Fuel Poverty (Targets, Definition and Strategy) (Scotland) Bill: island communities impact assessment

Annex D: Update on work being undertaken by other areas of the Scottish Government which impact on tackling fuel poverty

Target: Fuel Pricing and vulnerable customers

Scottish Energy Strategy

Published in December 2017, the Scottish Energy Strategy set out our vision for a flourishing, competitive local and national energy sector, delivering secure, affordable, clean energy for Scotland's households, communities and businesses. At the heart of the Energy Strategy is a commitment to "promote consumer engagement and protect consumers from excessive or avoidable costs, prevent new forms of social exclusion and promote the benefits of smarter domestic energy applications and systems".

In January 2018 we convened a summit of energy suppliers and consumer groups to address issues affecting vulnerable Scottish energy users. Building on the success of the 2016 summit it called on suppliers and consumer groups to work collaboratively for the benefit of vulnerable consumers. In line with this advancing agenda we wrote to the Big 6 energy companies in February 2019 pressing them to do more for vulnerable energy consumers.

Building on the work of the Scottish Energy Summit we are developing a Consumer Vision & Action Plan to give detailed consideration to consumer issues across the energy landscape. The Vision and Action Plan will be published in spring 2019 and will ensure the energy transition is shaped by and for the people of Scotland.

The Energy Strategy included a commitment to the ambition of a public energy company. The Minister for Energy, Connectivity and the Islands has written to COSLA offering to work in partnership with local authorities to develop this ambition. An outline business case is currently being developed for a company that would develop in phases; initially focusing on a white label arrangement which offered energy at a fair price and focussed on supporting actions to tackle fuel poverty.

Energy UK's Commission for Customers in Vulnerable Circumstances

Energy UK is the trade association for the GB energy industry with a membership of over 100 suppliers, generators, and stakeholders with a business interest in the production and supply of electricity and gas for domestic and business consumers.

The Commission for Customers in Vulnerable Circumstances was brought together by Energy UK to improve understanding of vulnerability and energy to enable improved support for customers. The Scottish Government responded to the Commission's call for evidence in May 2018 setting out issues of particular importance to Scottish energy consumers. These issues can create new - or exacerbate existing - vulnerable circumstances. In particular:

• Higher numbers of Scottish customers with restricted meters - including prepayment meters. These customers have less choice than the rest of the population, often leaving them paying higher bills. Furthermore, a lack of price transparency makes accessing and assessing tariff information difficult.
• Fewer Scottish customers are on priority services registers than elsewhere in Great Britain. This means that customers who need extra support to engage with their energy company are not always being identified and therefore not receiving the services they need.
• The Commission will report in spring 2019 and make recommendations for industry, Government and other stakeholders.

Alongside its obligations on fuel poverty, the Scottish Government is also engaged in a process of carbon emission reduction across our society. Whilst we recognise the difficulty of this task, the Government is committed to meeting its fuel poverty targets whilst simultaneously driving down emissions from heating in Scottish homes. A call for evidence on the topic of low carbon heat in homes that do not use mains gas was released in March 2019. This 12 week call will seek evidence on the most appropriate technologies and approaches to policy that will allow us to provide affordable, low carbon heat.

Restrictive metering and non-competitive tariffs

At the Orkney ICIA stakeholder meeting, the cost of replacing restrictive meters in order to take advantage of more flexible tariffs was highlighted.^[18] The Shetland meeting mentioned 'exotic' tariffs that were present only in the Shetland Isles: standard economy and heating load. The tariff issue was also brought up in the Argyll and Bute meeting written feedback:-

"[There is an]…Energy vulnerability for Total Heat Total Control tariffs [THTC] on island and rural areas due to a lack of switching options. Whilst the meter is changed for free, the householder has to employ an electrician to complete the works in the house. There is no help available to deal with these extra works (either financial or service provision). A comparison made on the day indicated that a normal dual rate tariff was approx. 30% cheaper than THTC."

The Competition and Markets Authority (CMA) investigation into the energy market found that customers with restricted meters are not getting a good deal:

• Over 85% of restricted meter customers would have been better off on the cheapest single-rate tariff and
• Customers on restricted meters face particularly strong barriers to accessing and assessing information and barriers to switching supplier and / or tariff.

A disproportionate number of restricted meters are in Scotland and these consumers face difficulties switching supplier due to additional costs of having the meter re-wired.

