Terms that appear in capital letters in this Ask the team are defined in Practice note, CRC Energy Efficiency Scheme: PLC glossary and abbreviations.

I work for a manufacturing company that owns a large site on which both our factory and a number of warehouses are situated. A completely separate company uses one of the warehouses. I've been told by our lawyer that there is no formal lease of that warehouse. Instead there is a licence in place.

We have a single electricity supply to the site (through a settled half hourly meter) but all the warehouses are sub-metered. We charge the company that uses the warehouse (the licensee) for electricity it uses on the basis of the sub-meter. Our company's electricity supply in 2008 was 9,500 MWh so we are required to register for the introductory phase of the CRC Energy Efficiency Scheme (CRC). I know that the landlord and tenant rule makes landlords covered by the CRC responsible for the energy that they procure for their tenants. However, I am not sure if this rule also applies to the licence situation that I have described. Is my company responsible for the electricity supply that the warehouse licensee consumes?

Under the CRC, where a company (such as a facilities management company) contracts for energy supplies on behalf of a third party, and it is the third party that uses the energy, the company will not be responsible for those energy supplies. The supply to the facilities management company is known as an Unconsumed Supply and it can be excluded by that company when it is working out what energy supplies it is responsible for under the CRC. This exclusion is set out in paragraph 13 to Schedule 1 of the CRC Energy Efficiency Scheme Order 2010 (SI 2010/768)) (the CRC Order).

This rule does not apply when it is a landlord procuring an energy supply for its tenants. The Department of Energy and Climate Change (DECC) took the view that landlords were able to influence the amount of energy consumed in the buildings that they rent out and, therefore, they should be allocated responsibility under the CRC for energy supplies that they procure on behalf of their tenants. Paragraph 14 of Schedule 1 to the CRC Order provides that the exclusion for Unconsumed Supply does not apply:

Although the Environment Agency's various guidance documents on the CRC do not specifically mention how the CRC will apply in licence situations, we think that the wording in paragraph 14 to Schedule 1 of the CRC Order is wide enough to include licensees and licensors (in the same way as landlords and tenants) because a licensee is occupying the relevant building with the licensor's agreement.

Applying this to the scenario in your question, your company will be responsible for both the electricity supply that it procures and which it consumes itself and also the electricity supply that it procures on behalf of its licensee. The situation is no different just because the contract between your company and the company occupying the warehouse is a licence rather than a lease.

It should be borne in mind that occupation under a licence can arise by way of express licence documents as in your case, but can also arise under a clause in a sale contract or agreement for lease, permitting occupation in advance of completion as a licensee.

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