Co-op Energy confirms ECO3 shortfall of £35 million

Co-op Energy has agreed to implement various energy efficiency measures after Ofgem found the company to have missed its Energy Company Obligation (ECO) with a shortfall of £35 million.

ECO was first introduced in 2013 and places legal obligations on larger energy suppliers to deliver energy efficiency measures to households in the UK. This primarily focuses on both insulation and heating measures and is targeted to support vulnerable customers.

The scheme has seen four iterations, ECO, ECO1, ECO2 and ECO3. The ECO3 scheme ran from 2018 until it closed on 31 March 2022 with it being replaced by ECO4 in July 2022.

Co-op Energy failed to deliver measures under the ECO3 obligation with Ofgem citing shortfalls of £35 million. The organisation only achieved 36.37% of its cost saving target by the end of March 2022.

The energy supplier confirmed to Ofgem it would deliver measures to address this shortfall plus additional measures to provide £3.5 million extra in energy bill savings by 31 December 2024. This is estimated as 10% extra on top of the £35 million shortfall.

“Now, more than ever, we need to prioritise energy efficiency, and it is vital that energy suppliers take their obligations under the government’s energy efficiency schemes seriously. These schemes reduce energy consumption, as well as consumer bills, delivering real benefits for low-income households,” said Cathryn Scott, director of enforcement and emerging issues at Ofgem.

“The action we have agreed with Co-op will ensure that consumers benefit from these important energy efficiency measures, and we welcome their engagement with us on the matter.

“As we move forward with the new ECO4 we expect suppliers to be proactive in ensuring they achieve compliance, as well as ensuring they act where they are falling short ahead of key milestone deadlines. We will take robust action where suppliers fail to meet expectations.”

In November 2022, Energy UK publicly voiced the inefficiencies associated with the ECO scheme and put forward proposals to stimulate the creation of a commercial market, boost jobs and the supply chain dubbed ECO+.

Analysis indicated that if ECO+ had been fully up and running for the year in the run up to October 2022, it could have improved 702,000 homes with loft and cavity wall insultation.