Key information
Executive summary
The Mayor is committed to tackling fuel poverty and improving the energy efficiency of London’s homes. This paper seeks approval for the funding and administration of a new fuel poverty boiler replacement and repair pilot scheme, this winter, as part, and to inform the development, of the Mayor’s Energy for Londoners programme and Fuel Poverty Action Plan.
If approved, capital funding of up to £1m will be used to replace and repair inefficient and broken boilers, in up to 500 owner occupied homes of people who are in receipt of qualifying benefits (a proxy for fuel poverty). It is proposed that the scheme be managed and administered by the Energy Saving Trust (EST), and a contractor will be procured through the RE:NEW framework to deliver the boiler replacements and repairs.
The scheme will help alleviate fuel poverty, and reduce cold-related ill health, as well as excess winter deaths. It will also result in estimated annual savings of up to 310 tonnes of carbon dioxide (tCO2), and a reduction in average annual energy bills of around £150 per participating household, among other benefits such as reduced NOx emissions/improved air quality and a reduced risk of carbon monoxide poisoning.
Decision
That the Mayor approves:
1. the introduction of a pan-London fuel poverty boiler replacement and repair pilot scheme commencing in early January 2017;
2. the reallocation of existing capital funding of up to £1m from the London Boiler Cashback Scheme budget to the new scheme;
3. procurement and award of, entry into and execution (by the Executive Director of Housing and Land) of a contract for the delivery of up to 500 boiler replacements and repairs to households with qualifying benefits;
4. allocation and expenditure of revenue funding of up to £115,000 as follows:
a. the award of a contract, with a value of up to £75,000, to EST for the administration and evaluation of the scheme and a related exemption from the requirements of the GLA’s Contracts and Funding Code to seek competitive tenders for such services;
b. the variation of the GLA’s RE:NEW contract with Capita (for administration of the RE:NEW Support Team) to undertake a programme of third-party audits for the scheme, with a value of up to £25,000; and,
c. the development and distribution of marketing materials of up to £15,000.
Part 1: Non-confidential facts and advice
1.1 The Mayor’s consultation, “a City for all Londoners”, highlights the need to promote energy efficiency, to both reduce CO2 emissions and help Londoners living in poverty and struggling with high costs in the capital. The Mayor has also committed to producing a Fuel Poverty Action Plan.
1.2 London’s domestic buildings have been built and developed over hundreds of years, and their energy efficiency varies from good to dreadful. London needs to overcome multiple challenges in relation to domestic energy efficiency including age, type and tenure of homes, and the lack of investment and stable government policy framework.
1.3 Fuel poverty is on the rise in London. In 2014, over 348,200 households (10.6 per of homes) were fuel poor, compared to 276,700 (8.9 per cent of homes) in 2012 . In addition, the number of excess winter deaths in London remains high.
1.4 It is necessary therefore, to introduce new schemes and initiatives that can directly support the most vulnerable, while boosting domestic retrofit delivery in the capital.
1.5 There is a strong case for a GLA fuel poverty boiler replacement and repair scheme aimed at households which have inefficient or broken boilers, and are in receipt of benefits:
• old inefficient boilers, which are still working after many years, are not necessarily a priority to replace for homeowners. This has two costs associated with it. First, the homeowner will be paying higher bills to operate the boiler compared to a new efficient one. This can impact greatly on lower income households, and lead to homeowners choosing not to heat their home adequately, which can cause new or exacerbate existing health problems. Second, in environmental terms older boilers generate far higher emissions (both CO2 and NOx)
• installing an efficient boiler is one of the most cost-effective ways to tackle fuel poverty, cut household energy bills, CO2 and NOx emissions, and prevent carbon monoxide poisoning. Domestic heating accounts for around three quarters of household energy consumption and boilers, in particular, for around 55 per cent of household energy spend each year. Gas boilers also account for approximately 12 per cent of London’s NOx emissions.
• it is estimated that around 725,000 owner occupied homes have non-condensing boilers (typically 10+ years old which are more expensive to operate). Of those, around 16 per cent are likely to be in income deprivation – so there is clearly scope to achieve far more
• a strong precedent already exists for fuel poverty grant schemes. Successful schemes such as Nest (the Welsh Government’s Fuel Poverty Scheme), and Islington’s Safe and Warm scheme, provide boiler and heating system replacements, among other measures, to homes which are in receipt of a means tested benefit, at no cost to the householder.
