CRC Enquiries for acquisition of freehold property with vacant possession where Buyer is a CRC Participant

 These enquiries are intended as supplemental to the Commercial Property Standard Enquiries (CPSE).  They will be useful where the client requires information on its potential liabilities under the CRC Energy Efficiency Scheme.  They form one of a range of enquiries on CRC issues.  To ensure that you select the right variety, see Additional enquiries on CRC issues - which to select.

Note: this document is in the process of being updated and does not yet take account of the CRC Energy Efficiency Order 2013 (SI 2013/1119).

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Contents
Hide Note: Why these enquiries are relevantNote: Why these enquiries are relevant
Why these enquiries are relevant
Why these enquiries are relevant

In very general terms, once it acquires the Property, the Buyer will have to include, in its annual CRC report, those supplies of electricity, gas and other fuels to the Property for which it will have responsibility (see Drafting note, Responsibility for energy supplies). The Buyer will also have to purchase CRC allowances to cover the carbon dioxide emissions relating to those supplies.

These enquiries allow the Buyer to find out, in advance, whether it will be responsible for supplies, and, if so, the likely quantity of supplies which will need to be covered by CRC allowances. It can then decide whether it will need (and can afford) more CRC allowances.

In view of the consultation expected during 2011 on simplification of the CRC, these enquiries do not ask the Seller whether it has surplus CRC allowances which it is willing to sell. For more details of the possible changes to the CRC see Legal update, CRC: DECC publishes five discussion papers on simplifying the scheme (www.practicallaw.com/2-504-6025).

 

CRC enquiries for acquisition of a freehold property with vacant possession, where the Buyer is a CRC participant

PARTICULARS

Seller:

Buyer:

Property:

Development (if appropriate):

Transaction:

Seller's solicitors:

Buyer's solicitors:

Date:

INTERPRETATION

1. In interpreting these enquiries, the terms set out in the Particulars have the meaning given to them in the Particulars, and the following terms bear the following meanings:

  • Buyer: includes tenant and prospective tenant.

  • Conduits: means the pipes, wires and cables through which utilities and other services are carried.

  • CRC: means the scheme established under the CRC Order.

  • CRC Order: means the CRC Energy Efficiency Scheme Order 2010 (SI 2010/768) as amended (from 1 April 2011) by the CRC Energy Efficiency Scheme (Amendment) Order 2011 (SI 2011/234).

  • CRC participant: means either:

    • a public body or an undertaking which is registered as a participant for the CRC; or

    • a member of a group of public bodies or undertakings, which group is registered as a participant for the CRC.

  • CRC reporting year: means a calendar year commencing on 1 April (as defined in more detail in Article 3 of the CRC Order).

  • Property: includes any part of it and all buildings and other structures on it.

  • Seller: includes landlord and prospective landlord.

2. The replies to these enquiries will be given by the Seller and addressed to the Buyer. Unless otherwise agreed in writing, only the Buyer and those acting for it may rely on them.

  • References in these enquiries to "you" mean the Seller and to "we" and "us" mean the Buyer.

  • In replies to these enquiries, references to "you" mean the Buyer and to "we" and "us" mean the Seller.

3. These replies are given without liability on the part of the Seller's solicitors.

4. The Buyer acknowledges that even though the Seller will be giving replies to the enquiries, the Buyer should still inspect the Property, have the Property surveyed, investigate title and make all appropriate searches and enquiries of third parties.

5. In replying to each of these enquiries and any supplemental enquiries, the Seller acknowledges that it is required to provide the Buyer with copies of all documents and correspondence and to supply all details relevant to the replies, whether or not specifically requested to do so.

6. The Seller confirms that pending exchange of contracts or, where there is no prior contract, pending completion of the Transaction, it will notify the Buyer on becoming aware of anything which may cause any reply that it has given to these or any supplemental enquiries to be incorrect.

