Green Gas Levy: Flat rate and quarterly collections favoured

Government thinks its plans for a biogas levy will add no more than £6.90 per annum per meter – both for businesses and households.

The Green Gas Support Scheme is due to launch in Autumn 2021. It will be funded by the Green Gas Levy, which will pay biogas producers, largely anaerobic digestion operators, over a 15-year period.

Government’s thinking is that suppliers will initially collect a flat-rate levy based on meter points, via a pence per meter per day charge. It may then move onto a usage-based levy in 2024/25 though is also working on alternative plans, given the challenges with fluctuating gas consumption and the extra risk management this would entail.

The Department for Business, Energy and Industrial Strategy (Beis) favours collecting the levy from suppliers on a quarterly basis, which may help to avoid fiascos encountered with the Renewables Obligation Buyout scheme. Collected annually, the RO fund has been left short by as much as £206m, due to late or non-payments, with a spate of failed or failing suppliers having spent the money trying to stay afloat.

Suppliers will also need credit cover for 100 per cent of the next quarter’s bill and Beis and Ofgem will work on an appropriate penalty regime. As well as the usual threat of loss of licence, this may include fines of up to 10 per cent of turnover, additional fines where turnover is low and automatic late payment interest set at a government determined rate.

Beis has considered tiering the costs based on industry consumption bands, e.g. households and microbusinesses; SMEs; large businesses. However, it said it couldn’t find a tiering structure that significantly cut bills for households without risking “disproportionate” cost increases for some businesses. As such, it favours the flat rate.

Per the consultation: “Whilst this means that domestic consumers will be paying the same as larger businesses, bill impacts are relatively low, and we will implement robust budgetary controls to ensure costs do not rise unexpectedly”.

Beis seeks industry input on its Green Gas Levy proposals. Details here.

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