1.6 The GLA currently runs the London Boiler Cashback Scheme, which was launched in February 2016. While this delivers carbon savings, it does not directly address fuel poverty. This is because households must contributing around 80 per cent of the overall boiler installation cost, which would be unaffordable to many households on benefits.
1.7 Following engagement and consultation with boroughs and key stakeholders, a fuel poverty boiler replacement and repair scheme is considered the most effective intervention that can be designed and delivered this winter.
1.8 It is therefore proposed that we reallocate some of the capital expenditure from the existing London Boiler Cashback Scheme to a new scheme focusing on fuel poverty alleviation and support this winter, as a first pilot in the development of the Mayor’s Fuel Poverty Action Plan.
Scheme design: eligibility and requirements
1.9 The eligibility criteria and requirements for the scheme would be as follows:
1. properties must be homes in Greater London
2. applicants must be owner occupiers in receipt of qualifying benefits (as defined by the Affordable Warmth Group in the Energy Company Obligation)
3. boilers being replaced or repaired need to be the main boiler used to heat the home and must be
o an 85-per cent or below efficient gas, oil, LPG or solid fuel boiler (typically 10+ years old), when being replaced. (The boiler does not need to be in working order)
o an 86-per cent or above efficient broken gas, oil, LPG or solid fuel boiler when being repaired. Repairs must be undertaken where it is economical to do so, otherwise the boiler must be replaced
4. replacement boilers must be A-rated ultra-low NOx appliances and will include new thermostats/boiler controls and thermostatic radiator valves (TRVs), as per building regulations
5. installations and repairs will be undertaken by a contractor procured through the RE:NEW Framework
6. the GLA boiler placement and repair grant will be able to be used in conjunction with existing Energy Company Obligation funding, where it is available and identified by the homeowner (or borough on their behalf) when the application is made.
1.10 Due to higher installation costs, renewable heat technologies will not be installed under the scheme.
2 Scheme design: customer journey
2.1 The full application and installation/repair process is set out in Appendix 1.
2.2 Similar to GLA’s existing London Boiler Cashback Scheme, to minimise administration and delays to homeowners, there will be no facility to submit paper applications for the scheme.
Scheme design: value for money
2.3 The current London Boiler Cashback scheme shows that the cost of a new energy efficient gas boiler installation varies greatly, from £1,500 to well over £3,000, with an average cost of around £2,300 including installation.
2.4 Under the RE:NEW framework we are inviting bidders to set out how they will achieve at least 450 boiler replacements and around 50 repairs within the £1m capital budget available (including any additional work that may be required to ensure the heating system works effectively). Contracting in this way (which will involve the RE:NEW framework contractor bulk-purchasing boilers and heating controls) is expected to provide better value for money (rather than homeowners choosing their own boiler installer), and eliminate fraud.
2.5 While the boiler replacements and repairs are being carried out, we anticipate that some heating systems will require additional minor repairs in order to make the boiler operate fully and effectively. In this event, the RE:NEW framework contractor will be allowed to proceed with minor repairs up to the value of £200 in total, per property. However, additional repairs required that exceed £200 in total per property will need to be agreed with EST and the GLA, following an independent audit of the works required, which will be undertaken by Capita (which currently undertake fraud prevention audits for the London Boiler Cashback Scheme). Following agreement and audit, the RE:NEW Framework contractor will be able to proceed with the additional works following instruction by EST.
2.6 We will limit grant funding to a maximum of £3,000 per household. However, we expect the majority of replacements and repairs to cost below £2,000 per household (given economies of scale).
2.7 The GLA will stipulate that the scheme closes once the £1m capital budget is spent.
Targeting and evaluating scheme impact
2.8 In terms of demography, the scheme will be designed to attract homeowners on eligible benefits (as set out at paragraph 1.6 above).