The CMA's remedy requires all suppliers, with 50,000 or more domestic customers, to make all their single-rate tariffs available to any customer on a restricted meter without making switching conditional on a meter being replaced. However, most of the CMA's energy market reforms are dependent on the roll out of smart meters.

Restricted meters were a focus for both the 2016 and 2018 Scottish Energy Summits. During our engagement with consumer representatives such as Citizens Advice Scotland (CAS) we have heard anecdotal evidence that the restricted meter remedy has not to date provided the desired consumer outcomes. CAS are currently collating evidence on this matter which will be given to Ofgem (and shared with the Scottish Government) to help inform the refresh of the Ofgem Vulnerability Strategy. Ofgem have confirmed restricted meters will be an area of focus for this strategy.

The Scottish Government recognises that this issue is of particular importance to island communities. We have committed to bring together industry, consumer groups and the Energy Regulator to develop the Energy Consumer Charter for Scotland to deliver our vision for a secure, affordable and clean energy system for all. As part of the development of this Charter, we commit to ensuring that restricted meters is tackled.

Definition

Use of localised weather patterns in fuel poverty energy modelling

We are moving to more localised postcode district level weather data in our energy modelling for fuel poverty to ensure that it truly reflects the additional fuel costs borne by households in remote rural areas where weather may vary from the regional average.

This reflects that the average running costs in remote rural areas are higher using the postcode district data than they are using the regional weather data (around 2-3% higher, or around £90 per year), meaning that at a local authority level (for the period 2015-17), the average running costs based on postcode district weather data were higher for most of the rural local authority areas, but lower for urban local authorities areas (note that stats are based upon the proposed new definition of Fuel Poverty without any remote rural uplift).

Strategy

The Scottish Government is committed to removing poor energy efficiency as a driver of fuel poverty. The government launched the Energy Efficient Scotland programme to ensure that Scottish homes meet EPC band C by 2040. The programme should ensure that by 2040, Scottish homes will be warmer, greener and more efficient.

The Energy Efficiency Scotland Route Map was published in May 2018 outlining EPC targets and timelines for different tenures including social housing, private rented sector (PRS) housing and owner occupied housing.

The Route Map also sets out proposals for fuel poor households to be a minimum EPC band B by 2040 prioritising those vulnerable customers living in fuel poverty. To further assist in the eradication of fuel poverty, the government has proposed a new milestone to maximise the number of socially rented homes meeting EPC band B by 2032. In March 2019, we published a consultation asking for views on the impact of bringing forward the 2040 EPC target date for all domestic properties.

In the 2018-19 budget, we have allocated £145 million to improving the energy efficiency of Scotland's building stock through Energy Efficient Scotland to reduce energy costs, tackle fuel poverty and place the government on track to invest £500 million in energy efficiency by 2020-21.

We have a commitment to spend more per head on energy efficiency in remote rural areas including island communities to overcome barriers such as higher installation and labour costs. Since 2013/14, remote and rural areas across Scotland have received over £64 million in investment through our Home Energy Efficiency Programmes and Area Based Schemes (HEEPS: ABS) which is distributed on an assessment of need to tackle fuel poverty. The maximum grant available to households in remote rural areas through the HEEPS area based scheme has risen since 2013 to £9000.

We are also focused on promoting low carbon heat solutions in off gas grid buildings or heat networks where they are appropriate. This will support the other key objective of the Energy Efficient Scotland programme of decarbonising our heat supply which should also help support the alleviation of fuel poverty.

In March 2019, we launched a call for evidence focusing on decarbonising the heat supply to buildings that do not use gas. The consultation explores existing barriers to the uptake of low carbon heat options, the opportunities and challenges for the supply chain, and how to avoid any potential adverse effects on households living in fuel poverty.

Improving the standard of some Agricultural Housing

The Scottish Government is committed to ensuring that everyone who rents a home is able to live in one which meets not only the tolerable standard, but also either the repairing standard or the Scottish Housing Quality Standard.

Rented housing, including tied houses, on agricultural holdings and crofts are currently excluded from the repairing standard condition requirements of the Housing (Scotland) Act 2006. As there is increasing evidence to suggest that rural housing is falling behind other sectors, at a joint Summit last October, the Cabinet Secretary for the Rural Economy, Fergus Ewing and Minister for Local Government, Housing and Planning, Kevin Stewart announced their commitment to bringing rented houses in these sectors up to the same repairing standard, as is currently required for the private rented sector elsewhere, by March 2027. From 2024, part of the repairing standard will be a requirement for private rented houses to have a fixed heating system.