We've learned from our mistakes
Today, Ofgem has concluded its investigation into our failure to meet our full targets under the Community Energy Saving Programme (CESP) by the deadline of 31 December 2012.
This scheme required energy suppliers including SSE to provide energy saving measures to certain low-income households.
We worked hard to deliver our obligations under CESP, but in the end it proved very difficult to find enough eligible customers and install enough measures in time. Although we were only able to meet 90.9% of our target by the December deadline, by May 2013 we had delivered enough measures to make up for the shortfall plus an additional 346 homes.
We are very sorry that we missed our target and agree that this was unacceptable. However, I am pleased that this ultimately led not only to us making up the shortfall but to hundreds more households benefiting from energy saving measures than would otherwise have been the case. I'm also glad that the settlement we have agreed with Ofgem today will see us pay £1.75m directly to charities set up to help vulnerable people with their energy costs.
CESP and its sister scheme - the Carbon Emissions Reduction Target (CERT) - have since been replaced by a bigger scheme called the Energy Company Obligation. We are determined to learn the lessons from CESP and I'm pleased to say we are well on course to fulfil all of our obligations under ECO, providing many thousands of energy efficiency improvements to some of the households who need them most.
But the reality is that while ECO (and CERT and CESP before it) are hugely valuable and important schemes, they are also very complex, requiring energy companies to track down customers who meet a very strict set of eligibility criteria (relating to things like disabilities and benefit entitlement, for example) and convince them to have work done to their homes. They are also very expensive, with the first phase of ECO, due to end in March 2015, expected to cost somewhere in the region of £1 billion which will all be recouped from energy bill payers.
And that for us, remains the big question that hangs over all such schemes currently paid for through energy bills. This method of funding is fundamentally unfair and regressive, because it does not take into account an individual's income or ability to pay - so those on a low income pay proportionately more. Most public spending is funded through taxation, which is fairer as those on higher incomes pay more.
Until this is addressed, there remains a risk that energy efficiency schemes - by adding costs to energy bills, particularly for those not benefitting from the measures - actually draw people into fuel poverty rather than take them out of it. Yes, it's a time of austerity and tough decisions about public spending are being made. But we don't think that justifies raising money unfairly in order to keep some spending 'off the books'.
We'll keep work hard to deliver on our obligations, but surely it's time for a proper debate about how these very important programmes are paid for.