Energy Performance Certificate (EPC) reform: government response

To: Professor Russel Griggs OBE
From: Alasdair Allan, Minister for Climate Action

Energy Performance Certificate reform

Thank you for your letter of 2 May 2025 to Gillian Martin, Cabinet Secretary for Net Zero & Energy. As portfolio Minister with responsibility for Energy Performance Certificates (EPCs) I have been asked to reply.

I welcome the Regulatory Review Group (RRG)’s scrutiny of the Scottish Government’s final proposals for EPC reform, set out in our January 2025 Government Response to our 2023 public consultation. In your letter, you make a series of helpful recommendations, which I am happy to accept.

I would like to offer an initial response to each of the points you make and am happy to commit to my officials returning to the Group to update you on progress on these in future, as requested.

Recommendation 1: Further consideration is needed regarding how the proposed changes to the EPC will interact with the Home Report.
Our reforms to EPCs are progressing in parallel with the review of the Home Report, and have been presented and discussed with external experts advising on future reforms to the Home Report. I would like to assure the Group of Ministers’ commitment to ensuring continued alignment with the Home Report, of which the EPC already forms a part.

Recommendation 2: The RRG notes concerns raised about potential unintended consequences for consumers if mortgage providers start using the revised EPC ratings as criteria for lending.
I am happy to accept your specific recommendations around engagement with the financial sector on connections between EPC ratings and mortgage eligibility, and with the Financial Conduct Authority regarding Consumer Duty requirements.

The Scottish Government has already established a regular forum for engagement with key stakeholders through our EPC External Reference Group, of which UK Finance is a member representing the financial sector and lenders, and which also includes participants representing estate and lettings agents, and conveyancing solicitors. We will continue to be advised by them alongside this specific engagement which the RRG suggests and which I agree is essential.

Recommendation 3: Constructive working relationships with local authorities and the Scottish Government are critical to the success of implementation.
I welcome this recommendation, which is consistent with our existing ongoing engagement with local government representatives at Ministerial and Spokesperson level through COSLA, and at official level through bodies such as the Scottish Energy Officers Network, Association of Local Authority Chief Housing Officers, Trading Standards Scotland and Local Authority Building Standards Scotland.

As my officials set out in their presentation, the Scottish Government has already established a small team to lead on operational governance of the new regulations, which includes enforcement by local authorities. The team is engaging regularly with the groups listed above to ensure that local authorities understand the forthcoming changes to the new regulations. This will include establishing a short life working group to develop a new enforcement ‘toolkit’ and guidance in collaboration with local government officers, and will include review of the penalty charge regime within two years of the regulations coming into force.

Once the regulations are in force (expected in autumn 2026) the team will also be expanded through recruitment of a team of auditors and inspectors who will liaise with enforcement authorities in local government (see below).

Recommendation 4: The management and capacity of on-site inspections presents potential challenges.
I appreciate the Group’s concerns on this matter and would like to reassure you that planned resourcing (to be funded, as set out in our technical consultation of February 2025, by EPC lodgement fees) will be proportionate to the % of on-site inspections required to maintain alignment with the revisions to the EU Energy Performance of Buildings Directive. Our plans will ensure that there are sufficient numbers of auditors to meet the requirements of the Directive and budget to cover travel for onsite visits.

Our recent consultation set out that we will review the on-site inspections function within two years of the regulations coming into force. We are working closely with the governments of Ireland and Denmark (through their Sustainable Energy Authority and Energy Agency, respectively) who already have such onsite inspection regimes, to benchmark staff capacity and design of operational systems.

Recommendation 5: Comprehensive public engagement is essential to ensure consumer understanding and support.
I fully accept this recommendation and agree that it is vital that consumers are informed of the changes and understand why we are making them and what they will mean for them in practice. That will be particularly important given the role that we propose the new EPC rating system could play in supporting proposed regulations such as a private rented sector minimum energy efficiency standard.

I also note your points regarding terminology used to describe different types of heating system and appreciate the challenge raised about industry norms and standards which we also have to balance against language that makes sense to the general public. As my officials outlined, these terms are not yet fixed and we are moving into a second phase of user testing with consumers to further refine the language used to ensure that it is accessible and meaningful to consumers. We have a good period of time still to work on this before the regulations come into force in autumn 2026.

I hope that this response is helpful and would of course be happy to meet with you in summer to discuss this further. That would also be an opportune time to discuss latest progress of our proposed Heat in Buildings Bill. Please contact my private office to set up a suitable time.