Making the business case for energy efficiency
The Treasury is set to increase CCL rates incrementally each year between now and April 2019 to compensate for the removal of CRC revenue. These are set out in the table below
The increases in the CCL rates will be significant. For power, the CCL rate will increase from its current level of £5.59MWh in April 2016 to £8.47MWh in April 2019 – an increase of 51.5%.
For gas, the increases are even steeper, the gas CCL rate will increase from £1.95MWh in April 2016 to £3.39MWh in April 2019 – an increase of 73.8%.
Government has confirmed its intention to start rebalancing the proportion of CCL revenues between power and gas; the higher proportion increase in gas should be seen as the first step towards the achieving the Government’s stated intent to have a 1:1 ratio by 2025.
The levy will increase from the date the CRC scheme is abolished, to compensate for lost revenue to the public purse. However, Climate Change Agreement tax breaks (known as CCAs) will be retained until 2023 to protect energy-intensive businesses. These reductions are available to energy intensive businesses which have entered into agreements with the Environment Agency.
The relief will provide a 93% discount on electricity (up from 90%) and 78% discount on gas and other taxable fuels (up from 65%). The protection will insulate a sub-set of businesses from the full costs of the CCL.
Small energy consumers will not need to pay the CCL’s main rates. Small quantities (de minimis) of fuel and power will automatically be treated as supplies for domestic use, even where they are supplied to a business. The de minimis limits for each fuel are as follows:
The government intends to introduce a single reporting framework that will incorporate the most effective elements of the existing reporting schemes (such as mandating board-level involvement). It believes this new framework will lead to a net reduction in compliance costs and greater transparency, so businesses can better understand, forecast and report upon their energy related use and expenditure.
The government has signalled that it will consult further over the summer months and present the long-term direction in the Autumn Statement (November 2016).
We are committed to informing our customers when the government reopens the review for debate, through our online channels. You can follow developments via our Twitter handle @npower_nbs and via our blog at npower.com/energyblog.
www.npower.com/energyblogs
In the meantime we would urge all of our customers to get a head start now by rolling-out energy efficiency measures throughout their organisation. Your npower Business Solutions Client Manager would be happy to discuss potential solutions appropriate for your business; please get in touch to find out more. If you are not currently an npower Business Solutions customer please e-mail nbs@npower.com for further information.