The Sunday Telegraph carried a story on 10th November confirming that energy suppliers have given their commitment to immediately cut bills if the ECO obligation was removed from them.

The two hot favourites for potential changes are for the Government to pay for ECO out of general taxation or to extend the current ECO for 18 months. Shifting ECO into general taxation would make the cost of delivering ECO far more transparent and would lead to an immediate reduction in energy bills, if the suppliers are true to their word. This would also remove the burden from low income households who are unlikely to be tax payers and who have suffered the most through recent energy bills rises. It is however unclear how this would be achieved and how quickly. ECO is now up and running and suppliers have signed a number of long term contracts. Even if the Government consult on the change as they are legally obliged to do, stopping or changing the scheme early could lead to chaos across the industry and give rise to a number of potential legal actions.

Climate Change Minister Ed Davey is reported to be adamant that he will not water down the UK\’s Climate Change targets by extending ECO by 18 months, also whilst this would create some savings, energy suppliers are delivering ECO at significantly differing costs so customers may not actually see a saving. If ECO is extended by 18 months, some energy suppliers may use change of legislation clauses to tear up contracts and cancel work already in progress. There is also no guarantee that any cost reductions would be passed through in full to customers, leaving the coalition without the headline grabbing political ground that it is trying to make up against Labour.

It seems that the bottom line is that ECO funding will be available for quite a while yet.