Certain schools, hospitals and factories which have their own back-up power using oil, gas or coal will be saved from a new energy tax in the new financial year.
Organisations which use fossil fuels in stand-by power stations or combined heat and power (CHP) plants generating less than 2 megawatts (MW) will not have to pay the carbon price support (CPS) as part of the Climate Change Levy.
This week the Government released a draft of its 2013 Finance Bill this week which contains more details about how the CPS will work.
Under the carbon price floor (CPF), energy generators have to pay a basic price on emissions they create.
There had been a worry that businesses which had more than one power installation which combined to more than 2MW would have to pay. This would lump them with an extra yearly admin burden of between £917 and £1,400 per business, as well as a one-off registration cost of £18.
Analysts say more details on what are complex energy tax laws will be very welcome.
Jayne Harrold, environmental tax specialist at PricewaterhouseCooper said: “The exclusion of small generating plants will eliminate an administrative burden without significantly reducing the tax take. It would have affected a lot of organisations like hospitals, universities, schools and factories at a time when costs are already high.”
The Government’s simplification of the rules also means coal delivered to power plants before next year won’t be unexpectedly hit with the carbon tax. Analysts say this should be a relief to larger generators.
Ms Harrold added: “There had been fears that coal stocks delivered to power generators before 1 April 2013 would be taxed, with a potential bill of more than £50 million for power generators, which ultimately could have impacted the cost of electricity for consumers. The new legislation makes it clear that fuel delivered before 1 April 2013 will not be taxed, taking away a significant headache for power generators.”