MCS Consulation – HIES’ response
Before commenting on the specific questions we feel are relevant to consumer protection, there is a general point which must be considered. The report references a number of consultations with installers/traders. It sets out details for a consumer code but does not appear to have been subject to any consumer consultation or review. Nor has there been discussions with any consumer code (as far as we are aware). The proposals relating to consumers appear driven by industry requirements and not consumer requirements. We have made a number of comments below but generally our view is that the consumer protection requirements are wholly inadequate to ensure appropriate levels of protection and would cause significant detriment to confidence in the renewables market. Further we would expect implementation of such changes to lead to the public questioning the benefits of schemes which fail to achieve even a minimum level of approval from the Chartered Trading Standards Institute.
1.1 Do you agree with a proposed new scheme structure to incorporate MISs containing the technical requirements for an installation, new Scheme Rules and Customer Duty? Please explain why, providing evidence to support your answer.
We do not agree with the new scheme structure and believe that standards are being lowered in support of making it simpler for contractors. Contractors may feel that the current structure is complex and costly but that shouldn’t mean standards should be lowered. In 2022 and 2023 we have seen an increase in enquiries from installers looking to enter the renewable sector – this is because of increase in consumer demand in solar.
The following has been taken from the MCS website here:
“The latest data from MCS (Microgeneration Certification Scheme) shows that the three months to the end of March 2023 has seen the most small-scale renewable installations of solar PV technologies, heat pumps and battery storage since Q4 2015.
More than 60,000 installations completed in Q1 2023, the highest-performing quarter since Q4 2015
- Solar PV installations from January to March 2023 numbered 50,719, a 114% increase on the number of installations for the same period in 2022
- 8,790 heat pumps deployed in Q1 2023, the second highest quarter for the technology in the scheme’s history
- Number of MCS certified contractors increasing as demand for renewable technologies continues, with number of solar PV contractors rising by 66% in 12 months.
- In March 2023 alone, MCS recorded a total of 20,868 installations, which was the highest performing March since 2012 and the second consecutive month in which the number of installations had exceeded 20,000.
- Overall, 449 new MCS certified contractors joined the scheme in Q1 2023, representing 13% of the 3,337 contractors on the scheme in total. The number joining the scheme in Q1 2023 is the highest in a three-month period since Q4 2011.”
The above clearly demonstrates that if there is an increase in consumer demand then installers will enter the renewable sector. Lowering standards now will only increase the risk later for consumers and hurt the reputation of the industry.
The Good Practice Principles for Standards Bodies issued by the CMA in May this year sets a number of principles for standards bodies. In these principles it covers the following which are likely to be conflicted by this approach.
The first of the principles is for standards bodies to actively promote their activities to help consumers understand their scope and purpose. The suggestion in the consultation is that MCS would provide certification for works but also set requirements for consumer expectations. There does not appear to be any suggestion that MCS would become an approved consumer code in this regard. It is hard to see the management of the conflicts which arise in setting appropriate levels at which works should be certified and managing appropriate consumer standards when being funded almost exclusively by the industry for whom works are being certified. It is suggested that it would be most appropriate for MCS to determine appropriate standards by remaining in a neutral position in relation to the industry and consumer requirements.
MCS is able to determine appropriate standards of work, training and monitoring by consultation with its industry members and the appropriately certified consumer codes. Taking this approach would make it clear that MCS is responsible for setting standards of work not managing other obligations.
The second principle is to carry out robust monitoring and vetting. The suggestions throughout the consultation are related to the vetting of works rather than issues surrounding consumer protection. MCS would need to consider further monitoring of any member’s consumer obligations if it is to add a consumer duty as suggested.
The third principle is considered further below but the suggestion that MCS would operate its own dispute resolution scheme does not consider the requirements for expertise in this area and how the additional costs of this to provide an effective resource for consumers would be achieved. Whilst comments are made on different types of ADR none is actually proposed as the independent provider the CMA specify is needed.
Further comments are set out below on the fifth principle.
1.2 In light of the proposed introduction of the MCS Customer Duty, are there any risks that need to be considered with the removal of mandatory Consumer Code membership? Please explain, providing evidence to support your answer.
