Government – guidance

Energy Companies Obligation: brokerage

Find out how ECO providers can sell 'lots' to energy companies in return for ECO subsidy, what are the rules and who can trade.

Brokerage objectives

Brokerage is a market based trading platform introduced to support cost-effective delivery of the Energy Company Obligation (ECO). The objectives of the brokerage platform are:

  • Competition – new sellers benefit from anonymity, which levels the playing field and allows smaller sellers to fairly compete with larger sellers.
  • Transparency – costs are published after each auction, allowing brokerage to set the market price.
  • Market Efficiency – a market with low transaction costs and administrative burdens for all parties.
  • Cost Effectiveness – Enables obligated energy companies to deliver ECO at the lowest cost, thereby reducing the impact on consumer bills.

How it works

Brokerage operates as a fortnightly anonymous auction where providers of the Energy Company Obligation (ECO) can sell ‘lots’ of ECO measures to energy companies in return for ECO subsidy.

The Crown Commercial Service (CCS) hosts an e-auction online platform that allows energy companies to bid in real-time between 9am to 11am and 1pm to 3pm on each auction day.

Registration

Currently, only Green Deal Providers (GDPs) are able to sell on Brokerage, although we may look to expand this to other delivery partners in the future. More information about the requirements and application form to become a GDP can be found on the GD ORB website.

Following the announcement to cease funding of the Green Deal Finance Company, DECC has determined that GDPs are no longer required to hold full Financial Conduct Authority (FCA) authorisation to access ECO Brokerage.

This is because FCA authorisation is required for the provision of consumer credit, which is not a requirement under Brokerage. This decision supports new entrants to the Brokerage market who may not be able to provide the evidence needed to comply with the FCA checking process. Where an existing Brokerage GDP holds full FCA authorisation, but no longer wishes to provide consumer credit, DECC are content for these permissions to lapse and access to Brokerage to be retained.

Once GDP status is obtained, you will need to register with CCS to access Brokerage. CCS can be contracted at: eauctionsecobrokerage@crowncommercial.gov.uk.

DECC publishes a List of all buyers and sellers registered to trade on the brokerage platform (PDF, 214KB, 3 pages) .

Brokerage contract

All trading on ECO Brokerage is underpinned by a standard 4 part contract which sets out the terms of delivery, reporting and payment between seller and buyer:

Contracts for lots submitted and bought at Auctions 72 onwards:

The brokerage compliance letter also includes:

  • a form in addendum A that confirms who can trade on behalf of the company and who else will be needed to sign the bid confirm letters
  • the anti-bribery questionnaire in addendum B which also requires copies of two forms of photo ID for the ‘nominated person’ – the person able to submit lots for trading on the Auction Platform
Bi-lateral Off-take contract October 2015 and operational changes to brokerage

The revised bi-literal off-take contract introduced from Auction 72 was as a result of comments received against proposed changes to both the contract and operational aspects of brokerage. The proposals and decisions made are summarised in the document below:

Energy Company Obligation - Summary of the Contractual and Operational Changes made to Brokerage (PDF, 209KB, 12 pages)

Contracts for lots submitted and bought at Auctions 33 – 71 inclusive:

Contracts for lots submitted and bought at Auctions 1 – 32 inclusive:

Brokerage auction

When submitting lots for sale, GDPs will need to specify the length of the contract (3, 6 or 12 months), and the volume they intend to deliver. However, to preserve anonymity, when lots are published for sale on brokerage they will be displayed as ranges:

ECO Carbon

  Band 1 Band 2 Band 3 Band 4 Band 5 Band 6 Band 7
Lot size (tCO2) 1k to 3k 3k to 6k 6k to 10k 10k to 14k 14k to 19k 19k to 26k 26k to 35k

ECO Affordable Warmth

  Band 1 Band 2 Band 3 Band 4 Band 5 Band 6 Band 7
Lot size (£bill saving) £100k to £300k £300k to £600k £600k to £1m £1m to £3m £3m to £5m £5m to £7.5m £7.5m to £10m

Once the auction has closed, the highest bidder will be informed of the exact amount of ECO they have bought (provided they have met the Seller’s reserve price).

The auction cycle

  • Step 1 - sellers submit lots electronically to CCS 6 days in advance of the auction day
  • Step 2 - the lots are compiled, anonymised and uploaded onto the portal in advance of the auction. This is to allow buyers the opportunity to consider the lots on offer before the auction starts
  • Step 3 – buyers place bids via the platform during the auction (Carbon 9am to 11am; Affordable Warmth 1pm to 3pm). To successfully win a lot the reserve price must be met. The winning bid will highest bid at the end of the auction.
  • Step 4 – within 2 days of the end of the auction, both buyers and sellers are advised of any successful bids.
  • Step 5 - anonymous trading data is published publicly on this website prior to the next auction

Results

A full breakdown of the ECO Brokerage results can be found at: Breakdown of ECO brokerage results

DECC also publish a summary of the auction dates and deadlines (PDF, 216KB, 2 pages)

Guidance and support

The Crown Commercial Service has issued guidance for buyers and sellers:

In addition to this, web-based training, guidance and a telephone support service are available for buyers and sellers.

For help when submitting lots please contact CCS by emailing eauctionsecobrokerage@crowncommercial.gov.uk

The eAuctions hotline is 0151 672 2046 and can be called during the hours of a Live eAuction.

Frequently asked questions

How do I report on delivery under an ECO Brokerage contract or when a contract is terminated?

When a lot is sold on ECO Brokerage, buyers are required to report on delivery or when a contract is terminated in accordance with the provisions allowed by the brokerage contract.

Buyers must complete an ECO brokerage contract report (PDF, 271KB, 2 pages) and return via email to eauctionsecobrokerage@crowncommercial.gov.uk

Reports are due back to CCS no later than 8 weeks after the contract due date or 8 weeks after contract sale date if the contract is terminated.

The ECO Brokerage Contract Report supersedes the Delivery Date Contract Quantity Report and should be used for contracts bought from Auction 72 (17th November 2015) onwards.

Can I sell measures I have already installed via Brokerage?

No, only future measures can be sold via brokerage. This is to enable to buyers to prove that carbon or bill savings were delivered through ECO.

What is the smallest ‘lot’ size?

The smallest lot that can be sold on brokerage is 1,000 tonnes of CO2 or £100,000 of bill savings.

If prices rise on brokerage, and I am half-way through a contract, can exit the contract?

The Brokerage contract does not provide a means of exiting the contract once it has been entered into. Where the agreed contract volume is not delivered; the buyer has the right to determine the method of remediation to ensure that they do not suffer a financial loss. This is to discourage sellers from over-contracting, under-delivering or playing the market to their advantage.

How is the Brokerage performance rating system calculated?

Due to the anonymous nature of Brokerage, the performance ratings system was introduced in January 2014 to provide buyers with some evidence of a seller’s ability to deliver agreed contracts. On its introduction, both under and over delivery of the agreed contract volume affected the rating; however, from November 2015 only under delivery will be considered. DECC have published further information on how the ECO brokerage performance rating system (PDF, 207KB, 2 pages) are calculated.

Who can trade on Brokerage?

Currently, only Green Deal Providers (GDPs) are able to sell on Brokerage, although we may look to expand this to other delivery partners in the future.