1. RESPONSIBILITY FOR ENERGY SUPPLIES

Hide Note: Responsibility for energy suppliesNote: Responsibility for energy supplies
1. Responsibility for energy supplies
Responsibility for energy supplies

Under the CRC, if a person:

  • "receives a supply" of energy (as described in paragraphs 1 to 4 of section 1 of Schedule 1 to the CRC Order). This is colloquially known as a "direct supply"; or

  • supplies itself with energy (within the strict requirements of paragraph 6 of section 2 of Schedule 1 to the CRC Order) ("self-supply"),

then it (or the group of which it forms part for the purposes of the CRC), if it is a CRC participant, must report on that energy supply and buy CRC allowances to cover the carbon dioxide emissions relating to that supply (starting with emissions during the CRC reporting year commencing 1 April 2011). This is commonly referred to as being "responsible for the energy supply" although that phrase is not defined in the CRC Order.

If the Seller is responsible for the energy supplies to the Property, then the Buyer will inherit that responsibility on completion of the purchase.

Where a freehold property is sold with vacant possession, it is unlikely that there will be anyone other than the Seller who is responsible for the energy supplies to the Property. However, it is best to check.

It should be straightforward to decide whether the Seller has a "direct supply". For example, where:

  • the Seller is the named customer of the energy supply company;

  • the Seller receives the bill direct from that company;

  • the supply is measured by a main (often called a "fiscal") meter; and

  • the Seller pays the bill direct to the energy supply company,

this will be powerful evidence that it receives a "direct supply" of that energy.

However, these factors will not always determine when there is a "direct supply". For example, the Seller may buy its energy through a facilities management company. This is a third party which procures the energy supply on behalf of a number of customers (the end users) and by bulk buying in this way, can secure a better pricing structure for all its customers. The facilities management company is the customer of the energy supply company, and will receive and pay the overall bill. However, the facilities management company uses none of the energy itself. It passes it all down to the Seller. Under the CRC it is the Seller, not the facilities management company, which is responsible for the supply.

For further guidance on the supply rules, see:

 

Please confirm that all energy supplies to the Property (whether gas, electricity or other fuels) are supplied to you (within the meaning of paragraphs 1 to 4 of section 1 of Schedule 1 of the CRC Order).

2. TYPES OF ELECTRICITY METER IN THE PROPERTY

Hide Note: Types of electricity meter in the PropertyNote: Types of electricity meter in the Property
2. Types of electricity meter in the Property
Types of electricity meter in the Property

When preparing its annual report (and calculating how many CRC allowances it will need), a CRC participant must take into account its electricity supplies if they fall into one of four varieties ("core supplies"). These four varieties are described in greater detail below. Other types of electricity supply are treated very differently as part of the regime set out in articles 42 to 45 of the CRC Order (the "residual supplies" regime).

NOTE: It is possible that these varieties and their significance for CRC will be simplified as part of the review of the CRC which is planned for 2011. What appears in these drafting notes is based on the CRC Order as originally published.

The Buyer needs to be able to classify the types of electricity supply to the Property. This is generally determined by the variety of meter that measures the supply. These enquiries ask for the position of the meters and their Meter Point Administration (MPAN) numbers (if any). The MPAN number will appear on the face of the meter and on the bill.

The replies should enable the Buyer's surveyor (or the Buyer itself) to inspect the meter and try to classify it for the purposes of the CRC. This may not be possible for several reasons:

  • The physical appearance of a meter is not always an accurate guide to its variety. It may not be obvious from the outside whether the meter can or does measure the electricity in any particular way. It may be necessary to look at its technical specification to be sure.

  • Sometimes the meter is not visible (it may be underground or in an inaccessible part of the Property).

  • The MPAN number is not necessarily definitive as to the variety of meter.

  • The fact that the meter is attached to a telephone or internet line is also not definitive as to the variety of meter. Some such lines will be connected but not visible, and some may be connected for purposes that are nothing to do with CRC classification but so that they can be integrated into the computerised building management system.

If classification from visual inspection is impossible, the Buyer may need to ask the Seller for more information on the type of meter. The Seller may be able to work this out from the bill or by asking its electricity supply company or the meter manufacturer. We do not know as yet whether they will be prepared to respond or how quickly.

