in the Carbon Emissions Reduction Obligation (CERO) target
  • The introduction of new primary measures under CERO
  • A new 'levelisation process' under CERO
  • Revised eligibility criteria for the Carbon Saving Community Obligation (CSCO)
  • New group excess actions.

We consulted on our guidance for ECO1.2 between 11 August and 22 September 2014, and have now reviewed the responses. We published our consultation response, alongside our final version of the Guidance for Suppliers (Version 1.2), on 6 November. This guidance will now apply to all measures notified, or applications made, on or after 5 December 2014.

Changes under ECO2

The second set of changes relate to the next obligation period, which runs from 1 April 2015 to 31 March 2017. The ECO Order 2014, which sets out the requirements for ECO2, came into force on 5 December 2014.

In developing our guidance for ECO2, we have run two separate consultations (ECO2.1 and ECO2.2). The first consultation (ECO2.1), which closed on 1 December 2014, was run separately in order to provide early certainty on HHCRO requirements which affect ECO1 measures that suppliers may wish to carry forward to ECO2. On 14 January 2015 we published our response to this consultation along with a guidance note on the ECO2 requirements for HHCRO measures and surplus actions. We ran a second consultation (ECO2.2) on the remaining of areas of ECO2 where we will use some degree of discretion in our administration - areas where the law has changed and areas where we are proposing changes to our existing policies. This consultation closed on 21 January 2015. We will publish our response to the ECO2.2 consultation and the final ECO2 guidance in early March 2015. The final ECO2 guidance will also include the contents of the ECO2.1 guidance note.

Further information

If you have any queries on these documents or any other area of ECO, please contact us.