Energy Company Obligation (ECO)—key features of ECO3
Energy Company Obligation (ECO)—key features of ECO3

The following Environment guidance note provides comprehensive and up to date legal information covering:

  • Energy Company Obligation (ECO)—key features of ECO3
  • What is the ECO?
  • ECO3
  • Who has obligations under the ECO?
  • The Home Heating Cost Reduction Obligation
  • Transfers of qualifying actions and obligations
  • Surplus actions
  • Ofgem’s role
  • Monitoring and compliance
  • Green Deal providers
  • more

What is the ECO?

The ECO is an energy efficiency scheme that requires large energy suppliers to deliver energy efficiency measures to existing domestic premises. It requires the provision of support and funding worth approximately £640m every year (in 2017 prices).

Alongside the domestic green deal, it is focused on supporting the installation of energy efficiency measures in low income households and areas, and those harder to treat properties.

The ECO replaced previous schemes designed to reduce carbon emissions and deliver energy savings within domestic properties—the Carbon Emissions Reduction Target and the Community Energy Saving Programme.

The ECO has four policy aims:

  1. the alleviation of fuel poverty

  2. the reduction of carbon emissions

  3. reducing the costs of meeting the UK’s renewable energy target through the promotion of energy efficiency, and

  4. the encouragement of innovation in the industry

The ECO is implemented through secondary legislation; the Electricity and Gas (Energy Company Obligation) Order 2018, SI 2018/1183 (ECO 2018 Order).

The legislative powers to create the ECO are derived from Chapter 4 of the Energy Act 2011, under which the Secretary of State is empowered to impose carbon emissions and home heating costs reductions targets on energy companies via secondary legislation.

The ECO applies in England, Wales and Scotland (it does not apply in Northern Ireland). Sections 59 and 60 of the Scotland Act 2016 transferred the powers