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Item 02 - Gateshead Warm Zone reportdoc - Gateshead Council

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Item 02 - Gateshead Warm Zone reportdoc - Gateshead Council

     REPORT TO CABINET

     5 July 2005

TITLE OF REPORT: Gateshead Warm Zone

    REPORT OF: Derek Quinn, Group Director, Development and Enterprise

    EXECUTIVE SUMMARY

    Warm Zone Limited has prepared, on behalf of the Council, a draft business plan to set up a ‘Warm Zone’ in Gateshead. The ‘Warm Zone’ will tackle fuel poverty and aims to increase energy efficiency.

    This report requests Cabinet to agree to the implementation of the proposals set out in the draft business plan.

Policy Context

    1. A Warm Zone will contribute to the health and environment objectives of

    Towards 2010. The health objective states that local people should live

    longer and healthier lives and the environment objective states that

    communities should live in and contribute to a clean, pollution free,

    attractive and sustainable environment.

    2. The Home Energy Conservation Act 1996 includes a target of 20%

    improvement in energy efficiency within 10 years and 30% in 15 years. The

    Council adopted these targets in 1996 as part of its Housing Energy

    Strategy.

3. The Council’s Fuel Poverty Strategy was agreed on 27 November 2002. Its

    aim is to minimise the incidence of fuel poverty by increasing the number of

    energy efficient homes in Gateshead.

Consultation

    4. The Environment and Employment and Economy Portfolio holders and

    officers of the Gateshead Housing Company have been consulted on the

    contents of the report and support the proposals.

Implications

    5. The Strategic Director of Finance and ICT confirms that budgetary provision

    exists for the proposed Council contribution of ?9,000 per annum as outlined

    in the draft business plan. In addition, on 26 April 2005 Cabinet agreed to

    provide rent free accommodation at Swinburne House for the project lead LALLCA-73739

    agent up to 31 March 2007. The Council will thus incur a loss of rent from

    Swinburne House. Should the contract with the project lead agent be

    terminated for any reason, the provision of rent free accommodation would

    also be terminated.

    6. The overall funding to the Gateshead Warm Zone will be continuously

    monitored by the Council and any arising implications will be reported to

    Cabinet.

Recommendations

7. It is recommended that Cabinet:

    (i) Agrees to the development of a ‘Warm Zone’ as outlined in the draft

    business plan. Further details of the business plan are included in

    Appendix 1.

    (ii) Agrees to contract with Warm Zone Limited (WZL) as the project lead

    agent, in order to develop and implement the project in accordance

    with the proposals set forth in the draft business plan. This is subject

    to details of the contractual engagement of WZL and governance

    procedures being agreed by the Strategic Directors, Legal and

    Corporate Services and Finance and ICT, and the Group Director,

    Development and Enterprise.

    (iii) Agrees to the appointment of Scottish Power as the Council’s

    principal funder and Energy Efficiency Commitment (EEC) partner for

    the project for the reasons set out in appendix 1.

    iv) Notes that further reports will be brought to Cabinet to monitor the

    implementation of the Gateshead Warm Zone and outcome of

    securing any additional and currently uncommitted funding.

     For the following reasons:

     i) To pursue policy objectives and meet the relevant targets therein.

     ii) To reduce fuel poverty in Gateshead.

CONTACT: Mike Boase extension 3430 PLAN REF: 549

    LALLCA-73739

    APPENDIX 1

Background

    1. The Council‟s Housing Energy Strategy 1996 sets targets of 20%

    improvement in energy efficiency within 10 years and 30% in 15 years. Up to

    31 March 2004 the energy efficiency savings were slightly more than 15%. On

    a pro rata basis across both public and private sectors we should have

    achieved 16%. Although the Housing Strategy 2003-2008 has since been

    assessed as „fit for purpose‟, more work is needed to improve energy

    efficiency in all sectors.

2. The Council‟s Fuel Poverty Strategy was agreed on 27 November 2002. Its

    aim is to minimise the incidence of fuel poverty by increasing the number of

    energy efficient homes in Gateshead. Strategic Objective 5 is to facilitate

    partnerships to draw funding, expertise and other resources into Gateshead to

    assist in the eradication of fuel poverty.

