We wrote a variety of blog postings on the UK’s Carbon Reduction Commitment (Energy Efficiency) Scheme (‘CRC’) whilst the Government was consulting on the draft Regulations. A lot of the information must have seemed unimportant prior to April 2010 but now the CRC Energy Efficiency Scheme Order 2010 (‘CRC Order’) is in force and many businesses will need to evaluate whether, how and to what extent they must comply with the CRC.
The CRC is aimed at organisations which are not energy intensive and will cover many sectors including offices, retailers and hotels. The CRC affects overseas companies that do business in the UK and applies whether or not they do so using UK subsidiaries. Private equity investors have to determine how to manage their CRC liabilities.
This posting covers how to determine whether the first phase of the CRC Order is going to apply to your business and provides pointers on what to do next.
STEP 1 – identify which companies were in your corporate group as at 31 December 2008. If there are none but you ran a business in the UK you will still fall within the legislation.
STEP 2 – identify any half hourly meters that supplied your UK businesses with electricity in 2008. If you had no half hourly meters in 2008 then you will not fall within the first phase of the CRC. If you had at least one half hourly meter then you will have to comply with the CRC Regulations in one of three ways (discussed below after Step 4).
STEP 3 – identify what energy supplies your UK businesses are responsible for (and this includes direct supplies and self supplies). Generally the organisation that is responsible for the energy supply will be the party who will need to report on that energy supply for CRC purposes although there are some exceptions to this.
STEP 4 – having identified through steps 1 – 3 that you are required to comply with the CRC Order, the next stage is to establish whether you have to comply in full or have reporting obligations and this will depend on how much electricity you consumed through your half hourly meters in 2008 –
Consumption of up to 3,000 MWh will mean you have to register at the CRC online registry and supply information about the meters.
Consumption between 3,000 MWh up to 6,000 MWh means you have an obligation to register and supply information about your group’s UK electricity consumption.
Consumption of 6,000 MWh + requires full compliance including detailed reporting of most carbon emissions for your business and from April 2011 buying allowances for each tonne of CO2 you expect to emit each year. These allowances will be sold at a fixed price initially but after two years available allowances will be capped and allowances will have to be bought at auction.
This posting is hugely simplified to create signposts for what should be done. There are many complications around what you can exclude from the supply figures, what happens to franchise businesses, the landlord/tenant relationship issues, detailed reporting requirements and all of the penalties that can apply if you breach the CRC Order. The point of the posting is just to help businesses to decide if CRC is something that can be ignored or something to be looked into more closely.
The Environment Agency, who oversees the CRC, has a lot of useful information. Also, the Department of Energy and Climate Change’s user guide is, well, quite useful.
We have a specialist team who can advise on the impact of the CRC and we are offering seminars and workshops to existing clients. Get in touch with your usual Reed Smith contact or the authors for details.