The supply company can be asked to provide an annual statement listing the MPAN numbers of any meters covered by a specified supply contract, and the annual energy consumption measured by each such meter (article 63, CRC Order as expanded by advice in the DECC User Guide (www.practicallaw.com/5-501-2745)). It is not clear that that statement will (or could be required to) identify whether the meters are settled, non-settled, or even able to measure half hourly. The request for such a statement must be made before the end of the relevant CRC compliance year, and the supply company must reply within six weeks of the end of that CRC compliance year.

Settled Half Hourly Meters

A settled half hourly meter is defined in paragraph 2 of Schedule 2 to the CRC Order. It is one for which both of the following tests are satisfied:

  • The meter is able to measure, at least every half hour, how much electricity has been used. It may be able to measure more frequently than this. It can be difficult, from visual inspection, to tell which meters are able to do this.

  • The meter enables the electricity supplier to comply with its obligations under the Balancing and Settlement Code (BSC). This is the mechanism which allows a balance to be maintained between electricity generated and electricity taken up by suppliers. Working out this balance is called settlement, and only data from "settled meters" is used for the purposes of the BSC. That data may be used for settlement on a half hourly basis, or on a less frequent basis (for example, daily, monthly or quarterly). If it is used for settlement on a half hourly basis the meter is classified as one which is "settled on the half hourly market".

    All meters whose data is used for the purposes of the BSC have an MPAN number, regardless of how often that meter reading is settled.

    A meter which is settled on the half hourly market will always have an MPAN number that starts 00, and will be connected to a telephone or internet line, to enable the consumption figures to be collected that frequently. Such a meter will definitely qualify as a "settled half hourly meter" because it is able to measure the electricity at least every half hour and enables compliance with the BSC.

    At the start of the CRC, the Environment Agency (EA) wrote (based on information given to them by the electricity supply companies) to those people it believed had a supply through meters with an MPAN number starting 00. The EA has already said that there will be some such meters for which no customer can be identified, and others where the customer will have been wrongly identified. If the Seller has received such a letter, whilst it should be able to check that that particular meter is on its property, it may well be unable to cross-check that the classification of the meter is correct. It will have to accept that information at face value. Therefore, if the Seller (or a superior company in its group) has received such a letter (or letters - there was no obligation on the EA to consolidate all the relevant meters onto one letter to the same addressee), it should retain it/them as an important reference document.

    Other meters with an MPAN number (starting other than with 00) may still be able to measure the electricity every half hour. A meter may be capable of measuring half hourly consumption, but not be using that half hourly capability for the purposes of settlement. Instead the meter may be settled only quarterly. Such meters will still count as "settled half hourly meters" for the purposes of the CRC because they satisfy both tests. They may be connected to a telephone or internet line, but not always.

Non-settled Half Hourly Meters

A non-settled half hourly meter is defined in paragraph 3 of Schedule 2 to the CRC Order. It is one which can measure electricity used on a half-hourly basis, and where that data is used to work out the cost of that electricity to the Seller, but the half hourly data is not used for the purposes of the BSC. For more details about this, see Drafting note, Settled Half Hourly Meters.

To qualify as a non-settled half hourly meter, both the following tests must be satisfied:

  • The meter is able to measure, at least every half hour, how much electricity has been used. It may be able to measure more frequently than this. It can be difficult, from visual inspection, to tell which meters are able to do this. Equally, it may not be read every half hour, even though it is able to measure that often.

  • The meter has been read remotely by the Seller (or someone acting on its behalf) at some point during the current CRC phase. This means that there must be a telephone or internet line attached to the meter to enable this to be done. That line may be present, but not visible from physical inspection.

It is not clear whether, having been read remotely once during the CRC phase, the meter will only continue to qualify as a non-settled half hourly meter if it is read remotely in each of the succeeding years of that CRC phase. Paragraph 3(3) of Schedule 2 to the CRC Order, and its interrelationship with paragraph 3(1)(b), is ambiguous. Since the broad intention behind the CRC Order is to bring within the CRC as many energy supplies as possible, it would seem more likely that the definition would capture meters that had been read remotely once, even if they were not (for whatever reason) read remotely regularly after that first reading.