    3. In 2003/2004 (latest figures available), the spend on energy efficiency

    measures in Gateshead was:

    Gateshead Council ?1.58m

    EAGA (Warm Front Grants) ?0.59m

    ScottishPower ?0.1m

    Total ?2.27m

    4. The Council needs to increase its activity in energy efficiency in housing in

    order to achieve its targets and objectives. The adoption of a Warm Zone

    approach will significantly contribute to the achievement of these objectives.

    5. The Council agreed in principle to set up a Warm Zone in Gateshead, subject

    to the detail being agreed (Minute C103 14/9/04). It also agreed to the

    preparation of a business plan for the implementation of a Warm Zone. This

    document has been prepared and shall in its final form address the following

    issues :

    ; Identify and approach potential partners

    ; Secure and identify involvement and necessary funding

    ; Produce a detailed programmed development plan leading to and

    including the production of the Business Plan for the establishment of

    Gateshead‟s Warm Zone

    ; Promote the concept of energy efficiency across the Borough and the

    Warm Zone

    6. The main aim of a Gateshead Warm Zone will be to eliminate a significant

    percentage of fuel poverty in the borough over a period of 5 years which has

    health and quality of life benefits in line with the Council‟s Fuel Poverty and

    Local Agenda 21 Strategies. In achieving this aim several actions will be

    taken:

    LALLCA-73739

    ; improving energy efficiency across the entire housing stock regardless of

     tenure, providing a positive contribution to Gateshead‟s Home Energy

     Conservation Act (HECA) strategic objectives

    ; efficiently and effectively identifying and targeting delivery of the energy

     efficiency commitment measures in all tenures (cavity wall insulation, loft

     insulation, heating etc.)

    ; stimulating domestic energy efficiency awareness generally and

     contributing to the reduction of pollutants (particularly carbon emissions) ; encouraging take up of all welfare benefits

    ; creating new employment and training opportunities

    ; maximising available funding

    ; improving control of existing schemes that take place within Gateshead

     e.g., Warm Front grants.

    7. The Warm Zone shall bring together and work closely with a group of interested stakeholders who shall be represented on a Steering Group made up of representatives from Gateshead Council, Gateshead Housing Company and other stakeholders including the principal fund provider, Registered Social Landlords and Private Landlords. The Steering Group will determine the strategic direction and policy for the Gateshead Warm Zone and oversee its implementation and delivery, integrating existing schemes and implementing new initiatives as appropriate although ultimate control for the project shall reside with the Council through its legal agreement with the project lead agent.

    Proposal - Gateshead Warm Zone Business Plan

    8. Contractual Arrangements

    The Council will contract with Warm Zone Limited (WZL) for the delivery of the Gateshead Warm Zone (GWZ) and the contract shall make provision for:

    (i) GWZ to provide an operational budget for the forthcoming year and each

    subsequent year of the project and shall be contractually bound not to

    materially deviate from it;

    (ii) any significant expenditure or management/senior appointments falling

    outside the pre-agreed budget and staffing profile shall require prior

    written approval from the Council;

    (iii) GWZ shall submit trading accounts no less than quarterly to the Council;

    (iv) all GWZ staff except for temporary seconded Council staff shall be

    employed by WZL who shall assume responsibility for payroll

    administration and other staff issues;

    (v) requests for payment by WZL for the GWZ for measures carried out by

    the contractor shall be monthly in arrears and supported by a Surveyor‟s

    report confirming the work has been carried out and authorised by at least

    one senior manager of WZL. The Council shall however reserve the right

    to inspect any work with minimum notice;

    LALLCA-73739

    9. The Council shall assess, approve and appoint contractors and shall be able

    to terminate any contract with a contractor should they fail to comply with

    quality and other requirements, which shall be contractual obligations. GWZ

    shall assume the role of administering the contractors on behalf of the Council.

    This shall not apply to Gateshead Housing Company on non-energy efficiency

    works.

    10. The Council will contract with WZL for the delivery of the Warm Zone as

    detailed herein. WZL will set up a local team the Gateshead Warm Zone

    (GWZ) who will manage the process of assessment and the planning, delivery

    and approval of works carried out. GWZ will be located in Swinburne House

    as agreed by Cabinet on 26 April 2005.

