On 4 February 2009, Ofgem published the final set of green supply guidelines following the consultation which was launched in July 2008.

In an open letter announcing the final green supply guidelines, Ofgem explained the overarching aim of the guidelines is to reduce customer confusion by providing clarity to customers on whether the tariff they purchase, that has been branded as "green", has an environmental benefit over and above what suppliers are already required to do.

Ofgem announced that a sufficient number of suppliers, including Good Energy, E.ON Energy, ScottishPower Energy, EDF Energy, RWE Npower, Scottish & Southern Energy and British Gas have signed-up to the final green supply guidelines and accreditation scheme.

RESULTS OF THE CONSULTATION

A key response to the consultation concerned the scope of the guidelines. It was decided that the final guidelines will cover only domestic consumers and small and medium enterprise sectors but will exclude the Industrial & Commercial (I&C) sector. Ofgem explained that the I&C sector should look to Defra's Guidelines for Company Reporting on Greenhouse Gas Emissions for how green supply contracts should be treated. Further, the guidelines cover renewable tariffs only, not low carbon tariffs such as good quality Combined Heat and Power or nuclear.

Another key change is the inclusion of a volume test to ensure that suppliers do not double-count the "greenness” of a unit of renewable electricity. A supplier must also demonstrate that the environmental measure it undertakes, as part of the green tariff, results in the abatement of at least a minimum threshold of Carbon Dioxide equivalent (CO2e) emissions. This replaces the star-ranking system that was proposed in the consultation document based on financial contribution.

THE FINAL GUIDELINES

The guidelines require that, where tariffs are marketed as "green” by suppliers, they must apply the following principles:

  • transparency: tariffs need to be clear and consistent with public understanding and expectations as to what constitutes green supply;
  • evidence of supply: suppliers will need to have and retain evidence, for the duration of the relevant compliance period, to verify all claims regarding both the source of electricity supply and additionality;
  • additionality: customers choosing a green tariff need to be able to be satisfied that their support is contributing to additional environmental benefits or additionality;
  • accreditation: suppliers who have signed up to the guidelines will be required to agree and develop an accreditation scheme within given time periods.

TIMETABLE

Ofgem expects that the participating suppliers will begin implementation of the accreditation scheme immediately, with a view to accrediting green tariffs by Summer 2009. This process will be overseen by Ofgem to ensure that the structure adheres to the key principles outlined in the guidelines. Suppliers will be meeting with Ofgem this month to begin implementation discussions. This process may lead to detailed accreditation scheme rules which could be appended to the guidelines.

THE FUTURE

Once the accreditation scheme is in place and sufficient experience has been gained, Ofgem will review the guidelines to determine the possibility of extending them to include the I&C sector, low carbon tariffs and green gas. Ofgem will also revisit the additionality thresholds and consider the possibility of developing a ranking system, based on CO2 emissions abated, that allows for greater differentiation between tariffs.