ESOS Phase 3 – Qualification Date Has Passed And Compliance Is Critical

Overview

  • ESOS Phase 3 applies to large UK organisations (≥250 employees or meeting turnover and balance-sheet thresholds) and requires compliance following the 31 December 2022 qualification date.
  • Businesses must measure total energy use, identify at least 95% of significant energy consumption, complete an energy audit, and have it reviewed by a certified Lead Assessor.
  • Non-compliance risks include public disclosure and substantial fines, with penalties reaching up to £50,000 plus daily charges for ongoing breaches.
  • ESOS reports must be completed and submitted by 5 December 2023, using a valid 12-month reference period, making early action critical given limited assessor availability.

The qualification date for Phase 3 of the ‘Energy Savings Opportunity Scheme’ (ESOS) was 31 December 2022, meaning if your business is in scope for Phase 3, you must comply with the reporting criteria. Your business will be in scope of ESOS from that date if it has either or both:

  • 250 or more employees
  • An annual turnover in excess of £44 million, and an annual balance sheet total in excess of £38 million.

What Is ESOS?

Large UK firms are required to report on their energy consumption and find potential methods to consume less energy under the ‘Energy Savings Opportunity Scheme’, which is a mandated programme. We are now in Phase 3 of its four-year cycle. If your company falls inside the scope of the plan, you must abide by the rules or risk fines.

What Happens If You Don’t Comply?

Organisations who fail to comply with ESOS regulations or meet the required criteria risk facing financial penalties from the Environmental Agency (EA). The changes to legislation in 2022 have also increased the reporting requirements for Significant Energy Use (SEU) from 90% to 95%.

Additionally, with limited ESOS Lead Assessors available for ESOS Phase 3 compliance, it’s crucial for companies to act now to ensure compliance and avoid potential fines and penalties.

All non-compliance will be made public by the EA on their website, with the amount you were fined. There are different types of non-compliance all with separate breaches and various penalty amounts. These include:

  • Failure to Notify

Any organisations who do not declare they have met with their ESOS responsibilities will be punished since it will compromise the integrity of the programme. Whether or not the organisation has conducted an energy audit, they might still be fined up to £5,000 as well as a daily fee of £500 for each working day they are in violation (for a maximum of 80 days). This amount would be added to any additional penalties as well.

  • Failure to maintain records

Maintaining your records is essential so that you can carry out an energy audit and provide proof of your ESOS compliance. In the event that this is not done, there will be a £5,000 punishment as well as an “amount representing the cost to the compliance body of establishing that the responsible undertaking has complied with the plan,” which must be settled. To correct this violation, the compliance body will provide measures, which must be followed.

  • Failure to undertake an energy audit

The greatest punishment is assessed when an energy audit is not performed because it is a crucial ESOS obligation. It is worth making sure you comply if required since the fine is £50,000 as well as £500 for each working day an organisation is in violation (up to a maximum of 80 days). With a decreased fine of £5,000, new entrants are treated more leniently. Keep in mind that organisation is no longer regarded as a new participant in the ESOS program’s second phase. Additionally, corrective measures (such as doing an energy audit) must still be taken.

  • Failure to comply with an enforcement/penalty notice

Any organisation that disregards a compliance, enforcement, or penalty notice will be subject to this fine. An organisation will be subject to an initial punishment of £5,000 followed by £500 for each day that it is in breach, up to a maximum of 80 days.

  • False or misleading statement

Your ESOS evaluation and report must be factually correct and accurate. The largest penalties, again £50,000, might be expected from an organisation if the EA finds that you made a false or misleading statement.

What Should You Do Now?

The final deadline to complete and submit your ESOS reporting for Phase 3 is 5 December 2023. Your data should be based on a 12-month period that includes the qualification date (December 31, 2022) and ends before the compliance date for ESOS Phase 3 reporting (5 December 2023). It might begin as early as 1 January 2022 and it could finish as late as 4 December 2023. Within that timeframe, any consecutive 12 months are acceptable. This is referred to as your reference period. During then, you need to:

1. Calculate the overall energy usage of your business

You will need to calculate the total energy consumption of your business, which includes energy needed for industrial operations, building heating and lighting, and transportation fuel. These should be reported in a standard unit, such as pounds sterling or an energy unit like the kWh.

2. Locate places with high energy consumption

You can classify up to 5% of your organisation’s energy use as “de minimis” under the ESOS regulations for Phase 3. You might decide to exclude a location, an activity, or the use of a certain fuel. You must still have a “significant energy consumption” of 95% or higher.

3. Review the data

Your report should examine how much energy your business uses and how energy-efficient it is. It should include suggestions for potential improvements to your company’s energy efficiency and include information on their costs and advantages. For more information, please visit EIC Route Zero.

4. Request that a lead assessor review the report

According to the ESOS regulations, a certified lead assessor is required to review your report. Several situations constitute an exception to this rule:

  • If ISO 50001 certification already covers 100% of your energy use
  • If the company uses less than 40,000 kWh of energy annually

If you have no energy supply (although you will still need to notify the Environment Agency and get a director to confirm this). Before approving it, the corporate directors and the lead assessor should both evaluate your report.

How Can EIC Partnership Help With Your Compliance Needs?

Our carbon team have extensive experience with complex compliance legislation and are dedicated to helping you reach deadlines efficiently. Our Lead Assessors and highly trained Auditors are on hand to assist you throughout your compliance process.

We have assisted over 550 clients with their ESOS journey, and in doing so have identified 4.65 million tonnes worth of CO2 savings. This has meant that our clients have avoided approximately £80 million worth of fines over phase 1 and 2.

Whilst balancing other jobs and responsibilities, schemes may seem like a hassle. Fortunately, EIC can help turn that obligation into an opportunity for your organisation.

Get in touch or call us on 01527 511757 to find out how we can help you start your compliance journey.

With a century of combined experience in carbon and energy strategy, EIC Partnership is here to help you manage today and plan for tomorrow.

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