Exemption certificate guideline - Clean Energy Regulator · Exemption certificate application...

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Exemption certificate guideline Electricity method Version 2.0 01/08/2018

Transcript of Exemption certificate guideline - Clean Energy Regulator · Exemption certificate application...

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Exemption certificate guideline

Electricity method

Version 2.0 01/08/2018

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Contents Overview .............................................................................................................................................................. 3

Exemption certificate application process .......................................................................................................... 3

General requirements 4

Secrecy of information collected 4

Timeline for the electricity use method for 2019 4

Abbreviations 6

Completing the exemption certificate application .............................................................................................. 6

Part 2: Applicant Details 6

Part 3: Executive officer(s) and organisation contacts 6

Part 4: Prescribed person 7

Scenario 1: An entity has a contract with the liable entity ......................................................................... 7

Scenario 2: Liable entity with operational control ...................................................................................... 7

Scenario 3: Nominated person .................................................................................................................... 8

Part 5: Liable entity 8

Additional or change of liable entity during the year ................................................................................. 9

Part 6: Site details 9

Part 7: Emissions-intensive trade-exposed activity 9

Is the site part of an activity group? .......................................................................................................... 10

Part 8: Quantity of relevant product 10

Part 9: Exemption determination 11

Total exemption for the site ...................................................................................................................... 11

Part 10: Audit report 20

Exemption certificate application processing times 21

Information contained in the exemption certificate 21

Providing information to the Clean Energy Regulator during 2019 22

Notice of exemption 22

Amending an exemption certificate 22

There is a change of liable entity (regulation 22ZPA) ................................................................................ 22

There are multiple liable entities (regulation 22ZQA) ............................................................................... 23

The EITE activity ceases at the site (regulation 22ZR) ............................................................................... 23

The exemption certificate is inaccurate (regulation 22ZS) ........................................................................ 23

Transfer of exemption certificate to liable entity 23

How an exemption certificate reduces a liable entity’s Large-scale Renewable Energy Target (LRET) and Small-scale Renewable Energy Scheme (SRES) liability 24

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Auditing and compliance 25

Protected information ............................................................................................................................... 25

Publication of exemption certificate information ..................................................................................... 25

Contact us .......................................................................................................................................................... 26

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Overview The Renewable Energy (Electricity) Act 2000 (the Act) and the Renewable Energy (Electricity) Regulations 2001 (the Regulations) allow exemption from Renewable Energy Target liability for electricity used in emissions-intensive trade-exposed (EITE) activities. To obtain exemption, prescribed persons apply to the Clean Energy Regulator (the agency) for an exemption certificate.

From 2018 applicants could decide to determine their exemption based on actual EITE activity electricity consumption rather than using production for the previous two financial years. Using actual electricity consumption is called the ‘electricity use method’. The electricity use method documents are available on the Clean Energy Regulator website1.

The method to determine exemption prior to introduction of the electricity use method is the ‘production calculation method’. This method has been used to date to determine an exemption amount. There are separate guidelines and application form for this method, available on the Clean Energy Regulator website2.

All exemptions will be determined based on actual EITE activity electricity use by 2020, so 2019 is a transition year. In 2019 most applicants can choose to use the electricity use method (refer to Regulation 22ZHA for the application of the method during the transition period). Under regulation 22ZHA(2), if the amount of electricity consumed at the site in 2018 is more than 2000 gigawatt hours (GWh), the site must use the electricity use method from 2019. Note that 1 GWh is the same as 1000 megawatt hours (MWh).

Once applicants have an exemption certificate issued using the electricity use method, this method will be used for future exemptions (regulation 22ZHA(f)). Information on how exemption is determined under the electricity use method is in Part 9 of these guidelines.

Note: This document should be read in conjunction with the Act and the Regulations in their current form at the time of reading. Changes to the legislation may affect the information in this document. The information contained in this document is provided as guidance only. The guidelines are non-binding and are of a general nature only. Applicants are responsible for determining their obligations under the law, and for applying the law to their individual circumstances. This document is not intended to provide legal advice. The agency suggests you seek your own legal advice if necessary, in relation to your application.

Exemption certificate application process Complete and lodge the 2019 Application form for an exemption certificate on the Clean Energy Regulator’s Client Portal.

1 http://www.cleanenergyregulator.gov.au/RET/Forms-and-resources/Forms-and-resources-for-industry 2 http://www.cleanenergyregulator.gov.au/RET/Forms-and-resources/Forms-and-resources-for-industry

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Applications for the 2019 year (1 January to 31 December 2019) must be made on or before 1 April 2019. No extension can be given to lodge an exemption certificate application after the due date.

Note: This deadline is affected by the Acts Interpretation Act 1901 (Commonwealth) which applies where a deadline falls on a weekend or public holiday.

General requirements

The agency recommends that potential applicants familiarise themselves with the Act3 and Regulations4 before applying for an exemption certificate.

• Read the relevant parts of the Regulations.

• Lodge your completed and signed application form through the Client Portal.

• Complete all applicable parts of the application form. If there is insufficient space to complete your response, please provide additional information as an attachment.

• Reference and label attachments in a logical manner. Attachments up to 25 MB in size can be submitted via the Client Portal.

• Keep a copy of the completed and signed application form for your records.

The agency is responsible for implementing the legislation governing exemption certificates. The Department of the Environment and Energy is responsible for developing the policy and legislation. The Department of the Environment and Energy can be contacted by phone (1800 803 772) or through their online enquiries portal using the contact us link on their home page5.

Secrecy of information collected

Under Part 3 of the Clean Energy Regulator Act 2011 there are strict secrecy provisions for the data and information collected by the agency . This can involve imprisonment for those disclosing the information.

The Clean Energy Regulator Act 2011 does have provisions for providing collected data in certain circumstances. The agency’s Privacy Policy can be found on the Clean Energy Regulator website6.

Timeline for the electricity use method for 2019

The timeline for the electricity use method is below..

