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Energy Act 2023

Contents

Part 11: Energy Savings Opportunity Schemes

Section 254: Energy savings opportunity schemes

  1. The purpose of this section is to set out powers for the establishment and operation of one or more Energy Savings Opportunity Schemes (ESOS).
  2. Subsections (2) and (3) set out that an ESOS scheme imposes requirements on undertakings as defined under the Companies Act 2006, for the purposes of enabling or requiring actions relating to assessing undertakings’ energy consumption or resulting greenhouse gas emissions, and enabling, encouraging or requiring actions relating to identifying and achieving energy savings or emissions reductions. The purposes also include assessment of costs and benefits of possible energy savings or emissions reductions and setting out plans or targets for achieving them.
  3. Subsections (4) and (5) explain the meaning of the terms ‘energy saving’ and ‘emissions reduction’ for the purpose of interpreting Part 11.
  4. Subsection (6) enables regulations to make provisions determining the energy consumption and resulting greenhouse gas emissions for which an undertaking is responsible.
  5. Under provisions in subsection (7), regulations may impose requirements on persons, give them functions or enable them to exercise judgments on matters.
  6. Subsection (9) sets out that the existing ESOS scheme regulations can be treated as having been made under these new powers and explains that the term ‘compliance body’ in the existing regulations is covered by a reference to ‘scheme administrator’ in Part 11. A scheme administrator, as set out by section 260, is a public authority which may be appointed by regulations to carry out functions relating to administration, compliance monitoring and enforcement of an ESOS scheme’s requirements.

Section 255: Application of energy savings opportunity schemes

  1. The section enables regulations to set out the application of an ESOS scheme, including in terms of which undertakings it applies to, and what the territorial application of such a scheme may be. This section also enables regulations to make provision for situations where responsibility for energy consumption under such a scheme may need to be determined.
  2. Subsection (2) enables regulations to set out how multiple participants (defined by section 266) may be treated as a single participant and require obligations on one participant to be treated as if imposed on another. This would allow the existing arrangements for corporate groups under the current regulations to be maintained.
  3. Subsections (3) and (4) set out that powers under Part 11 relate to energy wholly consumed in the UK or an offshore area, or to energy partly consumed in those areas (for example in the case of energy used by transport which begins in the United Kingdom and ends outside the United Kingdom) but that regulations may also set out particular circumstances under which energy consumed outside the UK and offshore areas may also be covered by the regulations.
  4. Subsection (5) stipulates that the provisions in Part 11 apply to all greenhouse gas emissions resulting from energy consumption to which Part 11 applies, whether they occur in the UK, an offshore area, or elsewhere.
  5. Subsection (6) allows for regulations to set out how energy consumption is to be attributed to participants, including in certain specific situations such as where energy is consumed by someone that a participant has control or influence over.
  6. Subsection (7) sets out the meaning of ‘offshore area’ for the purposes of subsections (3) to (5).

Section 256: Requirement for assessment of energy consumption

  1. This section allows ESOS regulations to set out the requirements for an assessment of energy consumption and the greenhouse gas emissions resulting from it under an ESOS scheme. This may include, for example, the:
    • frequency and periods of assessment,
    • manner in which assessments are carried out, and
    • record-keeping in relation to an assessment.
  1. Subsection (3) enables regulations to provide that the whole or part of an assessment must be carried out, approved or audited by a specified person called ‘an assessor’.
  2. Subsections (4), (5) and (6) allow regulations to include provisions to enable or require that ESOS assessments include recommendations relating to energy savings or emissions reductions, and to require a cost-benefit analysis to be carried out first. Subsection (6) sets out details in relation to the meaning of ‘cost-benefit analysis’ for these purposes.
  3. Subsections (7) and (8) enable regulations to make provisions relating to formal written reports and the sharing of them within the corporate group, and notification of the scheme administrator of compliance with the regulations, as well as the publication of this compliance information.
  4. Subsection (9) allows regulations to make provision enabling alternative routes for complying with the ESOS regulations.

Section 257: Assessors

  1. This section enables regulations to set out functions and powers relating to assessors (see section 256) and also to bodies responsible for maintaining list or register of individuals who may be appointed as ESOS assessors.
  2. Subsections (2) and (3) enable regulations relating to the appointment of assessors, including powers to require that they must be of a specified description which may refer to any criteria, for example competence, or membership of a designated list, body or scheme.
  3. Designation for these purposes must be either by the Secretary of State or scheme administrator (subsection (4)) and subsection (6) enables regulations relevant to this, including provisions relating to powers to give, review and remove those designations and to publish a list of them.
  4. Subsections (7) and (8) enable regulations to provide for a designated body, scheme administrator or the Secretary of State to maintain lists or registers of persons who may, or who may not, be appointed as assessors (for example assessors who have been removed from a designated register for poor practice).
  5. ESOS regulations under subsection (9) may authorise a scheme administrator to share specified information with designated bodies, for the purpose of ensuring that assessors still meet relevant criteria or to ensure the quality of ESOS assessments.
  6. ESOS regulations under subsection (10) may enable the Secretary of State or a scheme administrator to give directions about a list or register to a person responsible for maintaining that list or register, and to require compliance with those directions.

Section 258: ESOS action plans

  1. This section sets out that regulations may require ESOS participants to produce an ESOS action plan, which is a written statement of proposed actions or targets intended to achieve reductions of energy use or greenhouse gas emissions. Regulations may require participants who have an action plan with no actions or targets to explain why.
  2. Subsection (4) and (5) allows regulations to set out requirements for action plans, including timings, form, content and publication requirements.

