Haven Power

Energy Intensive Industry (EII) exemption explained

Energy Intensive Industry (EII) exemption explained

In the 2015 Autumn Statement, the Government announced its intent to reduce the impact of renewables policies on the costs of electricity for the most Energy Intensive Industries (EIIs). 

This proposal would see EIIs exempt from a significant proportion1 of the costs of the Renewables Obligation (RO) and the Small Scale Feed-in Tariff (ss-FiT), in order to ensure that they maintain their competitiveness internationally. EIIs are currently entitled to cash compensation from the cost of these schemes (i.e. they pay the costs but receive compensation from the Government). From April 2017, it is proposed that this would change to a direct exemption at source; however, this is subject to State Aid Approval.

Under this exemption, companies operating in sectors such as metal casting, heavy manufacturing and mining will benefit, but non-exempt customers will pay extra to cover the cost of the exemptions. This cross-subsidy will put further upward pressure on prices for these non-EII customers.

1. What are EIIs?

EIIs are Energy Intensive Industries which include sectors such as mining and heavy manufacturing, and are distinguished by their trade and electricity intensity.2

2. What is the potential impact for non-exempt customers?

With an estimated volume of 17TWh3 exempt from RO and ss-FiT4, and non-eligible customers expected to absorb the extra costs, this policy could add approximately £1.10/MWh to the RO forecast and around £0.30/MWh to the ss-FiT forecast. This would mean an increase from current rates upwards of 6.3% for RO, and 6.4% for ss-FiT.

Haven has considered the likely implementation of this policy and believes that, in line with the impact assessment above, there will be a considerable cost impact on those customers outside of the EII exemption from April 2017. Once the exemption is implemented, this cost will be recovered through customer charges.

In line with Haven’s company values, we want to be transparent with you and give you and your customers as much information as possible so that you can provide the correct analysis moving forward. An increase of this proportion could potentially lead to suppliers re-opening contracts to recover this cost from customers, even those deemed as completely fixed.

3. What about businesses on fixed contracts?

An increase of this proportion could potentially lead to suppliers re-opening contracts to recover this cost from customers, even those that are claimed to be completely fixed.

We continue to offer our Complete product, which gives customers the opportunity to take a fixed price with the security that there will be absolutely no changes to charges that were agreed at the beginning of the contract.  This product takes the implementation of EII exemption into consideration, giving your customers the budget certainty they require.  

4. How can Haven guarantee they won’t re-open fixed rate contracts?

Our Contract Awards Schedule for Haven Complete specifies the treatment of all TPCs and that they are fixed. This gives customers the security that should any of the specified TPCs increase in cost; Haven will not re-open contracts to recover these costs. 

5. How can Haven Help?

We continue to offer our Complete product, which gives customers the opportunity to take a fixed price with the security that there will be absolutely no changes to charges that were agreed at the beginning of the contract. This product takes the implementation of EII exemption into consideration, giving your customers the budget certainty they require.

For those customers who want to fix the majority of their costs, but do not want to pay a premium to protect against these potentially large rate increases, Haven Assured now allows customers to fix all costs except CfD, CM and EII Exemption Charge

Haven Assured gives Haven customers the choice of whether or not they want budget certainty regarding these costs. Under this offering, customers can choose to fix all prices except CfD, CM and cost increases related to EII exemption. This means that until April 2017 EII exemption charges will not be passed through, and no premium will be paid to cover the costs of CfD, CM OR EII exemption. Once EII exemption is implemented, any increase in RO and ss-FiT costs will be passed through directly to the customer. 

Haven Assured gives Haven customers the choice of whether or not they want budget certainty regarding these costs. Under this offering, customers can choose to fix all prices except CfD, CM and cost increases related to EII exemption.

Haven Assured gives customers' the option not to pay for a premium in advance of April 2017 when the EII related charges take effect.

 

1 Likely to be up to 85% of the cost

2Compensation for the indirect costs of the Renewables obligation and small scale feed-in tariffs - Guidance for applicants

3 20TWh of EII volume at an expected exemption level of 85%

4Estimate provided by Cornwall Energy

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