The ‘Golden Rule’ of the Green Deal is the principle that the charge collected through the electricity bill should be no greater than the expected energy bill savings estimated during the assessment process. This principle has underpinned the design of the Green Deal from the start, and is an important protection for both customers and investors.
How can we make the Golden Rule a reality in practice?
The Golden Rule is not a guarantee that the charge will never exceed energy bill savings, nor that bills will never rise. People change their heating and energy consumption habits, and energy prices may well rise and increase the overall bill. But right from before a customer even makes contact with a Green Deal Provider, the stepping stones are in place to ensure the charge collected through the bill is as likely as possible to be offset by the expected savings, for the initial and future occupants.
Firstly, work is ongoing at the moment to ensure the data on the amount of energy that different improvements save is as up to date and accurate as possible. A team within DECC is leading this work and taking advice from scientists and experts on how much energy different measures are likely to save.
Secondly, we are making some important changes to the assessment methodology used to estimate energy consumption in a dwelling, RdSAP, to ensure the estimated savings are as accurate as possible. One example is that the estimated savings will now take into account regional weather variations. Importantly, the assessment will take into account the amount of energy that would typically be used in the type of property, and what price would typically be paid for that energy, in estimating the likely savings. The assessor will also provide additional advice on the household’s actual energy use, and, if applicable, how they might reduce their energy consumption.
Thirdly, we propose to require Green Deal Providers to limit the Green Deal charge in the first year to the year 1 savings estimate provided by the assessment. For subsequent years of the Deal, we propose to place restrictions on how much the charge can then vary; we are consulting on what the right options are, but the aim is to minimise the risk that the charge might exceed the expected savings during the lifetime of the Deal.
Green Deal finance is not restricted only to products which fully pay for themselves through savings; partial finance via a Green Deal is an option to fund measures which save at least some energy, and are modelled in the assessment tool.
The Golden Rule ‘cap’ applies only to the amount that can be collected via the electricity bill at the property, but there is no cap to what customers may pay via other means. A customer may choose to pay for a measure in part upfront, or may be eligible for a subsidy to part-fund a measure, bringing the charge on the bill down to below the Golden Rule.
And meeting the Golden Rule is not in itself sufficient to fulfil the affordability assessment required under the Consumer Credit Act; Green Deal Providers will have to meet the Golden Rule but will also need to take account of other relevant information when determining a payment schedule that is affordable for a customer. So while the charge in the first year will be capped at the savings for a typical energy user, an individual’s energy usage will also be considered before finalising a Deal.
Liz Devine, Green Deal Legislation & Finance team