BIC – What’s New?

In two weeks time, applications for the first year of the British Industrial Competitiveness Scheme (BIC) should begin and then, in ten and a half weeks they will close.  So where are we and what are we still waiting for?

The consultation on the required legislation updates to enable BIC to happen closed a week ago, but the outcome has not yet been published.

The proposals would allow Exchequer funding to be channelled through the CfD supplier obligation to prevent implementation of BICS from increasing electricity bills for households and other non-exempt consumers.

 

“Exchequer funding received by the Low Carbon Contracts Company (LCCC) would reduce the amount that LCCC needs to recover from suppliers to fund CfD generator payments, resulting in a lower Interim Levy Rate (ILR) and lower reserve amounts than would otherwise apply. The Government intends for the first Exchequer payment to reach LCCC in time for it to be reflected in the levy from 1 April 2027, when the BICS exemption is expected to take effect. 

The Government’s minded position is that payments should be made to LCCC each quarter before the ILR is calculated. Further details will be set out by the Department for Business, Innovation, Science and Trade (DBIST) in due course. DBIST will separately publish an Impact Assessment setting out how the implementation of the BICS exemption will not lead to an increase in electricity bills for domestic consumers or non-eligible businesses.”

 

The changes are relatively minor and simple to the legislation, however they are crucial to the operation of the scheme in the above manner, to protect other companies from footing the bill:

Amendment of the Contracts for Difference (Electricity Supplier Obligations) Regulations 2014

2. The Contracts for Difference (Electricity Supplier Obligations) Regulations 2014 are amended as follows.

Amendment to regulation 2 (interpretation)

3. In regulation 2, in the definition of “SoS funds”, omit “(under section 154(2)(b) of the Act)”.

Amendment to regulation 5 (CFD quarterly contribution)

4. In regulation 5, for the definition of “SoS repayment” substitute— “SoS repayment is the total amount of SoS funds that the CFD counterparty was required to repay during that period;”.

Amendment to regulation 7 (estimated cost, income and electricity supply)

5. In regulation 7—
   1. in paragraph (1)—
      1. after “sum of” omit “any SoS repayment and”;
      2. after “estimates of” insert “any SoS repayment and”;
   2. in paragraph (2), before sub-paragraph (a) insert— “(za) the terms on which any SoS funds have been or are expected to be provided to the CFD counterparty;”.

Proposed legislative changes to support implementation of the British Industrial Competitiveness Scheme – GOV.UK

 

We know roughly how the FY2026 equivalent payment will be calculated.  However, we do not yet know when this payment will be made – the consultation and the implementation guidance both state this will be updated as soon as possible to confirm the timeline.

The one-off payment equivalent to FY2026 benefits was confirmed in the consultation on regulatory changes and scheme delivery, and we were told that:

“This payment will be proportionate in value to what businesses would have been entitled to had BICS exemptions been in operation earlier.  To ensure businesses receive support that closely mirrors this, calculations to confirm the value of payments to be received by individual businesses will use: 

• historical estimated electricity consumption data

• a government-set average RO, FIT and CM policy cost discount rate

• the businesses’ banded pro-rating percentage, to ensure that payments reflect eligible electricity use.”

 

We know how the application process will work, and that 6 years of records for audit must be kept on all matters relevant to the application.

“BIST may undertake proportionate verification activity before and after exemptions are awarded, including both targeted and random checks where appropriate.”

“Businesses must retain all records and supporting evidence relating to their application for at least 6 years and make them available to the Department on request. Records must be sufficient to demonstrate eligibility and substantiate any information provided as part of the application or ongoing exemption.

Failure to maintain or provide adequate records may result in recovery action, withdrawal of support, or other appropriate compliance measures.”

We will keep monitoring the information available as the scheme matures and if you have any questions or want to know more about BIC and how it might benefit your business, please contact us.