The start of May saw Ofgem announce investigations into six energy companies in respect of compliance with energy efficiency requirements. The Ofgem website refers to the companies as British Gas, Scottish Power, SSE, Intergen, Drax, and GDF Suez/IPM Power.[1]  For all six companies the issue is whether they have complied with their obligations under the Electricity and Gas Community Energy Saving Programme Order 2009. The CESP programme was designed to improve domestic energy efficiency standards in the most deprived geographical areas.  Additionally, British Gas is being investigated as regards its obligation under the Electricity and Gas Carbon Emissions Reduction Target Order 2008.  Both the CERT and CESP programmes concluded at the end of 2012 and the new investigations follow the submission of the final reports on each programme to the Secretary of State.

The targets were not missed by much and indeed SSE has stated that its failure is not to meet the targets but rather that it was unable to verify and report the delivery of some of the obligations, namely the Priority Group and Super Priority Group to Ofgem before the December 31 cut-off date.[2] British Gas says that it exceeded the CERT targets but narrowly missed the deadline, and was prevented from carrying out all the work to meet the CESP targets because of harsh winter weather conditions.[3]

However, that did not stop Energy Minister Ed Davey issuing a clear warning to energy companies:  “I am disappointed that under the old schemes, some companies failed to meet their obligations. Ofgem will be conducting a thorough investigation and will take any necessary enforcement action. We are already acting through the Energy Bill to give Ofgem the teeth it needs in future to get compensation to those directly affected.”[4]  This will undoubtedly be seen as having serious implications for companies just embarking upon compliance with the Energy Company Obligation under the new Green Deal (the Electricity and Gas (Energy Companies Obligation) Order 2012).[5] The reference by the Minister to “compensation” in his comments presumably refers to the proposed powers in cl. 126 and Schedule 14 of the Energy Bill to allow financial redress to customers suffering loss, damage or inconvenience as a result of contravention by the energy company of any relevant requirement.  In fact more to the point is the power of Ofgem to fine companies for non-compliance, a power which in principle could result in very large penalties.

The ECO is an unusual obligation in that it may lead to the energy company incurring such fines for failure to achieve outcomes which are very much dependent on actions of third parties, those delivering the necessary energy efficiency improvements to homes, and the home-owners willing to take up those measures – particularly since retrofitting existing homes may be inconvenient and intrusive for the occupants.  Already we are starting to see the major energy companies seeking to strike early deals with social landlords, housing associations and councils to get ahead.[6]  Expect more of this, and careful scrutiny by those companies of the CERT and CESP investigations and their outcome, which could be the overture to a much bigger event when the reckoning comes under ECO.