Get ready for Energy Tax Changes in 2019

The new year brings with it big changes to energy taxes, markets, policy and legislation, which you should prepare for now.

Be prepared for major changes in 1 April 2019:

If you’re unsure whether your organisation will be affected by the new SECR regulations, try our SECR Qualification Tool to find out.

What’s changing?

  • Closure of CRC and start of SECR: Big changes are due on 1 April 2019 when the CRC scheme is scrapped. This coincides with the introduction of SECR, which will affect around 12,000 large businesses, including limited liability partnerships. It will be mandatory for these companies to record carbon emissions, energy use and energy efficiency actions and report them in their annual reports.
  • The CRC tax revenue that is lost when the scheme is abolished will be offset by much higher CCL rates for most energy users, including a 67% increase on natural gas (from 0.203 pence per KWh to 0. 339) and 45% increase on electricity (from 0.583 pence per KWh to 0.847).

CCL is a tax applied to non-domestic energy supplies (electricity, gas, LPG, coal, coke, etc.). It’s charged by HM Revenue & Customs via energy bills (often as a separate item above the VAT line).

Are you a ‘winner’ or a ‘loser’?

There will be financial winners and losers, dependent on whether you are a CRC participant, your overall energy usage, and whether you are exempt from CCL or receive discounts. It’s important to find out what the financial impact will be and how you might mitigate higher costs.

How much will CCL cost you?

Losers: non-CRC participants (with no CCL exemptions or discounts), such as most Small and Medium Enterprises (SMEs), could see their power bills increase by approximately 2.5% from April 2019.

Winners: existing CRC participants (with no CCL exemptions or discounts) could be better off from 1 April 2019 when they will no longer need to purchase CRC allowances. Our calculations show that these organisations could reduce their electricity bill by approximately 2.5%. However, they must initially budget for overlapping charges of final CRC payments and new increased CCL rates.

CCL Eligibility and Discounts

Light energy users and charities may be exempt from CCL, while many energy intensive businesses will be protected from rising rates via extra discounts from Climate Change Agreements (CCAs). CCL relief on gas is also available to sites using ‘good quality’ Combined Heat and Power (CHP).

What will the CCL rates be for 2020 and beyond?

Actual CCL rates for 2020/21 and beyond are yet to be published, but the government has said it intends to increase CCL on gas and reduce CCL on electricity from 2020. Its aim is to narrow the gap between the two by ensuring that CCL on gas  reaches 60% of the electricity main rate by 2021-22.

How to reduce CCL costs

  • All organisations can reduce CCL costs by using less energy, so improving energy efficiency is imperative.
  • Those organisations that are eligible for ESOS should ensure that they take action on the energy saving recommendations made in the report.
  • Eligible companies should get ready for new carbon and energy reporting regulations under SECR. They should use the requirement to report on energy efficiency actions to ensure that they are exploiting all opportunities to reduce energy waste.
  • Consider installing energy efficient CHP, which provides the added benefit of CCL relief for CHPQA approved facilities.
  • Large energy users with CCA agreements must keep on top of their eligibility data and evidence packs to ensure continued CCL discounts.
  • Investigate if you may be able to benefit from other CCL exemption schemes.

With all these changes, you may find it difficult to predict your future energy costs. We can help you develop an accurate budget forecast. We’ll use our expertise in energy markets, non-commodity charges and energy policy to ensure there’s no nasty surprise waiting for you in 2019.  Contact us on 0330 166 4444.