The Energy Company Obligation 3 (ECO3) scheme closed on 31 March 2022 with 16 of the 26 suppliers obligated over its course still operating, according to Ofgem's final determination report1. Ten suppliers exited the market during the scheme, which ran from 1 October 20181.
The suppliers that left had a collective obligation of £190 million, or 2.3% of the total Home Heating Cost Reduction Obligation (HHCRO), leaving a shortfall of £135 million, or 1.6% of the total1. Four of the ten exited without submitting any measures1. The shortfall was covered by over-delivery from other suppliers: the overall target was exceeded, with measures worth 103.56% of the £8.25 billion obligation delivered1. Ofgem found Co-operative Energy non-compliant, having achieved 36.4% of its obligation by 31 March 20221.
A total of 1,035,868 measures were delivered under HHCRO in ECO3, with a further 82,057 carried over from ECO2, giving associated lifetime bill savings of £8.547 billion1. The rural sub-obligation was exceeded at 147.29% of its £1.24 billion target, with 124,863 measures delivered and 27,558 carried over from ECO2, worth £1.82 billion in bill savings1. The solid wall minimum requirement reached 113.94% of its £0.72 billion target1. Suppliers were required to deliver at least 15% of their total HHCRO obligation to domestic premises in rural areas1.
Ofgem's report also records changes to installation standards during the scheme. The requirement for measures to be completed by TrustMark registered businesses came into force on 1 January 2020, and from 1 July 2021 the enhanced PAS 2030:2019 and PAS 2035:2019 standards were mandated1. Ofgem noted that the delivery rate fell around the time the TrustMark quality standards were introduced in January 20201. The ECO brokerage mechanism was decommissioned as of June 20211.
"Over the course of ECO3 a total of 26 suppliers were obligated under the scheme"
Why it matters for households
ECO3 was the mechanism through which obligated suppliers funded energy efficiency measures such as insulation and heating replacements for low income and vulnerable households, so the number of suppliers still standing at its close affects how much of that work was delivered and by whom. The £135 million shortfall from suppliers that exited was absorbed by over-delivery elsewhere rather than left unmet, meaning the collective bill-saving target was still exceeded1. For a household, the practical effect is that the scheme's total delivery was not reduced by the market exits, but the concentration of delivery among fewer, larger suppliers increased. The ECO and household energy efficiency statistics set out the measured outcomes, and the list of obligated suppliers shows which companies carry obligations. Households looking at what replaced ECO3 can read about ECO4, the current scheme.
What happens next
Up to 10% excess ECO3 measures, on a per supplier basis, may be carried over into ECO4 as surplus actions1. Delivery above the scheme caps also does not count towards a supplier's obligations but can be carried forward to ECO41. The broken heating cap of £1.74 billion was exceeded by 0.35%, or £6.13 million1. Ofgem stated that it expects suppliers to be more proactive in future and will have an increasingly low tolerance for those that do not meet their obligations1.
Sources1 cited
- ECO3 Final Determination Report, ofgem.gov.uk