ECO4 Fraud and Error Assurance

The Department for Energy Security and Net Zero (hereafter referred to as “the Authority”) are looking to conduct a fraud and error assurance exercise related to the Energy Company Obligation (ECO4) scheme. The ECO4 scheme works by placing an obligation on large and medium-sized energy suppliers in England, Scotland and Wales, to provide energy efficiency and heating measures to low-income and vulnerable households living in the least energy efficient homes across Great Britain. This scheme is funded and delivered by energy companies on behalf of the Authority. The first obligation started in 2013, and the most recent iteration, ECO4, commenced on 1st April 2022 and will run until 31st March 2026. ECO4 focusses on improving the least energy efficient properties, and targets homes equivalent to an energy performance certificate (EPC) band D-G for owner occupied households; and bands E-G for privately or socially rented homes (subject to certain restrictions). Households eligible for the scheme must also be in receipt of either income-based benefits, certain tax credits, pension credits or qualify through ECO4 Flex (where Local Authorities identify properties for treatment). The scheme aims to provide a more complete retrofit of properties to ensure maximum carbon emission savings, including a variety of measures such as insulation, solar panels, and renewable heating systems. DESNZ is aware of the potential for non-compliance within the scheme, including: • The misrepresentation of property eligibility characteristics in the ECO4 scheme, indicating the need for greater control of error and fraud. • Potential for discrepancies within Energy Performance Reports (EPRs), particularly relating to building characteristics for instance in ceiling heights, default U values (rate of transfer of heat through a wall) and boiler models. • Possible gaps in household eligibility checks which are required to ensure all households receiving ECO4 support meet the eligibility requirements. The scope of the exercise is to examine and understand exposure to and causes for this, and other types of error and fraud, on the ECO4 scheme. The overall aim of the exercise is to improve the scheme delivery process, ensure targeted support is going to those most in need, and ensure ECO4 is providing value for money for energy bill payers. Outputs of the exercise will include a report detailing the thematic areas of fraud and error, and providing recommendations that are addressed to the Authority, but relevant to all elements of the supply chain and to delivery stakeholders.