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"Authorities need to be much more transparent in the way they manage energy and all managers across the organisation have to take accountability for consumption."



CRC: The next financial black hole?

Local Government Chronicle

David Rees and Marietta Di Ciacca

12 October 2012

In many local authorities, energy consumption and carbon emissions data has now been captured and submitted to the Environment Agency as part of the Carbon Reduction Commitment (CRC) scheme. The focus now is on the league table and how authorities will compare both with each other and with the private sector.

However, while a good performance in the league is important reputationally, senior officers and members also need to be aware of the financial implications of the CRC scheme. The CRC is, in reality, a direct tax on the energy used by the authority. In the current phase, participants will pay for ‘carbon allowances’ for the previous CRC year. With the initial allowance costs of carbon being £12 per tonne, this could add up to between 7 per cent and 10 per cent of energy costs for participating authorities.

They can then face further costs from non-compliance and data errors. For example, there is a £5,000 fine for any organisation failing to register and a £40 charge per tonne of CO₂ incorrectly reported (over 5%). This could potentially add tens if not hundreds of thousands of pounds to already stretched revenue budgets. Planning and managing energy consumption will become increasingly important as part of the financial stewardship of an authority’s budget.

This means it is important to act now, as planning for 2013-14 budgets gets underway, to ensure energy consumption figures are built into other accounting, measurement and management processes.  Equally, as energy consumption begins to rise during the winter, usage should be monitored and managed with care.

Authorities need to be much more transparent in the way they manage energy and all managers across the organisation have to take accountability for consumption. This will require the details of energy and carbon to be available, so data which has always been aggregated now needs to be provided to individual managers.

There are four key steps authorities will need to take to achieve this. The first is to map the energy metering onto the organisation structure. This is likely to produce surprising results as metering tends to reflect usage in buildings rather than departments. So it is important to identify energy consumption by business units and determine whether there are alternative and more efficient ways of operating, which does not adversely affect the council’s overall position.

The next step is to allocate energy consumption and carbon emission targets across services to encourage more energy efficient ways of working.  This will need some careful work, and the targets will need to be reviewed after the first year to reflect any changes in services.

There will also need to be a recognition that there will be resistance as busy managers will be expected to take on new responsibilities.. They will need help from the ‘centre’, in understanding the rationale behind the change, what the numbers mean and how they can control and manage this. That means providing very clear data on both fixed energy consumption and variable consumption, and helping managers link the figures back to their procedures so they understand what options they have to change usage. This means they will need hands on practical support to interpret the data and understand how the usage reports are put together.

The final step is to introduce these changes on a pilot basis to recognise that services are changing and that it will take time for managers to understand their energy consumption and begin to control it in the same way as they do with their budgets.

Given the pressure facing local authority managers this work may seem an optional extra to be done when they have time. However, the reality is that this will need to be done soon and the authorities that take proactive action will save significant amounts of money in future years.


David Rees is head of local government services at PA Consulting Group and Marietta Di Ciacca is an energy sustainability expert at PA Consulting Group


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