Carbon Reduction Legislation Could Net Millions of Pounds in Windfall Penalties

From: Energy Solutions Consultants
Published: Sun Feb 21 2010

THOUSANDS of UK companies could end up handing the government a windfall of more than £230 million pounds in penalties unless they move fast to comply with new Carbon Reduction legislation.

Recent surveys indicate that around 66 per cent of the 5,000 businesses which will be affected by new regulations are unaware of their responsibilities and possible repercussions.

Energy Solutions Consultants has estimated that firms could end up forking out at least £70,000 each if they donít comply with the new rules which come into force on April 1.

The CRC Energy Efficiency Scheme, formerly known as the Carbon Reduction Commitment, is a compulsory energy efficient emissions trading system central to the UKís strategy for improving energy efficiency and reducing CO2 emissions.

The scheme is mandatory for organisations which have at least one half-hourly electricity meter. If they use at least 6,000 megawatt-hours (MWh), or have an annual energy bill of £500,000 or more, they will have to register and comply with the legislation.

However, if their half hourly metered energy supply is below 6,000MWh they will still have to make an Ďinformation disclosureí and prove they are exempt. Failure to do so incurs an automatic fine of £5000 and £500 per day until it is submitted. It is estimated that another 15,000 businesses could fall into this category.

The scheme, which is enforced by the Environment Agency in England and Wales and SEPA in Scotland, is, in the first instance, likely to affect government departments, universities, hospitals, schools, banks, retailers, hotel chains, large business, factories and many others.

"A number of recent surveys have shown that between half and two-thirds of businesses are either unaware of their duties or havenít started doing anything about it," said William Morris, Managing Director of Energy Solutions Consultants.

"If you add the automatic £5,000 fine each company will get for failing to submit their information on time with the minimum penalty of £50,000 added to energy costs itís a lot of money. But, thereís an additional fine of £500 a day until the information is submitted to the proper authorities and gathering it all together could take a month or more, thatís at least another £15,000 on top," said Mr Morris.

As of April 1 organisations using more than £500,000 worth of gas, electricity, water, oil and other energy sources have to submit a "robust" report detailing their usage of electricity, gas, oil, water and other energy sources dating back to the beginning of 2008.

Organisations will then be expected to purchase carbon allowances at £12 per tonne to off set their emissions and submit a detailed roadmap of how they intend to reduce those emissions over the next few years.

League tables of the best and worst performing companies will be published at the end of each year and, depending on how well they have done, organisations will either get up to 10 per cent of their energy costs back or have to pay 10 per cent more. Those figures are due to rise year on year to plus or negative 50 per cent.

To ensure correct accounting directors will be required to sign off on the energy use reports and could face up to three years imprisonment if they knowingly falsify the information.

"Indications coming back from various surveys within the energy industry have shown the vast majority of organisations who will have to join this scheme donít know enough about it," said Mr Morris.

"Among those that are aware about 20 per cent are struggling to comply and are using vast amounts of in house resources to produce a report which if not completed properly could cost them tens of thousands of pounds".

Energy Solutions Consultants is one of the countryís leading specialists in helping organisations save energy costs, reduce carbon and comply with all the requirements set out by the CRC legislation.

"We have invested a lot of time and effort into developing our Carbon Check software programme which has all the DEFRA carbon calculations preloaded," said Mr Morris.

"Our engineers are all accredited by the Chartered Institute of Building Services Engineers (CIBSE). They can take any organisationís data and, using our software, provide a 100 per cent accurate assessment of energy expenditure, carbon liabilities and potential savings in a fraction of the time it would take several people to do in house.

"Correctly done the CRC legislation provides an opportunity for organisations and businesses to save costs and reduce carbon emissions but if ignored or handled badly it could prove to be a very expensive exercise indeed."

Company: Energy Solutions Consultants
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