Landlords, investors and management companies who are required to complete an energy audit under the Energy Savings Opportunity Scheme (ESOS) Regulations 2014 are urged to notify the Environment Agency of their compliance as soon as possible as the compliance deadline of 5 December 2015 looms. 

The ESOS Regulations require participants to measure energy consumption, identify and evaluate energy efficiency opportunities and for a nominated director to notify the Environment Agency by 5 December 2015 that an ESOS compliance audit has been completed. 

The ESOS Regulations apply to all ‘large undertakings’.  A large undertaking is one that on 31 December 2014 met any of the following criteria:

  • Has 250 or more employees (including all contracted staff, owner managers and partners employed by the organisation in the UK or abroad);
  • Has an annual turnover exceeding €50m (equivalent to £38,937,777) with a balance sheet exceeding €43m (equivalent to £33,486,489); and
  • Is part of a corporate group that includes an undertaking that meets criteria (1) or (2).  In this case, the entire UK operations of the corporate group will be required to participate in ESOS.  Global parents and overseas group undertakings are not subject to ESOS.

Undertakings include public and limited companies, partnerships, trusts, not-for-profit bodies engaged in trade or business and unincorporated associations.  Contracting authorities for the purposes of the Public Contracts Regulations 2006 (and Scottish equivalent) are not required to participate in ESOS.

Where an organisation fails to comply with its legal obligations it may be served with a compliance notice, enforcement notice or penalty notice.  Penalties for failing to comply are civil and, depending on the nature of the breach, can range from £5,000 - £50,000 with additional daily penalties.

Concerns regarding non-compliance

There is concern that many undertakings will fail to notify the Environment Agency of their compliance by 5 December.  Such organisations will be in breach of the ESOS Regulations and at risk of enforcement action and civil penalties.  Consequently the Environment Agency has taken the unusual step of announcing its intention to exercise discretions regarding enforcement action for non-compliance.

In particular, the Environment Agency has advised that:

  • It expects to exercise its discretion so that enforcement action will not normally be taken for late notification provided it is received by 29 January 2016 and the relevant undertaking has informed the Environment Agency it will miss the original deadline before 5 December.
  • Undertakings working to achieve ISO 50001 (the international energy management standard) certification as a form of compliance will have until 30 June 2016 to comply.
  • It will focus on bringing organisations into compliance using enforcement notices where necessary (normally allowing up to 3 months for organisations to remedy the outstanding compliance actions), using civil penalties only in the most serious cases.
  • In cases where an organisation’s energy use is at a domestic level (for the first compliance period this is 40,000kWh/yr or below) the Environment Agency will not normally enforce the requirements for fully-compliant ESOS audits or alternative routes to compliance, and lead assessor review.  Any such undertakings will still need to make a notification, confirm their energy use falls below the domestic threshold, consider and document opportunities for reducing their energy consumption; and record their compliance approach in their evidence packs.
  • Undertakings that qualify but have zero energy consumption will need to declare this to the Environment Agency.  In such cases the Agency will not normally enforce other elements of the scheme.

Any undertaking that is concerned that it will not comply fully by 5 December 2015 should inform the Environment Agency of this by this date via the Agency’s online portal, giving information on why they have been unable to comply and when they expect to submit their notification of compliance.  Such organisations are advised to do as much as they can before the deadline, including appointing a Lead Assessor, and include this information in their evidence packs.