Ask the team: CRC Energy Efficiency Scheme: What should I do if my annual report contains inaccurate information? | Practical Law

Ask the team: CRC Energy Efficiency Scheme: What should I do if my annual report contains inaccurate information? | Practical Law

An Ask the team article on what to do if your organisation's annual report under the CRC Energy Efficiency Scheme (CRC) either contains inaccurate information or omits information that should have been included.

Ask the team: CRC Energy Efficiency Scheme: What should I do if my annual report contains inaccurate information?

by PLC Environment
Published on 20 Mar 2012 • UK
An Ask the team article on what to do if your organisation's annual report under the CRC Energy Efficiency Scheme (CRC) either contains inaccurate information or omits information that should have been included.

Question

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 have recently taken over responsibility for the CRC Energy Efficiency Scheme (CRC) for my organisation. I have reviewed our registration for Phase I and the Annual Report that was submitted in July 2011.
My organisation contains a Significant Group Undertaking (SGU) that participates in the CRC as part of our Group. When our Group registered for the CRC, we did not provide separate details of the SGU to the Administrator. Should we have supplied these details at registration even though the SGU was not disaggregated from our Group? Do we now need to supply these details to the Administrator?
The overall Group CRC Emissions reported in our Annual Report included data relating to the SGU's emissions although this information was not provided separately. What steps should we take in order to remedy this situation?

Answer

Duty to provide details about non-disaggregated SGUs at registration

Groups do not have to disaggregate any of the SGUs in their Group unless they want to. The SGU and the Administrator (the Environment Agency) would both need to agree to the disaggregation.
Even if a Group has chosen not to disaggregate any SGUs, it was still required to list its SGUs when the Group registered (see Annex 1 to the Environment Agency guidance: CRC Energy Efficiency Scheme: Registering as a CRC Participant). There is an example of how this information should have been submitted on the online registration on slide 17 of the Environment Agency presentation: CRC Energy Efficiency Scheme: Registration as a CRC Participant: Public Sector). Note that what should have been registered was the Group's structure as it was at the date of registration; not the current Group structure.
The reason the Environment Agency asks for this information is so that it can include it in the Performance League Table to prevent well known brands from "hiding" poor CRC performance behind the name of a less recognised parent company.
For more information about the 2010/11 League Table, see Legal update, CRC: Environment Agency publishes first Performance League Table.

Rectifying inaccuracies in information submitted at registration or in an Annual Report

The answer to this question needs to be broken down into:
  • Inaccurate information provided during registration
  • Inaccurate information provided in an Annual Report.

Registration

Article 98 of the CRC Energy Efficiency Scheme Order 2010 (SI 2010/768) (the CRC Order) states that providing inaccurate information when a company registers as a Participant is subject to a civil penalty (see Practice note, CRC Energy Efficiency Scheme: enforcement and penalties: Civil penalties).
However, the Environment Agency guidance: CRC Energy Efficiency Scheme: Compliance Auditing Overview says that:
"It is the intention under the scheme that penalties will be only used as a last resort. However the regulators will use their limited discretion as appropriate. Where there has been no attempt to comply or there has been a persistent failure to correct deficiencies we will consider our enforcement action."
This would appear to indicate that genuine mistakes (such as accidental omission of the details of non-disaggregated SGUs during registration) can be corrected and are unlikely to result in a civil sanction, but it would be prudent for you to check this with the Environment Agency.

Annual Reports

The Environment Agency guidance: CRC Energy Efficiency Scheme: Annual Report (May 2011) says that:
"You need to record the amounts of all energy supplies that make up your CRC emissions across the whole participant organisation, including any Significant Group Undertakings (SGUs) that you may have" (page 24).
The guidance also says that:
"You will be required to enter the total emissions for each SGU within your group. If an SGU has another SGU sitting underneath it, you should not include the emissions of that underlying SGU. You will need to calculate the emissions for the SGU using the emissions calculator. You should deduct any EGCs (Electricity Generating Credits) applicable to the SGU before reporting the emissions for the SGU." (page 25).
The information referred to above includes information about SGUs that have not been disaggregated. There are civil penalties for providing inaccurate Annual (and Footprint) Reports (see Practice note, CRC Energy Efficiency Scheme: enforcement and penalties: Civil penalties). However, according to article 99 of the CRC Order, a report will not be considered inaccurate unless a Participant provides information about its supplies or emissions that differ by more than 5% from what should have been reported.
That is not to say that a Participant does not have to provide an accurate report. It just means that a civil sanction will only apply if the inaccuracy in the report is more than the 5% margin for error. As you have indicated that the data relating to your organisation's SGU was included in the Annual Report, it would appear that the 5% margin for error has not been breached.
However, seeing as you should have provided a breakdown of your SGU's CRC Emissions, your Annual Report will still contain inaccuracies. Slide 17 of Environment Agency presentation: CRC Energy Efficiency Scheme: Annual reporting screenshots and worked example (April 2011) shows how this information should have been submitted.
The Environment Agency guidance: CRC Energy Efficiency Scheme: Compliance Auditing Overview appears to indicate that they will take a pragmatic approach and allow information to be corrected but it would be prudent to check this with the Environment Agency.

Audits

The Environment Agency will be conducting a number of audits during 2012 to check that Participants' Evidence Packs are correct. The Evidence Pack includes the Annual Report and details of the Participant's organisational structure. Not all Participants will be audited each year but all Participants can be expected to be audited at least once in Phase 1 (1 April 2010 to 31 March 2014).
The Environment Agency's guidance on audits explains the audit process (see Legal update, CRC: Environment Agency publishes new guidance on audits). The guidance says that if a Participant is selected for an audit, one of the things the Environment Agency will want to discuss is the Participant's organisational structure. The more inaccuracies the Agency finds in the first stage of the audit (which is meant to be "light touch"), the more likely it is to proceed to a full audit. So it would be in a Participant's best interests to rectify any inaccuracies to avoid a detailed audit.
As mentioned above, it would be prudent to check with the Environment Agency what is the best way of rectifying the mistake in the Annual Report that was submitted to them in July 2011.

Further information

For more information on:

Comments

If you have any comments on this, or any other, Ask the team, please e-mail the PLC Environment team at [email protected].