Ed Davey, the Liberal Democrat Energy Secretary, is involved in negotiations to move the green levy which pays for ECO (including the Affordable Warmth scheme) from energy bills to general taxation.  This could result in an average £53 annual reduction in energy bills from as early as next month.  ECO (Energy Company Obligation) was introduced in January this year to force energy companies to meet the £1.3 billion cost of installing energy efficient boilers and insulation in households receiving certain State Benefits.  As a result, energy companies are, in part, blaming their recent price increases on the cost of meeting the Energy Company Obligation.  ECO includes the Carbon Saving Obligation, the Carbon Saving Community Obligation and the Affordable Warmth Obligation.  A decision on the switch of the green levy from energy bills to general taxation could be made before the Chancellor’s autumn statement on 4^th December.

ED Davey has ruled out scrapping the ECO scheme and a party spokesman stated that “it is vital to protect what these schemes deliver.  It is about tackling fuel poverty and keeping poor people’s bills down permanently.”  However, although the government feels obliged to act on recent increases in energy bills, there are expected to be objections due to the current pressure on government finances.

Separately, a British Gas executive claimed that the ECO levy should only help to pay for green measures for the poor, rather than for everyone.  Around half of the cost of ECO is down to the installation of external wall insulation in ‘hard to treat’ properties such as Victorian houses with solid walls, regardless of who owns them.  The rest of the scheme deals with installing energy efficient boilers and insulation in properties where the householder receives State Benefits such a Pension Credit, Working Tax Credit, Child Tax Credit and income-related state benefits.

Consequently it is anticipated that a compromise will be reached and although ECO may not be completely scrapped, it could be more restrictive for the remainder of its planned term, which is due to end in March 2015.  If this is the case, households which currently meet the criteria for assistance under the Affordable Warmth scheme may not do so in future.  It is important therefore, that if you feel you may qualify for a new energy efficient gas central heating boiler or new insulation in your home, you should apply immediately, otherwise you may miss out.