Update on tax exemptions for Energy Intensive Industries (EII)

Update on tax exemptions for Energy Intensive Industries (EII)

Legislation has now been passed in Parliament to allow Energy Intensive Industries (EII) access to partial exemption from the costs of the Contracts for Difference (CfD).

Additional legislation is still needed for exemption from the Renewables Obligation (RO), but this is expected to be in place by April 2018. The exemption will cut energy bills for the UK’s most energy intensive businesses, but in so doing will increase the cost for all other consumers.

The Government has reissued application forms for those businesses that are seeking EII status, available here, and Utilitywise has previously covered developments in this situation.

The production of new application forms follows new legislation being passed at the end of October. European State Aid approval had already been granted for the exemption scheme for RO and CfD costs, with similar approval for exemption from Feed-in Tariff (FiT) costs still pending.

The exemption replaces the current rebate scheme, where eligible EII received costs back directly from the Government for elements of their energy costs. This means that the discount will become led by the supplier and not from the Government. Businesses will still have to apply to the Government for EII status, but once it has been granted, businesses will have their RO and CfD charges cut by a maximum of 85%. Crucially, there is no backdating of the discounts to the start of the EII scheme. The discount will only apply from the point you have been granted EII status by the Government and informed your supplier of this fact. Once done, the consumer should then expect this to be reflected as a new line on future electricity bills.

What if you’re already registered for rebates?

Those companies which are already registered for RO and FiT rebates should not have to reapply for the exemption scheme. The Government is currently working on this issue as part of the move to the new method of support. Indeed, the rebate scheme will continue making payments to businesses for RO and FiT costs until the scheme converts to exemptions.

The situation is different for the new CfD exemption. EII, even those currently receiving some rebate from RO and FiT, will have to apply for the CfD exemption scheme if they want to take part.

Crucially, the overall costs for the renewable energy schemes will not change. As such, costs to the rest of the UK’s bill payers will have to rise accordingly. Below are estimates on the net RO and CfD charges for both EII’s and those ineligible for the exemption in £/MWh.



Utilitywise can help

We can ensure any new charges are accurately reflected in your bills with our Bill Validation service. Plus, if you’re looking for assistance with future budgeting, our Long-Term Price Forecast Report details delivered pricing for the next five years and demonstrates the rapidly increasing proportion of non-commodity costs.

For more information you can contact us on 01527 511 757 or by emailing corporate@utilitywise.com

Ross Moffat

Posted by on Wednesday, the 29. November at 15.46

Ross Moffat has been a part of the Market Intelligence team at Utilitywise since early 2014. His responsibilities include delivering Market Intelligence reports to clients and managing the Utility Insights Twitter account. Ross has a first class Honours degree in Business and Marketing from the University of Stirling.