We believe that removing the mandatory requirement of an installer being part of a consumer code will lower standards and increase risk. Consumer codes have been an important part of the renewable sector for over a decade and removing them effectively means starting from zero. What the scheme should focus on is enhancing the standards instead of lowering them. The proposed Consumer Duty is lightweight compared to the Code of Practice operated by HIES – the Consumer Duty is 5 pages whereas the HIES Code of Practice is 28 pages. The HIES Code of Practice exceeds the requirements of the Chartered Trading Standards Institute (CTSI) and we believe MCS Consumer Duty would not comply with CTSI requirements. This is a serious cause for concern and indicates a lowering of standards in favour of a simple solution for contractors. As required by principle one of the CMA good practice principles, if MCS is to issue a Consumer Duty code then this would need to clearly specify if it was compliant with the CTSI requirements and MCS would need to make clear how it operates to balance the interests of installer members and consumers.
Of similar importance is the need to monitor and vet based on the consumer code, and this is not something we see that MCS would have the scope to be able to do. The lack of a robust consumer protection arrangement by watering down the obligations of installers to meet the high standards required by consumer codes must raise questions about the partiality of MCS and is likely to create a confused arena for consumers where differing consumer protection arrangements are in place with installers promoting the benefits of the arrangements they have. This is likely to lead to new consumer protection arrangements which may have less protection for consumers. Any reduction below the minimum threshold of a CTSI approved code is extremely concerning and looks to be a change intended to benefit installers and reduce proper protections.
The comprehensive accreditation process HIES operates helps ensure that a certain level of contractor becomes a member. Our accreditation process has also recently been enhanced to take into account new entrants who are looking to potentially profit from the solar boom. MCS proposed accreditation process is weak in comparison and will ultimately mean contractors who should not be certified will become MCS certified. HIES also monitors its members on an ongoing basis and again has recently enhanced this process to adapt to changes in the marketplace. We are happy to walk through with government and other stakeholders our accreditation and monitoring process so they can actively see the difference between what HIES do compared to MCS proposal.
HIES also annually audits our members against the Code of Practice and have received great feedback from CTSI on the process. MCS are vague on how they will ensure contractors comply with their Consumer Duty and again will mean a light touch approach.
We must stress that MCS has never raised any concerns about HIES as a Consumer Code and find it very surprising and alarming that MCS are potentially looking to stop mandating Consumer Codes, and doing so with such a short consultation and implementation timeline. As far as HIES is concerned MCS are very happy with how we implement our Code of Practice. It does seem that these changes are more about making it simpler for a contractor and may be in MCS commercial interest rather than ensuring best outcomes for consumers and the industry.
Certificates for replacement, extended and adopted systems
2.1 What risks, associated with MCS allowing for the certification of replacement or extended systems, should be considered? Please highlight any differences or limitations for the various technologies certified.
When considering taking responsibility for additional or replacement works there is no guidance on failure which arise between the original works. Is the proposal that the new installer will become responsible for the whole of the works and if so, will that provide a new guarantee on the original works? Consumers must have clarity on what is being certified and if there is a responsibility for the original works will that involve additional costs? Effectively extending guarantees on old works has to include a cost and it should be transparent what this is to avoid consumers having unreasonable burdens placed upon them. Whilst extending certification could have benefits the cost of this and clear basis for it must be set out to ensure this is the case. Any extra costs being placed on consumers must be justified.
2.2 Should MCS allow for the adoption of incomplete installations and if so, what additional checks or consumer protections might be necessary? Please explain why, providing evidence to support your answer.
Again, how this will be done is key. Will there be additional costs and how will responsibility be allocated.
Risk-based compliance assessments
3.1 Do you agree with our plans to refocus the schemes CB delivered compliance assessments on ‘delivered quality’, with a reduced focus on a contractors back-office systems and paperwork? Please explain why, providing evidence to support your answer.
This arrangement seems to reduce the consumer protections available and increase the risk for consumers. The allocation of risk would need to be much more detailed to account for changes in staff, additional business changes in turnover/workloads and other material changes. The specification of fixed review periods give too much certainty to installers in respect of when visits may arise and as such an element of random inspections should be introduced. The concern here is this is a change to make processes easier for installers which reduce the protection for consumers.
