Expert energy analysis and insight for UK businesses.
From the questions we’ve received this month from customers and energy consultants, it’s clear there’s a lot of uncertainty and ambiguity about Renewable Source Electricity (RSE), Levy Exemption Certificates (LECs) and the Climate Change Levy (CCL).
This stems from the surprise announcement in this year’s Summer Budget to remove RSE’s exemption from CCL and the role that LECs play.
We completely understand that businesses need to know what this change means for their electricity contracts and budgets. And of course good energy consultants want to give businesses the right advice. So we’d like to provide as much clarity as we can today.
Although the government has published limited guidance and are yet to consult on transitional arrangements, we have made some decisions which mean we can let most of our affected customers know where they stand right now.
At EDF Energy, we have a fixed commitment and we’re sticking to it
We’re standing by the prices we have promised our fixed price contract customers, no matter which electricity supply they chose – standard, Blue, Renewable Source LEC backed, or Renewable for Business. For customers who have LECs as part of their fixed price contract with us there will be no financial impact during their current fixed term period.
If you’re wondering why we would do this, remember our “It’s fixed” Commitment comes with every fixed price contract:
When we say an element of your price is fixed, we’re making a commitment to you that we will not use our terms and conditions to recover additional costs arising from our forecasting errors. But we can't plan for absolutely everything. In the case of force majeure events, or in exceptional circumstances such as a change in law relating to your energy use, we may have to pass on the costs. But we’ll always try to avoid taking that action.
Even though technically this change counts as an exceptional circumstance (it is a change in law), on this occasion we won’t let this event have a financial impact on our customers who chose EDF Energy for a fixed price contract. It’s part of what makes us the Feel Better Energy company and is clearly in the interests of our customers.
But we may have to make some changes to your contracts and bill presentation
This is a change in law related to a tax on the electricity we supply to you, depending on the details of the legislation; we may need to make some changes to your contract or bills. But, there will be no change to your fixed prices during your current contract term. We will write to you directly, later this year, if you’re affected and will do everything we can to avoid inconvenience to you and your business.
What about our other business customers?
There are two other groups of customers affected, but we can’t yet detail their contractual or financial impact:
1. Our largest business customers that use flexible price contracts to purchase electricity from us.
2. Businesses that we purchase RSE and LECs from, for example through Power Purchase Agreements (PPAs).
We need to wait for further detail on how the change in law will be implemented – expected later this year. We will contact these customers directly to discuss the changes we may need to make to contracts and prices.
What happens next?
Here is our best view on what is likely to happen next with LECs based on our conversations with government in recent weeks.
1.No new LECs: On July 31, Ofgem revised their FAQs confirming they would not issue LECs for RSE generated on or after 1 August 2015. Ofgem will issue LECs for RSE generated before 1 August and expects to issue the last LECs in October to cover RSE generated during July 2015.
2.LECs relating to RSE generated before 1 August 2015 remain valid, for now: HM Treasury, HMRC and DECC will soon launch a consultation to work out how LECs can be applied against customer contracts and for how long; these are called the “transitional arrangements”. The transitional arrangements will detail the circumstances and duration that this practice can continue. Of course this is subject to the consultation and government’s direction which we expect to be completely finalised next year.
Sign with certainty
If you’re looking for a new fixed price electricity supply contract, EDF Energy can give you prices and low carbon options you can bank on. As we’ve demonstrated again, our fixed prices are fixed, plus our Blue for Business supply option gives you assured low carbon benefits in this period of change.