As some readers will be aware, Article 8 of the Energy Efficiency Directive introduces the requirement across the EU for a programme of regular energy audits for large enterprises (non-SME) by 5 December 2015 (and every 4 years thereafter). In the UK the requirement has been implemented by the Energy Savings Opportunity Scheme (“ESOS”) via the Energy Savings Opportunity Scheme Regulations 2014 (the “ESOS Regulations”). The compliance deadline of 5 December 2015 is on a Saturday, the prior working day being 16 weeks away from today. Whilst some organisations are on track with compliance, others, sometimes due to structural complexities are struggling to gather appropriate information to complete the assessment. It is not too late to start or accelerate plans to ensure compliance and potentially secure cost benefits.

Points to consider

It is essential that the appropriate organisational group is identified in the first instance. This is the key hurdle. The Companies Act tests apply which are wider than some may initially consider. 

In particular:

  • For private equity you have to consider the wider group, including looking upwards at non UK organisations and where portfolio companies sit.
  • Assets held in trust are included if the organisation that is party to the agreement for the supply of energy to the assets qualifies for ESOS.
  • There are specific rules regarding trustees, operators and alternative investment fund managers and franchises.
  • The relationship with overseas undertakings should be considered: 
    • ESOS applies to overseas undertakings with non-incorporated UK establishments if they:
      • have at least 250 UK employees (e.g. paying income tax in the UK); or
      • are part of a global corporate group which has a large non-incorporated UK undertaking or UK establishment which meets the ESOS qualification criteria.
  • Conversations about which organisation consumes the energy and should account for it in the assessment should be progressed to ensure adequate representation of energy supplied.

Sanctions for non-compliance

There are civil penalties for specified breaches of the ESOS Regulations. Amongst others, failure to undertake an energy audit may attract an initial penalty of up to £50,000, a daily penalty of up to a maximum of 80 working days and publication of the penalty. Separately, failure to notify, can attract an initial penalty of up to £5,000, a daily penalty of £500 upto a maximum of 80 working days and publication. Making a false or misleading statement can attract a penalty of up to £50,000 and publication.

Position in other Member States

Each Member State has to transpose the EED’s requirements in to domestic law. This is happening at different rates of progression to which our snapshot guide refers