Questions 15-34 (Mr Curry/Chairman):   How do fluctuations in the price of energy impact on DECC's work, do they negate or affect it, how does this affect people's attitudes, and what work have we done on this?

  1.  Energy prices have been rising significantly since 2004. In early 2008, oil prices rose sharply to reach a peak of $146/bbl in July. Since then, crude oil prices have fallen rapidly and averaged around $55//bbl in November.

  2.  These changes in prices of crude oil, as well as increases in prices seen in wholesale electricity and gas have fed through to prices of domestic duels (gas and electricity) as well as pump prices of petrol and diesel. The recent decreases in crude oil prices and the wholesale gas and electricity prices have not yet been reflected in domestic gas and electricity prices[6].

  3.  Most modelling of consumer response assumes that there are short and longer term changes in energy use in response to rise in price:

—  Over the shorter term, households can respond to high energy prices by making small changes in behaviour such as switching off lights in rooms not in use.

—  Over the longer term, investment in energy efficient infrastructure in homes such as loft insulation etc can lead to further reductions in demand for energy.

  4.  The evidence we have on how price changes affect energy use is as follows:

—  Residential gas has been responding to price changes seen over the last few years. From 2004 to 2005 gas demand (adjusted for temperature, income and policy) remained relatively stable while real prices for gas were rising slowly. As prices continued to rise through 2005 gas demand (adjusted for temperature, income and policy impact) fell sharply (-7%) and gas demand continued to fall into 2006 while prices remained high.

—  National Grid's estimates show that in 2007-08, observed gas demand actually fell by about 1.1% compared to the previous year.

—  The observed electricity demand response to price increase in 2007-08 has been, consistent with analysis by DECC and National Grid which reflects the reluctance by households to reduce electricity demand in the short term.

  In a survey of consumers in four European countries, conducted by Logica in 2007, the cost of energy was identified as one of the primary factors which would lead to consumers increasing their energy saving behaviour. However, rising energy prices adversely impact the fuel poor. To help counter this effect, the government's energy efficiency programmes such as Warm Front, and the Community Energy Saving Programme which was announced by the Prime Minister in September are targeted at those households most vulnerable to the impacts of high energy prices.

  5.  As we work towards our climate change targets, the Government's policy is that carbon should be appropriately priced to support moves to a less carbon intensive mix of energy. The Government is supporting households through this transition by encouraging them—through the range of spending programmes discussed in the NAO report—to improve their energy efficiency so that they are able to heat and run their homes more affordably, whatever the source of the energy. This is important for all consumers, but especially for those in or at most risk of fuel poverty.

Questions 35-42 (Keith Hill/Chairman):   When does the Government expect the building regulations to be observed?

  6.  The government acknowledges the importance of this issue as requirements are set to become ever more demanding in the move towards zero carbon standards for new homes.

  7.  To improve compliance, alongside the changes to Part L in 2006 the government instigated a substantial training programme, improved guidance, mandatory air-tightness testing and additional schemes for competent installers. This year the government have introduced extended time limits for prosecution and consulted on proposed changes to the building control system and will be following this up with a programme of reform to make it work more effectively.

  8.  The government believes things are improving as a result of these actions but, like the NAO, recognise the need for better evidence to supplement current anecdotal evidence of non-compliance. That is why the government is undertaking a project, together with the Energy Efficiency Partnership for Homes, to survey implementation of Part L 2006 for new homes. The findings of Phase 1 of this project are promising, with improved levels of air-tightness compared to earlier surveys. Although not statistically significant, this trend is supported by a larger dataset of results obtained from the wider air pressure testing industry. Together, in the Government's view these suggest that the introduction of mandatory air pressure testing has been a success. Phase 2 of the project will be extended to 100 homes and is scheduled to be published in March 2009.

  9.  The government has also commissioned a separate study to look at compliance with Part L 2006 for non domestic buildings and work to existing buildings. This work will start shortly and is expected to conclude in June 2009.

  10.  In addition, there is a considerable body of evidence on the energy performance of new housing contained in the results from the Stamford Brook Project. This seven year long field trial has demonstrated potential for underperformance against design standards and underlying challenges for the industry. The findings from the project are being discussed with the industry in a series of regional workshops.

  11.  The government will conclude these studies and in the light of the evidence obtained will decide upon action in proposed measures for improving compliance and reform of the building control system. Given the drivers for increased performance standards in this area, the government is committed to regular monitoring.

