1. Eligibility is likely to widen
We are currently awaiting the outcome of the BEIS consultation on widening eligibility for EII exemption. The exemption thresholds were initially calculated to ensure that the most energy intensive UK industries could compete against their EU counterparts, despite higher electricity prices. Marketplace changes, increases in policy costs and a persistently bearish wholesale market have given BEIS cause to reconsider what those thresholds should be.
For business to be exempted under the EII, they must currently demonstrate that their energy expenditure is more than 20% of their total site costs, including staff costs and income. The consultation asks whether this should be lowered to 17%, 15% or 10% and explores how this may impact newly eligible businesses, as well as other electricity consumers. The need to support energy intensive industries must of course always be balanced with the impact on the wider business marketplace, who will absorb the additional costs of the scheme. However, even if the Government decides on the highest of the new thresholds under consideration, there will be businesses that were not previously eligible who will stand to save an average of £2.8million p.a.
For businesses who believe they may become eligible, it’s important to keep an ear to the ground for new developments and consider the resources needed to complete the application process in advance, as savings from the EII cannot be backdated.
2. Rising costs have pushed more businesses towards the threshold
Businesses across the board will have seen significant rises in the total cost of their energy over recent years. Non-commodity costs now make up more than half on an energy bill; by 2020, they are likely to account for around 60% of the total cost of business electricity. Volatile wholesale costs are also putting pressure on those with responsibility for business energy budgets. It’s more important than ever to try to find new ways to mitigate the total cost of energy. So, if a business believes that the rising cost of electricity has pushed them towards or beyond the EII threshold, our advice would be to investigate further. Under current rules, EII exempt businesses can receive 85% exemption on Renewable Obligation (RO) and Feed-in-Tariff (FiT) costs. This is received directly as a reduction on electricity bills. The cost of running the scheme is covered by payments from non-eligible consumers – so, if you think your business could be eligible, act now.
Inenco can offer advice and support to businesses who believe that they may be eligible for EII exemptions, as well as those who have already confirmed that they are exempt but need assistance meeting reporting requirements and submission deadlines. If you think your business could benefit from expert help with EII or other energy compliance requirements, please get in touch.
Watch this space! The outcome of the EII exemption is expected soon. We’ll be reporting on what happens and what it might mean for your business, so why not bookmark our compliance hub to be sure you have the clear and easy to understand information you need?