An update on a number of issues raised at a conference on the CRC Energy Efficiency Scheme (CRC), held by the Environment Agency on 24 February 2010 in Manchester.
This update provides a summary of some of the key issues raised at the Environment Agency's conference on the CRC Energy Efficiency Scheme (CRC), held on 24 February 2010 in Manchester. This includes the latest news on the draft legislation and how the Environment Agency plans to enforce the CRC during Phase 1.Close speedread
On 24 February 2010, the Environment Agency (EA) held a conference on the CRC Energy Efficiency Scheme (CRC) in Manchester. To view the agenda, click here (www.practicallaw.com/1-501-6142). A similar conference is being held in London on 4 March 2010.
The terms that appear in capital letters in this update are defined in CRC Energy Efficiency Scheme: PLC glossary and abbreviations (www.practicallaw.com/1-501-2573). References to the "CRC Order" are to the version of the draft CRC Energy Efficiency Scheme Order 2010 (www.practicallaw.com/6-501-2924) that was laid before Parliament and the devolved administrations in January 2010.
The following is a summary of some of the key issues raised at the conference:
The Department of Energy and Climate Change (DECC) said the CRC Order has been approved by the House of Commons and the House of Lords, as well by the Northern Ireland Assembly. DECC did not know when the Scottish Parliament and Welsh Assembly would be voting on the Order.
The EA indicated that, after the national election, it is possible there may be some restructuring of central government departments and local authorities and that these bodies might take the view that they would rather wait until the later part the Registration Period (which will run from 1 April to 30 September) so that they know for sure what their new structure is going to be before the register as Participants. We will shortly be publishing a practice note on CRC issues for the public sector.
However, private sector organisations will need to register based on what their organisational structure was as at the end of 2008, subject to the rules on organisational changes in Schedule 6 of CRC Order. For more information on the rules in Schedule 6, see Flow chart: CRC Energy Efficiency Scheme: Impact of changes to private sector organisations before registration (www.practicallaw.com/7-501-5314).
DECC announced that a revised version of the Draft CRC Energy Efficiency Scheme (Allocation of Allowances for Payment) Regulations 2010 (www.practicallaw.com/2-501-6009) have been published and are due to be laid in Parliament before the summer recess. The Draft Regulations set out the detail of how Allowances will be sold in the Fixed Price Sales and through the Safety Valve during Phase 1 (the Introductory Phase) of the CRC. Under the Draft Regulations, the minimum price for Allowances bought through the Safety Valve will be £14/tCO2 instead of £12/tCO2, as previously indicated by the Government in the Response to the Consultation (www.practicallaw.com/2-500-4167) it published in October 2009.
For more information on the Draft Allocation Regulations, see Legal update, Government publishes revised draft regulations on the sale of CRC allowances (www.practicallaw.com/0-501-6005).
DECC confirmed that there will be no separate legislation on the recycling of revenue from the sale of Allowances, as the power to make these recycling payments is already provided for under section 53 of the Climate Change Act 2008. However, DECC did say that it will be issuing the EA with "instructions" on how these payments will work in practice. It is not yet clear whether these instructions will be made available to the public.
Enforcement and auditing:
The EA indicated that the main purpose of the Introductory Phase is to help organisations understand and comply with the scheme, rather than to impose sanctions and fines.
There will be three "waves" of enforcement and auditing activity:
checking registrations from April 2010;
checking "orphan" meters from April 2010; and
checking compliance with the main requirements of the scheme from July 2011 when the first Annual Reports are due.
The registration auditing will be carried out by the EA's staff but the other types of auditing will be outsourced to third party contractors.
Guidance on Evidence Packs is expected to be published in mid-March 2010. This will also cover guidance on audits.
PLC asked whether the EA could clarify how it expects the joint and several liability rule will operate in practice. Under article 8(2) of the CRC Order, each member of a Group will be jointly and severally liable to comply with the requirements placed on the Group. Groups will be represented by a Primary Member. Unless another member of a Group has been nominated as the Primary Member, this will be the Highest Parent Undertaking.
For example, if a Primary Member fails to submit an Annual Report or surrender enough Allowances at the end of the relevant Compliance Year, would the EA require one of the other members of the Group to comply on behalf of the Group as a whole? The EA indicated that it intends to pursue the Primary Member first and foremost and recover any unpaid fines or other sums from that party, but it did not discount the possibility of pursuing other Group members if this did not work.
There appeared to be some confusion amongst those attending the conference as to how to define an organisational structure for the purposes of the CRC, how to decide who is responsible for the relevant energy supplies and how to apply the rules on the disaggregation of Significant Group Undertakings (SGUs).
In particular, some companies had not appreciated that if they want to apply to disaggregate one or more of their SGUs for the Introductory Phase, they must do so as part of the registration process and within the first three months of the Registration Period opening (to allow enough time for the disaggregated SGUs to register separately). After that date, it will no longer be possible to apply for disaggregation and the SGUs will therefore have to participate as part of the Group. The Primary Member for that Group would therefore need to report on, and surrender Allowances for, any CRC Emissions associated with those SGUs. The SGUs would also be ranked as part of the wider Group in the League Table.
For more information, see:
For more information on the CRC in general, see the CRC Survival Kit.