It is necessary to distinguish non-settled half hourly meters or devices from other types of "automatic" meters that can be used to monitor the electricity usage by different parts of a property. These may have been fitted by the Seller, they do produce data to show the energy usage pattern and that data may be collected remotely. However, that data is not used by the supplier to determine the bill for the electricity. Their readings are simply used for internal purposes (perhaps to see how heavy a user one occupation tenant is in relation to another). These are often called sub-meters or check meters. It can be hard to distinguish between these without further help from the Seller.

Non-domestic meters

A non-domestic meter is defined in paragraph 4 of Schedule 2 to the CRC Order. It is a meter which is designed to (and does) measure electricity supplies to non-domestic premises and is capable of measuring the highest demand for electricity over a set period. It may, or may not, be capable of being automatically read and it may, or may not, be able to measure half hourly or not.

Non-domestic meters are all settled under the BSC. They fall into Profile Classes 5, 6, 7 or 8 and this will show as the first two digits of their MPAN number (05, 06, 07 and 08). Typically, this type of meter monitors supplies under 100KW.

Dynamic supply

A dynamic supply is defined in paragraph 5 of Schedule 2 to the CRC Order. It is a relatively unusual variety of electricity supply. Instead of the whole supply being metered, a device (not necessarily a meter) records when electricity is supplied to one piece of equipment on the Property. The other similar pieces of equipment are neither metered nor monitored by such a device. From the reading on the first device, the supplier works out (on a half hourly basis) the total electricity supplied to all the pieces of equipment.

The most common example is street lighting, where one lamp standard is monitored and the supplier knows that there were, say, 20 lamp standards on the circuit, all on at the same time. It multiplies the metered supply to the one lamp by 20 and charges for that total supply. Other examples might be a set of phone masts or traffic lights.

For more information on meters and the CRC, see EA Guidance on the CRC Energy Efficiency Scheme: Meters and metering (www.practicallaw.com/5-501-8605).

 

2.1 Where is the main electricity meter for the Property?

2.2 Please state the MPAN number for that meter.

Where there is more than one main meter, please reply in respect of each such meter.

3. TYPES OF GAS METER IN THE PROPERTY

Hide Note: Types of gas meter in the PropertyNote: Types of gas meter in the Property
3. Types of gas meter in the Property
Types of gas meter in the Property

When preparing its annual report (and calculating how many CRC allowances it will need), a CRC participant must take into account its gas supplies to the Property if they fall into one of three varieties ("core supplies"). Other types of gas supply are treated very differently as part of the regime set out in articles 42 to 45 of the CRC Order (the "residual supplies" regime).

NOTE: It is possible that these varieties and their significance for CRC will be simplified as part of the review of the CRC which is planned for 2011. What appears in these drafting notes is based on the CRC Order as originally published.

The Buyer needs to be able to classify the types of gas supply to the Property. This is generally determined by the variety of meter that measures the supply. These enquiries ask for the position of the meter so that a visual inspection can be carried out (either by the Buyer or the Buyer's surveyor) so as to classify it for the purposes of the CRC. This may not be possible for several reasons:

  • The physical appearance of a meter is not always an accurate guide to its variety. It may not be obvious from the outside whether the meter can or does measure the gas in any particular way. It may be necessary to look at its technical specification to be sure.

  • Sometimes the meter is not visible (it may be underground or in an inaccessible part of the Property).

  • There is no equivalent scheme to an MPAN number for gas meters.

  • The fact that the meter is attached to a telephone or internet line is not definitive as to the variety of meter. Some such lines will be connected but not visible, and some may be connected for purposes that are nothing to do with CRC classification but so that they can be integrated into the computerised building management system.

If classification from visual inspection is impossible, the Buyer may need to ask the Seller for more information on the type of meter. The Seller may be able to work this out from the bill or by asking its gas supply company or the meter manufacturer. We do not know as yet whether they will be prepared to respond or how quickly.

Daily Meters

A daily meter is defined in paragraph 7 of Schedule 2 to the CRC Order. It is one for which both the following tests are satisfied:

  • The meter is able to measure gas supplied at least daily (it could be more frequent).

  • The meter is read in Great Britain by an authorised supplier or transporter of gas. They will do so under the Uniform Network Code which requires gas suppliers to read the meters for high volume gas users on a daily basis. Those readings are used to settle the supply on the gas market.

