The ESOS Regulations are a good example of EU ‘derived’ legislation – as are Display Energy Certificates, Energy Performance Certificates. When the decision was made to leave the EU I know that some thought that all EU based regulation would be removed – the problem is that with a 40 year relationship the extent of legislation that is EU derived is so complex that nobody has been able to provide a definitive count!
In order to avoid what has been described as a legislative cliff-edge the Government is progressing the ‘great repeal bill’. This may be a misnomer as in fact the day after it has been passed the only thing that will have happened is that the body of EU derived legislation will remain but have the ‘links’ to the EU removed. On Exit Day+1 (30 March 2019) we will still have the same laws in place. What is not clear is what happens next and how it will happen. The detail devil on this one will be what powers the Government gives itself to ‘alter’ legislation after exit. In an ideal world all changes to legislation would proceed through parliament for scrutiny. This will create a massive workload if all EU derived law is to be reviewed. To ease this situation the government is looking to have ‘executive powers’ granted by the ‘great repeal bill’ that may allow it to by-pass the normal law making process. A House of Lords Committee has said: “Parliament should ensure that the delegated powers granted under the ‘Great Repeal Bill’ are as limited as possible.”
So, where does that leave ESOS Phase Two?
The qualification date for Phase Two is 31 December 2018 – which is pre-Brexit.
The compliance date is 5 December 2019 – which is post-Brexit.
The ‘informed’ view appears to be that ESOS will still be in place for the second compliance date. Now, one question you may ask is will ESOS be enforced? It is fair to say that the Environment Agency have deferred enforcement in the first phase. I think this in part was due to the Regulations being new and in part avoiding the political ramifications of a £50,000 fine from EU derived legislation. Although the Agency have taken time to act, they are issuing enforcement notices.
There is also something else going on regarding ESOS that you may not know about. On the 21 August an invitation to tender (ITT) was issued by the Department for Business, Energy & Industrial Strategy entitled Research on energy audits and reporting, including the Energy Savings Opportunity Scheme (ESOS).
To quote the notice “BEIS requires an evidence review & additional research on the effectiveness of energy audits & reporting in driving energy efficiency savings in organisations. This will include a further evaluation to develop the understanding of the impact of the Energy Savings Opportunity Scheme (ESOS), following on from the previous process evaluation (2015-2017). The research is expected to be conducted in 2 phases, starting Oct 2017 & ending in March 2019.”
It is interesting to note that the end date of the contract is March 2019 – which is before the Phase Two compliance date of 5 December 2019. (The maximum budget for this project is up to £350,000, excluding VAT – this is outside our capacity, so we won’t be putting in a bid!) A quick scan of the 76 page ITT does not lead me to think that there is an expressed intention, at this time, to abolish ESOS. But who knows what will happen if the findings are that ESOS is not working as intended?
In a world where the UK voted to leave the EU and Mr Trump has been elected as President of the USA making predictions is a risky process! Taking a risk management approach, I would work on the basis that ESOS will still be required by 5 December 2019. (But I could be proven wrong!)
What should you do?
Firstly, remember that whilst ESOS is about compliance the processes required can be of significant benefit – if done well. I think a problem with Phase One was that the timescale was tight and the focus was on compliance rather than getting maximum benefit from the process. My advice is to Plan for ESOS Phase Two now.
Qualification date: The first key date is 31 December 2018 – this is the qualification date. At a simplistic level this is the day on which you need to determine are you a ‘large entity’ as defined by the regulations. Sounds simple? Well, it might not be. Looking at the result of some of the compliance audits undertaken by the Environment Agency, one of the most common ‘faults’ appears to be in the area of correctly defining the full scope of an organisation’s operations in the UK. This is all based on a) knowing which is the highest parent company in the UK and b) knowing all the companies that report to that highest parent. My advice here is talk to the company secretary and explain what ESOS requires. Don’t rely on you own understanding of the structure.
Reference year: This a continuous 12 month period that includes the qualification date – i.e. 31 December 2018 and end before the compliance date (5 December 2019). The earliest the Phase Two reference year could begin is 1 January 2018 – not that far away! My advice is look at your data collection and get a good data set for the reference year. Part of this will be selecting your reference year. For example, if you are in CRC, then 1 April 2018 to 31 March 2019 (the last compliance year of CRC) might be an option. But, warning, CRC does not include transport and this an area that has given many organizations some heartache in suitable data collection.
Audits: You can start doing audits now – you can repeat Phase One Audits – using a different data set – or if you used sampling of sites, select a different sample. One risk with auditing before you have your reference year data is that you will not be certain what you can exclude under the de minimis. My advice here is if auditing before the end of the references year select significant energy uses that are in excess of 10% of the expected total energy consumption.
Lead Assessor: in Phase One there were two issues driving the selection of Lead Assessors – one was Assessor availability with the tight timescale; the other was, in my opinion, an ill-informed process of buying on price alone. It is my understanding that in the post ESOS compliance auditing process a number of Lead Assessors have found to have not delivered the best advice. This is clear to those that had Agency compliance audits – but what about those that did not. Were you fully compliant? Did you get real value for money?
If you want to talk about ESOS – please get in contact.
If you know others that might find this posting of interest – please share.