Section 259: Action to achieve energy savings or emissions reductions

  1. This section enables ESOS regulations to require participants to take action to reduce energy use and greenhouse gas emissions. The section sets out different ways in which regulations may set these requirements by reference to various objectives and means (subsection (1)).
  2. The objective may be to take a course of action, for example to implement specific recommendations from the ESOS assessment, or it may be to make a specified energy or emissions reduction, for example to reduce emissions by a set percentage.
  3. The means may be either a requirement to achieve that objective, or a requirement which encourages the participant to achieve the objective. An example of the latter would be a requirement to publish information on whether they have carried out specific recommendations or set a public target to reduce emissions by a set percentage.
  4. Subsection (2) sets out the kind of actions that may be required of a participant for the purposes of subsection (1), for example, taking action in accordance with an ESOS action plan.
  5. Under subsections (3) and (4), regulations may require participants to report on actions taken or energy or emissions reductions achieved and may also require participants to provide an explanation when such requirements are not met.
  6. Under subsection (5), regulations may set out requirements for the publication and verification of these reports.
  7. Subsection (6) enables regulations to specify various matters in relation to the requirements on scheme participants, including that they may need to refer to a cost-benefit analysis, and may specify which participants are required to take action or in what circumstances.

Section 260: Scheme administration

  1. The purpose of this section is to allow regulations to set out the requirements for the administration, compliance monitoring and enforcement of an ESOS scheme’s requirements. Subsections (1) and (2) enable regulations to appoint public authorities, referred to as ‘scheme administrators’, to carry out functions relating to these objectives. Subsection (3) enables regulations allowing a scheme administrator to authorise others to carry out some or all of its functions.
  2. Under subsection (4), regulations may make provisions relating to a scheme administrator’s functions, for example, setting out arrangements for cooperation and information sharing between multiple scheme administrators.
  3. Under subsections (5) to (8), regulations may make provisions relating to scheme administration which include:
    • Requiring participants to provide facilities to allow the scheme administrator to carry out its functions,
    • Allowing the scheme administrator to carry out functions relating to the publication of information about an ESOS scheme or participants,
    • Providing for guidance to be given on the scheme and specify who must have regard to it, and
    • Requiring payment to be made by participants to cover fees or costs incurred by the scheme administrator.
  1. Regulations under subsection (9) may give powers to the Secretary of State and appropriate public bodies throughout the UK to require a scheme administrator to provide them with information relating to ESOS which is relevant to the scheme or their functions, which, for example, could include monitoring the effectiveness of policies.

Section 261: Enforcement, penalties and offences

  1. This section makes provision about the enforcement of ESOS, enables offences to be created and details the powers of the scheme administrator to impose penalties.
  2. Subsection (1) enables ESOS regulations to authorise a scheme administrator to exercise various enforcement powers, including to obtain information and evidence, for example by entering premises with a warrant and seizing documents or records, and to issue notices requiring participants to demonstrate compliance with requirements or to remedy a failure to comply.
  3. Subsections (2) to (4) enable regulations to provide that a person may be liable to penalties if they fail to comply with the regulations or provide false or misleading information, and that participants may be required to notify the scheme administrator that they have failed to comply or are likely to do so. The penalty for a failure to comply may include publication of specified information or a financial penalty.
  4. Subsection (5) enables regulations to make further provisions relating to financial penalties.
  5. Subsections (6) to (9) provide that regulations may also create offences and set out further details in relation to those offences, including procedural requirements and potential liability for individuals.

Section 262: Appeals

  1. This section enables regulations to provide a right to appeal in relation to ESOS decisions and enforcement action and requires a right of appeal to be available for the imposition of a financial penalty.
  2. Under subsections (3) and (4), regulations must set out who will hear and determine the appeal and may include further provisions relating to making the appeal, for example, the procedure and any fee payable.

Section 263: ESOS regulations: procedure etc

  1. This section establishes procedural requirements for the making of ESOS regulations. Subsection (1) contains a general duty for the Secretary of State to consult those likely to be affected by the regulations.
  2. Subsections (3) to (8) require the Secretary of State to consult devolved authorities in Scotland, Wales or Northern Ireland where the regulations contain provisions within devolved competence. For regulations that have effect in relation to the compliance period beginning 6 December 2019, there is a general duty to consult with devolved authorities on such provisions. Otherwise, an enhanced consultation duty applies where regulations contain provisions within devolved competence, which includes requirements on giving of notice of the intention to make ESOS regulations, describing any provisions within devolved competence, and allowing a minimum of 28 days’ notice for representations to be made.
  3. Subsection (9) allows regulations to create exceptions to requirements in regulations and subsection (10) allows regulations to provide for application to the Crown.
  4. Subsections (11) and (12) set out when regulations would be subject to the affirmative parliamentary procedure, and which would be subject to the negative procedure.

Section 264: Directions to scheme administrators

  1. This section sets out that the Secretary of State may give directions to a scheme administrator, which they must comply with, and this includes a power for the Secretary of State to vary or revoke directions.

Section 265: Financial assistance to scheme administrators and participants

  1. This section sets out that the Secretary of State may provide financial assistance in any form to scheme administrators and/or participants, which may be subject to conditions determined by, or in line with arrangements made by, the Secretary of State.

Section 266: Interpretation of Part 11

  1. This section provides the meanings and definitions of various terms used in Part 11.

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