Monday, 20 May 2013

Simplification of CRC, proposed changes in Phase 1 - webinar Q&A

The following questions are a sample of those that were raised during the first of our free webinars on CRC held on 8th May 2013.  We intend to repeat this webinar and there will be others in the series on CRC to follow from May 2013 to July 2013. 

These questions concern the changes to the CRC Energy Efficiency Scheme that are due to be brought in by the CRC Energy Efficiency Scheme Order 2013.  (This is referred to below as the CRC Order 2013.) Most of the questions concern the changes that will take effect in the final two years of the current phase of CRC, ie from compliance year 2012-13, since that was the focus of this first webinar.  However, some questions also address qualification for Phase 2. 

Please note that this article is not intended to provide legal advice and should not be relied on.  It is not to be regarded as a full statement of law and practice in this area and specific advice should be taken on matters of concern.
Q          Does gas used for heating other than space heating have to be reported, and does gas used for cooking count as heating gas?
 A             The draft CRC Order 2013 says: “... gas is consumed for the purposes of heating where it is used as part of a process where the primary purpose of that process is the generation of heat.”  This is not limited to space heating, it catches all types of heating.  There seems little doubt that the primary purpose of a cooking process is heating the food, so cooking usage must be included - unless the gas supply to it is through a meter that records less than 73,200 kWh in the compliance year, or the 2% de minimis can be claimed.

Q             How is a heated swimming pool dealt with now? 
 A             Assuming it is heated by gas, the energy used to heat it will remain within the scope of CRC because the gas is used for heating.  (Of course, if it is a domestic swimming pool it will not be caught.)

Q             Is energy used in temporary soldiers' accommodation (boot camps) caught?
 A             In general, the energy consumed in temporary as well as permanent buildings falls within CRC.  However, supplies to domestic accommodation are excluded, but "domestic accommodation" is limited to premises intended to be used as a person’s permanent home.  In addition, for the supplies to be excluded the accommodation must not be provided in relation to a person’s education, employment or service.  Therefore, even permanent soldiers' accommodation would not fall within the exclusion.  The CRC Order 2013 doesn't change this, but the changes to the types of meters that fall within CRC may have an impact: if the boot camps are supplied through profile class 01 or 02 meters, or through gas meters that deliver less than 73,200 kWh in the year in question, then these supplies do not need to be reported. 

Q             Does the energy consumed in buildings acquired after the qualification date count towards qualification?
 A             The Phase 2 qualification period ran from April 2012 to March 2013 and only electricity consumed by the organisation/group during that period counts towards qualification.  So, if a building was acquired on, say, 13th January 2013, you only need to include the electricity supplied to it from that date until 31st March 2013 in your total when determining whether you are above the 6,000 MWh threshold.

Q             How is electricity that is generated using diesel now dealt with?
 A             Diesel usage no longer has to be reported and CRC allowances will not have to be bought to cover the emissions.  Possibly this was the case in previous years too, depending on whether or not the diesel was on your Residual Measurement List (RML).  You may not be able to claim Electricity Generation Credits (EGCs) for the final two years of this phase, even if they were claimed in previous years, because a new EGC eligibility rule has been added: the electricity must be generated without using a fuel that is or should be reported in the annual report or that was included in the RML.  In other words, you will not be able to claim EGCs this year and next unless the diesel was not on your RML.  See section 4.3 of the EA's revised Phase 1 guidance document (issued February 2013).  EGCs go completely from Phase 2. 

Q             Will CRC auditors expect to see participants following the new rules with immediate effect?
 A             The new simplification changes do not yet have the force of law, although the CRC Order 2013 is anticipated to come into effect very soon and there is no realistic chance that the changes won't affect reporting this summer.  In the meantime, it would seem a little unreasonable to expect participants to have got their records completely ready for the changes that will apply from the 2012-13 annual report.  But you will need to report according to the new rules by the end of July so it would be as well to start gathering the necessary information now (eg which gas and electricity meters can be excluded, and which non-core ones that were not on your RML must be included).  The auditor may expect you to have at least made a start on working out how you will tackle this. 

Q             What is a settled half-hourly meter and a dynamic supply?
 A             These definitions are not changing.  The Environment Agency's revised Phase 1 Guidance contains a useful glossary.  It defines the above terms as follows (although the glossary provides additional information):

A [settled half-hourly] meter … is able to measure electricity supplied at least every half hour and … enables the supplier to comply with provisions of its licence to determine charges between that supplier and another licence holder in respect of the transmission and trading of wholesale electricity.

Dynamic supply is a technique for calculating half hourly electricity supply where the supply is unmetered. These data are used for settlement purposes and so, in CRC, are counted as a half hourly meter (HHM) settled on the half hourly (HH) market.

Dynamic supply is often used for street lighting.

Q             For an organisation that has fallen below the qualification threshold, how do you de-register for Phase 2?
 A             There is no need to de-register.  The CRC runs in phases that are separate from each other.  If your organisation/group doesn’t qualify for Phase 2 based on its April 2012 to March 2013 electricity consumption (through settled HHMs only), then it's not necessary to do anything because your existing registration is for Phase 1 only and will lapse at the end of this phase.  Just don’t register for Phase 2.

Q             How does the 10% estimation uplift affect the 73,200 kWh threshold for gas meters - if a gas supply is estimated at just under this threshold, must it be included as a CRC supply on the basis that applying the uplift will take it above 73,200 kWh?
 A             A supply of gas, for CRC purposes, must be measured by a "metering device", and the draft CRC Order 2013 defines that as “a device which during a year of a phase measures more than 73,200 kWh of gas supplied, in relation to the supply of gas.”  Therefore, it is at the very least arguable that the meter must actually measure more than 73,200 kWh for the supply to be a CRC supply.  In any case, it is only at the point that the supply is reported that an estimation uplift is applied, meaning that there will be no uplift if the participant decides that the supply is below the 73,200 kWh threshold and therefore does not need to be reported.  This point is not specifically addressed in the EA's revised Phase 1 guidance.  However, it may well have been considered by the EA previously, because the definition of a large point gas meter that applied in the first two years of the phase is very similar.   We have raised a query with the EA to find out if they agree with our view - which is that no uplift should be applied when considering whether the 73,200 kWh figure is exceeded.  Obviously, it would be best if you could obtain at least two meter readings at least half a year apart, then the issue does not arise.

Q             When will Carbon Counter be updated to reflect these simplification changes, and will information entered ahead of the updating be lost?
 A             Work is underway now to update Carbon Counter, in anticipation of the simplification changes.  Many of the changes will require users to input additional information that is not currently held within Carbon Counter, because it has not been required until now.  For example, users will need to identify which (if any) of their gas supplies are not used for heating, and which electricity meters are Profile Class 01 or 02 (or serving domestic accommodation in Northern Ireland).  The changes will not go live before the CRC Order 2013 becomes law but - assuming that does not happen right at the last minute before the 31st July reporting deadline - we are committed to updating Carbon Counter appropriately and in sufficient time to allow customers to compile their annual reports.  We know that Carbon Counter is viewed as an essential compliance tool and many participants would struggle to gather, handle and store the required data without it.  Please, don't wait until we have completed the necessary work before inputting your 2012-13 data, particularly if you have a large number of meters.  Start now, because you will have to go back into Carbon Counter to add the additional information before you are in a position to report, and that may take some time.  You need have no fear that the data will be lost or overwritten, it is all stored safely within Carbon Counter.  

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