Scotland’s small hydro power industry has launched a ‘pincer-movement’ attack on what it regards as an unfair and incompetent business rates valuation system and outcomes.
The Alba Energy coalition of independent operators, in alliance with the British Hydro Association (BHA) are taking the campaign to the doorstep of the Scottish Finance Minister and have re-energised a slothful legal appeal process involving buck-passing by business rate assessors and the Lands Valuation Appeal Court in Edinburgh.
At the same time, Alba Energy is urging all small-scale hydro operators in Scotland – whether they are members of the coalition of not – to lodge common appeals against their rateable values (see below) by the 27 September 2017 deadline.
The Scottish Government has openly conceded that there is a structural problem in the way Rateable Values (RVs) have been applied to small hydro sites, leading to extraordinarily inflated rates bills.
Compare RVs for Small Hydro with those applied to Small Wind – financed by the same system of Feed-in-Tariffs – and the anomaly comes into sharp relief.
RVs for wind sites average 10 per cent of their annual turnover, whereas RVs for small hydro average a disproportionately enormous 24 per cent (see chart, above)
Acknowledging the extreme impact on hydro of the 2017 revaluation of business rates, the Scottish Government introduced a temporary cap on increases for schemes under one megawatt, while engaging with industry representatives.
A joint UK hydro power group – involving the British Hydropower Association and Alba Energy – has now presented Scottish Finance Minister Derek Mackay, MSP, with proposals for a solution.
One option available to the Scot-Govt would be to make a special case of the Small Hydro industry and to “de-rate” it.
Another would be to maintain a system of relief so that, whatever the rateable values were, the actual business rates payable by hydro sites would remain in line with other sectors.
But Alex Linklater, Executive Director of Alba Energy, said: “These are temporary or reversible measures, neither of which resolves the fundamental question: how to get the right valuations of hydro sites in the first place?
“The simplest and most durable solution would require just a minor amendment to the Plant & Machinery Order (PMO) – secondary legislation, devolved to the Scottish Government, that determines which parts of a business property should be valued for the purposes of charging rates.
“Arguably, the change required would not actually alter the meaning of the PMO, but merely clarify what it already says.
“Alba Energy has argued continuously since 2012 that the order already exempts the “penstock” of a hydro from valuation. Had this been accepted by the Assessor when the case was first raised, the problem of inflated business rates for hydro would have been settled in 2013.
“So an amendment of a clause in the PMO has been proposed to remove any doubt about the meaning of the order, or the definition of a penstock. The new wording would confirm that, for hydro schemes with a maximum capacity of 10 megawatts, all physical aspects, from the point where the water is collected to the point where it is returned to the water course, are exempt from rateable valuation.
“This would not only clarify what parts of a hydro should be rated – principally, the powerhouse – it would also rectify the apportionment of assets between landlord and tenant, which the Assessor uses to arrive at his calculation.
“The desired result: rateable values of between 8-10 per cent of turnover, which would reflect real-world rental values and put Small Hydro in line with other industries.”
Perth-based Alba Energy have largely dismissed as irrelevant the so-called Barclay Review of business rates. The Scottish Finance Minister is due to publish the Scot-Govt response to the Barclay Review tomorrow (12 Sept 2017)
Meanwhile, Alba Energy now has a chance to challenge and rectify 2017 Rateable Values, prior to the next valuation roll in 2022 – by taking its appeal to the Lands Tribunal, where a judgement is far more likely to be definitive.
Linklater added: “This is a course of action which the Assessor has also endorsed. Legal counsel has been appointed and written opinion commissioned.
“In order to ensure they are included in any successful result, Alba members are advised to appeal no later than September 30, according to the following guidelines:
How to appeal your Rateable Value
- Ensure you have appealed on the same basis as the group appeal
- An appeal does not need to contain details, it merely requires to be lodged and registered by the Scottish Assessor’s Association (SAA) appeals system.
- The precise terms of an appeal may be provided later, in line with the terms of the case being taken to the Lands Tribunal.
- If the case is not successful, this does not, thereafter, commit you to pursuing an individual appeal.
- Appeals may be withdrawn at any time, without repercussions.
The 10-step process is simple and may be completed as follows:
- Go to the Scottish Assessors website: https://www.saa.gov.uk
- In the box marked To Search For A Rateable Value, enter the postcode of your site.
- Click on your site, then click on Make an appeal, then click on Continue to appeal form.
- In Part B – Reasons for Appeal – click the box that says Revaluation, but leave everything else blank.
- In Part C – Grounds for Appeal – write simply: “The valuation is erroneous and overstated.”
- Where it asks for your proposed Net Annual Value and Rateable Value, leave the boxes blank, but fill in the “effective date” as ‘1 April, 2017’.
- In Part D – Details of Appellant – click the “Proprietor” option and it should produce your details automatically.
- There is no need to put in the name of an agent, or a reference at the bottom, only email address and telephone number.
- Click Continue and the rest is self-explanatory: you should receive an email confirming the appeal.
- Appeals should be acknowledged by return of email, but can be confirmed by calling your respective assessor.
The Scottish Environment Protection Agency is holding an industry workshop on charges levied on the small hydro power sector in Perth on 27 Sept 2017.
Alba Energy can currently perceive no meaningful connection between the activity of hydro schemes and the charges being proposed by SEPA.
To reserve a place, contact: jill.Kelly@sepa.org.uk
SEPA’s explanations for its charging and compliance schemes may be viewed in the following locations:
For a breakdown of how SEPA are calculating charges for individual sites, visit:
11 Sept 2017