The Department of Environment released a rule (the Rule) last week which outlines the true-up process of the JCP free carbon units for the 2013-14 financial year.
As explained in the accompanying consultation paper made available earlier, the process involves correcting an allocation of free carbon units for a financial year based on the actual production for that year. To this end, the Clean Energy Regulator (CER) undertakes a ‘true-up’ adjustment process as part of the calculation of assistance for the last fixed price year 2013-14.
As part of the process, the applicants are required to lodge an accompanying audit report with the true-up report in order to substantiate the actual production figures. An adjustment is then calculated by the CER based on the difference between the previous financial year’s production (on which the allocation was based) and the actual production for the past financial year.
Furthermore, there are provisions in the Rule which empower the CER to make additional adjustments for certain circumstances such as sub-threshold facilities, a maximum cap on the number of units for new facilities; and a supplementary allocation for liquefied natural gas (LNG) facilities.
It is also worth noting that unlike the voluntary participation in the original program, EITE entities will be required by law to lodge a true-up report if they have received free permits previously.
In terms of estimation of the previous year adjustment of permits based on the actual production data, the Rule provides for using the same methods and applying the same formulae in Part 9 of Schedule 1 to the Clean Energy Regulations 2011 as if the program continued to operate in 2014-15.
With regards to the timeline, a key consideration in determining the timing of the true-up process was to ensure that that entities entitled to an additional allocation of units have sufficient opportunity to meet their carbon tax liabilities or sell the units back to the Government before 2 February 2015 (the final surrender date for 2013-14 liabilities). As such, the government has proposed the following timeline:
|31 October 2014||True-up report due date: Due date for entities to submit a true-up report containing audited 2013-14 production data and other relevant information to the Regulator.Unlike the Jobs and Competitiveness Program, under which participation was voluntary, submission of a true-up report under the draft True-up Rules would be compulsory for affected entities.|
|1 December 2014||Extension true-up report due date: Due date for entities to submit a true-up report, if an extension has been granted by the Regulator.|
|Up to 45 days after true-up report is received, or requested further information is provided||True-up adjustment notice provided: Maximum time for the Regulator to provide an entity with an ‘adjustment notice’, which will inform the entity whether it has an under- or over-allocation for 2013-14.Note: Where further information has been requested by the Regulator, the 45 days would commence once the requested information has been provided.|
|15 December 2014||Submission of additional information: If the Regulator requests further information from a designated person relating to their true-up report, the Regulator will specify a date for provision of that information. The Regulator will not be able to specify a date that is after 15 December 2014.|
|16 January 2015||Last date for true-up adjustment notification: Final date for the Regulator to issue a true-up adjustment notice.|
|2 days after the issue of a true-up adjustment notice and no later than 23 January 2015||Final issuance date: Final date for the Regulator to issue any additional units that relate to an under-allocation.|
|1 February 2015||Final buy-back date: Final date for Government buy-back of units.|
|2 February 2015||Final surrender date: Final date for entities to relinquish units to deal with any over-allocation. After this date, the value of over-allocated units will be payable as cash in the form of a true-up shortfall levy. The Regulator will issue a notice indicating the amount of true-up shortfall levy due and when it is to be paid.|
|9 February 2015||Designated carbon unit day: All carbon units will cease to exist after this date (or a date specified by legislative instrument).|
|16 February 2015||True-up shortfall levy due: The true-up shortfall levy is calculated as number of over-allocated units not relinquished x $24.15. If not paid by this date, the levy will be subject to a 20 per cent per annum penalty rate|
Matt is the Managing Director and provides strategic carbon emissions and energy advice for some of Australia’s largest and most well-respected corporations.