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Refunds of large-scale generation shortfall charges

17 July 2018
RET

Contents

Surrender of large-scale renewable energy certificates and payment of shortfall charges

Liable entities can comply with the Renewable Energy (Electricity) Act 2000 (REE Act) by fully surrendering certificates.

For large-scale generation certificates (LGCs), liable entities may carry forward less than 10 per cent of their surrender liability for a particular year without incurring a shortfall charge. This amount is added to their surrender liability for the following year.

Entities with a LGC shortfall of more than 10 per cent of their liability for a year incur a shortfall charge. Under certain circumstances, these entities can subsequently surrender additional certificates and obtain a refund of the shortfall charges previously paid, less an administrative fee.

Shortfall charges must be paid on time. Unpaid shortfall charges attract interest charges and are managed in accordance with the Clean Energy Regulator’s debt recovery policies and procedures.

The Clean Energy Regulator publishes the details of all entities in shortfall.

Refund provisions

Overview

Under the REE Act, liable entities that pay a large-scale generation shortfall charge, resulting from a shortfall of surrender of LGCs, may claim a refund for the shortfall charge less an administration fee. To qualify for a refund, liable entities must surrender additional LGCs in a future year to cover all or part of the amount of certificate shortfall for which they initially paid the shortfall charge.

A refund on a paid shortfall charge may only be claimed if:

  • the refund claim is made during the allowable refund period
  • the liable entity did not have a large-scale generation shortfall in the year immediately before the year in which the refund is claimed, and
  • additional certificates are surrendered.

Refunds are not available for small-scale technology certificate shortfall charges.

The allowable refund period

Refunds may only be claimed during the ‘allowable refund period’. This period will generally be a two year window, commencing a year after the shortfall charge was incurred, assuming entities meet their annual lodgement dates and pay their shortfall on time.

The allowable refund period starts the day after the liable entity lodges its large-scale generation shortfall statement (reporting no certificate shortfall) for the year following the year for which the shortfall charge was incurred.

For example, for a refund of 2016 assessment year shortfall charges, the allowable refund period would start on the day after the 2017 assessment year large-scale generation shortfall statement is lodged – generally by 14 February 2018.

The allowable refund period ends three years after the liable entity paid the shortfall charge. Where this day falls on a weekend or public holiday, the end date will become the next business day. For example, if the liable entity paid its 2016 shortfall on 9 February 2017, the allowable refund period will end on 10 February 2020.

Claim eligibility – no shortfall

A liable entity can only claim a refund if it did not have any LGC shortfall, including carried forward shortfall, for the assessment year immediately before the year that the refund is sought.

For example, if, in the 2018 calendar year, a liable entity plans to claim a refund on its 2016 shortfall charge, it could only do so if it fully met its 2017 liability through the surrender of LGCs. The liable entity would not be eligible to claim a refund if it carried forward less than 10 per cent of its 2017 liability, to 2018.

The eligibility to claim a refund is dependent on whether the liable entity had a shortfall for the assessment year immediately prior to the year the certificates are being surrendered.

For example, if, in the 2018 calendar year, a liable entity plans to claim a refund on its 2016 shortfall charge, it could do so if it fully met its 2017 liability through the surrender of LGCs. If, in the 2019 calendar year, the liable entity lodges a shortfall statement for the 2018 assessment year it would be ineligible to claim a refund on any unclaimed shortfall charges for the 2016 assessment year. The liable entity would need to wait until the 2019 calendar year before it could be eligible.

Additional certificate surrender

A liable entity that has met the eligibility requirements for claiming a refund can make the claim by surrendering additional LGCs to clear all or part of the shortfall. The liable entity can then request a refund of that shortfall charge (less an administration fee).

How the refund provisions could work in practice

As each liable entity’s circumstances are unique, we recommend that you seek independent advice. The examples below outline some potential ways that a liable entity could receive a refund of shortfall charges paid. These examples are illustrative only and do not reflect any actual liable entity.

Example 1 – A liable entity claims a refund as soon as possible

  1. A liable entity is required to surrender 300 000 LGCs for the 2016 assessment year. It had no carried forward shortfall or surplus from the 2015 assessment year.
  2. It surrenders 100 000 LGCs, and lodges its energy acquisition statement and large-scale generation shortfall statement on 14 February 2017.
  3. The liable entity receives a $13 million invoice for payment of the shortfall charge, representing the shortfall of 200 000 LGCs. The company pays its shortfall charge of $13 million on 14 February 2017. Note, the allowable refund period for obtaining a refund of the 2016 shortfall charge ends three years after this date – i.e. the last day they can claim refund of this amount is 15 February 2020.
  4. The liable entity has a LGC liability of 350 000 for the 2017 assessment year. It surrenders 350 000 LGCs, and lodges its energy acquisition statement and large-scale generation shortfall statement on 1 February 2018. It therefore has no large-scale generation shortfall for the 2017 assessment year.
  5. In addition, the liable entity requests to surrender 200 000 LGCs (any vintage) to acquit the 2016 shortfall.
  6. The liable entity is eligible for a refund of the shortfall charge paid for the 2016 assessment year ($13 million), less an administration fee.

Example 2 – A liable entity takes three years to claim a refund

  1. A liable entity is required to surrender 300 000 large-scale generation certificates for the 2016 assessment year. It had no carried forward shortfall or surplus from the 2015 assessment year.
  2. It surrenders 100 000 LGCs, and lodges its energy acquisition statement and large-scale generation shortfall statement on 9 February 2017.
  3. The liable entity then receives an invoice for payment of a shortfall charge representing the shortfall of 200 000 LGCs. The liable entity pays its shortfall charge of $13 million on 9 February 2017. Note, the allowable refund period ends three years after this date – i.e. the last day they could potentially claim a refund of the 2016 shortfall charge is 10 February 2020.
  4. The liable entity is required to surrender 350 000 LGCs for the 2017 assessment year. It surrenders 250 000 LGCs (2017 vintage) and lodges its energy acquisition statement on 1 February 2018 (including a shortfall statement). It therefore has a 100 000 large-scale generation shortfall for the 2017 assessment year and a $6.5 million shortfall charge applies.
  5. The liable entity pays $6.5 million in shortfall charges on 6 February 2018. Note, the allowable refund period ends three years after this date – i.e. the last day they could potentially claim a refund of the 2017 shortfall charge is 8 February 2021.
  6. The liable entity is required to surrender 400 000 LGCs for the 2018 assessment year. It surrenders 350 000 LGCs (2018 vintage) and lodges its energy acquisition statement and large-scale generation shortfall statement on 11 February 2019. It therefore has a 50 000 large-scale generation shortfall for the 2018 assessment year and a $3.25 million shortfall charge applies.
  7. The liable entity pays $3.25 million in shortfall charges on 12 February 2019. Note, the allowable refund period ends three years after this date – i.e. the last day they could claim a refund of the 2018 shortfall charge is 14 February 2022.
  8. For the 2019 assessment year, the liable entity is required to surrender 450 000 LGCs. It surrenders 450 000 LGCs (2019 vintage), and lodges its energy acquisition statement and large-scale generation shortfall statement on 14 February 2020. It therefore has no large-scale generation shortfall for the 2019 assessment year.
  9. The liable entity is not eligible for a refund of the shortfall charge paid for the 2016 assessment year ($13 million), as the allowable refund period ended on 10 February 2020.
  10. The liable entity is eligible to claim a refund of all or part of the amount of shortfall charge paid in relation to the 2017 and 2018 assessment years ($6.5 million and $3.25 million), less an administration fee and subject to the surrender of additional LGCs.

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