- CO-OP Energy did not meet its Energy Company Obligation, which is required as part of ECO3, an energy efficiency scheme helping vulnerable households.
- Following constructive engagement with Ofgem, CO-OP Energy has agreed to deliver measures to address its shortfall of £35m, plus additional measures to deliver £3.5m extra in energy bill savings, by 31 December 2024.
- All active suppliers obligated under ECO3 delivered their obligation in full.
Ofgem has today (Thursday 9 February 2023) announced that, following constructive engagement with Ofgem, CO-OP Energy has agreed to deliver additional energy efficiency measures after the company did not meet its Energy Company Obligation (ECO3).
CO-OP Energy was a domestic supplier previously but exited the market in August 2019. It has committed to make up any shortfall in energy savings against its legal requirements.
ECO3 was a government energy efficiency scheme, which ran between 2018 and 2022 in Great Britain, administered by Ofgem, to promote energy efficiency measures and to help fuel poor and vulnerable households heat their homes and cut bills, for example by replacing a broken heating system or upgrading an inefficient heating system.
CO-OP Energy has agreed with Ofgem to make up the shortfall and recognised its non-compliance with its obligation, having only achieved 36.37% of its cost saving (or obligation) target by 31 March 2022. Suppliers are allocated an overall target based on their share of the domestic energy market in Great Britain.
Cathryn Scott, Director of Enforcement and Emerging Issues at Ofgem said:
“Now, more than ever, we need to prioritise energy efficiency, and it is vital that energy suppliers take their obligations under the government’s energy efficiency schemes seriously. These schemes reduce energy consumption, as well as consumer bills, delivering real benefits for low-income households. The action we have agreed with CO-OP will ensure that consumers benefit from these important energy efficiency measures, and we welcome their engagement with us on the matter.
“As we move forward with the new Energy Company Obligation (ECO4), we expect suppliers to be proactive in ensuring they achieve compliance, as well as ensuring they act where they are falling short ahead of key milestone deadlines. We will take robust action where suppliers fail to meet expectations.”
CO-OP Energy has engaged productively with the energy regulator around their non-compliance, and alternative action has been agreed between Ofgem and CO-OP Energy to install energy efficiency measures to make up the £35m shortfall in their obligation.
This will see the company deliver its remaining outstanding obligation and an additional £3.5m in energy bill savings by 31 December 2024. This will ensure that more vulnerable consumers and those in fuel poverty benefit from energy efficiency measures.
Notes to editors:
ECO4 and ECO3 Final Determination Report
In addition to today’s alternative action with CO-OP Energy, Ofgem also publishes its ECO3 Final Determination Report, which outlines the impact of the ECO3 scheme since its implementation. The scheme has been amended over time and ECO3 closed on 31 March 2022, with the ECO4 Order coming into force on the 27th of July 2022 (covering a four-year period until 31 March 2026). The ECO4 Order applies to measures installed from 1 April 2022.
The ECO3 scheme commenced on 3 December 2018 and ran until 31 March 2022. The ECO (Amendment) Order 2019 came into force on 1 January 2020. The ECO3 Order overall target for the Home Heating Cost Reduction Obligation (HHCRO) obligation was £8.253 billion in energy bill savings.
As part of the role as an effective scheme administrator, Ofgem offers delivery guidance and other support measures for suppliers and the broader supply chain on how to contribute towards the ECO targets – however the onus is on suppliers to ensure they are familiar with their obligations and achieve compliance. Through ECO3, suppliers were expected to deliver measures that result in heating savings, such as the replacement of a broken heating system or the upgrade of an inefficient heating system. These measures can make a real difference for households, and it is important that suppliers meet the obligations.
ECO3 was entirely formed from one main obligation, HHCRO. Under HHCRO, obligated suppliers mainly promoted measures which improve the ability of low income, fuel poor and vulnerable households to heat their homes. For more information about the ECO4 see Energy Company Obligation (ECO4) Guidance.
£35m calculation: We estimate that customers missed out on approximately £35m in energy bill savings. This savings figure is an estimate and represents the amount customers could have missed out on, and is essentially the shortfall in the obligation target that CO-OP Energy were required to deliver at domestic premises. In the calculation to reach this figure, measures funded by a supplier are given a cost score. When measures are approved, it is this cost score that contributes towards a supplier’s obligation targets.
The additional c.£3.5m in energy bill savings by 31 December 2024 is calculated as approximately 10% extra on top of the c.£35m estimated savings figure.