The Energy Savings Opportunity Scheme ("ESOS")
Regulations (SI 2014/1634), which came into force on July 17, 2014,
requires large undertakings in the UK to carry out an energy audit
and notify the Environment Agency ("EA") of compliance by
December 5, 2015. Participants must carry out an assessment in each
subsequent four-year compliance period ending on December 5, 2019,
2023, etc. While there is no obligation to follow any
recommendations, the assumption is that having carried out such an
assessment, participants are then likely to take action to reduce
their energy use. ESOS is the UK's method of transposing its
obligations under Article 8(4) of Energy Efficiency Directive 2012
to promote energy efficiency.
In the first four-year period, an undertaking must participate if,
as of December 31, 2014, it either: (i) employed at least 250
people; or (ii) employed less than 250 people but had an annual
turnover in excess of €50 million and an annual balance sheet
in excess of €43 million; or (iii) was part of a corporate
group that included an undertaking that meets the criteria at (i)
or (ii) above.
In group situations, compliance responsibility rests with the
highest UK parent unless all group companies agree otherwise in
writing. Global parents and overseas undertakings not carrying on a
UK business are not subject to ESOS. An "undertaking" is
determined by reference to section 1161(1) of the Companies Act
2006, i.e.: limited or public companies, trusts or partnerships,
unincorporated associations, not-for-profit bodies engaged in a
trade or business (which could include some charities), and some
universities.
Public bodies and companies in insolvency are excluded. For these
purposes, a "public body" (in England, Wales, and
Northern Ireland) is a contracting authority as defined in
Regulation 3 of the Public Contracts Regulations 2006 (SI 2006/5).
This includes government departments, local authorities, police,
and fire authorities. Global parents and overseas group
undertakings are not required to participate.
In carrying out the assessment, participants must ensure that at
least 90 percent of their total energy consumed in the UK in
buildings, transport, and industrial processes is covered over a
12-month reference period. The compliance package in respect of the
audit has to be signed off by a qualified lead assessor that meets
special competency requirements.
The EA has indicated it will take a light-touch approach to
ensuring compliance, although failure to comply can lead to civil
fines. Financial penalties vary according to breach but range from
a fine of up to £5,000 for failure to maintain records to up
to £50,000 for failing to carry out an audit. Penalties may
also include additional fines of £500 per day for
noncompliance, together with the costs of the compliance body in
carrying out additional auditing activity to check ESOS compliance.
The EA can also publish a penalty notice setting out the breach on
its website.
Undertakings should therefore assess whether they are caught by
the qualification criteria as of December 31, 2014 and take steps
to ensure compliance by December 5, 2015.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.