Infinis and Drax have initiated proceedings for a judicial review after the Treasury announced it would remove the exemption from the Climate Change Levy for renewable power.
The announcement, made in George Osborne’s budget, caused consternation among energy com
panies and third party intermediaries who had been given no warning of the proposal.
Drax, the UK’s largest coal fired plant which is converting its generators to biomass, saw its value plunge by almost a quarter within two hours of the announcement being made in July.
How the CCL exemption worked
Businesses have to pay for using fossil generated power under the Climate Change Levy. But if they use renewable power, the charge is not added to their energy bill. The CCL came into force in 2001 to encourage energy efficiency, and with it, the exemption, to encourage uptake of renewable electricity. It is essentially a carbon tax.
From 1 August, the exemption for renewable power will no longer exist after the Treasury announced it would be cut in July’s Budget. That means renewable (or non-carbon emitting) power is now subject to a tax designed to penalise carbon emissions.
HMRC stated that scrapping the exemption will save £3.9 billion by 2020. However, it said that the move was “not expected to significantly increase business energy bills” nor “impact on wholesale prices”.
Third party intermediaries have disputed that statement. Two of the largest TPIs told The Energyst that axing the exemption would add eight figures to business energy bills and warned that suppliers had been taking legal advice.
Infinis and Drax have reacted most swiftly. The two today issued a joint statement:
Infinis Energy plc and Drax Group plc have today initiated proceedings for a judicial review of the notice period given by HM Treasury when removing the exemption from the Climate Change Levy (CCL) for electricity generated from renewable sources. The basis of this review is that the exemption was removed without the application of an appropriate notice period, as the notice given was only 24 days.
The companies ask the court to consider a reasonable and proportionate notice period for withdrawal of such renewable support.