The impact of the long-awaited EII exemption is already being felt by businesses across the UK, as the Contracts for Difference (CfD) exemption came into effect in December 2017. That’s why, whether you expect the exemption to have a positive or negative effect on your bills, you should be acting to ensure the change in legislation is included in your budgets.
What is the EII exemption?
While energy intensive industries (EIIs) have benefitted from a rebate compensation scheme for the indirect costs of renewable policies for some time now, the government has introduced new exemption schemes. This means that eligible businesses will have these costs (including CfD, RO and, eventually, FiT Levies) taken off their bills automatically, so they no longer need to pay upfront before applying for a rebate, on up to 85% of their electricity consumption.
Which businesses are eligible for exemption?
If your business’ energy expenditure accounts for more than 20% of your total site costs (including staff costs and income) and you operate in one of these industries, you should be eligible for the EII exemption.
What should eligible businesses be doing now?
If you’re eligible for EII exemption, and you’ve got your certificate, you don’t need to do anything further. Your certificate is valid from the day after you apply, unless you already have a certificate in place, in which case your new certificate will come into force on 1st April and be valid for the entire financial year.
If you’re eligible and you haven’t applied for your certificate yet, you need to act now! The Department of Business, Energy and Industrial Strategy has predicted that users could save around £100m a year in energy costs. As the CfD exemption came into force in December 2017, you’re missing out on the benefits of having an EII certificate already.
The RO exemption was due to be introduced in January 2018, but this has now been pushed back to 1st April. We’re still awaiting confirmation from the government on when the FiT charge will change, as this is currently still a rebate compensation scheme, but we expect that this will be changed later this year.
To obtain an EII certificate, you must apply to the Secretary of State. Fill in these application forms for exemption from each scheme, then present your certificates to your energy supplier(s).
What should non-exempt businesses do now?
The exemption scheme means that revenues previously earned from the renewables levies from EIIs will now be passed on to other consumers. The government has estimated that non-exempt businesses will see an overall increase in their energy bills of between 0.2% to 0.6%, from around £160 extra for an average small energy user to an additional £62,900 for an average large energy user over a 10-year period. With other non-commodity costs, also set to increase in the spring, non-exempt businesses should be looking for ways to mitigate the resulting rise in their energy costs.
There are some well-established ways to avoid energy cost rises, from securing a fixed procurement contract while prices are low, to participating in demand management schemes. An obvious way to avoid significant cost increases in your energy bills is to use less energy. This doesn’t have to involve an expensive and time-consuming energy efficiency plan – it can be as simple as reminding staff to turn the lights off before they leave the office. If you’ve previously dismissed energy efficiency measures due to an extensive payback period, you should take another look at them. With upcoming cost increases, the payback period may now be significantly shorter.
How can Inenco help?
Whether your business is exempt or not, your non-commodity costs are set to rise in just a few months – read our Cost of Inaction report to find out how failure to act could affect your business. Now is the time to ensure your energy strategy is working for your business, and will continue to do so once the above changes come into force.
We know that creating the optimum energy strategy for your business can be daunting, and our team of experts are on hand to guide you. If you’d like to talk to us about how we can help your business, call us today on 08451 46 36 26 or email firstname.lastname@example.org.