The final deadline for compliance with Phase 1 of the Energy savings Opportunities Scheme (ESOS) is fast approaching. The original deadline of 5th December 2015 was extended last year when it became clear that there were insufficient Lead Assessors to complete the audits within the timeframe. For organisations that decided to comply via the audit route, the deadline was extended to 29th January 2016. Those that took the ISO 50001 route were given until 30th June 2016 to have the certification in place.
There were 5,948 businesses that were registered with the Environment Agency as compliant by the initial 29th January deadline. Only a further 691 organisations have complied or submitted notifications of their intention to comply past that date despite the Environment Agency (EA) stating that there was a strong likelihood that those that made such notifications would be granted a grace period of up to three months from the 29th January deadline to comply.
As the grace period has drawn to a close, if the Government’s original qualification estimation of 10,000 businesses was correct, over 3,000 of organisations remain unaccounted for and are therefore now at risk of enforcement action.
The Environment Agency has started contacting organisations that it believes may be captured by the ESOS regulations but have not complied with the requirements of the scheme. The EA stated that where organisations are identified as non-compliant, they will be issued with enforcement notices but civil penalties will only be served in the most serious cases.
The official guidance on enforcement and sanctions details that the maximum penalty for failing to undertake an energy audit ahead of the ESOS compliance deadline is up to £50,000 and up to £500 for each working day that the responsible undertaking remains in breach of the mandatory scheme, for a maximum of 80 working days bringing the total potential fine to £90,000. The EA has been clear on its position, stating its focus remains on bringing organisations into compliance with ESOS to ensure that the scheme delivers the energy savings and financial and environmental benefits as intended.
Disappointingly the scheme does not carry any compliance requirement to act on the recommendations of the audits. However, when it comes to the intended and potential benefits of the mandatory scheme, failing to act on the findings of the audits does not make financial sense. Previous estimates made by the Department of Energy and Climate Change (DECC) have suggested that ESOS could collectively save businesses £250m if just 5% reductions in energy bills were achieved through the Scheme.
Larger businesses that have paid thousands of pounds to comply could be sitting on millions of pounds’ worth of energy cost savings and, at the bare minimum, all participants have the opportunity to recover the investment to date. Many of the recommendations provide great opportunities for businesses to save both energy and money, often without a substantial time or cost commitment. This is a chance for organisations to drive grassroots change that can have long-term benefits.
Despite thousands of businesses still apparently failing to comply with ESOS, there are strong indications that the scheme will have a more central role in the business energy reporting landscape in the future. In the Spring Budget, the Chancellor confirmed the scrapping of the Carbon Reduction Commitment (CRC) from 2019 which will be replaced with an increase in the Climate Change Levy (CCL) from 2019 and the creation of a single reporting framework, designed through the prism of ESOS.
With ESOS at the heart of the Government’s future plans for business energy reporting, it is clearly here to stay and is likely to be rolled out to capture a wider audience. There are however two issues that remain uncertain at this time. The first is whether the EA’s enforcement plans is robust enough to give credibility to the scheme by ensuring all qualifying organisations are brought into compliance. The second is whether there is sufficiently compelling argument to drive participants to act on the audit recommendations despite no requirement to do so.