ESOS
Approved ESOS changes and ESOS penalties
Guidance on approved ESOS changes and ESOS penalties implemented to strengthen ESOS Phase 3 and ESOS Phase 4.
ESOS changes and timelines:
The approved ESOS changes and new ESOS penalties for ESOS Phase 3 and Phase 4 are summarised below.
The Department for Business, Energy, and Industrial Strategy’s (BEIS) consultation on strengthening ESOS closed on 28 September 2021.
During July 2022 the Government announced its intention to make the necessary changes to ESOS in the Energy Bill.
The proposed changes were subject to legislative scrutiny and timetable, and The Energy Bill had to pass through Parliament.
It was confirmed that the qualification criteria for Phase 3 will not change, but the thresholds will be set in GBP.
All large businesses need to comply if they satisfied at least one of the below criteria on 31 Dec 2022.
250+ employees OR with a turnover of £44m+ and a balance sheet of £38m+.
The approved changes which will be introduced in ESOS Phase 3 and Phase 4 are indicated below.
Setting stronger standards for ESOS:
Phase 3 changes:
a standardised template for including compliance information in the ESOS report, comprising ESOS information the participant should already have available
the reduction of the 10% de minimis exemption to up to 5%.
a minimum of 95% of the participants total energy consumption be audited and included in the report.
the addition of energy intensity metrics in ESOS reports
share ESOS reports with subsidiaries.
ESOS reports to provide more information on next steps for implementing recommendations.
requirement for participants to set a target or action plan following the Phase 3 compliance deadline.
collection of additional data for compliance monitoring and enforcement
Approved Phase 4 changes:
removal of Display Energy Certificates (DECs) as a compliance route
removal of Green Deal Assessments as a compliance route
progress against action plan commitments to be included in the ESOS assessment
where action plan commitments have not been met, participants must provide an explanation
Further details and full guidance of these changes will be provided in due course.
These changes and changes to the Manage your ESOS reporting system are planned to be in place by early 2027.
For more information please go to our ESOS page.
The Environment Agency’s Enforcement and Sanctions Policy as it applies to the Energy Savings Opportunity Scheme (ESOS):
The Phase 1 & 2 enforcement approach for breaching Parts 4 and part 5 of the ESOS Regulations for failing to conduct an energy audit and submitting a notification of compliance by the compliance date to the Environment Agency (EA) are summarised below.
EA issued a compliance notice followed by an enforcement notice
The company would have 3 months from the date of the enforcement notice to complete the audit/s and notify the EA online of compliance
If the company met the above requirements and notified the EA of compliance on or before the 3-month period, then the EA would not normally apply a penalty
The EA will record the failure to undertake an energy audit and submit a notification of compliance by the compliance date i.e., 05 December 2019 for ESOS Phase 2
All past non-compliance will be considered when assessing the level of any penalty in the event of any future non-compliance.
The new penalty provisions which came into effect on 8 February 2022 are summarised below.
Failure to notify:
A UK organisation that qualifies for ESOS must notify the Environment Agency that it has complied with its ESOS obligations (regulation 29). Regulation 43 sets the maximum penalties for failing to do this - they are all of the following:
an initial penalty of up to £5,000
a daily penalty of up to £500 for each working day the responsible undertaking remains in breach, starting on the day after the service of the penalty notice, subject to a maximum of 80 working days
the publication penalty
Failure to undertake an energy audit
Chapter 3 of Part 4 requires responsible undertakings to undertake an energy audit, where alternative routes to compliance do not apply. Regulation 45 sets the maximum penalties - they are all of the following:
an initial penalty of up to £50,000
a daily penalty of up to £500 for each working day the responsible undertaking remains in breach, starting on the day after the service of the compliance notice, subject to a maximum of 80 working days
the publication penalty
any steps the compliance body requires the responsible undertaking to take, including conducting or completing an ESOS assessment, to remedy the breach
Procedure for imposing ESOS penalties
We will normally impose a penalty for each separate breach of the ESOS Regulations.
Where additional daily penalties apply, we follow a different procedure. We will first serve an initial notice of civil penalty which will state all the following:
what the breach was
the maximum initial penalty for which the responsible undertaking is liable
and the amount of the additional daily penalty, and that it will accumulate from the day after the date of the notice, until the responsible undertaking returns to compliance, or it reaches the statutory maximum number of days (80)
The notice is not the final decision, no payment is required at this point, and we will not publicise it. We will not apply our discretion at this stage. Once we have determined the total penalty (initial and daily penalties) we will serve a notice of intent to impose the penalty, setting out our proposed final penalty amount. At this point the organisation can make representations, which we will consider in determining the final penalty.
Need ESOS guidance and compliance support?
If you need guidance and compliance support, then we would welcome the opportunity to discuss your requirements with you and indicate how we can help you achieve fast and cost effective ESOS compliance.
Please feel free to contact us on 03300 881451 to discuss your specific ESOS requirements.