While the levy is widely regarded as a subsidy for renewables it is primarily a tax on the energy use of UK businesses, increasing cost of consumption while providing support to renewables. This could be offset by sourcing energy from renewables which due to growth in the industry resulted in Levy Exempt Supplies trading at a discount. The end result was that companies such a Utilitywise could negotiate a benefit for their customers generating significant savings.
Jon Ferris, Head of Markets, Utilitywise, said: “Without notice or consultation, the unexpected abolition of Climate Change Levy exemption in the summer budget has shocked the energy industry. Costs for UK business and public sector energy consumers will increase by millions of pounds as a result.
“This is contrary to Treasury analysis that ‘removing the exemption is not expected to significantly increase business energy bills’.
“While the aim of the policy is to stem the flow of UK taxes to support foreign renewable generation, three quarters of the affected renewable generation are in the UK. This policy removes an incentive for renewable generation, but for businesses the cost of the levy not only remains, but has increased.
“The HMRC Policy Paper explaining the CCL changes is demonstrably wrong to state that ‘removing the exemption is not expected to significantly increase business energy bills’, with increased costs for UK business and public sector energy consumers running to millions of pounds.
“Utilitywise calls on HMRC to allow existing contractual arrangements to be met in full.”