    11. Gateshead Council will fulfil the role of treasurer and banker for all physical

    measures work carried out on properties within Gateshead. The majority of

    funding will come from the proposed Energy Efficiency Commitment (EEC)

    supplier, ScottishPower and it is hoped that this will be supplemented by

    resources and funding from Bridging NewcastleGateshead, Single Housing

    Improvement Pot and the Gateshead Housing Company (who will manage the

    delivery of energy efficiency works in conjunction with the Decent Homes

    Programme), subject to the approval of bids or a successful two star appraisal

    for the Gateshead Housing Company.

    12. GWZ will ensure that all physical measures (e.g.insulation) works are carried

    out to the appropriate standard by independent contractors, who will be

    appointed by and be expected to contract with the Council. GWZ will inform

    the Council of works completed and the most appropriate source of funding;

    the Council then reimbursing the contractor upon receipt of an invoice. A

    contractor will not be permitted to submit an invoice to the Council without

    GWZ signing off the physical works.

    13. Although subject to local amendments, the above structure is essentially the

    same within every Warm Zone, of which there are 9 in the country.

    14. The Gateshead Warm Zone business plan has the following funding features:

LALLCA-73739

    Total Yr1 Yr2 Yr3 Yr4 Yr5 Status

Source ?000’s ?000’s ?000’s ?000’s ?000’s ?000’s

GC 1,265 173 273 273 273 273 To be confirmed

GHC 4,000 800 800 800 800 800 Subject to 2 Star

    status

ScottishPower 15,500 3,100 3,100 3,100 3,100 3,100 Confirmed

National Grid 420 100 80 80 80 80 Confirmed

    Transco

Lottery Funding 250 50 50 50 50 50 Bid submitted 31 May

    2005

Warm Zone Ltd 1,600 320 320 320 320 320 Confirmed support for

    assessors

    23,035 4,543 4,623 4,623 4,623 4,623

Sources of Funding

15. Gateshead Council

    15.1 The cost to the Council of the Gateshead Warm Zone management and

     administration team and energy conservation measures will be ?173,000 in

     the first year and ?273,000 for each of the four subsequent years. It is

     made up as follows (to be confirmed):

    ; Bridging NewcastleGateshead ?100,000 (?50,000 in the first year), for

    energy conservation measures.

    ; Single Housing Improvement pot ?100,000 (?50,000 in the first year), for

    energy conservation measures.

    ; 3 Administration posts ?50,000 from Bridging NewcastleGateshead or

    SHIP.

    ; The Council is required to contribute an additional 5% of the total funding

    sum secured from Bridging NewcastleGateshead and SHIP. Over the

    planned five years programme for GWZ, both sources may together

    contribute a total of ?900,000. The Council‟s contribution is ?45,000,

    equating to ?9,000 per annum.

    ; The accommodation cost of ?14,000 per year for Swinburne House was

    agreed by Cabinet on 26 April 2005 (Minute C461) and shall form the

    basis of an “in kind” contribution from the Council to the GWZ project.

    16. Warm Zones Limited

LALLCA-73739

    16.1 Warm Zones Ltd have confirmed that they will make ?1.6million available for

    the training and support of surveyors.

17. Gateshead Housing Company

    17.1 Part of the physical measures works to be carried out within the GWZ will

     include the insulation works planned to be carried out by the Gateshead

     Housing Company upon achievement of a two star rating and the subsequent

     release of additional government funds for Decent Homes. The creation of

     the GWZ allows the Gateshead Housing Company resources to be used as

     part of a much greater programme for addressing fuel poverty for Gateshead

     residents. The ?4m total proposed contribution from the Gateshead Housing

     Company in the above table shall assist to meet the Decent Homes standard

     in addition to addressing fuel poverty.

18. Lottery Funding

    18.1 A bid for Lottery Funding was submitted on 31 May 2005. Should this be

    successful it will be used to provide an enhanced welfare benefits and

    assessment service; providing greater links to Welfare Rights Support. This

     has proved a valuable additional service to residents in other Warm Zones.

     However, although a failed bid will result in the loss of this additional service it

     will not compromise the physical insulation measures to be provided by GWZ.

    19. Every effort will be made to secure the funding outlined above. A large

    proportion of the funding has already been confirmed, providing a secure

    foundation for the scheme. On this basis it would be possible to operate the

    Gateshead Warm Zone at a less ambitious level if necessary. The decision for

    GWZ to become operational, with the final Business Case, will be subject to a

    future Cabinet decision.