Step Description Date

1 Guidelines and application form available on the Clean Energy Regulator website.

1 August 2018

3 http://www.comlaw.gov.au/Series/C2004A00767 4 http://www.comlaw.gov.au/Series/F2001B00053 5 http://www.environment.gov.au/about-us/contact-us 6 http://www.cleanenergyregulator.gov.au/About/Policies-and-publications/Condensed-privacy-policy/Full-privacy-policy

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2 The due date is usually on or before 30 March, due to 30 March being a Sunday the due date is close of business 1 April 2018.

1 April 2019

3 Issuance of exemption certificate and calculation tool to EITE entity. The agency has 60 days to assess and issue the exemption certificate. If a request for information is required then the 60 day issuance time frame starts when the requested information is received.

The calculation tool allows the EITE entity to estimate the amount of exemption created throughout the year.

Expect certificate issuance by

30 June 2019

4 If the EITE entity has provided permission and relevant contact details to the agency then the exemption information will be provided to the nominated liable entity at the same time. This permission can be granted anytime during the exemption year.

If the nominated liable entity has this information, and in some cases relevant meter information from the EITE entity, they can also estimate the exemption throughout the year.

Throughout the exemption year.

5 Publication of certificate information on the Clean Energy Regulator website within 14 days of certificate issuance.

14 days after issuance

6 Publication of the estimated value of exemption reported by liable entities for 2018 on the website as required by section 38C of the Act.

30 March 2020

7 If required - information from EITE entity for the January to November period. 10 December 2019

8 Provision of certified exemption amount by the agency to EITE entity, and if the EITE entity has given permission also the liable entity.

15 January 2020

9 Acquittal of RET obligations by liable entities which include exempt amount, LRET certificates and SRES certificates.

14 February 2020

10 Publication of an estimate of the total amount of exemptions given for each EITE activity for 2019.

30 March 2020

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Abbreviations

Term Meaning or definition

Act Renewable Energy (Electricity) Act 2000

DLF Distribution Loss Factor

EAF EITE activity factor

EBF Electricity Baseline Factor

EPBC Environment Protection and Biodiversity Conservation

EITE Emissions-intensive trade-exposed

NGER National Greenhouse and Energy Reporting

NMI National Metering Identifier

Regulations Renewable Energy (Electricity) Regulations 2001

RET Renewable Energy Target

Completing the exemption certificate application The below information provides guidance for completing each part of the exemption certificate application.

Note: References to legislative provisions in this guide are to the Regulations unless specified otherwise.

Part 2: Applicant Details

Complete the details of the applicant (the applicant must be the legal entity that is the prescribed person as described in Part 4).

In Part 2 you must provide the company name (the legal entity name as registered on the Australian Business Register) and trading name/s, if applicable, (to enable the agency to accurately identify the company in different circumstances).

Part 3: Executive officer(s) and organisation contacts

The primary contact person (this should be the person who is most knowledgeable about the application and relevant legislation) will automatically be selected by the client ID of the person completing the application form in the client portal. This person will be the main point of contact for the agency when seeking additional information or clarification regarding the application.

A secondary contact person must also be nominated (this person should also have knowledge of the application and relevant legislation). This person may be contacted if the primary contact is unavailable.

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Part 4: Prescribed person

An application for an exemption certificate must be made by a prescribed person, who will receive the exemption certificate (this will generally be the entity carrying out the EITE activity).

Regulations 22G – 22K are categories of prescribed person eligible to apply for an exemption certificate. You must be in one of these categories to apply. Refer to the amending an exemption certificate section for prescribed person categories 22LA and 22MA.

Note: You are not a prescribed person under regulations 22G, 22H, 22I, 22J or 22K if another valid application has already been received for the 2019 year in relation to the EITE activity and site.

Scenario 1: An entity has a contract with the liable entity

During the 2019 year, you (the prescribed person) have a contract with the liable entity (e.g. your electricity retailer) for electricity supply to the site at which the EITE activity is carried out. This may be:

• an existing contract—the prescribed person is the person with a contract for supply of electricity to site (regulation 22G), or

• a new contract—the prescribed person is the person with a new contract for supply of electricity (regulation 22J).

For example: You have an existing contract to purchase electricity from an electricity retailer for use in the EITE activity of smelting zinc from 2017 to 2021.

Scenario 2: Liable entity with operational control

During the 2019 year, you have operational control of the principal facility at the site of the EITE activity and are also a liable entity for a substantial portion of the electricity consumed at the site.

Operational control is defined with reference to the National Greenhouse and Energy Reporting Act 2007 (NGER Act) and generally means you have the most authority over operating, health and safety and environmental policies for the facility. For more information about operational control, review the NGER legislation or guidance on the Clean Energy Regulator website7.

You are generally a liable entity if you make wholesale acquisitions of electricity. For more information about liable entities8 visit the Clean Energy Regulator website.

For an EITE activity currently carried out at a site, the prescribed person falls under regulation 22H if the:

• person has operational control of the site in 2018 immediately before the application is made

7 http://www.cleanenergyregulator.gov.au/NGER/About-the-National-Greenhouse-and-Energy-Reporting-scheme 8 http://www.cleanenergyregulator.gov.au/RET/Scheme-participants-and-industry/Renewable-Energy-Target-liable-entities/About-liability

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• facility is the principal facility that is carried on at the site, and

• person is the liable entity during the six months prior to lodgement of the application for over 30 per cent of the electricity consumed at the site, or the majority of the electricity consumed at the site that gives rise to a relevant acquisition (as defined under section 31 of the Act).

For an EITE activity which will be carried out at a site later in the 2018 year, the prescribed person falls under regulation 22I if the:

• prescribed person will have operational control of the facility

• person is the liable entity for more than 30 per cent of the electricity consumed at the site during 2018, and

• facility is the principal facility that is carried on at the site.

Describe the basis upon how you meet the criteria of a liable entity with operational control, including, in particular, supporting evidence of operational control and that you meet the criteria of being a liable entity.

For example: You conduct the EITE activity of smelting zinc, have operational control of the principal facility at the site, and you also purchase wholesale electricity for use in the EITE activity.

Scenario 3: Nominated person

If you are a controlling person in relation to the principal facility at the site at which the EITE activity is carried out, a prescribed person can nominate you to apply for the exemption certificate. In this case:

• the nominated person is the prescribed person (regulation 22K), or

• a controlling person is defined in subregulation 22K(3) and generally means a person with operational or financial control of the facility or a controlling corporation that has a member of its group with operational control of the facility.

