At the end of last week the Government announced a number of proposed amendments to the CRC Energy Efficiency Scheme (the “CRC”) following industry dialogue on simplifying the scheme.  Most of the amendments will probably be welcomed by many participants.

The main amendments are set out below.

Fixed price sale allowances

From phase 2 there will be two fixed price sales of allowances and there will no longer be any cap or auction.

It is intended that the sale at the beginning of the year (which will involve participants forecasting their energy usage) would have lower priced allowances than those sold in the sale at the end of year. Participants will be able to opt to participate in either or both sales if necessary.

Participants will no longer need to predict their usage or develop auctioning strategies.

Organisation rules

The organisational rules have been simplified so that CRC compliance will more closely follow natural business units. 

Participants will be able to disaggregate business units which are not large enough to qualify in their own right, and will also be able to disaggregate a business unit which results in the parent falling below the CRC qualification threshold.

If participants are content to continue in their current organisational groups, the new rules will allow this.

In relation to trusts, the rules will be amended so that the scheme will allocate responsibility to an entity with a genuine commercial interest in the property and use.

Landlord/tenant

There is no change planned to the landlord/tenant rule generally but the Government is considering whether there should be an exception where a tenant builds a structure on land owned by a landlord, the landlord supplies the energy but the tenant is the sole occupant and is wholly responsible for maintenance. This scenario is quite rare and therefore this change will have minimal impact on the property industry.

Qualification and administration

The qualification criteria will be simplified so that only electricity through settled half hourly meters will be taken into account.

By 2012, once the first reporting and auditing cycle has completed, the Government intends to review the evidence packs with view to reducing the administrative burden on participants.

The criteria for the performance league tables will be taken out of legislation and placed into guidance so that the Government will be able to change the criteria easily in the future.

Out of the 29 fuels originally covered by the Scheme, only electricity, gas and (if used for heating) diesel and kerosene will now been included.

Next Steps

Draft legislative proposals are expected to be available for consultation in early 2012.  In the meantime, the Government is inviting comments on the proposed amendments, prior to drafting the amending legislation, by 2 September 2011. Those who think that other changes should be made should seize the present opportunity to participate in further representations to DECC.

For a link to the Ministerial Statement and the proposals click here.