EGL12000 - The charge to EGL: the levy threshold

F(2)A23/S279(3) & (4) apply the levy to a “qualifying” generating undertaking which means one that produces power in excess of the levy threshold. As a result, many smaller generators, which are unlikely to be making exceptional receipts approaching the annual revenue allowance of £10 million, do not need to undertake further work to assess whether they are liable to the levy.

A generating undertaking is only “qualifying” if it has generation attributed to it for a qualifying period that exceeds the levy threshold. The levy threshold is 50,000 MWh per annum (or 50 GWh per annum). This is pro-rated where a qualifying period of the company is shorter than a year. A qualifying period for EGL purposes is based on the corporation tax accounting period of a single company or that of the lead company in the case of a group, see EGL32000 & EGL34000.

It should be noted that only attributable generation is counted when considering whether the threshold has been exceeded. EGL23100 explains what is meant by attributable generation. If an undertaking has attributable generation in excess of the threshold for a period, then the levy calculation includes all of the undertaking’s attributable generation, not just the amount by which the threshold is exceeded.

Example

A generating undertaking operates four windfarms, Windy Hill A – D. Following a takeover by an investment group with no other electricity generating assets, it prepares accounts for the six-month period 1/1/24 – 30/06/24 and this is a qualifying period for the purposes of the levy. During that period:

Windy Hill A generated 15 GWh all of which was sold via a private wire arrangement with a local industrial complex.

Windy Hill B generated 11 GWh, all of which was sold to an independent domestic supplier under a two-year power purchase agreement (PPA).

Windy Hill C generated 24 GWh which was exported to the National Grid subject to a Contract for Difference arrangement with the Low Carbon Contracts Company.

Windy Hill D generated 12 GWh all of which was exported to the grid and sold under a fixed price PPA agreement with an independent merchant.

The undertaking’s total output for the period is 62 GWh. Of this Windy Hill A and C are to be ignored because these are not relevant generating stations, EGL22400. That leaves 23 GWh of attributable generation.

The levy threshold of 50 GWh per annum is reduced to 24.93 GWh because the accounting period is only six months (182 days). Since the attributed generation is below the threshold, the undertaking is not within scope of the levy for that six-month period.