3.2 Do you agree with the deployment of a scheme-wide compliance risk model that determines the volume and nature of contractor assessments, with the aim of ensuring more compliance effort is spent on higher risk contractors, with low-risk contractors rewarded with less site assessments? Please explain why, providing evidence to support your answer.
There is a risk with all installers and categorising installers limits protections. Whilst a risk-based approach may be justified the timescales between visits and lack of random inspections seems to limit significantly the consumer protections. Care should be taken with any such approach and any categorisation should only be considered after a significant amount of full compliance (remaining subject to random inspections).
3.3 Do you agree with the level of assessment burden described and that this can only decrease after 2 years on the scheme? Please explain why, providing evidence to support your answer. If you disagree, please propose alternative assessment levels and reasoning behind your recommendations.
Whilst it is acknowledged any risk-based approach must follow a period of full compliance it is not understood why this approach is needed. It seems to be stepping away from ensuring consumers obtain the relevant standards by watering down compliance requirements.
3.4 Do you agree with our proposed list of factors that should influence a contractors risk of non-compliance (increasing or decreasing)? Please provide any further recommendations in addition to the factors already described, along with their relative importance.
Again, it is not understood why this would benefit consumers.
Technical responsibility for each installation
4.1 Do you agree with a move away from Nominated Technical Person (NTP) to a Technical Supervisor recorded on the MID for each installation? Please explain why, providing evidence to support your answer.
It is not understood why there is a need for change. There is a concern that having different people with the responsibility will reduce the expertise in this area, lead to installers approving their own works (rather than having one person work across a firm) and does not confirm how standards will be maintained.
Pending (conditional) certification
Q5.1 Do you agree that a ‘pending certification’ option is of benefit to contractors struggling to secure a first installation without having to complete an installation at their own cost? Will this resolve the issue of contractors needing to complete a first installation to support their initial assessment, but unable to find a customer willing to contract with a contractor who isn’t already MCS certified? Please explain why, providing evidence to support your answer.
It is concerning here that the consumer does not appear to have been considered at all. Some form of protection as suggested in 5.2 would be essential in this arrangement.
Centralised complaint management
7.1 What are the most important aspects of complaint management that we should consider? Please explain why, providing evidence to support your answer.
The key aspect in complaint management is to quickly look at a complaint and try to resolve it. The longer a dispute carries on, the harder it becomes to resolve because both parties get entrenched into their own position. Over the last few years HIES has lobbied MCS to change the complaint management process. In particular, to make Consumer Codes the single point of contact for consumers wishing to complain, and the Consumer Code would then liaise with the Certification Body. The response received from MCS was that the Certification Bodies need to deal with the complaint if its technical and also, as part of the Certification Bodies responsibilities, under UKAS 17065 they have to show they are dealing with complaints. At certain times, HIES has had no alternative but to handle a consumer complaint because of the danger it poses to a consumer, and subsequently have been told by MCS to stand down. It is very distressing that over the last few years MCS have taken this stance and are now proposing a new model whereby they do not have the manpower to carry this function and are looking to outsource this. Making the Consumer Code the single point of contact would have been sufficient.
HIES have also lobbied MCS to implement service level agreements when Consumer Codes and Certification Bodies should respond to consumers or each other. This has always been met with resistance by MCS and even in the proposed new model, MCS will encounter the same issues because any dispute management organisation appointed by MCS will experience the same delays and lack of responses with some MCS Certification Bodies, as HIES has encountered.
7.2 How should we judge the success of our complaint management and dispute resolution, including through the partnerships we form for the provision of dispute resolution services and ADR? Please explain, providing evidence to support your answer.
HIES has 3 main stages to resolve complaints and our 2022 statistics can be summarised as follows:
- Stage 1 informal complaint handling – 63% resolution rate – average complaint handling 3.55 days.
- Stage 2 mediation – 32% resolution rate – average complaint handling 14.64 days.
- Stage 3 ombudsman – 5% of consumers are offered free access to the Ombudsman.
As you can see from the statistics above, 63% of complaints HIES received are resolved on average 3.55 days, 32% of complaints referred to mediation are resolved on average 14.64 days and if in the unlikely event we cannot resolve the complaint consumers have free access to the ombudsman. MCS proposed complaint handling service would need to exceed the above, which is unlikely, because of our years of experience in this area.