Written notice of the nomination must be given to the agency before your application is lodged.

For example: You operate a zinc smelter, but an intermediary person has a contract with the liable entity for the supply of electricity to the zinc smelter. The intermediary (as a prescribed person) nominates you to apply for the exemption certificate.

Part 5: Liable entity

Complete the details of the liable entity for the electricity consumed at the site (generally this will be your electricity retailer) and provide any required supporting documentation. You will be able to provide detail for multiple liable entities if required.

You may need to contact the liable entity(s) for assistance in completing these questions.

If there are multiple liable entities for the site, the exemption will be split according to the liable electricity provided by each liable entity.

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Additional or change of liable entity during the year

If, during the year, an additional entity begins to be a liable entity in relation to the electricity consumed at the site, you will need to provide details of:

• any other liable entities, and

• indicate whether you are intending to apply for another exemption certificate in respect of a concurrent liable entity (under regulation 22MA).

Once you have been issued with the first exemption certificate, you can still apply for an exemption certificate in respect of another liable entity using the '2018 Application for Exemption Certificate – electricity use method - multiple liable entities9)' form, which will be available throught the client portal. Applications must be made on or before 31 December 2019.

If the liable entity for the electricity consumed at the site changes during the 2018 year (under regulation 22LA), once you have been issued with the first issued exemption certificate, you can then apply for an exemption certificate in respect to the second liable entity using the '2018 Application for Exemption Certificate – electricity use method - change of liable entity10)' form, which will be available throught the client portal. Applications must be made on or before 31 December 2019.

Part 6: Site details

The site is the geographical location at which the EITE activity is carried out. The site must be located in Australia to be eligible for an exemption certificate.

Where the production processes that constitute a single EITE activity occur across two or more different sites (with an intermediate product transferred between the sites as part of the production processes), the sites may constitute an activity group as defined in subregulation 22A(9).

• If the site is part of an activity group, separate applications must be lodged for each site across the activity group.

• If the site is part of an activity group, applications must be lodged separately for each site and the amount of relevant product reported in accordance with the concept of an activity group (see Part 7 for further details).

Provide details of the site to which the application relates, including:

• the site name (the name commonly referred to for business purposes)

• site location

• generation capacity at the site

• information about electricity that is used at the site that is not a relevant acquisition, and

• a site map with details as specified in the application form.

Part 7: Emissions-intensive trade-exposed activity

It is the responsibility of the prescribed person to identify whether EITE activities are carried out at a site. Refer to the activities specified in Schedule 6 of the Regulations to determine whether your activity is an eligible EITE activity. If there is more than one EITE activity for the application you will be able to provide

9 http://www.cleanenergyregulator.gov.au/RET/Forms-and-resources/Forms-and-resources-for-industry 10 http://www.cleanenergyregulator.gov.au/RET/Forms-and-resources/Forms-and-resources-for-industry

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details for each additional EITE activity in the online form. The definition of each transformation or production process that constitutes an eligible EITE activity is in Schedule 6 of the Regulations.

For each EITE activity, Schedule 6 also sets out what the product is and the electricity baseline for the activity for each product. The electricity baseline is the amount of electricity used in the activity for each unit of relevant product. This is not used if the actual electricity use determines the exemption at the site.

Under the electricity use method, the exempt electricity used at the site is measured directly.

Note: For the purposes of publication of total activity exemption amounts only – if multiple EITE activities are carried out at the same site then the exemption per EITE activity will be estimated using relevant product quantities for 2019 and electricity baselines set out in schedule 6 of the Regulations. Applicants need to provide the 2018 and estimated 2019 production levels for each EITE product (in Part 8 of the application form).

Explain how the EITE activity will be carried out at the site in 2018, by briefly describing how the specific processes conducted at the site constitute the activity specified in Schedule 6 of the Regulations. If required, attach process diagrams and other relevant supporting material.

If an EITE activity has not yet commenced at the site, but is due to commence in 2018, you must state:

• what approvals are necessary for the conduct of the EITE activity (e.g. Australian Government Environment Protection and Biodiversity Conservation (EPBC) approval, state government environmental approval and/or license, state government planning/construction approval, etc.), and

• whether these approvals have been obtained at the time of making the application.

Is the site part of an activity group?

EITE exemptions must be calculated using the same method (electricity use method) for all of the EITE sites that are part of the activity group. A separate application form needs to be submitted for each site. Where the production processes that constitute a single EITE activity occur across two or more different sites (with an intermediate product transferred between the sites as part of the production processes), the sites may constitute an activity group as defined in subregulation 22A(9).

Where multiple EITE activities are carried out at a site please specify whether each activity is part of an activity group, and which other sites form part of that activity group. For each activity confirm whether more than 80 per cent of electricity used at the site is used for the purposes of carrying out the activity and provide an estiate for the amount of electricity used at each site.

In Part 8 of the application the amount of product needs to be reported as the total quantity of finalized product across all sites.

Part 8: Quantity of relevant product

Relevant product is the product (or input) as defined in Division 3 of the applicable activity definition under Schedule 6 of the Regulations.

For each relevant product the estimated production for the exemption year (2019) and the actual production for the previous year (2018) will be provided by the applicant to assist the agency to estimate the amount of exemption for each activity undertaken at the site. If the application form is submitted before the exemption year starts, then the production for the 2017 year is estimated. Production is measured in tonnes or kilolitres of relevant EITE product. These amounts do not need to be audited and represent the best information available when the exemption application form is submitted.

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Some EITE activities at a single site can produce more than one type of relevant product. The different relevant product amounts and the estimates for the years that are not complete need to be reported. An example is Part 9 of Schedule 6 of the Regulations, integrated production of lead and zinc, which has three products.

1. lead metal with at least 99.97% lead

2. lead metal with between 99.5% and 99.97% lead metal, and

3. zinc in fume with a concentration of zinc.

The different products produced at the site and the amount of each product for the exemption year and the year before the exemption are to be provided. If there is more than one EITE activity for the application, production details for each additional relevant product can be provided under the EITE activity heading.