Selection of an Energy Efficiency Commitment (EEC) Partner

    20. A major partner in the Warm Zone is the Energy Efficiency Commitment (EEC)

    partner. Following an open tender procurement procedure inviting major fuel

    suppliers to be our partner, it is recommended that ScottishPower be

    accepted as the Gateshead Warm Zone EEC partner. They have offered

    ?15.5million as their contribution, made up of funds for measures, team costs,

    IT and other support. (The Energy Efficiency Commitment (EEC), requires

    electricity and gas suppliers to achieve energy saving targets by promoting

    improvements in energy efficiency in households in Great Britain. Suppliers

    encourage and assist their domestic consumers to make energy savings

    through measures such as cavity wall and loft insulation and energy efficient

    boilers, appliances and light bulbs. The second EEC runs for the period 2005-

    8 and is the successor to first EEC which completed in April 2005.)

    21. The GWZ intends to fund energy efficiency measures as follows:

LALLCA-73739

    (i) where there is currently no cavity wall or loft insulation the insulation will

    be provided free in the social sector.

    (ii) all persons over the age of 60 years of age in the private sector will

    receive free cavity wall and loft insulation if they currently have no such

    insulation.

    (iii) householders in fuel poverty (where more than 10% of the household‟s

    net income is spent on heating capable of sustaining normal winter

    comfort levels) in the private sector will receive cavity wall insulation and

    loft insulation free of charge; and

    (iv) householders who are not in fuel poverty will be able to take advantage of

    discounted energy efficiency measures.

    22. There will be a contribution from the GWZ for energy conservation measures

    for households who currently have no cavity wall insulation and less than

    250mm in loft insulation.

Structure

    23. The management and delivery team will be led by a Warm Zone Director, who

    has been appointed by National Grid Transco and funded through the

    National Grid Transco Affordable Warmth programme and employed by Warm

    Zones Limited. The Director will be responsible to Warm Zones Ltd. and the

    Steering Group and will be supported by a team of 36 posts funded from a

    combination of Scottish Power, Gateshead Council and other sources.

24. Bids to Single Housing Investment Programme and/or Bridging

    NewcastleGateshead will be submitted to fund the Council supported posts (3

    administration posts costing approx. ?50,000 per year for five years). Further

    Gateshead Council support for welfare rights activity is still to be determined.

Involvement of Gateshead Housing Company

    25. ScottishPower has indicated that as part of its EEC partner contribution to the

    Warm Zone it will provide ?6,850,000 (from the ?15.5m contribution) for

    energy efficiency measures (such as cavity wall insulation and loft insulation),

    contributions to the installation of condensing boilers, energy efficiency advice,

    benefits advice, a Void Scheme, and IT support. This in effect means that the

    partnership could double the Gateshead Housing Company‟s projected

    programme for energy efficiency measures.

Alternative Option

    26. Investigations into alternative ways of increasing energy efficiency and

     reducing fuel poverty have been investigated and included in the Cabinet

     report above. This has established that the most effective and efficient way to

    achieve these aims are the establishment of a Warm Zone in Gateshead. The

    draft business plan suggests that the Warm Zone approach will achieve, and LALLCA-73739

    exceed, the volume of fuel conservation measures activity anticipated. The

    alternative to adopting the warm zone approach would be to seek piecemeal

    funding for dealing with fuel poverty and increasing energy efficiency through

    other Energy Efficiency Commitment schemes such as Health through

    Warmth or the Community Energy programme. This approach does not give

    the benefits of scale, funding and systematic approach that the Warm Zone

    concept provides.

Consultation

    27. The Environment and Employment and Economy Portfolio holders have been

    consulted on the contents of the report and support the proposals.

    28. Officers from Gateshead Housing Company and the Gateshead Primary Care

    Trust have been consulted throughout the process of developing a Warm

    Zone proposal and support the proposal.

Implications of Recommended Option

29. Equal Opportunities Implications - Gateshead Warm Zone will help to

    ensure that none are excluded because of fuel poverty.

30. Crime and Disorder Implications - there are no implications for crime and

    disorder.

31. Environmental Implications - implementation of a Warm Zone would mean

    a significant improvement in the energy efficiency of housing in Gateshead

    together with reduced COemissions. 2

32. Human Rights Implications - there are no implications for human rights.

33. Ward Implications - all wards are included in the Warm Zone.

Background Information

Housing Energy Strategy 1996

    Fuel Poverty Strategy 2002-3

    Local Agenda 21 Strategy

    LALLCA-73739

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