The Cost of Carbon Compliance is coming......

Last year the Government passed The Climate Change Act 2008 and this piece of legislation now requires those responsible for the purchase of electricity (in most cases Landlords) to buy Carbon Credit Allowances which will match the amount of CO2 emitted as a result of the use of this power. The regulations will capture those who use more than 6,000mwh per annum (approximately £500,000 per annum). This scheme is known as the Carbon Reduction Commitment (CRC) and obligatory and begins in April 2010. Those companies who meet and exceed the 6,000mwh criteria are currently being requested to register as "participants" within the scheme. This request involves declaring data collected from meter readings (half hourly data) and along with details of the property ownership, this information is used to forecast the "participants" usage and subsequently calculate the number of Allowances they will need to purchase for the period April 2010 - April 2011.

Although the scheme begins in April 2010 the "participant" will not need to pay for these Allowances until April 2011 when they will be required to buy Allowances for the period April 2010 - April 2011 and April 2011 - April 2012.

It is the Government’s intention for the cost of administering this scheme to be met by the Landlord.  However, the Landlord will look to the terms of the lease to recover the costs of these Allowances from the Tenant and so companies should begin budgeting for increases in the their service charge contributions. This new legislation will apply pressure on the property owner to rein in the amount of energy they use and as a result the need to measure usage will be at the forefront of how this is done. 

Landlords across the country who are recording their energy usage on a half hourly meter, and who fall within the annual £500,000 spend on energy, will be sent packs to register themselves as a “participant” in the scheme and although a property owner may register himself as a “participant” in the scheme it is not certain whether they will inform a tenant of their application. This is a self certification scheme and non compliance will receive a strict financial penalty and any participant not complying will be named and shamed.  Consequently a property owner will be under a strict obligation to comply. A tenant may wish to make his own enquiries of the managing agent or property owner to understand the financial implications of being involved in such a scheme, but the confusion may result in limited information being available.

Prudent Landlords will be adjusting their service charges and adding the certificate costs to the Energy Categories as of now and tenants should be wise to this and begin setting aside monies to meet this increase in their service charge budget. There is one good piece of news and that is should a landlord consume less electricity than the number of certificates purchased then a rebate will be made in the following October (2011 being the first). Be careful to monitor what your Landlord is doing and if in doubt ask questions.