The draft CRC Energy Efficiency Scheme Order 2013 (the “Draft 2013 Order”) is presently making its way through the legislative procedure for the UK Parliament and the devolved administrations. It is anticipated that the parliamentary process will be ended by May 2013, with the law taking effect from June 2013.

The Draft 2013 Order amends the CRC Energy Efficiency Scheme by implementing the proposals identified in the Government Response to the simplification consultation which was issued in December 2012. The Draft 2013 Order, when it becomes law, will mean that the existing CRC Energy Efficiency Scheme Orders will only have effect in relation to the remainder of the first phase of the Scheme as amended by the changes in the Draft 2013 Order. 

The Environment Agency issued updated guidance for participants for the remainder of Phase 1 of the scheme on 1 March 2013 incorporating future changes as a result of the Draft 2013 Order.

The Proposed Changes

The Key Changes For the Remainder of Phase 1

  • The number of fuels for CRC purposes is reduced to 2 – electricity and gas (gas only when used for heating purposes).
  • There is a 2% de minimis organisational based threshold on gas for heating. (If a participant’s gas consumption is below 2% of the amount of electricity reported in the first annual reporting year of a phase that participant will not have to report on gas for CRC purposes).
  • The date for the surrender of CRC allowances is extended to the end of October each year.
  • The use of Electricity Generating Credits is restricted.
  • Changes to Climate Change Agreement exemptions and emissions exclusion.
  • The Performance League Table will be replaced with energy use and emissions data publication.

Additional Key Changes For Phase 2 (from 1 April 2014)

  • Qualification criteria restricted to supplies through settled Half Hourly Meters.
  • Amendment to supply rules: CRC responsibility for energy supplies to include supply at the direction of another party. Removal of the requirement for payment for supply.
  • The tenant to be responsible for supplies where the landlord provides land on which the tenant builds its own building, under a ground lease arrangement with a duration of at least 30 years and provides a building for the tenant to occupy. There are also other restrictions to unconsumed supply application.
  • The 90 per cent rule and associated reporting requirements are removed and replaced with 100 per cent reporting of emissions arising from the 2 fuel types stated above.
  • The removal of the transmission loss aspect of the emissions factor for self-supplied electricity to recognise the efficiency benefits of onsite electricity generation.
  • The removal of all CRC obligations in respect of the energy supplies to facilities already covered under CCAs and/or EU ETS.
  • Any undertaking within the group is able to disaggregate for separate participation without having to meet the minimum qualification threshold provided that mutual agreement is reached by all parties.
  • Redefinition and renaming of significant group undertakings (SGUs as participant equivalents), designated changes and review of liabilities for designated changes.
  • Changes to the treatment of trusts: assessing trusts at an individual level rather than as a group, ie treating trusts as an undertaking. Trusts that do not have a majority beneficiary will be required to aggregate with their trustee or operator for qualification purposes only (and then could disaggregate).
  • There will be 2 sales of allowances for each compliance year based on predicted emissions or “buy to comply” at the end of the compliance year. The latter is expected to have a higher price.
  • All state funded schools in England are withdrawn from the CRC.

Implications

The proposed changes which take effect for the remaining years within Phase 1 shall impact on the immediate reporting year for 1 April 2012 to 31 March 2013 in respect of which an annual report must be submitted before the last working day in July. Consideration must be given to the impact of the reduction in fuels for CRC purposes; the 2% de minimis organisational based threshold on gas for heating, the restrictions on EGCs and changes to CCAs. The Guidance should be carefully reviewed. As previously announced there are no changes to franchise rules for hotels and other franchises. 

The registration window for Phase 2 commences on 1 October 2013. The year 1 April 2012 to 31 March 2013 is the qualification year for Phase 2. However, qualification assessment must be conducted on the basis of the new rules which may give additional flexibility to the registration of organisational groups including funds and trusts. For those with more complex organisational structures the position should be considered well in advance of October 2013.  

Links

The Draft 2013 Order

The Environment Agency Guidance on the remainder of Phase 1

The Environment Agency Guidance on Phase 2 Qualification