Most waste treatment PFI/PPP projects involve the recovery of energy from waste, thereby contributing to national targets for increasing the supply of renewable energy. The market price for energy can vary significantly over time not least because it is a heavily regulated sector affected by numerous fiscal incentives, taxes and levies which may change from time to time. To ensure such variations result in gains relative to the base case expectations most PFI/PPP contracts are priced on the basis of relatively prudent forecasts of income from the sale of energy and include arrangements for sharing any upside between the Contractor and the Authority.
As set out in section 4.6.1 above the WIDP Contract (Schedule 4) refers to the WIDP Guidance on the Payment Mechanism41 which sets out drafting that would give the Authority a share of upside in relation to electricity and the revenues.
The Contract Management Manual should provide a clear reference to the relevant parts of the Contract and set out procedures for confirming that the Authority is receiving the benefit of any shares to which it is entitled. The upside calculation should include the impact of any relevant changes to or new measures to encourage renewable energy, such as Renewable Obligations Certificates (ROCs) and the Renewable Heat Incentive (RHI). If the Contract does not include any such explicit sharing arrangements the Contract Manager should consider whether the Change in Law provisions in the Contract give the Authority a right to claim the benefit of legislative changes that have a positive impact on the Contractor cashflows.
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41 This guidance is available online at http://www.defra.gov.uk/environment/waste/local-authorities/widp/widp-procurement-pack/