Energy Intensive Industry Compensation Scheme (EIIC)

1. What is this about?

As part of the UK government’s approach to decarbonise energy, incentives were given to generate electricity from renewable sources in the form of Renewables Obligations(RO), Feedin Tariff (FITs) and Contract for Difference (CfD). This resulted in the increase in retail electricity prices which, risks reducing the competitiveness of the UK’s most electricity-intensive businesses operating in international markets. As a result, the UK Government has committed to implement compensation for the impact of renewables policy on the costs of electricity for the most electricity intensive industries in line with European Commission’s published guidelines.

Compensation of up to 85% on RO and FIT charges and exclusion from the CFD scheme are possible.

2.Who is affected and eligible?

a) Any eligible businesses 1 must manufacture a product in the UK within an eligible sector (defined by 4-digit NACE code, similar to the SIC code).

b) The business (aggregated business level – whole legal entity) must pass the 20% electricity intensity test. In order to satisfy the business intensity test, businesses will need to show that

their implied mean electricity costs amount to 20% of their mean Gross Value Added (GVA) 2 .

3.What information do we need for 20% intensity tests?

a)Financial data from three (3) most recently audited statements (EBITDA & Staff Costs 3 ).

b)Total electricity consumption (Grid & non-Grid) for the same three (3) years for the business.

1 Business refers to the legal entity manufacturing a product in the UK within an eligible NACE code, typically registering at Companies House, with separate accounting.
2 GVA is defined as earnings before interest, taxes, depreciation and amortisation (EBITDA) and staff costs including employers’ pension and national insurance contributions.
3 Staff costs including pension costs and employer NI contributions.
4. How is eligibility determined for existing and new companies?

Eligibility will be determined using data from the applicant’s three most recent financial years.

For new businesses that do not have three years of recorded data, eligibility will be calculated using the period available, so long as at least two financial quarters 4 exist:

•Businesses with fewer than two full financial quarters of data are ineligible.

• For businesses with only two or three quarters of data, eligibility will be based on a forecast for the year assuming electricity consumption and GVA continues in line with the first quarters of data. We will then reassess eligibility at the end of the year, recovering any compensation paid if, based on a complete year’s data, the business is found to be ineligible.

• For businesses with one full financial year of data, eligibility will be based on that data and will be reassessed when two full years of data are available. If found to be ineligible on the basis of two years of data, compensation paid will not be recovered but the business will not receive further payments.

• For businesses with two full years of recorded data, eligibility will be based on the arithmetic mean of data for both years and reassessed when three full years of data is available. If found to be ineligible on the basis of three full years of data, compensation paid will not be recovered but the business will not receive further payments.

• The exception to these eligibility rules is that businesses can exclude their 2020 and/or 2021financial years to account for the negative impact of the COVID pandemic.

5. How & When will compensation from BIS be paid?

Following application approval, an exemption certificate will be provided and this is to be submitted to your energy supplier who will then apply the exemption directly to your invoices.

6. Will I see any changes to the cost of my electricity bills?

Yes, the exemption will be applied to your electricity bills by your supplier.

Contact

For more information contact Lisa Johnson at LG Energy Group [email protected] or on 0161 641 3608