Part 9: Exemption determination

For the electricity use method, an exemption amount is based on the amount of electricity used to carry out all or part of an EITE activity at a site. The definition of site inclusions and exclusions for an eligible EITE activity is found in the emissions-intensive trade-exposed activity boundaries document.

Electricity used in non-EITE activities at the site will be excluded from the exempt electricity. Similarly, exemptions will not cover acquisitions of electricity that are not liable under the Renewable Energy Target (such as certain self-generation). For sites that have a mix of liable and non-liable electricity the agency will consider that the percentage of liable and non-liable electricity consumed by each activity at the site (EITE activity or non-EITE activity) will be the same.

The agency will consider the information provided by the applicant when defining an exemption determination that accurately represents the electricity used to undertake each EITE activity at the site for 2019. The explanation and justification for the approach used to determine the exemption amount is known as the ‘electricity use method advice’ in the regulations.

Total exemption for the site

If the applicant considers internal metering data should be used (whether alone or as part of a formula with other elements), the applicant is to provide details of the metering data that should be used to identify the exemption amount for the site. This should identify information for the meters supplying the data, including:

• the National Metering Identifier (NMI) if any for each such meter within the meaning of the National Electricity Rules

• whether the meter is a billing meter or internal meter

• the liable entity supplying electricity to the meter

• the meter location, and

• the Distribution Loss Factor (DLF) code for the meter, as distribution losses are not included in the liable electricity that is used by the site.

The applicant must consider whether metering data is sufficient and appropriate to identify the exemption amount and provide an explanation as to why or why not.

The metering data used in a method may be:

• data for the whole year, or

• data for a 12 month period that uses at least three quarters of the year if the agency is satisfied with that reasonable approximation.

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If the applicant considers that metering data is not sufficient or not appropriate to identify the exemption amount for the liable entity, the applicant must provide a formula they consider would be appropriate to identify the exemption amount, and an explanation of the elements of the proposed formula and why it would be appropriate.

Ensure you state assumptions made about any values or amounts relevant to the exemption determination, which are not known at the time of making the application.

When providing the formula and explanation for the ‘electricity use method advice’ the applicant should have regard to the instrument titled emissions-intensive trade-exposed activity boundaries to ensure that the advice most accurately identifies the use amount (section 22ZHC(2) of the Regulation). If the formula needs to be updated during the exemption year please contact the agency.

The agency will choose the method that most accurately identifies the use amount for the liable entity. We will have regard to the emissions-intensive trade-exposed activity boundaries instrument, practicalities of the method and any other relevant matters.

Exemption by EITE activity

If there are multiple EITE activities at the site, the total exemption for the site will be split by the EITE activities for publication purposes only. The agency will determine the split for publication purposes using the 2019 estimated production amounts and the electricity baselines defined in Schedule 6 of the Regulations. In some cases additional information can be provided by the applicant to assist the agency in splitting the exemption between different EITE activities at a site. A single exemption certificate will be issued to a site for all the EITE activities that are undertaken at that site.

Exemption for each liable entity

If there are multiple liable entities providing electricity to the site, the total exemption for the site will be split by the proportion of liable electricity provided by each liable entity. A liable entity is expected to only have a single certificate for each site, even if the site has multiple EITE activities.

Calculating exemption

Seven basic methods exist to determine an EITE entity’s Renewable Energy Target liable electricity use at a site.

1. All the Renewable Energy Target liable electricity through one or more meters that determines the amount of electricity use at a site undertaking one or more EITE activities. See example 1.

2. All the Renewable Energy Target liable electricity through one or more meters less the metered electricity that is used for non-EITE activities at the site. See example 2.

3. Using an EITE activity factor (EAF) or factors to determine the proportion of the liable electricity through one or more meters that determines the amount of electricity used at a site undertaking one or more EITE activities. See example 3.

4. The EAF is determined by considering measured parameters such as electricity consumption using electricity meters, production levels and electricity use of major equipment based on hours of equipment use. The EITE activity factor may vary year to year. See example 4.

5. A site has both EITE and non-EITE activities and uses both liable and non-liable electricity. The amount of electricity for the non-EITE activity is metered. See example 5.

6. A site has an EITE activity and non-EITE activity, where a specified amount of electricity is used for a non-EITE activity. The exemption is the liable electricity minus a specified amount. See example 6.

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7. Example 7 is similar to example 2 except the amount of internal metered electricity is very large compared to the amount of exemption for the site. We expect this type if situation is not likely to exist in practise.

Example 1: All electricity through a meter is Renewable Energy Target exempt

The production of carbon black is defined in Part 5 of Schedule 6 of the Regulations. The applicant needs to confirm their product meets the definition of carbon black.

The site has one electricity meter, meter 1, measuring Renewable Energy Target liable electricity supplied to the EITE site. If carbon black is produced at a site in a year and all the Renewable Energy Target liable electricity through meter 1 is used to produce the EITE product at the site, the exemption for the EITE activity at the site is:

[Renewable Energy Target Liable electricity imported through meter 1]

= 51,521 MWh / year

This amount of electricity will be determined after 2018 is over and is determined by the agency.

The NMI will be provided to the agency in the exemption application and used by the agency to obtain the amount of electricity used from the market operator.

Notes

1. In some cases electricity meters will be used for which the agency cannot obtain the data. This will require electricity data to be provided to the agency quickly after the end of the exemption year.

2. If the amount of metered electricity changes after the exemption is determined the next year’s exemption can be adjusted by this amount.

3. The maximum exemption is the amount of Renewable Energy Target liable electricity that is supplied to the site less the amount of Renewable Energy Target liable electricity the site provides to a separate facility.

4. The accuracy is considered to be 0 MWh as the billing meter alone determines the EITE exemption.

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Example 2: The difference between two or more electricity meters represents exemption

If carbon black is produced at a site in a year and the site only uses RET liable electricity, however the site also carries out non-EITE activities, then the liable electricity through meter 2 less the electricity through internal meter 3 determines the amount of liable electricity used to undertake the EITE activity, the exemption for the EITE activity is:

[Renewable Energy Target liable electricity imported through meter 2] –

[Internal electricity through meter 3 measuring non-EITE activities]

= 84,258 – 12,458 MWh / year

= 71,800 MWh exemption for 2018

Notes

1. The maximum exemption is the amount of Renewable Energy Target liable electricity that is supplied to the site less the amount of liable electricity the site provides to a non-EITE activity.