Hourly meters

An hourly meter is defined in paragraph 8 of Schedule 2 of the CRC Order. To qualify as an hourly meter, both of the following tests must be satisfied:

  • The meter is able to measure the gas at least every hour. It may measure it more frequently. Equally, it may not be read every half hour, even though it is able to measure that often.

  • The meter has been read remotely by the Seller (or someone acting on its behalf) at some point during the current CRC phase. This means that there must be a telephone or internet line attached to the meter to enable this to be done. That line may be present, but not visible from physical inspection.

It is not clear whether, having been read remotely once during the CRC phase, the meter will only continue to qualify as an hourly meter if it is read remotely in each of the succeeding years of that CRC phase. Paragraph 8(3) of Schedule 2 of the CRC Order, and its interrelationship with paragraph 8(1)(b), is ambiguous. Since the broad intention behind the CRC Order is to bring within the CRC as many energy supplies as possible, it would seem more likely that the definition would capture meters that had been read remotely once, even if they were not (for whatever reason) read remotely regularly after that first reading.

It is necessary to distinguish this type of hourly meter from other types of "automatic" meters that can be used to monitor the gas usage by different parts of a property. These may have been fitted by the Seller, and produce data to show the energy usage pattern and that data may be collected remotely. However, that data is not used by the supplier to determine the bill for the gas. Their readings are simply used for internal purposes (perhaps to see how heavy a user one occupation tenant is in relation to another). These are often called sub-meters or check meters. It can be hard to distinguish between these without further help from the Seller.

Large gas point meters

A large gas point meter is defined in paragraph 9 of Schedule 2 to the CRC Order. It is a meter through which a supply of more than 73200 kWh of gas was supplied in the relevant year. This type of meter will not be read daily or hourly. It may only be read (and billed) by the gas supplier monthly or quarterly.

 

Where is the mains gas meter for the Property? If there is more than one, please reply in respect of each such meter.

4. SELLER'S ENERGY SUPPLIES

Hide Note: Seller's energy suppliesNote: Seller's energy supplies
4. Seller's energy supplies
Seller's energy supplies

The Buyer will want to know the past level of core supplies (these will relate only to electricity and gas) and the other fuels supplied to the Seller. Such information will enable the Buyer to estimate whether it will need additional CRC allowances to cover the CO2 emissions relating to those supplies.

This enquiry is confined to questions about electricity and gas. If the Buyer establishes that the Property uses other fuels (perhaps from the survey, or from inspection, or from replies to other CPSE documents) the Buyer may want to raise additional enquiries about past usage figures for those fuels (in order to estimate any likely increase in what it will need to declare as its "residual supplies" and/or how many CRC allowances may be needed to cover CO2 emissions relating to those supplies).

This enquiry only asks for information on gas and electricity consumption in the last two years or (if shorter) the period that the Seller has owned the Property. No questions are asked about the consumption by the previous owner (if the Seller has not owned the Property for two years), as it seems unlikely (at least in the early stages of the CRC) that the Seller will have any information about its predecessor in title's consumption. This may change as awareness of the CRC increases, and it becomes more commonplace for sellers to pass on this information when a property is sold.

Where the Seller is a CRC participant, it is asked to supply the information by using the figures for core supplies that it will have reported in its annual CRC report. For this reason the question asks for the figures for the last two CRC reporting years, not the 24 months immediately preceding the date of the enquiries.

Where the Seller is not a CRC participant (and therefore has no duty to file an annual CRC report) or where, despite being a CRC participant, the Seller does not have the figures for core supplies, then the enquiry asks for copy energy bills for the 24 months immediately preceding the date of the enquiries (or if less, the period for which the Seller has owned the Property).

For more information, see Practice note, CRC Energy Efficiency Scheme: overview: Surrendering Allowances (www.practicallaw.com/0-294-1952).

 

If you are a CRC participant please state your core supplies of gas and electricity (as defined in Schedule 2 to the CRC Order) to the Property in each of the last two CRC reporting years or (if less) the period for which you have owned the Property.

If this is not possible, or you are not registered as a CRC participant, please supply copies of the electricity and gas bills for the Property for the 24 months immediately preceding these enquiries or (if less) the period for which you have owned the Property.

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