In earlier postings we’ve introduced the UK’s carbon reduction commitment (CRC). During May UK businesses with half hourly meters should have received letters from the Environment Agency (EA) introducing them to the CRC and the obligations the businesses will face. However, please note that letters went to the billing addresses for each relevant meter. The EA states that it does not know which parent company will be responsible for compliance with the CRC and that applies across the whole of the business of the UK group (covered in a previous posting). It is possible that your organisation has received a letter but there may be complications: it could have gone to a person who no longer works at the company; may be overlooked; or may not reach the right level of management. Even without the initial EA letter getting to the right people, businesses in the UK need to be prepared.

This posting covers the information to be gathered for the qualification year of 2008 and some practical steps to prepare for CRC compliance.

The calendar year of 2008 is critical for determining whether a UK business will fall into the initial three year phase of the CRC. This will be called the first Qualifying Year in the jargon of the Scheme.

What data do you need for 2008?

The location of the half hourly electricity meters and copies of your electricity supply agreements with the electricity suppliers for 2008.

Then work out your total electricity consumption for 2008 over the whole of your UK group of companies. Two things are clear.

  1. If you or your group consumed over 6,000 MWh of electricity through half hourly meters in 2008 you will have to comply.
  2. If you or your group had no half hourly meters in 2008 you will not have to comply.

If your group consumed between 3,000 and 6,000 MWh of electricity in 2008 through half hourly meters, your group will have reporting requirements to comply with but the obligations will stop short of the full requirement to buy and surrender allowances.

Consultation is taking place on whether half hourly metered supplies will be added to other electricity consumption for 2008 to determine qualification. We will keep you updated through future postings on this blog.

Note that to the extent your 2008 electricity supply came through your landlords, rather than direct to you from the electricity supplier because you are a tenant, then it is likely that your landlords will have the compliance burden and will be reviewing the terms of your leases to see if you can be charged for any of the costs incurred in complying with the CRC.

What will you receive to trigger compliance?

The EA had a target of contacting its customers in May and June where those customers in 2008 had half hourly electricity supplies to warn them of the CRC. After that in September 2009 the EA will send out packs to the billing addresses for each half hourly meter settled on the half hourly market which will trigger registration under the CRC Scheme. We understand the information will cover the 2008 electricity consumption figures for that meter.

Anyone concerned with compliance will want to be sure that the packs get sent to the correct person in their organisation and do not languish on a desk in the accounts or facilities departments.

Compliance officers are going to have a busy time. 2010 is the “footprint year” when all sources of fuel used by the CRC-affected businesses in the UK will have to be monitored and 90% of those fuel sources will have to be recorded. The business will need to prepare “evidence packs” and keep them up to date with all CRC relevant information. After the first year of the CRC Scheme a formal directors’ report will have to be sent to the EA.

Figures for fuel supplied can be requested from the energy suppliers but not until February 2011 which would make budgeting for allowances late and difficult. We recommend that businesses set up their own monitoring of fuel sources (except transport fuel which falls outside the CRC) for the footprint year themselves and do not wait for the suppliers.

The EA have published some FAQs on their website which you might find useful

Further postings will cover the reporting requirements, buying and surrendering of allowances and penalties for failing to comply.

Small Print

We have based this note on draft Regulations which may, of course, change.