HIES provides free dispute resolution facilities to consumers and the MCS proposal to have a consumer pay a fee for this service is not following the philosophy of ensuring best outcomes for consumers. If MCS appoint a panel of dispute resolution providers, then this is going to be confusing and complex for both consumers and contractors – this seems very strange considering MCS are stating there are too many organisations involved and they are now proposing alternative organisations.
HIES recommends the following:
- Consumer Codes become the single point of contact for all complaints (if this works for Certification Bodies under UKAS 17065).
- There are clear service level agreements which Consumer Codes and Certification Bodies must adhere to in terms of responding to consumers and each other.
- A meeting once per quarter should take place between MCS, Consumer Codes and Certification Bodies to discuss the management of complaints.
- A data sharing agreement is in place between the key stakeholders to share statistics MI and best practice to improve the complaint management service.
8.1 Do you agree with the premise of the “MCS Guarantee” as a new financial protection to be associated with MCS certified installations? Please explain why, providing evidence to support your answer.
MCS are referring to the ”MCS Guarantee” as a new financial protection mechanism. It is not a fund of last resort because the intention is for the MCS Guarantee to replace Insurance Backed Guarantees (IBGs) which are a financial protection mechanism. We believe the MCS Guarantee will act similarly to an IBG, however MCS are not authorised as an insurer under the Financial Services and Markets Act 2000 (“FSMA2000”) (please correct us if this is incorrect). This may be a breach of Section 19 of FSMA2000.
It is unclear, how MCS will ensure that the fund is of appropriate substance to be able to meet all claims and we also believe that all customers with a MCS certificate should be entitled to claim on this fund – this is over £1 million MCS certificates issued. Therefore, how MCS will be able to fund this is a cause for concern. In accordance with the first principle of the CMA good practice principles MCS must confirm to consumers any issue which may arise with insufficiency of funds. We are extremely concerned that this suggestion may leave consumers with no remedy due to insufficiency of funds or the illegality of the scheme.
As MCS have stated the MCS Guarantee will be funded by MCS contractors, what would happen in a situation whereby the MCS Guarantee is receiving a high volume of claims and the number of contractors is reducing because the contractors want to leave MCS? How will MCS ensure that the monies within the fund are appropriate for the level of protection required for consumers. What would happen in a situation whereby the MCS Guarantee runs out of money or it closes down as there would be no protection mechanism in place under Financial Services Compensation Scheme (FSCS). We can only assume that the government would step in because MCS was novated by the government and they would need to take responsibility to ensure there is no consumer detriment.
Overall, the MCS Guarantee as a replacement for IBGs is a non-starter and a significant risk to government, consumers and the industry.
8.2 What should we consider in designing the “MCS Guarantee” and in our choice of a financial protection partner(s)? Please explain, providing evidence to support your answer.
It is worrying that MCS hasn’t designed the Guarantee and are already suggesting the cessation of IBG’s without a credible feasible alternative. Full details of the MCS guarantee should have been provided as part of the consultation. A scheme which is very likely to be illegal, which hasn’t properly considered the potential risks it would be responsible for and its funding is not a scheme. It is an idea which seems wholly inappropriate.
Also, a renewable energy fund should be established in addition to IBGs, which should be managed independently by a third party and audited in accordance with certain requirements. The renewable energy fund should be contributed into by various stakeholders and should cover anything where the consumer, using a MCS contractor, falls outside of the existing protection mechanism. The fund could be only used to honour any ombudsman or arbitration awards.
8.3 Do you agree that there is little or no consumer detriment from removing the current mandatory requirement for IBGs? Please explain why, providing evidence to support your answer.
The removal of the mandatory requirement for IBGs will have significant consumer detriment and HIES have seen first hand how consumers could have lost out if it wasn’t for an IBG. Insurance providers that HIES have used in the past shows the value that IBGs provide; in fact one particular contractor’s consumers have made claims on the IBG which has reached over £900,000 in total so far. Over £2.5 million has been spent in claims related to renewable installations. This type of information is available from the HIES Annual Report 2021 on the HIES website.
