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Refunds of large-scale generation shortfall charges

08 December 2017
RET

Contents

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

Liable entities have a primary obligation to comply with the Renewable Energy (Electricity) Act 2000 (REE Act) by fully surrendering certificates. Payment of the non-tax deductible shortfall charge goes into consolidated revenue and does not contribute to the achievement of the 2020 large-scale renewable energy target. The Clean Energy Regulator publishes the details of all entities in shortfall.

There continues to be an adequate supply of certificates in the market for all entities to meet their obligations. Liable entities should plan well in advance of surrender deadlines to ensure that they hold enough certificates.

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 who have incurred a shortfall charge can subsequently surrender additional certificates and obtain a refund, less an administrative charge. It should be noted that a liable entity cannot claim a refund in a year if it has any shortfall for the previous year.

The Clean Energy Regulator encourages liable entities who are anticipating a shortfall of any amount in a particular year to advise us via email at the earliest opportunity.

Refund provisions

Overview

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

A refund on the shortfall charge paid 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 are only allowed during the ‘allowable refund period’. Assuming entities meet their annual lodgement dates and pay their shortfall on time, this period will generally be a two year window, commencing a year after the shortfall charge was incurred.

The allowable refund period starts the day after the liable entity lodges its large-scale generation shortfall statement (including a zero shortfall statement) for the year following the year for which the shortfall charge was incurred.

For example, if the shortfall charge that the refund is sought for applies to the 2016 assessment year, 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.

Compliance with previous year’s certificate surrender obligations

A liable entity cannot claim a refund if it had a shortfall in relation to the year immediately before the year that the refund is claimed. The requirement to not have any shortfall means that a liable entity cannot claim a refund if it has carried forward less than 10 per cent of its shortfall for the year prior to the claim year.

For example, if, in 2018, 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 large-scale generation certificates. 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.

A liable entity that has met the eligibility requirements for claiming a refund can make the claim by surrendering additional large-scale generation certificates 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 comes back into compliance as soon as possible

  1. An energy retailer 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 obtains and surrenders 100 000 large-scale generation certificates, and lodges its energy acquisition statement and large-scale generation shortfall statement on 14 February 2017. The liable entity receives a $13 million invoice for payment of the shortfall charge, representing the shortfall of 200 000 large-scale generation certificates.
  3. 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 14 February 2020.
  4. The company increases its investment in renewable energy. Many of its projects reach completion throughout 2017 and start to generate large amounts of large-scale generation certificates.
  5. 5. As the company is growing, it has a large-scale generation certificate liability of 350 000 for the 2017 assessment year. It obtains and surrenders 350 000 large-scale generation certificates 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 (note that the allowable refund period for obtaining a refund of the 2016 shortfall charge starts the day after the 2017 large-scale generation shortfall statement is lodged).
  6. In addition, the company obtains 200 000 large-scale generation certificates (any vintage).
  7. The company is now eligible for a refund of the shortfall charge paid for the 2016 assessment year ($13 million), less an administration fee. From any time immediately after it lodged the 2017 EAS until the end of 14 February 2020, it can surrender the 200 000 large-scale generation certificates and claim a refund of the 2016 shortfall charge (less administration fee).

Example 2 – A liable entity takes three years to come back into compliance

  1. An energy retailer 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 obtains and surrenders 100 000 large-scale generation certificates, and lodges its energy acquisition statement and large-scale generation shortfall statement on 9 February 2017. It then receives an invoice for payment of a shortfall charge of $13 million, representing the shortfall of 200 000 large-scale generation certificates.
  3. The company pays its shortfall charge of $13 million on 9 February 2017 (note that 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 company increases its investment in renewable energy. Many of its projects reach completion throughout 2017 and start to generate large-scale generation certificates, but not enough to meet their 2017 and 2018 liabilities.
  5. The company is required to surrender 350 000 large-scale generation certificates for the 2017 assessment year. It obtains and surrenders 250 000 large-scale generation certificates (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 $6.5 million shortfall charge applies.
  6. The company pays $6.5 million in shortfall charges on 6 February 2018 (note that 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).
  7. The company continues to grow and is required to surrender 400 000 large-scale generation certificates for the 2018 assessment year. It obtains and surrenders 350,000 large-scale generation certificates (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.
  8. The company pays $3.25 million in shortfall charges on 12 February 2019 (note that the allowable refund period ends three years after this date – i.e. the last day they could potentially claim a refund of the 2018 shortfall charge is 14 February 2022).
  9. For the 2019 assessment year, the company’s renewable investments have delivered and it is now able to fully meet its liability through certificate surrender. The liable entity is required to surrender 450 000 large-scale generation certificates for the 2019 assessment year. It obtains and surrenders 450 000 large-scale generation certificates (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.
  10. The company 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.
  11. The company is still eligible for 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.

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