In or out?
The Carbon Reduction Commitment came into operation on 1st April, with the registration deadline set for September 30th. Becky Clissmann looks at how public sector organisation can assess whether they are affected.
The CRC Energy Efficiency Scheme Order 2010 is now law and the scheme (the CRC) came into operation on 1 April 2010. Some organisations have already registered themselves using the online CRC Registry which can be accessed via the Environment Agency’s website. If you have been meaning to find out more about the CRC but have not yet got round to it, then read on. Similarly, if you have started reading up about CRC and are getting lost in a sea of detail, this article may help.
In discussions with a variety of public and private sector and commercial organisations, PLC has noticed that there is a tendency to skip the preliminary stage of properly identifying their organisational structure, which is crucial to deciding whether you are required to participate in the CRC.
There are, essentially, three main steps to deciding whether your organisation is covered by the CRC (that is, whether you are required to register as a participant or make an information disclosure):
Step 1: Establish what your organisation structure is for CRC purposes.
Step 2: Decide what energy supplies your organisation is responsible for.
Step 3: Decide whether your organisation meets the qualification criteria. (See Box 1 below.)
| Box 1: The qualification criteria There are two “limbs” to the qualification criteria: 1.Did you have a settled half hourly meter at any time during the qualification year for the relevant phase? 2.Did you have qualifying electricity supplies of over 6,000 MWh during the qualification year for the relevant phase? For the introductory phase (1 April 2010 – 31 March 2013), the qualification year is the calendar year 2008. |
These steps are shown in the diagramme accompanying this article. Click here to download,
Missing out step 1 is not a good idea. If you do not understand what the “universe” of your organisation is, you will not be able to identify correctly what energy supplies your organisation is responsible for. This will mean that you will be applying the qualification criteria to incomplete or inaccurate data which could lead to the wrong conclusion as to your qualification status. It could also lead to an inaccurate footprint report and annual reports being submitted and to you buying either too many or too few allowances.
Without wanting to overstate the case, this could lead to civil penalties being imposed for:
- A failure to register (if you have erroneously decided that you do not need to participate in the CRC)
- For submitting inaccurate footprint or annual reports where the supplies or emissions reported are out by more than 5% of what should have been reported.
In the latter case, the penalties are a fine of £40/tonne of CO2 for the amount that was inaccurately reported.
In more extreme cases (for example, where the error is not corrected following an enforcement notice served by the CRC administrator or where the person has wilfully or recklessly made a statement that he knows is false or misleading in a material particular), there is also a possibility of criminal penalties being imposed.
There is no need to face these risks. With careful planning and a sensible approach, you can work out if you need to participate in the CRC and navigate through the registration and footprinting processes.
So where do you start?
1.Get up to speed with the details of the CRC.
If you are not already up to speed with the scheme, then you need to read up on it. There are a number of guidance documents that have been produced by the Environment Agency (which is one of the CRC administrators), which can be accessed on its website: CRC Energy Efficiency Scheme.
PLC has also produced an on-line CRC Survival Kit (http://uk.practicallaw.com/about/crc-survival-kit) which you can subscribe to. This contains a wide range of continuously updated materials, which will help organisations determine what they need to do, and how they need to do it, as well as training materials and answers to FAQs.
2.Work out what your organisation structure is for the purposes of the CRC.
Obtain a copy of your existing organisation chart.
Check if the organisation chart shows legal entities or operating departments or functions.
If the organisation chart shows operating departments or functions, you will need to obtain further information about the various parts of your organisation, including whether they are separate legal entities. For example, you will need to find out if your local authority is designated as the Country Fire Authority and therefore whether the fire services in your area will participate as part of your group.
Given the complex nature of some local authorities, if your organisation chart shows legal entities, you will need to make sure that the entities listed in the chart cover all your various functions. Otherwise you could end up excluding energy supplies that your organisation is responsible for. You may find it helpful to refer to your land terrier (a map of a local authority’s property assets) as a way of identifying all the different functions that they are responsible for and for which a legal entity may exist which should be included in your group.
You also need to check that any bodies corporate that you control have been excluded from your group for CRC purposes. This will be relevant where you have any joint ventures (JVs), private finance initiatives (PFIs), public private partnerships (PPPs) or other similar arrangements.
Do not forget if you are a local authority that, in order to work out if you are required to participate in the introductory phase of the CRC, you need an organisation chart that shows your group's structure on the qualification day for the introductory phase (31 December 2008).
Find out what buildings are owned or occupied by each of the entities in your group. Identify if the buildings are owned or leased, and (where applicable) obtain a copy of the leases. Again, your land terrier may be a good place to find this information.
3.Now you need to collect data regarding your energy supplies.
Find out all the energy supplies for each building.
Find out what the electricity supplies through half hourly meters (HHMs) in the UK was in 2008 for each group member. You will need to apply this information to the qualification criteria to work out if you are required to participate in the CRC or make an information disclosure.
You may find it helpful either to create a different version of the organisation chart with all the information about buildings, energy supplies and meters referenced on it or have a spreadsheet that contains this information but that cross-references with your organisation chart. The method you choose to document this information will depend on the complexity of your group.
Decide which energy supplies your group is responsible for. This will involve considering the contractual arrangements surrounding your supplies and deducting excluded supplies (such as those relating to most domestic accommodation and transport). For example, if you are a tenant and the landlord is responsible for procuring and paying for the energy (and recoups the cost from you through the service charge), the landlord will be responsible for those energy supplies. Whether the landlord can recoup these CRC costs from its tenants will depend on what it says in the lease.
4.Apply the qualification criteria to the electricity data that you have collected to see if your organisation is required to participate in the CRC and what parts of it are affected.
5.You should now have the necessary information to register your organisation on the CRC Registry.
For a step-by-step guide to the registration process, see the Environment Agency’s guidance document called “Registering as a CRC Participant” (http://publications.environment-agency.gov.uk/pdf/GEHO0410BSDI-e-e.pdf).
Conclusion
If you are a large organisation, the steps outlined above may involve a fair amount of work. This is all the more reason to get going now so that you can be sure you will meet the registration deadline of 30 September 2010.
Becky Clissmann is editor of PLC Environment
If you would like further information about PLC’s CRC Survival Kit, visit www.practicallaw.com/about/crc-survival-kit.
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