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OVO Energy response to DECC Green Deal consultation

By OVO Energy Monday 05 March 2012

OVO Energy has made a submission to the Department of Energy and Climate Change consultation on the secondary legislation for the Green Deal and agrees with many of its proposals.

We have chosen to focus our attention on the Green Deal principally because we believe this to have a greater impact on the energy market and if implemented incorrectly it could have a negative impact on consumer trust in the industry.

OVO’s Managing Director Stephen Fitzpatrick believes that the Green Deal presents a positive opportunity for consumers to be more energy efficient and for suppliers to support them in doing this.  However, he has a number of concerns about the proposals, which have the potential to negatively impact market competition and levels of consumer trust.

Consumer protection

There are currently low levels of trust in the energy industry and so any new initiative, including the Green Deal scheme, needs to reassure consumers that their investment is safe and right for them.  To ensure this:

  • We believe that there should be an obligation for Green Deal advisors to inform a customer if there is a cheaper energy tariff for them;
  • For full peace of mind for consumers, we also want to see insurance-backed warranties on all installations, independent of the Green Deal plan terms;
  • Interest rates on Green Deal plans should be fixed (not variable between providers) and repayment terms simple.  Consumers must have confidence that they will not be liable for unexpected costs or confused by complex and variable arrangements.  Doing this will ensure that there is trust and simplicity in the scheme at the outset, meaning it will be easy to understand and that uptake for the scheme is high.
  • We support the Golden Rule (to find out what this means go to http://blog.decc.gov.uk/2011/12/22/the-golden-rule/) but stress that it must be adhered to throughout the duration of each agreement and that the duration is relative to the guaranteed lifetime of the measures installed.  We question whether and how much consumers will be recompensed if the rule is broken by the provider. 

Limiting the impact on energy suppliers

We have major concerns about the cost to suppliers of administering the scheme, both for the initial set up (we would expect to build a new piece of software to manage the flow of data) and on an on-going basis.  The proposal of £3 per year per plan is significantly lower than the costs we expect to incur and although the opt-in threshold would appear an appropriate measure to shield smaller suppliers from the actual costs required, there is a commercial and competitive disadvantage for those who fall below it because they may have no option but to turn away business as they cannot afford to offer the scheme.  We therefore believe that this initiative has the potential to discourage competition and create another barrier to entry and growth for smaller suppliers.

Finally, we are calling for clarity on which organisation will administer the Green Deal.

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