The Climate Change Levy (Combined Heat and Power Stations) Regulations 2005

Explanatory Note

(This note is not part of the Regulations)

These Regulations(1) relate to the reliefs from climate change levy (CCL) that may apply in the case of electricity produced in certified combined heat and power stations(2).

Input fuel to all certified stations

The exemption for supplies of leviable fuel to such stations is determined relative to an objective threshold efficiency percentage(3). Regulation 3(1) sets that threshold efficiency percentage as 20 per cent(4).

The actual amount of exemption depends on the ratio between a station’s efficiency percentage and the relevant threshold efficiency percentage(5). Regulation 3(2) provides for a station’s efficiency percentage in relation to a given calendar year to be determined in accordance with methodology described in detail in the Combined Heat and Power Quality Assurance Standard, Issue 1, November 2000 originally published by the Department for the Environment, Transport and the Regions (the Standard)(6), (7), (8).

Output electricity from partly exempt stations

Electricity may be supplied from partly exempt stations free from CCL, but only up to a specified limit. Regulation 4 specifies the current calendar year’s annual limit as the station’s CHP Qualifying Power Output in relation to that year in accordance with the Standard(9).

Condition for full-exemption certificate

A certified station is fully exempt or partly exempt for CCL purposes(10). Entitlement to a full-exemption certificate depends on prescribed conditions being satisfied(11).

Regulation 5 prescribes as a condition that the station’s Quality Index measured in accordance with the Standard must at least meet a Threshold Quality Index Criterion specified by the Standard.

Regulatory impact assessment

A full regulatory impact assessment has not been produced for this instrument as it has no impact on the costs of business, charities or voluntary bodies.

(1)

Revoking and replacing S.I. 2001/1140 and S.I. 2003/861, and partly implementing Articles 6, 15.1(c) and 15.1(d) of Council Directive 2003/96/EC (OJ L 283, 31.10.03, p 51) (taxation of energy products and electricity). A transposition note is available from www.hmce.gov.uk .

(2)

Certified for these purposes under the Finance Act 2000 (c. 17) Schedule 6 paragraphs 148(2) to 148(5), which are amended by the Finance Act 2003 (c. 14) sections 189 and 216 and Schedule 43 Part 4(2) in relation to supplies made on or after such day as the Treasury may by order made by statutory instrument appoint (about which, see S.I. 2005/1713 (C.72)).

(3)

See the Finance Act 2000 (c. 17) Schedule 6 paragraph 15, which is amended by the Finance Act 2003 (c. 14) sections 189 and 216 and Schedule 43 Part 4(2) in relation to supplies made on or after such day as the Treasury may by order made by statutory instrument appoint (about which, see S.I. 2005/1713 (C.72)).

(4)

This threshold is identical with the one established at the start of climate change levy on 1st April 2001 by S.I. 2001/1140 regulation 3(1). (A threshold of 15 per cent applied until 1st April 2005 for a station that on 1st November 2000 was solely operating a steam engine or steam turbine, see S.I. 2001/1140 regulation 3(2)). S.I. 2001/1140 is revoked by regulation 8 of these Regulations.

(5)

See the Finance Act 2000 (c. 17) Schedule 6 paragraphs 15(2) to 15(4); paragraph 15 is amended by the Finance Act 2003 (c. 14) sections 189 and 216 and Schedule 43 Part 4(2) in relation to supplies made on or after such day as the Treasury may by order made by statutory instrument appoint (about which, see S.I. 2005/1713 (C.72)).

(6)

Including the relevant Guidance Notes version Final 1.0 or 2.0. The Standard and Guidance Notes are available at http://www.chpqa.com or free of charge from the Action Energy Helpline (0800 585794) or the CHPQA Administrator (0870 190 6196).

(7)

Regulation 3 of S.I. 2001/1140, revoked by regulation 8 of these Regulations, made similar but less up to date provision by linking a station’s efficiency percentage to the most recent year’s assessed output figures stated in its current CHPQA certificate.

(8)

Regulations 2(2), 2(3) and 6 cater for updates to the CHPQA or Guidance Notes for the purposes of the efficiency percentage. Such provision is envisaged by the Finance Act 2000 (c. 17) Schedule 6 paragraph 149(2)(e).

(9)

Regulation 5 of S.I. 2001/1140, revoked by regulation 8 of these Regulations, made similar but less up to date provision by linking a station’s limit to a stated quantity on the CHPQA certificate for the most recent calendar year’s assessment. Regulation 7 of these Regulations preserves any benefit from that arrangement for the part of calendar year 2005 preceding these new arrangements.

(10)

See the Finance Act 2000 (c. 17) Schedule 6 paragraphs 148(2) and 148(3), which are amended by the Finance Act 2003 (c. 14) section 189 in relation to supplies made on or after such day as the Treasury may by order made by statutory instrument appoint (about which, see S.I. 2005/1713 (C.72)).

(11)

See the Finance Act 2000 (c. 17) Schedule 6 paragraph 148(4)(b).