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Financial penalties could be used to fund energy-saving measures

Late last year, energy watchdog Ofgem proposed a set of financial penalties that would be issued to energy companies that failed to meet the targets set out in the Community Energy Saving Programme (CESP).

The recommended fines - which would be imposed on firms including Drax, InterGen, British Gas, SSE, GDF SUEZ/IPM and ScottishPower - could generate up to £55 million and be used to finance other energy-saving measures or initiatives to tackle fuel poverty.

Consultation on the penalties closed earlier this month. However, Business Green reports that the National Insulation Association (NIA) has warned that the proposed penalties are not prescriptive enough and would not lead to a sustained reduction in energy use and carbon emissions.

A spokesman for the trade association explained that the point of the CESP is "to deliver carbon savings through the installation of hard energy saving measures to householders and therefore we believe that it would be appropriate for all of the penalties to be expressed in consumer redress measures which will provide benefits to householders as opposed to through financial penalties".

However, the group is concerned that Ofgem's current proposals are not specific enough in terms of how consumer redress is delivered. They believe that 'hard energy-saving measures' such as the installation of solid wall insulation should be required, as opposed to 'soft' measures like providing energy and debt advice.

Furthermore, the NIA is arguing that the funds raised should be used to provide a boost to the Energy Company Obligation scheme and the Green Deal Home Improvement Fund scheme.

Business Green reports that NIA members aren't the only ones expressing disquiet about how the CESP penalties are being handled. They say that without stronger action, there is a risk that energy firms will be tempted to flout future efficiency targets.

A spokesman for Ofgem said that they would continue to consult on the penalties. "We made it clear at the time of the announcements that we want to see as much money as possible going to benefit energy customers. We are currently consulting on the specific arrangements and will make a decision in due course," he explained.