2. The accuracy is only determined by the accuracy or meter 3. If meter 3’s accuracy is 4% the accuracy of the exemption is 498 MWh which is 0.7% of the exemption. This meets the accuracy requirements specified.

Example 3: Part of the electricity through a meter represents exemption

If carbon black is produced at a site in a year and 95% of the liable electricity through meter 4 is the only liable electricity used to produce the EITE product, the exemption for the EITE activity is:

[Liable electricity imported through meter 4] x EITE activity factor 1

= 75,251 x 0.95 MWh / year

= 71,488 MWh exemption for 2018

The proportion of electricity through meters (the EITE activity factor (EAF)) is used to determine the EITE activity electricity use. This will be nominated by the applicant and in the first year audited. The EAF can be determined based on engineering calculations to determine the amount of electricity used by equipment undertaking non-EITE activities or the amount of electricity used to produce EITE products and non-EITE products.

These calculations can result in a constant factor that can be used each year until there are changes at the site which require the factor to be determined again. Alternatively the EAF could be determined from a number of factors and the value of the factor determined every year based on the values of the measured parameters that make up the EAF. Parameters that could be used to determine the EAF year are production levels or hours of use of key equipment.

The maximum exemption is the amount of liable electricity that is supplied to the site less the amount of liable electricity the site provides to a separate site.

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Example 4 below shows how an EITE activity factor can be determined.

Notes

1. The accuracy is dependent on the accuracy of the EAF. If the accuracy of the excluded amount is 2%, the accuracy for the exemption is 75 MWh or 0.1% of the exemption. This meets the accuracy requirements specified.

Example 4: Determining an EITE activity factor based on parameters. All electricity used at the site is Renewable Energy Target liable electricity

If a site produces two products, EITE product (A) and a non-EITE product (B), and it is determined that the amount of each product can be used to estimate accurately the exemption then these products will have the same electricity baseline factor (EBF), 1 MWh per tonne of product. The electricity baseline factor does not need to be the same as in the factor in the Regulations.

All the electricity used at the facility is liable electricity.

It is determined that the split of electricity between the liable electricity use for the two products is the same proportion as the weight of products produced.

For this year the amount of EITE product A produced was 10,200 tonnes and the amount of non-EITE product B produced was 8,700 tonnes.

This means the EITE activity factor (EAF) for the year is:

EBF A × Product A (tonnes)

EBF A × Product A + EBF B × Product B (tonnes) =

1 × 10,2001 × 10,200 + 1 × 8,700

= 0.54

If the amount of liable electricity used as measured through meter 5 at the facility is 25,600 MWh then the exemption is:

𝐸𝐸𝐸𝐸𝐸𝐸𝐸𝐸 𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 𝑓𝑓𝑎𝑎𝑎𝑎𝑎𝑎𝑓𝑓𝑓𝑓 × 𝑎𝑎ℎ𝑒𝑒 𝑚𝑚𝑒𝑒𝑎𝑎𝑚𝑚𝑚𝑚𝑓𝑓𝑒𝑒𝑚𝑚 𝑙𝑙𝑎𝑎𝑎𝑎𝑙𝑙𝑙𝑙𝑒𝑒 𝑒𝑒𝑙𝑙𝑒𝑒𝑎𝑎𝑎𝑎𝑓𝑓𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎𝑎 (𝑚𝑚𝑒𝑒𝑎𝑎𝑒𝑒𝑓𝑓 5)

= 0.54 x 25,600

= 13,824 MWh

Notes

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1. As production changes each year the value of the EITE activity factor changes each year. But how the factor is determined does not need to change unless there is a change to the site leading to a change in how the factor is determined.

2. If the amount of production for the year cannot be determined for the entire year then the agency may determine that the production for the first 11 months may be able to be used.

3. The maximum exemption is the amount of liable electricity that is supplied to the site less the amount of liable electricity the site provides to a separate site.

4. The accuracy is dependent on the accuracy of determining the amount of product. If the accuracy of determining the amount if product is 1% then the accuracy of the exemption is approximately 128 MWh or 0.9% of the exemption.

Example 5: Determining an EITE activity factor based on parameters. Electricity used at the site is both liable and non-liable (self-generation) electricity

If a site produces two products, EITE product (A) and non-EITE product (B), and the amount of electricity used for product B is metered through meter 6, the exemption can be determined by subtracting a proportion of the electricity measured by meter 6 from the liable electricity used at the site. The liable electricity used at the site is metered through meter 7.

Not all the electricity used at the site is Renewable Energy Target liable electricity. Of the total electricity, 100,000 MWh, only 40,000 MWh is liable electricity. Electricity used to produce non-EITE product B at the site is from self-generation. This electricity is measured through meter 6 and is 60,000 MWh.

This means the exemption for the year is:

= meter 7 − liable electricity consumed at sitetotal electricity consumed at site

× meter 6

= 40 ,000− 40,000

100,000 × 60,000

= 40,000− 0.4 × 60,000

= 16,000 MWh

Notes

1. If the amount of electricity for the year cannot be determined for the entire year then the agency may determine that the production for the three quarters may be able to be used.

2. The factor of liable electricity at the site divided by the total electricity used at the site ensures the proportion of EITE and non-EITE electricity which is liable is the same. This is similar to the G factor in the production method.

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3. The maximum exemption is the amount of liable electricity that is supplied to the facility less the amount of liable electricity the facility provides to a separate facility.

4. The accuracy is dependent on the accuracy of meter 6. If the accuracy of meter 6 is 2% the accuracy of the exemption is approximately 180 MWh or 1.1% of the exemption.