2.9 Once applications for the scheme have been received by EST, details will be submitted to the Department for Work and Pensions (DWP) by EST using a DWP-approved on-line process for benefits verification. If applications come back as unverified, EST will follow up with the applicants directly to obtain a copy of the applicant’s benefits award letter. In addition, EST will use the Land Registry to confirm the owner occupier status, and other details of the applicant.
2.10 We plan to work through boroughs to ensure that existing referral mechanisms (i.e. fuel poverty and seasonal health networks) are used to communicate the scheme and for fuel poor households already on referral lists to be contacted in advance of launch. We would intend for the Mayor to write to boroughs and key organisations focussed on fuel poverty alleviation ahead of the scheme being launched, inviting their engagement.
2.11 It is proposed that EST will also evaluate the scheme to determine the extent to which the boiler replacements and repairs have helped alleviate fuel poverty. EST’s evaluation of the pilot scheme will be helpful in informing the development of future schemes, under the Mayor’s Fuel Poverty Action Plan.
2.12 Each replacement and repair will also include a home energy check to ascertain what other energy efficiency measures are already present, planned, or required in the home. EST will then submit a report to the Energy Saving Advice Service (ESAS), which will enable further assistance to households to take place.
Communications and marketing
2.13 It is envisaged that the offer, combined with a Mayoral launch and tactical communications and marketing campaign, will be quickly picked up by the media and awareness will spread.
2.14 The marketing campaign will use existing resources where possible, but will also generate new material. London.gov.uk will host a number of assets to provide public information, including a FAQ document and application form.
2.15 A marketing budget of up to £15,000 will be spent on external advertising via channels such as print, online, and social media. Print materials will also be produced to support the campaign and will be distributed to relevant communities via existing networks. The campaign will include, but will not be limited to, the following:
• high-level Mayoral announcement in mid-December trailing the launch of the scheme
• launch on or around w/c 9 January 2017
• webpages on London.gov.uk promoting and explaining the scheme, with links to the scheme’s micro site which will hold the transaction pages
• letter from Mayor to boroughs inviting their engagement
• digital marketing to and through NGOs and fuel poverty action groups (e.g. National Energy Action, and Citizens Advice Bureau). Organic social media activity will be used before, during and after launch (including, to communicate progress)
• encouraging the Government to communicate the scheme on gov.uk.
Proposed next steps
2.16 We plan to procure and appoint a contractor to deliver the boiler replacements and repairs to eligible households, through a competitive tender under the RE:NEW framework. The Invitation to Tender was issued on 29 November (in order to keep within the timetable below) and bids are due on 13 December 2016. We expect to award the contract on or around 16 December.
2.17 We also plan to appoint EST to manage and administer the scheme, including project management, monitoring and evaluation. Officers acknowledge that section 4.1 of the GLA’s Contracts and Funding Code requires, where the expected value of a contract is between £10,000 and £150,000, the services required should be tendered or called off from an accessible framework. Section 5 provides however, that an exemption from this requirement may be approved where a service provider has had previous involvement in a specific current project or its continuation of existing work cannot be separated from the new project/work. In this instance, EST remain involved in administering the existing London Boiler Cashback Scheme, which has involved putting on place IT and technical systems for and administering scheme, which will be utilised for the new fuel poverty boiler replacement and repair scheme.
2.18 Notwithstanding that the category of services required here differ from those procured in respect of the existing London Boiler Cashback Scheme, because the nature of the systems, expertise and experience held by EST as a consequence, coupled with the need to mobilise the scheme on or around w/c 9 January 2017, the GLA considers, that the award of contract to EST without further competition may be justified on the basis of its previous involvement in a specific current project and EST are in practical terms, the only organisation likely to be able to confidently mobilise and deliver the scheme within the timescale proposed. EST also possess access rights to DWP datasets for the purpose of conducting online benefits verification which, when combined with EST owned intellectual property rights in certain underlying source code and systems, is key to the prudent and efficient administration of the scheme.
2.19 Therefore, the approval of an exemption from the requirement to procure the services in question by conducting a tender exercise or called those services off from an accessible framework is sought.
