Top Energy Compliance Risks for Commercial Customers

Every commercial business in the UK, regardless of size, industry, or location, must meet energy compliance standards set out by the government. Failure to meet these standards can lead to:

● Heavy fines

● Negative PR

● Loss of contracts

● Difficulty attracting top talent

While risk levels may vary depending on the size or type of business, it is crucial to do everything you can to adhere to energy compliance.

Top Energy Compliance Risks & Opportunities for Commercial Customers

If you’re a business owner, here are the top risks for commercial customers in the UK and how they can comply:

1. Non-compliance with energy performance regulations – MEES

All landlords, investors, developers, and tenants must be aware of the upcoming changes to MEES and EPC requirements. Severe penalties apply to those who fail to take the necessary steps to comply by the deadline.

Commercial properties

Currently, a tenancy cannot be granted to new or existing tenants if the property has an EPC rating of F or G unless registered on the PRS Exemptions Register. However, from 1 April 2023, it will be an offence to continue to let or rent out a property if it does not have a rating of at least E. The penalty is based on the property’s rateable value and will be between £10,000 – £150,000 per breach. Details of the breach may also be made publicly available.

It has been indicated that these requirements will tighten again in the near future, with a proposal that commercial properties must have an EPC rating of C or higher by 1 April 2027 and B or better by 2030. Failure to adhere to the Minimum Energy Efficiency Standards (MEES) can result in the following:

● Increase in tenant void rates

● Unplanned expenditure to ensure compliance

● Legal sanctions

● Non-compliance fines and penalties

2. Non-compliance with energy performance regulations – TM44

According to the Government Energy Performance of Buildings Regulations, all commercial buildings must have air conditioning systems inspected every five years if the output exceeds 12kW. This also applies to systems comprising several individual units that are less than 12kW, but whose combined output exceeds 12kW.

The first TM44 inspection should occur before the air-conditioning is 5 years old, and further inspections should be scheduled every 5 years (or less) thereafter.

If you have an air-conditioning system approaching its 5th year of operation, or you have not had a TM44 inspection in the last 60 months, you should schedule an inspection immediately.

The inspection aims to provide owners and managers with information about how energy-efficient their cooling systems are. The report also provides advice on saving money by being more energy efficient when it comes to cooling your office or commercial premises. A modern and effective air conditioning system will not only save on maintenance and repair bills, but it will also use less energy.

Although any guidance does not have to be acted upon, business owners and managers can make an informed decision based on the TM44 inspection report.

In some cases, energy costs have been drastically reduced without any significant outlay in new systems. Inappropriate controls and settings may be causing both heating and cooling systems to operate simultaneously – a clear case of producing excessive CO2 emissions and unnecessarily burning money.

Once a TM44 report has been made, a copy is lodged on the government database. Enforcement can easily be checked anytime, so it pays to stay legal. Failure to arrange a TM44 inspection when due has a statutory fine of £300. There is an additional £200 fine if you fail to provide the outstanding report within 7 days of request.

How to Know When a TM44 Inspection is Required

Many companies are unaware of when their last TM44 inspection took place, if at all. Contact us, and we can help you determine if you should have a TM44 inspection to ensure you fully comply with the current legislation.

3. Non-compliance with energy performance regulations – Display Energy Certificates (DECs)

DECs are required in England, Wales, and Northern Ireland for all public buildings with a total useful floor area of over 250 sq. m that are occupied in whole or part by public authorities and are frequently visited by the public. Although private organisations are not required to have DECs, they can be obtained voluntarily.

For buildings over 1,000 sq. m, the current DEC, along with the two previous year’s ratings, must be prominently displayed.
The desired outcomes of EPCs and DECs are broadly similar, but subtly different. A DEC is intended to raise public awareness of energy use and to inform visitors to public buildings about the energy use of the building. An EPC is intended to allow the energy performance of different buildings to be compared to enable tenants, purchasers, and building users to make informed choices.

Stakeholders may often find a DEC more meaningful than an EPC as it measures performance based on actual energy consumption rather than theoretical performance, and therefore provides information on how efficiently a building is currently being operated.

There is a range of penalties for non-compliance with the requirements of EPCs and DECs. As of March 2021, these included:

Failing to have a DEC includes:

• £500 for failing to display a DEC at all times in a prominent place clearly visible to the public.
• £1,000 for not possessing or having in control a valid advisory report.

4. Non-adherence to greenhouse gas (GHG) emissions reporting

SECR regulations require companies in the UK to report accurate greenhouse gas emissions to Companies House as part of the Streamlined Energy and Carbon Reporting (SECR) regulations.

Late submission or failure to provide GHG information can result in fines ranging between £150 and £7,500.

GRESB is an internationally recognised benchmark assessing the ESG performance of a property, which includes energy.
GRESB can help protect shareholder value by evaluating and improving the energy and sustainability performance of property assets. Due to its emphasis on submitting the most relevant industry-specific ESG data, which is updated on an annual basis, it allows for continuous review and improvement.

Investors and real estate companies are given a three-month window starting from the 1st of April to respond to an online survey, which includes collating entity and building-level information in line with GRESB’s reporting methodology. The asset’s performance is then analysed and assessed against various indicators and specific sector and/or regional benchmarks. Once the review is completed, GRESB participants receive an individual score and ranking, alongside a detailed benchmark report.

Increasingly growing investor demand for timely, reliable and accurate ESG information and evolving GRESB submission requirements mean that rushing to submit all the data by the GRESB deadline is no longer enough. Ultimately, if GRESB is to be used as an effective tool to truly drive positive sustainability impacts, all participants will need to move away from thinking of it as a once-a-year event and should instead look at the advantages of more frequent monitoring performance. Doing this regularly will help identify opportunities for improving asset performance and tracking its progress against specific targets, which is needed to maximise investment and reputation.

5. Inaccurate or incomplete energy audits under the Energy Saving Opportunity Scheme (ESOS) regulations, businesses must provide information on:

(ESOS) regulations require businesses to provide information on:
● Organisational structure

● Total energy consumption over a twelve-month qualification period

● Individual energy information of your property, fleet, and processes

● Energy assessments to identify opportunities to increase efficiency

● Present findings to and achieve sign-off by a director listed on Companies House
For more information about ESOS, read our article, Why your business needs an ESOS audit.

6. Lack of preparation for future regulations

For continued compliance and to avoid penalties, businesses must stay informed of upcoming regulatory changes.

Energy performance best practice:

NABERS UK Energy for Offices measures the efficiency of an office building and rates its performance. The energy rating works by comparing the energy consumption of a building against a set of benchmarks developed using actual data.
https://weareinteb.co.uk/2021/04/16/nabers-is-landing-in-the-uk-what-does-this-mean-for-you/
NABERS is currently voluntary, but the government is looking at ways to merge EPCs (asset-based ratings) with operational performance ratings (DECs) and NABERS to further drive the UK’s commitment to net zero and help building owners, investors, and managers of commercial premises assess their impact on the environment.

Knowing these risks and partnering with a trusted energy expert can help you navigate complex energy compliance and reduce the chance of being hit with fines and penalties.

Need help improving your energy compliance?

Why not work with an expert like us? At Inteb, we offer audits and energy surveys that help your business discover where you’re wasting energy and how to make changes to cut your energy bills. What’s more, our Inteb Renewables service will identify:

7. Sustainable energy options

8. Energy-efficient technologies

9. Ways to reduce your carbon footprint

10. How to protect your business from volatile energy markets

We’ll also advise you on obtaining financial help for your plans and can help you prepare your company for future energy market changes.
Need help with your energy compliance? Call us now on 0151 601 3476 or email [email protected].