Costs of the ECO: The impact on low income households
This report, for eaga Charitable Trust, assesses the way that the costs of the forthcoming Energy Company Obligation (ECO) could be passed on to consumers by energy companies, in order to minimise the regressive nature of the policy. Through a combination of stakeholder interviews, a literature review and modelling, it assesses the pass-through of costs due to supplier obligations to date, before considering potential alternatives and their likely impact. It concludes that, for the majority of low income consumers, the pass-through of costs as part of the per unit charge is preferable. However, regardless of whether these costs fall upon the gas or electricity bill, there will be a minority of households that are worse off as a result, since they consume more electricity and/or gas than is typical. In order to minimise the impact upon these households, the optimal solution would be to spread the costs of the policy across the amount of both gas and electricity consumed. By sharing the burden equally between each kWh of gas and electricity supplied, it is expected that gas bills would account for 71% of the ECO costs, with 29% on the electricity bill.