The Environment Agency is proposing significant changes to its regulatory charges from April 2015. If implemented these could have significant cost implications for current operators with a poor compliance record. The Agency is also planning to introduce additional one-off costs for certain newly permitted installations and to introduce modest increases to its baseline charges. Operators may wish to consider carefully what these proposed changes will mean for them when considering their budgets from 2015.

The Agency is also signalling an intention to consider wider changes to how it might fund its work.

Key changes from April 2015:

  • Increased compliance charges for long term poor performers
    • The Agency says that a “significant number” of operators remain in compliance bands D, E and F for over two years and that these “poor performers…are often bad neighbours”, whom the Agency has to direct additional income and resources towards to ensure their improvement. To fund these additional regulatory efforts, the Agency is proposing to introduce a second tier of compliance charge multipliers (or uplifts) for sites that have been in compliance bands D, E or F for more than two consecutive years.
    • It is also proposed that the existing discretion to allow Band F sites a mid-year performance review will be removed.
    • The table below shows the proposed adjustment compared with the current uplift, for compliance bands D-F:

Click here to view table.

  • New 40% permit commencement charge 

    • The Agency is proposing to apply a new permit commencement charge to all new Environmental Permitting Regulations (EPR) installation and waste facility permits. The proposed change will mean that new operators will be required in the first year not only to pay annual subsistence charge but also an additional payment equivalent to 40% of the annual subsistence charge. 
    • The Agency believes that this additional one-off cost will allow it to fund additional scrutiny of newly permitted sites and prevent problems in the long term.
  • Increased charges for particular EPR installations
    • From April 2015, it is proposed that there will be a 2% increase in base charges for three EPR schemes: (i) Installations; (ii) Waste Facilities; and (iii) Radioactive Substances Regulation (non nuclear).
  • Additional changes
    • Other changes include some technical changes to the EPR scheme, amendments to the Opra scheme (including the ability to score sites for non-compliance with Regulation 60 information notices) and changes to abstraction charges.

Longer term proposals

From a wider perspective the Agency appears to be considering for a later date a much wider overhaul of its funding. It comments in its consultation document that due to “significantly increased level of activity resulting from environmental incidents” it is exploring funding options to “cover the costs of its interventions across a range of incident, compliance and enforcement situations”. Additionally, in terms of harmonisation and cost recovery the Agency plans to review the European Union Emissions Trading Scheme, Carbon Reduction and Energy Efficiency Scheme and Climate Change Agreements. It is not clear what impact this longer term review will have or when this review will take place but given the context in which these comments are made, it appears that this is an early indication to operators to expect changes in the charges associated with these schemes.

Implications for operators

In the consultation the Agency states that despite the proposed increases to baseline and abstraction charges, the overall cost to operators when compared with the Consumer Price Index for the same period, will actually be a cost saving of 6%. However, the proposed changes relating to compliance scoring could mean significant additional costs (running in some cases in to the £10,000s, if not more). If this results in an end to serial non-compliance then the increased charges will have beneficial effect.

By being both the enforcer and a cash collector the potential for conflict of interests to arise on the part of the Agency is at least a theoretical possibility. Of course the Agency is not the only regulator where such a strain could arise. No doubt the Agency will be mindful of this. In particular an important assumption underlying these changes is that in determining and recording non-compliance the Agency’s scoring and recording is reasonable, consistent and accurate. Unfortunately this is not always the case. Whilst it is unrealistic to imagine that the Agency will be perfect in this regard, we suspect that the Agency will be expected to be more transparent and consistent, otherwise it may be inevitable that more scrutiny, if not challenge, to Agency compliance scoring will arise. 

The consultation ends on 20 November 2014 and responses will be published in March 2015.

The consultation and further information can be found here.