Example 6: Electricity through a meter minus a specified amount of electricity used for a non-EITE activity represents EITE exemption

If a site produces an EITE product and has some activities at the site that do not contribute to its production, then the electricity should be deducted. If the electricity consumption can be determined for the year (e.g. pumps operating constantly across the year, consuming 1.6 MWh/day) then that amount can be deducted as an absolute number:

[Liable electricity imported through meter 8] – (1.6 x 365 MWh)

= 15,100 – 584 MWh

= 14,516 MWh exemption for 2018

Notes

1. The maximum exemption is the amount of liable electricity that is supplied to the facility less the amount of liable electricity the facility provides to a separate facility.

2. The accuracy is dependent on the accuracy of determining the amount of product. If the accuracy of determining the amount if product is 1% then the accuracy of the exemption is approximately 300 MWh or 2% of the exemption.

3. The accuracy of meter 8 is considered to be 0 MWh. The accuracy is dependent on the accuracy of the daily estimate of exemption. If the daily exemption is 10% accurate the accuracy of exemption is 58 MWh or 0.4% of the exemption.

Example 7: The difference between two or more electricity meters represents exemption

If smelting zinc is done at a site in a year and the site only uses Renewable Energy Target liable electricity, however the site also carries out non-EITE activities, then the liable electricity through meter 9 less the electricity through internal meter 10 determines the amount of liable electricity used to undertake the EITE activity, the exemption for the EITE activity is:

[Renewable Energy Target liable electricity imported through meter 9] –

[Internal electricity through meter 10 measuring non-EITE activities]

= 945,005 – 895,018 MWh / year

= 49,987 MWh exemption for 2018

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Notes

1. The maximum exemption is the amount of Renewable Energy Target liable electricity that is supplied to the site less the amount of liable electricity the site provides to a non-EITE activity.

2. The accuracy is only determined by the accuracy of meter 10. If meter 10’s accuracy is 1% the accuracy of the exemption being 8950 MWh, which is 18% of the exemption - This does not meet the accuracy requirements specified.

3. If the accuracy of your exemption is higher than the 5% or 5000 MWh accuracy requirement specified above then please contact the agency to discuss.

The methods outlined above can be used in combination. If any applicant believes that a combination of the methods will not allow a reasonable estimate of the amount of exemption for the EITE production at their site please contact the agency. There may be more complex descriptions of the exemption, but the agency is aiming to decrease complexity where possible to provide a determination of exemption within an accuracy of plus or minus 5% or lower, and plus or minus 5000 MWh or lower with a confidence interval of 95%. Correctly reported accuracy includes the associated confidence interval, with a default confidence interval of 95% most commonly used.

The accuracy in the examples below are all determined using a default confidence interval of 95% This means a site with an exemption of 2000 MWh needs to determine its exemption to an accuracy of plus or minus 100 MWh or less. For facilities with an exemption of more than 100,000 MWh the accuracy required is plus or minus 5000 MWh or less. If the accuracy of exemption is higher than either of the two the limits above then contact the agency to discuss ways of accounting for or improving the accuracy of the exemption. Example 7 below shows a situation where both the percentage and absolute accuracy is above the requirements above.

When determining accuracy the billing meters do not need to be considered and are in effect absolutely accurate. This means that when considering the accuracy of exemption the accuracy of billing meters that determine liable electricity use by a site do not need to be considered. An example of determining accuracy from one meter and a large number of smaller meters is below.

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Example

Determining the accuracy of a site that uses 1 million MWh of liable electricity with internal meters used to determine that 100,000 MWh of electricity is for non-EITE activitities. If one meter is used that is 2% accurate the accuracy of the exemption is 2000 MWh which is less than the 5000 MWh specified above, and 0.2% which is less than the 5% specified above.

If instead of using a single meter, 700 meters are used that measure up to 1000 MWh each and are 4% accurate. These meters measure electricity that is either added or subtracted to determine the final exemption. The accuracy overall is approximately 1100 MWh, again less than the 5000 MWh specified above. This represents a conservative estimate as the error for each meter, 40 MWh, is likely to be much lower. The improved accuracy is because with many meters the errors counteract each other.

Determining errors from many sources that are added or subtracted to determine the result is determined by the square root of the sum of the squares of the absolute errors. In the case of the 700 meters specified above the accuracy is determined below.

𝑎𝑎𝑎𝑎𝑎𝑎𝑚𝑚𝑓𝑓𝑎𝑎𝑎𝑎𝑎𝑎 = �𝑒𝑒𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓12 + 𝑒𝑒𝑓𝑓𝑓𝑓𝑓𝑓𝑓𝑓22 …

𝑎𝑎𝑎𝑎𝑎𝑎𝑚𝑚𝑓𝑓𝑎𝑎𝑎𝑎𝑎𝑎 = �700 × (402) = √1 120 000 = 1058 MWh

Similar to the single meter used above the the accuracy of the exemption when 700 meters determines the excluded amount is 1058 MWh which is less than the 5000 MWh specified above, and 0.1% which is less than the 5% specified above.

The accuracy of individual meters has not at this stage been specified, but higher accuracy is required for meters than total exemption. An option is to use specifications in NGER legislation or that used for other parts of the Renewable Energy Target . Guidance for meters for Renewable Energy Target large scale generation are included in Chapter 7 in the National Electricity Rules and is summarised in the table below (web link: http://www.aemc.gov.au/energy-rules/national-electricity-rules/current-rules).

Type Volume limit per annum per connection point

Maximum allowable overall error (+%) at full load (Item 7)

active reaction

Minimum acceptable class or standard of components

Meter installation clock error (seconds) in reference to EST

1 Greater than 1000 GWh

0.5 1.0 0.2CT/VT/meter Wh

0.5 meter varh

±5

2 100 to 1000 GWh

1.0 2.0 0.5CT/VT/meter Wh

1 meter varh

±7

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3 0.75 to less than 100 GWh

1.5 3.0 0.5CT/VT

1 meter Wh

2.0 meter varh

±10

4 Less than 750 MWh (item 2)

1.5 n/a Either 0.5 CT or 1.0 meter Wh; or whole current general purpose meter Wh:

• Meets requirements of clause 7.3.1 (a)(10); and

±20

(Item 2a)

For the second and ongoing years using the electricity use method, the amount of exemption in the following year can be adjusted to account for over or under exemption (regulation 22ZHC(2)). Reasons for this could be adjustment of AEMO data up to 30 weeks after it was released or adjustment of other parameters that changed significantly where this was determined more than a month after the end of the exemption year. It is expected that this will not occur for most facilities.

