By Accounting for Energy – (3 min read)
Local authority waste departments face a daunting range of challenges. Charged with driving behaviour change through communications campaigns and assessing the most efficient technologies, they also need to manage the everyday logistics of collections to thousands of households, while staying abreast of waste material trends and prices.
In the current age of austerity, ambitious environmental goals sometimes seem to work at odds with cuts to service budgets. As a result, councils need to find creative ways to make the most of available funds. Often, a reduction in service, or halt to communications campaigns seem inevitable, but authorities that scrutinise assets – such as the royalties from landfill gas generation – may unearth an unexpected windfall.
Many different types of organisation are eligible for landfill gas royalties. What they all have in common is a tendency for payments to be inaccurate. Accounting for Energy (AfE) Operations Director Freccia Benn estimates that 75% of reviews undertaken by Accounting for Energy have identified underpayments. The sums involved can be substantial – in 2017, the site generating the most energy produced enough for each person in the UK to charge an iPad Pro daily for a year, and the UK landfill gas industry as a whole adds £400 million to the economy.
Many local authorities that operate, or have operated, landfill sites, work in partnership with landfill gas companies. These arrangements typically began in the 1990s, when gas equipment was installed across many UK sites. Under standard arrangements, the local authority will own the land, and lease the rights to install and run the landfill gas equipment to a third party. The landowning council then receives royalties based on the level of gas generated.
Mistakes can be difficult to spot; Travis says that in many cases, it is only the experience of assessing hundreds of past cases which helps auditors to recognise anomalies and encourage them to dig deeper. Examples of underpayment include the wrong indexation being used in royalty calculations, or faulty output data being applied to past royalty results. These cases tend to be spotted through analytical review trend analysis and, once identified, all payments are re-calculated.
It is not easy to determine exactly how many local authority sites host landfill gas equipment, but AfE estimates the number to be around 25% of the country’s entire capacity. For any organisation, missing out on revenue is detrimental; for local authorities facing budget cuts, a back payment of royalties or new payment arrangements can have a significant impact on funding.
Councils do not have the available expertise to investigate, and allocating staff who are already stretched to capacity is not an option. However, with a free service, charged on a contingency basis, and funded by the gas generation outfit, all that is needed is the relevant paperwork. The auditors do the rest and, in most cases, all parties benefit. There is nothing to lose and, perhaps, a great deal to gain.