2.20 Audits will be undertaken by Capita before any additional repair work that exceeds £200 in total per property is undertaken (as set out paragraph 2.5 above). This will help ensure robust management of the RE:NEW Framework contractor and quality assurance of repair work (minimise the risk of unintended consequences and future call outs). In addition to the proposed award of contract to RE:NEW Framework contractor (which will undertake the boiler replacements and repairs), and to EST (which will administer and evaluate the scheme), the variation of the GLA’s current contract with Capita for services for the administration of the RE:NEW Support Team therefore, is proposed to accommodate such audit services.
2.21 Capita was contracted in 2014 by the GLA through the TfL’s EPM Framework, to provide the services of the RE:NEW Support Team. The services required for fuel poverty boiler replacement and repair scheme are within the scope of their current RE:NEW administration services. A variation of the GLA’s RE:NEW contract with Capita (for administration of the RE: NEW Support Team) would be necessary to undertake a programme of audits for the scheme, with a value of up to £20,000.
2.22 Before the scheme commences, the GLA would convene boroughs, NGOs and fuel poverty action groups, to brief them on the scheme and gain their agreement to promote the scheme.
3.1 The key purpose of the new fuel poverty replacement and repair scheme will be to provide rapid support to households which have inefficient or broken boilers and deemed to be in fuel poverty. It will also drive savings in CO2 and NOx savings across London by:
a. supporting up to 500 households in fuel poverty and prevent excess winter deaths
b. saving carbon. Replacing 450 inefficient boilers should save up to 310tCO2 per year
c. saving approximately £70,000 per year off Londoners’ fuel bills. An individual household's energy bill will be cut by an average of £150 a year, (depending on the size of the property and the efficiency of the boiler being replaced)
d. improving air quality. Each boiler replacement will be ultra-low NOx (and must emit no more than 40 mg/kWh NOx, as per the requirements for new build energy performance standards in the London Plan).
e. reducing the risk of carbon monoxide poisoning
f. promoting behaviour change through the installation of new heating controls, and energy efficiency advice and support.
4.1 The GLA will take appropriate steps to ensure that there are no potential negative impacts expected on those with protected characteristics. Those with protected characteristics will gain from the positive benefits of this scheme in equal measure should their properties be selected, and there will be equality of access to participate in the delivery and benefit from the scheme, without discrimination.
4.2 It is expected that this scheme will have a positive impact on lower income and fuel poor households directly through the direct grant support they will receive, and by catalysing greater awareness of energy use and the opportunities to reduce their consumption. The number of homes in fuel poverty will be estimated through the scheme, including the extent to which the boiler replacements and repairs delivered through the scheme, help alleviate that fuel poverty.
5.1 The key risks and issues for delivery of these projects are set out in the table below:
6 Project costs
6.1 Given the priority to tackle fuel poverty, it is proposed to use £1m of the £1.3m remaining in the London Boiler Cashback Scheme budget to a fuel poverty boiler replacement and repair scheme for winter 2016/17. This budget will fund the total contract value of the RE:NEW framework contractor which will undertake all boiler replacements and repairs. This will leave an overall budget of approximately £300,000 to support the replacement of inefficient boilers through the existing scheme to ensure the pipeline of live vouchers (and any new vouchers issued before the new scheme is launched) are honoured.
6.2 Additional revenue funding of up to £115,000 in total is sought for:
• the procurement of EST which will develop the on-line system, administer the scheme and undertake the evaluation of assistance provided to fuel poor households (with a value or up to £75k in total)
• the variation of the GLA’s RE:NEW contract with Capita (for administration of the RE: NEW Support Team) to undertake a programme of third-party audits for the scheme (with a value of up to £25,000)
• development and distribution of marketing materials (up to £15k in total).
7 Governance and oversight
7.1 The GLA will transfer to EST sufficient capital funds in tranches to pay the RE:NEW framework contractor responsible for the boiler replacements and repairs, which will be paid monthly in arrears. Similar to the management and administration of the London Boiler Cashback Scheme, the Buildings Energy Efficiency Team in Housing and Land will audit a sample of about a dozen verified successful applications, prior to releasing each tranche of funding, to extend the due diligence checks and safeguard against system mismanagement.
