Consultation outcome

Amending the ECO4 Order to allow cost recovery via grant funding: government response

Updated 9 February 2026

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Executive summary

The Energy Company Obligation (ECO) places obligations on energy suppliers to deliver energy efficiency and heating measures that help households reduce energy consumption and lower heating costs. ECO4 is the latest version of the scheme, having started in July 2022.

As announced in the November 2025 Budget, there will be no successor supplier obligation to ECO4. [footnote 1] The government has instead committed to additional grant funding of £1.5 billion which will be directed to upgrading low-income households, benefitting those in fuel poverty. This brings the Warm Homes Plan to just under £15 billion in capital investment, making it the biggest energy efficiency programme in British history.

In December 2025, the Department for Energy Security and Net Zero (DESNZ) consulted on proposals to amend the ECO4 Order, [footnote 2] specifying the government grants from which measures cannot receive money. [footnote 3] The consultation satisfies a statutory requirement to consult when making an order under the relevant sections of the Gas Act 1986 and the Electricity Act 1989, and relates only to matters pertaining to the amendment order itself. [footnote 4] Government is not consulting on related matters not required by the relevant sections.

DESNZ received 128 responses to the consultation from a variety of stakeholders ranging from larger energy suppliers to trade associations to individuals with an interest in energy efficiency and fuel poverty.

The final policy decision set out in this document reflects the responses to the consultation.

  • The ECO4 Order will be amended to specify the government grants from which ECO4 measures cannot receive money.

Amending the ECO4 Order

Consultation question

  1. Do you agree that the ECO4 Order should be amended to specify which government grants cannot be used to fund measures?

Summary of responses

We received 128 responses to the question. Of these, 82 agreed, 45 disagreed and one responded neutrally.

Concerns were raised over the exhaustive nature of the proposed legislation, allowing measures funded by public grants not listed, to be qualifying actions.

Government response

We will specify which government grants cannot be used to fund measures. Obligated suppliers have spent more than was anticipated in the impact assessment for the scheme that was published before it was established. As outlined in the consultation, without intervention via direct funding from DESNZ, Ofgem would consult on an upward adjustment to the price cap to reflect the under recovery.

Specifying which grants are subject to the provision will allow money to be paid directly to suppliers and reduce the risk of an increase to consumer energy bills, should government decide to pay energy suppliers.

A measure will not be a qualifying action, if it receives grant funding from the following government schemes:

  • Social Housing Decarbonisation Fund
  • Boiler Upgrade Scheme
  • Green Homes Grant: Local Authority Delivery
  • Green Homes Grant: Voucher Scheme
  • Home Upgrade Grant
  • Warm Homes: Local Grant
  • Warm Homes: Social Housing Fund
  • The Scottish Government’s Home Energy Scotland Grant and Loan scheme
  • The Scottish Government’s Warmer Homes Scotland scheme
  • The Scottish Government’s Area Based Schemes
  • The Scottish Government’s Social Housing Net Zero Heat Fund
  • The Welsh Government’s Optimised Retrofit Programme
  • The Welsh Government’s Warm Homes Nest scheme

  1. HM Treasury (2025): Budget 2025 in full. ↩

  2. Article 12 of the Electricity and Gas (Energy Company Obligation) Order 2022. ↩

  3. Department for Energy Security and Net Zero (2025) GOV.UK: Amending the ECO4 Order to allow cost recovery via grant funding. ↩

  4. Section 33BD of the Gas Act 1986, and section 41B of the Electricity Act 1989. ↩

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