The regulatory problem in more detail
To accelerate the retrofitting of existing housing stock, we need a system whereby loan repayments for energy efficiency retrofit work can be paid for as part of a household electricity bill.
Our assumption is that the Distribution Network Operator (DNO), as opposed to the suppliers, would be best placed to take the role of collecting agent, as the DNO, unlike the suppliers, has a permanent relationship with a property. But to allow this to happen the regulations regarding the role of the DNO would have to change.
Ultimately, the charge would be added to the energy bill and paid to the electricity supplier, who in turn receives a higher charge from the DNO for distribution of electricity to the property in question. If it is handled as a higher DNO charge attached to the property then it will persist as a charge even if people move house or change supplier, giving reassurance to the investor. So the DNO element of the overall energy bill would rise.
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The current regulatory situation is that the Electricity Act (which defines distribution activities) cannot be interpreted in such a way as to allow DNOs to act as conduits for payments for low carbon measures. This activity would also be outside the activities listed in the distribution license. Finally, it would be out of sync with the multi-party industry code, the Distribution Connection and Use of System Agreement (the ‘DCUSA’).
Ultimately, these problems would (in our opinion) disappear if the utility becomes the financier of the energy efficiency measures via the CERT Obligations.
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