NEC update: what to expect from the results of the energy-intensive industries consultation

We’ve been expecting the government to publish the results of a consultation that could affect the non-energy costs (NEC's) on your energy bill, impacting Renewable Obligations (RO) and Feed in Tariffs (FiT's). These results have been delayed and to complicate matters, Government has now published its response to the part effecting RO but not FiTs. The delays have mainly been due to the need to agree State Aid requirements for the schemes with the European Commission (EC) but Brexit negotiations and the recent general election have only added to the uncertainty.

The consultation, launched in 2016 by what is now the Department for Business, Energy and Industrial Strategy (BEIS), reviewed how the FiT and RO apply to energy-intensive industries (EIIs) such as chemicals and manufacturing. In June Government received State Aid approval from the EC for the RO exemption but not FiT (timescales for this still remain unknown) and hence this is why the consultation response has been split.

FIT and RO are two of the non-energy costs that make up your business’s energy bill. They go towards encouraging more use of renewable energy. There is already a compensation scheme, paid direct from Government funds, to offset some of the costs of RO and FiT for energy-intensive industries (EIIs) businesses, but BEIS is considering exempting similar organisations through reducing suppliers’ costs instead.

We now know that Government intends to start the RO exemption from January 2018 but this is entirely dependent on them getting Parliamentary time for the required legislation and it is possible it may take a back seat to more urgent EU Exit legislation. Therefore, the start could still be further delayed until the compliance year 2018/19.

For more about the different costs in your bill and what they pay for, take a look at our cheat sheets for non energy and power costs.

What will this mean for my business?

If your business qualifies as part of an EII, this could be good news for you. RO and FiT make up a large proportion of your non-energy costs. Once the exemption scheme is up and running, and if you haven’t already through the compensation scheme, you’ll need to check your eligibility and apply for recognition as an EII. But once you’re recognised- and if BEIS decides the exemption applies- you’ll be excused from up to 85% of the RO and FiT– a potentially significant reduction to your bill.

However, the RO and FiT schemes will still cost the government the same amount. If EIIs are made exempt, the schemes’ cost will have to be recovered from a reduced volume of consumption. So if your company doesn’t fall under the banner of the EIIs, and the consultation result is in favour of the exemption, it’s highly likely you’ll see the RO and FiT scheme charges on your bill go up - if your current contract permits these costs to be recovered in the event that they change post contract signature.

The great news is that if you’re on EDF Energy’s Peace of Mind contract or have taken the decision to fix your Non-Energy Costs on one of our alternative products you will not have to worry about any further increases relating to this change.

What can you do?

Keep an eye out for news from BEIS announcing the next steps in the consultation result and State Aid process – or just sign up to our Market Insight service for regular updates on all the costs that make up your bill.

And in the meantime, you should check your company’s current electricity tariff to find out how your supplier treats changes like these – especially if they promised you a fixed price when you signed.

Some tariffs look like they offer a good rate at first glance, but include terms and conditions that let your supplier increase your bill amount to recover unforeseen costs. No supplier can promise a rate that stays fixed under absolutely all circumstances, but the terms and conditions should be clear about when and why your rate can change.

Search your terms and conditions for a clear statement like our It’s fixed commitment:

“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 forced major 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.”

Or simply call your supplier or energy broker and ask how the EII exemption will affect your business.

For regular updates on developments like this and their effects on your bill, sign up for our Talk Power updates, events and webinars. You can also log in to or register for our Market Insight service.

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Posted by Glenn Lamotte

Senior Manager of Market Analysis at EDF Energy.

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