UK business face £55k cost increase in energy bills
At least 5,000 UK businesses to face more than £55,000 increase in energy costs from 2010. RSA, the UK’s largest commercial insurer and energy management expert, is urging businesses to make preparations for the Carbon Reduction Commitment (CRC) now, after a survey conducted by the insurer found that less than half of businesses are aware of the new legislation.
- 41% of businesses in UK unaware of the Carbon Reduction Commitment
- Over 5,000 UK companies are to face increases in overall energy costs of at least £55,000 from next year
- Three quarters of all businesses are unaware of when the legislation takes effect
- Almost 60% of businesses haven’t started preparing for the legislation
CRC will require businesses to purchase allowances for every tonne of CO2 they emit. It is estimated that allowances will amount to 6% of an organisation’s current energy spend and related administration costs will be a further 5%. This means that businesses that spend £500,000 each year on energy, will need to spend £30,000 on allowances and £25,000 on compliance-related administration costs.
It is vital that organisations take advantage of the potential financial benefits by acting now
Alex Matthias, Energy Management Leader at RSA
All companies subject to the legislation will be ranked in a public league table according to their energy use and rewarded or penalised depending on their chart position. Therefore, there are financial and reputational incentives to act early and reduce energy consumption. Despite this, RSA’s survey found that three quarters of businesses are unaware of when the legislation comes into force and almost 60% have yet to start preparing.
To solve this problem, RSA has created forecasting and benchmarking tools to enable companies to accurately predict their energy use for the year while at the same time reducing their energy consumption. This provides participants with significantly lower energy costs as well as fewer allowances to buy.
Alex Matthias, Energy Management Leader at RSA, said, “CRC will be an important issue for many years to come and it is vital that organisations take advantage of the potential financial benefits by acting now rather than leaving it to the last minute and risking their company’s reputation and bottom line.
“RSA is working hard with its energy industry partner to provide companies with the help they need to optimise their energy efficiency, be environmentally responsible and comply with the new regulations.”
An organisation will be included in CRC if its annual half-hourly metered electricity consumption is greater than 6,000MWh – equivalent to roughly £500,000 a year in electricity bills. This means it will include public and private sector organisations, such as banks, insurers, local authorities, schools and retailers.
To help businesses avoid fines for failing to comply with the new legislation, RSA offers ten suggestions:
- Identify stakeholders. Understand your company structure, identifying key stakeholders to ensure full reporting compliance. Omission of any information may lead to remedial action (ranging from criminal prosecution to fines) by the enforcing authority, The Environments Agency.
- Delegate responsibility. Advise key stakeholders of their responsibilities under CRC and set key milestones for the delivery of relevant information. It is vital that the information submitted under CRC is accurate and complete, therefore clear communication and accountability is important.
- Appoint someone to manage CRC. Appoint a designated signatory to report on CRC and a board member to sign off submissions. This is a requirement of the legislation.
- Gather information. Make sure access to energy data is available. Understand your Group energy procurement processes and responsibilities and start gathering energy data now. Unnecessary delays could lead to missed deadlines and/or increased cost of compliance.
- Understand MPAN. Collect and record all MPANs (Meter Point Administration Number) to make collection and recording of energy data quick, simple and accurate. Early capture of all metering sources ensures no errors or omissions at the time of submission. This is a mandatory element of the submission.
- Explore early action metrics. There are two ways a company can qualify for bonus payments under the early action metrics: Obtaining the Carbon Trust Standard, and setting up Automatic Meter Readings. This could place your company higher up in the league and potentially provide you with a bigger return in the early years of the scheme.
- Set aside a budget. There are substantial initial costs associated with CRC. Procurement could reach hundreds of thousands of pounds, if not millions. There will be fines for non-compliance so it is important that businesses have money put aside. Be mindful of the “double payment and recycling” element of first year trading meaning that you will have to invest two years in one payment.
- Climb the league table. It makes good business sense to reduce energy and costs in the current climate. To enable you to do this, create a strategy for league table positioning to maximise economic benefits of CRC participation.
- It’s ok to get help. Third party validation of your submission will provide the Finance Director or Managing Director with the peace of mind that the submission is correct and there will be no financial ramifications. It is possible to self-certify under the scheme but this would leave you wholly accountable for errors or omissions. Engaging with a competent company to validate your submission would create an additional benefit as most of the work will probably need to be done in the early stages of the scheme and engaging in-house resource could be seen as cost ineffective in long run.
- Do not delay - start action now. The scheme starts in April 2010.
