UK's OFGEM takes carrot-and-stick approach to energy-efficiency suppliers

UK's OFGEM (Office of the Gas and Electricity Markets) has warned energy suppliers and generators that they face the risk of enforcement action and fines if they fail to deliver U.K. government's set targets to install energy-efficiency measures for consumers by this December's 2012 deadline. The CESP (Community Energy-Saving Programme) and the CERT (Carbon Emissions Reduction Target) set up by the DECC (Department of Energy and Climate Change) are to deliver energy-saving measures to domestic customers. DECC gave OFGEM the powers to ensure these schemes are delivered by the industry, but OFGEM does not set policy for these schemes. In an open published letter, OFGEM sets out its priority: to protect consumers' interests and ensure that companies are incentivised to deliver benefits to consumers. OFGEM will consider investigating and taking possible enforcement action against companies who do not meet their targets. OFGEM will take into account additional energy-saving measures installed after the 31st of December in mitigation against future enforcement action, such as possible fines. This incentivises companies who fail to meet their obligations to continue to deliver for vulnerable consumers, while still holding them to account for their obligations. Otherwise suppliers may stop at the end of December and just face enforcement action. Stuart Cook, MD of OFGEM E-Serve, said: "Today's message to companies and generators is clear, if you fail to comply with your CERT and CESP obligations by the December deadline you risk investigation and a possible fine. But, focusing on financial penalties alone will not deliver benefits for consumers. That is why we will take account of late delivery of scheme measures. By doing this we are giving companies likely to fail their targets every incentive to do the right thing by the public and the environment and to keep delivering energy efficiency help for consumers." Set targets

• A carbon-emissions reduction target of 293 million lifetime tonnes CO².
• A priority-group obligation under which 40% of a supplier's total obligation must be promoted to those aged 70 and over and those on qualifying benefits.
• A super-priority-group target was introduced under which 16.2 million lifetime tonnes CO² must be promoted to those on certain qualifying benefits, for example, low-income households in receipt of child tax credits.
• An insulation target was introduced under which 73.4 million lifetime tonnes CO² must be met by promoting professionally-installed insulation measures (e.g. cavity wall and loft insulation).
• Suppliers that individually, or within a group of companies, have over 250,000 domestic customers are obligated under the Order.
• Suppliers may meet up to 10% of their total obligation with market transformation and demonstration actions, which are reserved for innovative measures and technologies. This is increased to 12% where 2% is achieved through promotion of microgeneration measures.
• Suppliers may meet up to 12.5% of their priority-group obligation through the priority-group flexibility mechanism, which provides an uplift to the carbon saving score for solid wall insulation (solid wall insulation is scored according to fuel type so this provision incentivises suppliers to target hard-to-treat and off-grid households).
• Halogens and compact fluorescent lamps were removed from the programme.
• Free, non professionally-installed measures must be requested in writing.
• Microgen can only be promoted in the Super Priority Group.