For all descriptions of exemption at a site the maximum exemption is the amount of liable electricity that is supplied to the site less the amount of liable electricity the site provides to a separate site.

Part 10: Audit report

An exemption certificate application must be accompanied by an audit report for the first year that the electricity use method is used and where the expected amount of exemption under that method (that is the amount of electricity to be used in undertaking the EITE activities) is likely to be greater than 15,000 MWh.

The agency may request sites with an expected exemption of less than 15,000 MWh at the site to provide an audit report. This generally occurs if the agency is satisfied that the method for working out the amount of a liable entity’s exemption for the year in relation to the site is likely to be materially different from the method used to work out the amount of a liable entity’s exemption in relation to the site for the previous year. If such a request is made, an application for a year must be accompanied by an audit report.

An audit report must also accompany an application for exemption under the electricity use method every every three years unless otherwise requested by the agency. Following the first year under the electricity use method an audit report will be required every third year when the exemption amount is likely to exceed 15,000 MWh unless otherwise requested by the agency under regulations 22UG(3) and (4). For example, if an application is made for an exemption in 2018 where the electricity use method is to apply, an audit report would be required to be included with the application and another audit report would be required to be provided with an application for exemption for the 2021 calendar year.

The agency will inform EITE entities in time for them to engage an auditor and have the audit report completed before the application due date. In most circumstances the agency will let applicants know of their audit requirements by 31 October the previous year.

The audit report must comply with the requirements set out in regulation 22UH, which outlines who may prepare an audit report and the information that an audit report would be required to verify in relation to an application where the electricity use method is to apply.

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For more information on what is required in the audit report see the Audit determination handbook11 on the Clean Energy Regulator website.

Exemption certificate application processing times

Processing times for exemption certificate applications are outlined in regulation 22ZL.

Exemption certificate application forms for 2019 will be made available on 1 August 2018. All applicants must lodge 2019 exemption certificate applications to the agency by no later than midnight Australian Eastern Standard Time (AEST) on Monday, 1 April 2019. Please note that this deadline is not 30 March 2019 because 30 March 2019 is on a weekend.

Under the legislation exemption certificate applications cannot be submitted after the due date.

The agency must issue an exemption certificate within 60 days after receipt of the exemption certificate application. If the agency requests further information, then the agency must issue an exemption certificate within 60 days of receipt of the further information.

Information contained in the exemption certificate

Once the exemption certificate is approved by the agency, the EITE applicant will be issued a letter that details a single exemption certificate covering all EITE activities at the site. The EITE applicant will also be provided separate letters for each liable entity for each site.

Under regulation 22ZJ the following information will be contained in each exemption certificate:

• unique exemption certificate identification number as determined by the agency

• name of the prescribed person

• name of the liable entity to whom the exemption certificate relates

• site and EITE activity or activities to which the exemption certificate relates

• year of the exemption certificate (this guidance relates to the 2019 exemption certificate year)

• date the exemption certificate is issued

• description of the exemption amount through the exemption determination(described below), and

• details of amendments made to the exemption certificate (if any).

11 http://www.cleanenergyregulator.gov.au/NGER/For-auditors/Requirements-and-responsibilities

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Determining exemption amount

Also provided with each letter will be a tool – ‘Exemption determination details’. The EITE entity or liable entity may use this to determine the amount of exemption at any point during the exemption year and estimate the exemption for the remainder of the exemption year.

The workbook will include an exemption determination (formula and a schematic description) as defined by the agency, calculation for the exemption (for the site and by EITE activity), production details, and meter identifiers. The EITE entity will need to insert meter readings and other components (if applicable) to determine an estimate of the exemption amount.

Providing information to the Clean Energy Regulator during 2019

The agency will be monitoring the exemption for EITE entities using the electricity use method throughout 2019. If your exemption determination has components other than retailer meters (with NMIs), then the agency requests that the EITE entity provides this information for the period 1 January to 30 June 2019 by 31 July 2019.

To determine the 2019 exemption amount, the EITE entity must provide the meter readings for the internal meters for the period 1 January 2019 to 31 December 2019 by early January 2020. Please contact the agency if you would like to consider providing internal metering data late in 2019.

Please insert all requested information into the ‘Exemption determination details’ excel workbook and email it as an attachment to [email protected].

Notice of exemption

The agency will provide the EITE entity with written notice of the exemption amount (certifiable amount) in January 2020 (regulation 22ZHD of the Regulations). If the exemption certificate has been traded, it is the EITE entity’s responsibility to provide the written notice to the liable entity. The EITE entity may at the time of application or during the year authorise the agency to provide the exemption amount to the liable entity when it is issued.

The written notice will allow the liable entity to use the exemption details in their 2019 electricity acquisition statement to claim a reduction in their relevant acquisitions for 2019.

Amending an exemption certificate

The agency may amend an exemption certificate upon request in writing by the prescribed person or on its own initiative under section 46C of the Act. In doing so, the agency may have regard to matters prescribed under regulation 22ZN of the Regulations, and any other matter it considers relevant.

There is a change of liable entity (regulation 22ZPA)

A prescribed person who has been issued with an exemption certificate may apply for another exemption certificate under regulation 22LA if the liable entity for the site changes during the 2019 year.

If this occurs, then the agency will:

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• issue the prescribed person with a second exemption certificate that provides an exemption determination in relation to the second liable entity. This exemption certificate will cover the period that the second liable entity is providing electricity to the site, and

• only apply the first exemption certificate for the period in which the first liable entity was providing electricity to the site.

Furthermore, if the liable entity for the site changes again during the 2019 year, the prescribed person 2019 apply for a third exemption certificate in relation to the third liable entity (on or before 31 December 2019).

Note: Applications for the 2019 year must be made on or before 31 December 2019.

There are multiple liable entities (regulation 22ZQA)

A prescribed person issued with an exemption certificate may apply for new or replacement exemption certificates under regulation 22MA if a new liable entity provides electricity to the site. This maybe instead of or in addition to the initieslalliable entities (provided in the initial application).