7.2 To ensure robust management of the contractors (EST, the RE:NEW Framework contractor and Capita), the Internal Review Group (already established to oversee the existing London Boiler Cashback Scheme) will meet fortnightly to oversee progress. (It includes senior representatives from Finance, Governance and the Services, Commissioning and Retrofit team in the Housing and Land Directorate).
8.1 The decision seeks approval for the introduction of a pan-London fuel poverty boiler replacement and repair pilot scheme, commencing in early January 2017. It requests a reallocation of Capital funding of up to £1m from London Boiler Cashback Scheme (MD1606), as well as Revenue funding of up to £115k, which will be allocated to the project from Contingency Reserves.
8.2 The anticipated capital expenditure for the scheme is expected to be £1m which will be used to deliver up to 500 boiler replacements and repairs to home owners with qualifying benefits in Greater London. It is estimated that revenue expenditure will not exceed £115k and will be used to administer the scheme as follows:
8.3 Up to £75k to be awarded to EST for the administration and evaluation of the scheme.
8.4 Up to £25k to be awarded to Capita to undertake third-party audits for the scheme.
8.5 Up to £15k will be used for the development and distribution of marketing materials.
8.6 Reallocation of £1m to a new scheme will leave approximately £300k in London Boiler Cashback Scheme to honour the outstanding commitments (confirmed by the scheme administrators EST).
8.7 EST will be allocated the capital funds by the GLA in tranches to pay the chosen contractor responsible for the boiler replacements and repairs. The team in Housing & Land will audit the sample of about dozen of successful applications, prior to releasing each tranche of funding, to extend the due diligence checks and safeguard against system mismanagement.
8.8 The scheme is anticipated to close once the £1m capital budget is fully spent. Any changes to this proposal, including any requests for additional funds, must be subject to further approval via the Authority’s decision-making process. All appropriate budget adjustments will be made.
9.1 The foregoing sections of this report indicate that:
• the decisions requested of the Mayor involve the exercise of the GLA’s general powers falling within the GLA’s statutory powers to do such things considered to further or which are facilitative of, conducive or incidental to the promotion of the improvement of the environment and social development in Greater London; and
• in formulating the proposals in respect of which a decision is sought officers have complied with the GLA’s related statutory duties to:
(a) pay due regard to the principle that there should be equality of opportunity for all people;
(b) consider how the proposals will promote the improvement of health of persons, health inequalities between persons and to contribute towards the achievement of sustainable development in the United Kingdom; and
(c) consult with appropriate bodies.
9.2 In taking the decisions requested, the Mayor must have due regard to the Public Sector Equality Duty; namely the need to eliminate discrimination, harassment, victimisation and any other conduct prohibited by the Equality Act 2010, and to advance equality of opportunity between persons who share a relevant protected characteristic (race, disability, gender, age, sexual orientation, religion or belief, pregnancy and maternity and gender reassignment) and persons who do not share it and foster good relations between persons who share a relevant protected characteristic and persons who do not share it (section 149 of the Equality Act 2010). To this end, the Mayor should have particular regard to section 3 (above) of this report.
9.3 Section 4.1 of the GLA’s Contracts and Funding Code (“Code”) requires that contracts with values of this level be awarded following the seeking of competitive tenders/should be called off from accessible frameworks. However, section 5 of the Code also provides that an exemption from this requirement may be justified where the proposed contractor has had previous involvement in a specific current project. Officers have indicated at sections 2.15 to 2.17 (inclusive) that this is the case here. The Mayor may therefore, approve the proposed award of contract to EST and related exemption if satisfied with the content of this report.
9.4 Officers must ensure that appropriate contract documentation is put in place and signed by the GLA and EST before the commencement of the provision of services in question.
9.5 Officers must also ensure that:
• the variation of the GLA’s RE:NEW support contract with Capita is agreed, documented and executed by the GLA and Capita in accordance with the provisions set out in that contract before the commencement of the provision of the varied services;
• any further services, supplies or works required are procured by Transport for London Procurement who will determine the detail of the procurement strategy to be adopted in accordance with the GLA’s Contracts and Funding Code and appropriate contract documentation is put in place and signed by the GLA and contractors before the commencement of the provision of services, supplies or works in question.
Signed decision document
MD2057 Fuel poverty boiler scheme (signed) PDF