On 1 April 2017, several significant energy reform changes came into force, affecting everything from the Climate Change Levy to the renewables programme. The UK government is striding ahead with its decarbonisation of electricity generation targets, which it originally outlined as part of its Electricity Market Reform white paper, and this was reflected in April’s changes to energy reform.
Unless your business or sector was directly affected by April’s reform changes, or you keep an ear to the ground to stay abreast of the energy market, you may have missed the changes introduced at the start of the month. So, to keep you in the loop on what’s changing in the UK electricity market — and specifically how this could affect you and your business — here we provide a quick summary of the changes which took place on 1 April.
Changes to the Climate Change Levy
Businesses eligible to pay the main Climate Change Levy for qualifying electricity consumption could see a change in their energy bill going forward. That’s because the government introduced new charges for main CCL rates from 1 April, a rate increase it first submitted during the 2016 Budget. The new rates for CCL are now live, and, due to the projected Retail Price Index (RPI), will increase again in April 2018 and April 2019 respectively — meaning slightly higher energy bills in the coming years.
From an electricity point of view, the rate increases are minimal, with the £ per KWh taxable commodity rate for electricity increasing from 0.00559 in April 2016 to 0.00568 in April 2017. However, by 2019, the CCL main rate for electricity will rise to 0.00847, reflecting the government’s plans to curb carbon-intensive electricity generation. These figures were sourced via the gov.uk website, where all changes to the CCL main rates can be reviewed.
Implementation of the Mandatory P272 Policy
After six years of planning and negotiation, the P272 policy became a mandatory requirement on 1 April. This regulation, which was spearheaded by Ofgem and Smarter Energy, requires businesses with a 5-8 meter profile to have their energy use settled on a half hourly basis by their energy provider.
Back in 2014, it was made mandatory for all energy profile classes of 5-8 to receive an advanced meter reader capable of recording HH consumption data. However, the legislation didn’t require energy suppliers to settle these customers on a HH basis, so many energy users still found themselves relying on manual meter reads. This changed on 1 April, however, with all suppliers now required to bill customers using the HH data collected by the AMR device.
UK business energy suppliers, Gazprom Energy, told us they’re pleased the P272 policy has finally become mandatory, and that the change is great news for businesses currently relying on out-dated manual meter readers. They said: “Now that the P272 policy has been given the green light, businesses can look forward to accurate invoices that reflect their actual consumption — making it easier to manage energy costs by putting an end to estimated billing.”
Closure of the Renewables Obligation Mechanism
From 31 March 2017, the government’s Renewables Obligation mechanism, which provides monetary support to large-scale renewable electricity generation projects in the UK, closed to new capacity. The scheme has been replaced by the Contracts for Difference (CfD) scheme, with the second allocation of capacity for this programme opening to businesses from 1 April 2017.
The switch to CfD was originally announced in 2014, giving businesses plenty of time to select the scheme that’s for them. Ofgem has been particularly active in encouraging businesses to think carefully about which CfD initiative to select, publishing a series of guides which outline the options available to businesses.