Commentary on Sections Part 2: Sustainability and Renewable Energy Sources Chapter 5: Renewable Transport Fuel Obligations Section 128: Discharge of obligation by payment
302.This section enables the Secretary of State to make provision in an order requiring obligated suppliers who do not discharge their RTFOs through the production of evidence, to pay a specified amount (commonly described as a “buy-out price” - 'BOP') to the Administrator. This might relate to the amount of RTF by which a supplier has fallen short of its obligation in the relevant period (e.g by requiring payment of a specified sum per unit of RTF for the shortfall). A purpose of the power is to allow for a degree of flexibility for suppliers in meeting their obligations, and a safety net to limit the costs to the consumer should the price of renewables be higher than expected.
303.The section also allows for a two-stage enforcement approach to be adopted, whereby a supplier is given a period of time to pay the BOP, then a further period to pay at a penalty rate, before civil penalties may be invoked (see subsection (2)(a) and (d)).
304.Subsection (2) enables amounts to be increased in line with inflation (paragraph (b)). An order may provide for the BOP (and any penalty sums) to be repaid to a company in certain circumstances (e.g. where RTFO certificates produced by the company after the obligation period are accepted by the Administrator by virtue of section 127(7) (paragraph (c)). An order may prohibit the Administrator from seeking to recover BOP sums owing where specified conditions are satisfied (e.g. where a decision is taken to pursue civil penalties instead) (paragraph (d)).
305.Subsection (4) would allow an order to require specified suppliers to make payments into the “buy-out” fund, to cover any shortfall in payments due caused, for example, by an obligated supplier becoming insolvent without paying amounts owing for the relevant period. Under subsection (5), an order may provide for subsequent adjustment or repayment of such sums. For example, it may be appropriate for repayments to be made where the administrator or liquidator of a supplier who has become insolvent is subsequently able to raise funds to make a payment into the “buy-out” fund.
306.Subsections (6) and (7) provide that an order may require the Administrator to use a specified portion of BOP revenues to cover its operational costs; otherwise, the money must be recycled to specified transport fuel suppliers (e.g. only those who met their obligation in the relevant period) in accordance with a specified allocation system.