What progress is being made on being able to identify organisations that qualify for EPC?

1. UK ETG 26 January 2007 What progress is being made on being able to identify organisations that qualify for EPC? Driving a legally-defined step-by-step solution

2. Defining the EPC ‘organisation’ • Where has the issue of organisational boundaries been dealt with before? • The Greehouse Gas Protocol • UK ETS

3. The Greenhouse Gas Protocol • Developed by: • The World Business Council for Sustainable Development (WBCSD) is a coalition of 175 international companies united by a shared commitment to sustainable development. Its members are drawn from more than 35 countries and 20 major industrial sectors. • The World Research Institute (WRI) is an independent nonprofit organisation with a staff of more than 100 scientists, economists, business analysts, statistical analysts, mapmakers and communicators working to protect the Earth and people’s lives.

4. The Greenhouse Gas Protocol Goal The Greenhouse Gas Protocol’s goal is to help business better manage their greenhouse gas (GHG) emissions, create a GHG accounting platform to ensure that different trading schemes and other climate related initiatives adopt consistent approaches and to generally expand GHG accounting capacity around the world. The Corporate Accounting and Reporting Standard* is available at: www.ghgprotocol.org *adopted by the International Standards Organisation

5. The Greenhouse Gas Protocol Two distinct approaches to defining organisational boundaries: Equity Share: accounts for Green House gases (GHGs) from operations according to its share of equity in the operation. Control: a company accounts for 100% of GHGs from operations over which it has either financial or operational control.

6. The Greenhouse Gas Protocol Financial control: A company has financial control over the operation if the former has the ability to direct the financial and operational policies of the latter with a view to gaining economic benefit from its activities. Operational control: A company has operational control over an operation if the former or one of its subsidiaries has full authority to introduce and implement its operating policies at the operation. [This is the definition for EU ETS & CCA]

7. The Greenhouse Gas Protocol Financial control: A company has financial control where an operation is fully consolidated in financial accounts. Financial control usually exists if the company has the right to the majority of the benefits. For joint ventures where partners have joint financial control emissions are based on the equity share approach. Further information can be found in the GHG Protocol document.

8. UK ETS • Companies (voluntarily) entered the UK ETS as a direct participant • Each company had to include “ every source within a sector over which it has management control” • Management control , when a direct participant: • “exercises dominant influence over the emissions from a source, through having the ability to direct the financial and operating policies governing the emissions from a source” • This management control definition is essentially referring to ‘financial control’

9. Other GHG Programmes

10. Defining ‘organisation’ for the EPC Scheme A key objective is to engage the attention and action of public and private sector Management Boards. To take a ‘top-down’ view when identifying an ‘organisation’ to see whether or not it meets the qualification criteria for the EPC scheme. To ‘tag’ each mandatory half-hourly meter with the organisation name for the EPC scheme as defined by Defra.

11. A Suggested Definition For the purposes of the EPC Scheme ‘organisation’ might be defined as: The UK organisation that has financial control over the operation that is consuming the electricity at the HH meter site. In most instances, this definition is expected to identify UK parent companies. A company has financial control where an operation is fully consolidated in financial accounts. Landlord - tenant issues are discussed later.

12. Applying the EPC Scheme Rules Step 1: Identify all UK organisation with financial control over HH meter sites. Step 2: Remove organisations that have aggregated annual mandatory HH meter consumption < 3000 MWh. Step 3: Organisations that have more than 25% of their energy use emissions in CCAs would petition for exemption from EPC.

13. The Need for Case Studies To test that this definition works in the majority of cases? To test how the definition can be applied to the public sector? To test landlord-tenant issues? We are looking for 20-30 case studies covering: - the private sector - the public sector - landlord-tenant Can you help? Contact: Carl Lynch - carl.lynch@hedra.com Target date: Monday 5th February

14. Landlord - Tenant Where owner/long-term tenant is invoiced directly for HH meter, then UK organisation that has financial control over the owner/long-term tenant is the EPC organisation. Sole tenant of large property where tenant is invoiced directly for HH meter, then UK organisation that has financial control over the tenant is the EPC organisation.

15. Landlord - Tenant (cont’d) Multi-tenancy properties Scenario 1: Property Management Company or Managing Agent is invoiced for the HH meter consumption and pays the whole electricity bill. It uses sub-meters to apportionate share of the bill to the tenants or tenants pay a service charge that includes electricity use. EPC organisation would be UK organisation that has financial control over the Property Management Company or Managing Agent. Scenaro 2: Tenant is invoiced directly for the HH meter consumption. The Property Management Company/Managing agent is invoiced directly for common-parts usage (e.g. lifts, lighting and central plant). Both tenant and Property Management Company/Managing Agent could qualify for the EPC Scheme, dependent on whether or not their organisation’s agreggated consumption exceeds 3000 MWh per annum.

16. Summary of Suggested Approach for EPC registration • Find MPANs in database, check site address; ADD • EPC Organisation/address • EPC Co. Registration Number • EPC Org contact name /address Audit Process: Sort non-registered companies by billing organisation & apply Dun & Bradstreet ownership check • Consolidate data from all suppliers in database: • All MPANs • Annual Consumption • Billing Org/address • Contract Org/address Defra Letters to non-compliant customers Electronic File • Notify each customer (billing or contract address) of their: • MPANS & site addresses • EPC qualification guidance • Provide Annual return to Defra listing: • All MPANs • Annual consumption • Billing Org/address • Contract Org/address Electricty Suppliers Letter to all MPAN customers: Submit data to register for EPC - website or letter: Write to customer stating their legal obligation to join EPC (subject to Defra’s information being correct) • Consolidate customer list of: • MPAN & site address • EPC Organisation name • EPC Co. Registration name • EPC Org contact name /address • Check data from each supplier • Consolidate data from all suppliers (if more than one) to check if >3000MWh Customer Decides EPC eligibility Customer