  12.  Based on these implementation surveys of the 2006 changes and our proposals for improving compliance, the government will build our best possible assessment of compliance levels into the estimated impact of the amendments scheduled for 2010.

  13.  On a related matter raised in the evidence, the Committee asked whether Government was on track to meet its commitment to Decent Homes by 2010. CLG have confirmed that projections show 95% of homes meeting the standard by 2010, with work scheduled for the remainder.

Questions 66-68 (Dr Pugh):   If people replace all their lamps with energy saving bulbs on average then you get about a £35 a year saving. What would that work out at in terms of carbon saved?

  14.  Analysis by Defra's Market Transformation Programme indicates that removal of incandescent light bulbs in favour of Compact Florescent Lamps (CFLs) and halogen lamps would yield savings of over 1 MtCO2 per annum by 2020. Similarly, removal of incandescent and halogen lamps would yield savings in the order of 3 MtCO2.

  15.  Compact Florescent Lamps (CFLs) typically offer 80% energy savings in comparison to incandescent lamps. Halogen lamps, of which there are various different types, offer between 20% and 50% of savings.

  16.  The UK has a voluntary initiative led by retailers and energy suppliers to phase out incandescent lamps from shop shelves over the period to 2011, and 1 January 2009 will see the removal of 100W lamps from the market in participating stores. Furthermore, the Government is closely involved in negotiations with the European Commission and Member States to set mandatory efficiency standards for lamps under the Eco-design for Energy-using Products Directive. This will effectively ban incandescent lamps from sale on the EU market as well as potentially remove the least efficient halogen lamps. The measure is expected to be agreed by the end of this year.

Questions 77-81 (Mr Williams):   How long is it going to take to set up a minimum standard for energy installers? Secondly, even if you find one and set one, how do you enforce it? How do you keep out cowboys?

  17.  The cavity wall insulation industry is tightly regulated. Training is carried out by the system designers and the major insulation firms. All installers are registered with the Cavity Insulation Guarantee Agency (CIGA) who issue 25 year guarantees on cavity wall installations.

  18.  Loft insulation is a far less complex and lower skilled job. The NIA (National Insulation Association) is working with CIGA and the industry to develop best practice guidance for both cavity wall and loft insulation installation.

Question 114 (Keith Hill):   A note from BERR and HMT on the procedures that should have been followed in the case of the Sellafield Nuclear Indemnity, covering Malcolm Wicks' letter of letter of 14 July

  19.  The rules for notifying Parliament of liabilities are laid out in Annex 5.5 of Managing Public Money (MPM). The standard procedure where non-statutory liabilities need to be reported to Parliament is to notify the House of Commons using a standard form of Minute. The liability should not go live until 14 Parliamentary sitting days after the Minute has been laid, but if a member objects within that period, the liability should be delayed until the objection has been answered. Every effort should be made to ensure that the full waiting period falls while Parliament is in session.

  20.  Annex 5.5 of MPM also identifies non-standard procedures to be used to notify contingent liabilities where there are issues of confidentiality, short notice, or in the period shortly before the end of a Session or parliamentary recess. In such situations, where Departments report a contingent liability with less than 14 days before the end of the session, the liability should not normally go live until after the 14 sitting days period has passed after the start of the next session. However, if the liability is more urgent than this rule would allow, the department should write to the chairs of the PAC and the relevant departmental committee, explaining the need for urgency, and providing the Chairs with a 14 working day period in which to object. As a matter of record, when Parliament reconvenes, a Minute should be laid explaining what has happened, including any liabilities undertaken.

  21.  It was in this latter situation that the Sellafield indemnity arose, and it was agreed with the Treasury that in view of the urgency the department should follow the non-standard procedure in accordance with MPM. This was the advice given to Ministers and the basis on which the then Minister for Energy, Malcolm Wicks MP, wrote to the Chairmen of the PAC and BEC.

  22.  In accordance with MPM, there is no requirement under the non-standard procedure to provide MPs generally with the opportunity to object to a liability. Departments should, however, as noted earlier, lay the Departmental Minute in the House when Parliament reconvenes, as a matter of record. It was a policy decision to place a copy of Malcolm Wicks' letter and the Departmental Minute in the Libraries of the House to make Parliament aware that we were seeking the approval to the Sellafield indemnity of the Chairs of the relevant Parliamentary Committees. The failure to do so was a clerical error which is very much regretted.

  23.  This note has been agreed by BERR and HMT.

26 January 2009