As a result the agency will:

• issue the prescribed person with a second exemption certificate that provides an exemption determination in relation to the second liable entity. This exemption certificate will cover the period that the second liable entity is providing electricity to the site, and

• then amend the first exemption certificate to take account of the issuing of the additional certificate.

Note: Applications for the 2019 year must be made on or before 31 December 2019.

The EITE activity ceases at the site (regulation 22ZR)

An exemption certificate may be amended if during the 2019 year the agency becomes satisfied that the EITE activity has ceased at the site. The amendment must take account of the cessation of the activity at the site.

The exemption certificate is inaccurate (regulation 22ZS)

An exemption certificate may be amended if during the 2019 year the agency becomes aware that the exemption certificate is inaccurate. Without limiting the circumstances, a certificate is taken to be inaccurate if there has been any change in relation to information that formed part of the electricity use method advice (see paragraph 22O(1)(i)) or any other matter that affected a decision of the Regulation in relation to the certificate under regulation 22ZHB.

Transfer of exemption certificate to liable entity

The agency will provide the prescribed person with written notice of the exemption amount (in MWh) in January 2020. If the exemption certificate has been traded, it is the EITE entity’s responsibility to provide the

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written notice to the liable entity. This will allow the liable entity to use the exemption details in their 2019 electricity acquisition statement to claim a reduction in their relevant acquisitions for 2019.

The transfer of an exemption certificate is a matter between the EITE entity and the liable entity, and the agency does not have any role in overseeing this transaction. You should discuss timelines and other aspects of the negotiation with the liable entity.

Note: Only the named liable entity can use the exemption certificate for exemption from liability.

How an exemption certificate reduces a liable entity’s Large-scale Renewable Energy Target (LRET) and Small-scale Renewable Energy Scheme (SRES) liability

A liable entity must submit their exemption certificate with their Energy Acquisition Statement (EAS) for the applicable year (the EAS for a year is due by 14 February of the following year) to reduce their relevant acquisitions for the year by the amount stated on the exemption certificate.

The amount of exemption provided by a single exemption certificate can be used to reduce both the Large-scale Renewable Energy Target (LRET) and Small-scale Renewable Energy Scheme (SRES) liabilities of the named liable entity.

LRET liability = [total relevant acquisitions (MWh) - exemption (MWh)] x RPP

• LRET liability is effectively reduced by [exemption (MWh) x RPP]

SRES liability = [total relevant acquisitions (MWh) - exemption (MWh)] x STP

• SRES liability is effectively reduced by [exemption (MWh) x STP]

Where:

RPP = renewable power percentage

STP = small-scale technology percentage

The renewable power percentage is generally specified in the Regulations before 31 March each year.

If the renewable power percentage is not specified for a year by 31 March, a default formula will apply as set out in section 39 of the Renewable Energy (Electricity) Act 2000.

More information on the RPP and STP is available on the Clean Energy Regulator’s website.12

12 http://www.cleanenergyregulator.gov.au/RET/About-the-Renewable-Energy-Target/The-certificate-market/The-renewable-power-percentage http://www.cleanenergyregulator.gov.au/RET/Scheme-participants-and-industry/the-small-scale-technology-percentage

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Example: In the 2019 year, if the RPP is 17 per cent and if the STP is 10 per cent, and a Renewable Energy Target liable entity has total relevant acquisitions of 100,000 MWh and an exemption certificate which provides 20,000 MWh of exemption.

Renewable Energy Target liability without the exemption certificate

LRET = 100,000 MWh x 17% = 17,000 LGCs

SRES = 100, 000 MWh x 10% = 10,000 STCs

Liability with the exemption certificate

LRET = [100,000 - 20,000] MWh x 17% = 13,600 LGCs

SRES = [100,000 - 20,000] MWh x 10% = 8000 STCs

The exemption certificate reduces liability by

20,000 MWh x 17% = 3400 LGCs

20,000 MWh x 10% = 2000 STCs

These examples provide a guide only. Liable entities are required to surrender Small-scale Technology Certificates on a quarterly basis and the calculations determining quarterly surrender requirements are complex. For more information about determining liability under SRES13 visit the Clean Energy Regulator website.

Auditing and compliance

The agency may audit the information provided in the exemption certificate application (including relevant product data, details relating to the conduct of the EITE activity, and liable/non-liable electricity consumption).

The Act provides the agency with the authority to search premises and seek information to assess compliance with the Act.

Possible outcomes of an audit may include amendments to the exemption certificate or penalties under the Act.

Protected information

The agency is bound by the secrecy provisions of Part 3 of the Clean Energy Regulator Act 2011 (Clean Energy Act) for the information it collects in relation to this application and also by the Privacy Act 1988 in regard to personal information it collects.

Publication of exemption certificate information

Under section 38C of the Act, the agency is required to publish the following information in relation to exemptions:

13 http://www.cleanenergyregulator.gov.au/RET/Scheme-participants-and-industry/Renewable-Energy-Target-liable-entities/Calculating-certificate-liability

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• the name of each person to whom an exemption certificate is issued and the EITE activity set out in the exemption certificate (must be published within 14 days after the exemption certificate is issued)14

• the name of each liable entity that receives an exemption for a year, the estimated value in dollars of the amount of exemption, and the name of each of the EITE activities set out in the exemption certificates to which the exemption relates (must be published by 1 October in the following year to which the exemptions relate)15, and

• the total amount of exemptions given for each EITE activity for a year (must be published by 30 March in the year after the year to which the exemptions relate)16.

Contact us If you require assistance or have any questions regarding this application process, please contact the agency’s general enquiries line on 1300 553 542 or email: [email protected]

14 http://www.cleanenergyregulator.gov.au/RET/Scheme-participants-and-industry/Industry-assistance/Industry-assistance-published-information/Issued-partial-exemption-certificates 15 http://www.cleanenergyregulator.gov.au/RET/Scheme-participants-and-industry/Industry-assistance/Industry-assistance-published-information/Reported-exemptions 16 http://www.cleanenergyregulator.gov.au/RET/Scheme-participants-and-industry/Industry-assistance/Industry-assistance-published-information/Reported-exemptions