Business energy regulations changes: April 2017

13 March 2017

A number of significant changes to energy reform are scheduled to come into force from 1st April 2017, some of which could impact on your business. Here, we highlight the changes to energy regulation you need to know about, and provide information on how they could affect your existing business energy contracts.

Big changes to the climate change levy 

If your business currently pays the main Climate Change Levy (CCL) rate on its qualifying energy use, you could see a change in your energy bill from 1 April. This is because, during the 2016 Budget, the government submitted plans to change the main rates of the Climate Change Levy, with the new charges set to come into force from April 2017. The main CCL rates will then increase again in April 2018 and April 2019 respectively, to keep in line with the projected Retail Price Index (RPI).

So, why are the rates changing, and what can businesses expect from the increase? In 2015, MPs debated the CCL scheme in the House of Commons, with many raising concerns about how complex it is for businesses to negotiate the current tax landscape (particularly when it comes to validating their business efficiency). Plans were sought to simplify key processes regarding the reporting requirements of several tax relief schemes, with the government later publishing a consultation paper highlighting ways this could be achieved without hindering its overarching decarbonisation commitments.

As part of its review into business energy policies and regulations, the government announced the following changes to the main rates of CCL.

Taxable Commodity

1 April 2016

1 April 2017

1 April 2018

1 April 2019

Electricity (£ per KWh)

0.00559

0.00568

0.00583

0.00847

Natural Gas (£ per KWh)

0.00195

0.00198

0.00203

0.00339

LPG (£ per kg)

0.01251

0.01272

0.01304

0.02175

Other (£ per kg)

0.01526

0.01551

0.01591

0.02653

Source: gov.uk

Given the CCL rate increases, businesses which currently pay the main rates may see an increase in how much they pay for gas and electricity after the 1 April. The more material increase from April 2019 coincides with the abolition of the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme. While this might sound like bad news, it should be noted that costs are expected to dip in the long-term as replacing the CRC with higher CCL should lower inflation.

P272 policy set to be implemented

Having been in the pipeline for over six years, the P272 regulation requiring all businesses on a 5-8 meter profile class will be implemented from 1 April 2017 — meaning that energy suppliers must settle all customers within this profile bracket on a Half Hourly (HH) basis. 

The P272 regulation first came to fruition back in 2011, when a modification proposal was raised to mandate that all SVA Metering Systems for Profile Classes 5-8 be settled every half hour. Since 6 April 2014 all meters with a Profile Class of 5-8 must have an advanced meter installed which is capable of remotely recording meter readings on a HH basis.

However, although these advanced meters had to be installed from 6 April 2014 there was no requirement to use the HH data available for settlement purposes,  meaning that the majority of energy users still found themselves relying on out-dated manual meter readings. This is all set to change from 1 April 2017, with the P272 regulation making it obligatory for suppliers to settle customer profile classes on 5-8 meters on a HH basis.  

Business energy regulations changes

This is great news for business energy customers who currently rely on a manual energy meter readings, as AMR (automatic meter reading) systems mean an end to estimated billing and more accurate monthly invoices based on real-time HH energy consumption data.

But what about smaller businesses which have a profile class of 1-4, can they expect mandatory HH settlement in the near future? Currently, Ofgem is in the process of assessing similar regulations for these profile classes, as this will be made possible thanks to the roll-out of Smart Metering and their capability of recording data every half hour. Indeed, a decision on this topic may be announced in 2017. 

For more information on what this means for your business, read our comprehensive P272 regulation guide.

Closure date looms for Renewables Obligation (RO)

The Electricity Market Reform (EMR) is a long-term programme introduced by the government in 2013 to tackle issues affecting the UK’s future electricity supply. The programme focuses primarily on two main areas, Contracts for Difference (CfD) and the Capacity Market (CM). The Policy was introduced to help decarbonise the industry whilst ensuring affordable security and stability of supply in the short and long term.

Prior to the EMR, the government introduced the Renewables Obligation (RO) in conjunction with Ofgem in 2002. This became the main support mechanism for large-scale renewable electricity projects in the UK, with hundreds of businesses receiving monetary funding for low-carbon electricity generation projects.

Business energy regulations changes: April 2017

However, the RO is set to end on 31 March 2017 to all new generating capacity, with the second allocation round of Contracts for Difference (CfD) opening from 1 April 2017.

Since the switch to CfD was announced in 2014, Ofgem have actively encouraged businesses to make an informed choice on the scheme which is right for them. The energy regulator has published a number of guides to help businesses select their preferred CfD programme, with dual scheme facilities (DSF) and RO-CFD phased projects being among the choices available to eligible parties.

For further information on the RO to CfD switch, we’d recommend this informative Ofgem guide.  

We hope this guide has provided insight, help and food-for-thought on April’s biggest energy regulation changes, and how they could impact on your business. For more of the latest news from the UK energy sector, don’t forget to check out the Gazprom Energy blog. Alternatively, to find out more about our business energy solutions, visit the homepage or call us now on 0845 230 0011.

The views, opinions and positions expressed within this article are those of our third party content providers alone and do not represent those of Gazprom Energy. The accuracy, completeness and validity of any statements made within this article are not guaranteed. Gazprom Energy accepts no liability for any errors, omissions or representations.


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