At the recent InstallerShow, a MCS representative stated that 9 out of 10 IBGs do not pay out – when questioned about this statement, the MCS representative clarified it related to one single provider. For the consultation MCS has collected evidence from only one IBG provider, whereas there are circa 8 providers within the renewable sector. It seems strange that MCS have only collected from one IBG provider and not approached all the other IBG providers. We believe MCS need to clearly state:
- Who the IBG provider is?
- What information was requested of the IBG provider?
- Clarify why they did not approach all IBG providers?
- What relationship do they have with this IBG provider? Is this the firm that MCS are in fact an appointed representative for thus a conflict of interest arises?
- For the consumers whose valid IBG claims were rejected, what is MCS’ plans to protect these consumers?
We recognise that there are differences amongst IBG’s across the sector – some cover workmanship only and some cover both product and workmanship. There are no clear guidelines to ensure that IBGs across the sector have commonality – hence why there may be variations in length and coverage.
We recommend the following:
- Clear definition is in place of what cease to trade means for a contractor.
- Clear guidelines on what an IBG should cover and the minimum length of IBG.
- A panel is established to assess the IBG and whether it meets the guidelines.
- A quarterly meeting with IBG providers who share their claims data confidentially and any issues are discussed.
- The panel meets every 6 months to discuss claims data and any improvements that need to be made with the IBG and gives IBG providers 6 months to implement.
8.4 Are alternatives to credit card protection of deposits necessary in today’s market and if so, what form of protection would you suggest? Please explain, providing evidence to support your answer.
Deposits should be protected regardless of the payment method being used. Many contractors do not have a facility to take credit card payments and mainly take BACS payments, therefore these deposits need to be protected by either giving the consumer the money back or completing the contract for the outstanding amount in the contract value. For example, customer has a contract for £10,000 and paid a deposit of £2,500 – the contract should be completed for the outstanding amount to be paid by the customer i.e. £7,500. Also, credit cards only cover contracts up to £30,000, and the liability lasts 6 years.
8.5 Should MCS prescribe the maximum deposit a contractor can take from their customer, as a percentage of the overall cost of an installation? Are there any other considerations in relation to a contractor taking deposits that we should review? Please explain, providing evidence to support your answer.
HIES currently stipulates that a contractor cannot take more the 25% of the contract value as a deposit. We believe that this level is sufficient, and a deposit should not exceed this. If a contractor is found to be taking more than 25% as a deposit, then HIES take immediate action and if necessary, sanctions.
HIES deposit protection protects 25% of the contract value (maximum £5,000) for 120 days from the date the customer signs the contract. We believe that this is sufficient time for an installation to take place and our statistics from 2022 and 2023 show that a significant number of installations registered with HIES with a completion date were completed within 120 days. With the unprecedent demand in solar, there have been three main problems:
- Contractors have signed up too many customers and are unable to fulfil orders for a number of reasons, including resource.
- Supply issues with battery storage where there isn’t enough stock in the UK
- G99 notifications taking longer than expected to be responded to by Distribution Network Operators (DNOs).
We believe battery storage supply is more consistent now and also the Energy Network Association (ENA) are introducing a portal in 2024 whereby a contractor can use the system to notify of a renewable energy installation and receive a response within minutes rather than months. Therefore the 120 days coverage is more than enough time for an installation to be completed moving forward.
A key stakeholder which has not been considered properly is manufacturers. They play an important role in ensuring consumers have a good experience with their renewable system. We have come across situations whereby a manufacturer has their product MCS certified but either have limited or no presence in the UK, which means if a consumer contacts a manufacturer, then they sometimes fail to respond. We believe it is important that not only is a manufacturer’s product certified but also the manufacturer itself is assessed based on what presence they have in the UK, what customer service levels do they operate and what is the process in the event a consumer has a product fault and the installer is unable to help. We have come across situations whereby the consumer has been told by the manufacturer to contract someone to take the solar panel off and send it back to them at their offices outside of UK. This is a critical element which MCS need to consider of the roles and responsibilities of a manufacturer.
We recognise that improvements should be made in consumer protection and would be happy to consult with MCS, government, Ofgem and any other stakeholder to discuss how we can enhance consumer protection instead of potentially lowering standards.
If you would like to discuss our response further, please email us by clicking here.