Energy Performance Certificate reform – lodgement fees and penalty charges: technical consultation - partial BRIA

Section 3: Costs, impacts and benefits

Quantified costs to businesses

This consultation will allow us to further understand costs to businesses – as such, this section of the BRIA is still under development and final impacts cannot be quantified at this stage (however, these will be reflected within the final BRIA).

Costs from increase in lodgement fees

There will be no change to the process for the charging and collection of fees. We, therefore, do not envisage any additional administrative burden. The main cost impact will be through the increase in the lodgement fee itself.

As noted throughout this BRIA, the AOs and EPC assessment businesses would be impacted by an increase to the EPC lodgement fee. However, it is likely that these costs would be reflected in the overall cost of an EPC, meaning consumers are likely to face higher costs to secure an EPC for their property.

In the technical consultation, we propose that lodgement fees for domestic and non-domestic EPCs rise by the same amount, to ensure fairness across all EPCs lodged, in covering the additional costs of the new system. When these fees are taken into account, Domestic EPC consumers including homeowners and landlords, will likely see an increase in the up-front cost of an EPC. While the increase is greater than inflation, this increase will be a small percentage of the total cost of an EPC, and it is not expected to significantly impact domestic EPC consumers. For non-domestic consumers, as set out within the consultation document, the proposed increase to EPC fees would be lower than any increase in line with inflation since 2017.

Costs for AOs and assessors from interacting with independent Audit & Inspection function

We will ensure that the introduction of this new function will be streamlined as much as possible to limit any additional administrative burdens on AOs and assessors. Proposals are still being developed, and feedback received from this consultation will help to ensure that these are deliverable and fit-for-purpose.

Scottish firms' international competitiveness

We do not believe that these proposals will impact on the ability of Scottish businesses to compete internationally. EPCs are a legal requirement across the EU, and energy performance ratings for buildings are also required in other nations such as Australia, Canada, the United States of America, and South Africa – therefore, Scottish firms seeking to operate in other markets could face similar legal requirements.

Benefits to business

Improving quality assurance will benefit businesses (including commercial/ non-domestic building owners) by driving up standards across the industry.

It is envisaged that AOs will benefit through greater industry oversight (as the on-site audit will provide feedback to AOs and assessors, where required, to help with any further additional training needs, etc.) and will help to reduce reputational risks to the EPC assessment industry.

By the Scottish Government taking on the responsibility of delivering an on-site audit regime, the AOs themselves will avoid any direct costs in staff recruitment, supporting infrastructure, etc. to achieve this.

The Scottish Government sees energy assessment as being a long-term market (given there are already circa 200,000 EPCs produced per year) and, arguably, it is a growing market (should any proposed minimum standards around clean heat and / or energy efficiency be introduced in future, following the Scottish Government's consideration of its response to the consultation on a Heat in Buildings Bill^[11]).

Small business impacts

Due to data constraints we are unable to provide employment numbers for the entire EPC assessment company employment stock.

Existing data for domestic EPCs between November 2023 and October 2024^[12] indicates that the vast majority of EPC assessor companies would be considered micro businesses, and none would be considered a large company.

Through our ERG, we have ensured members of Scotland's EPC assessment industry (both domestic and non-domestic) are represented. The ERG will continue to meet throughout 2025 (and beyond) to ensure that the Scottish Government has a formal means to discuss and gain views of our proposals directly from organisations representing EPC assessors themselves.

It is also our intention to engage directly with businesses as part of the development of the final BRIA. Throughout 2025, Scottish Government officials will engage directly with businesses of all sizes (including micro and small businesses) to help us assess the impacts of our proposals on businesses who operate in Scotland's energy assessment market.

Investment

It is not envisaged that the proposal set out will have an effect on global investment as the lodgement fees will be used to fund the costs associated with providing an EPC Register, Calculation Methodology and Audit & Inspection function. The intended outcomes of this proposal will ensure that EPC's remain accurate and deliver best value for any public expenditure associated with the discharge of regulatory functions.

Workforce and Fair Work

We do not believe that these proposals will impact on Fair Work First principles.

Climate change/ Circular Economy

EPCs must be provided when a building is sold or let to a new tenant. They have formed part of the domestic Home Report since 2008, and help current and prospective tenants or owners to make informed choices when moving or considering improvements to their buildings.

The Scottish Government committed to reforming EPCs in light of longstanding feedback that they are not fit for purpose in providing property owners, tenants, or purchasers with relevant information on meeting net zero requirements for heating and energy efficiency.

The proposals for EPC Reform set out within this partial BRIA are part of wider-plans to support decarbonisation of heat in buildings and to ensure EPCs have a continued role as a vital tool to help our buildings reach net zero: helping to ensure more accurate and comprehensive energy efficiency assessments, thereby enabling targeted improvements to - ultimately - reduce energy consumption and carbon emissions.

Competition Assessment

We do not envisage the proposals contained within this document to limit the number or range of suppliers. The proposals should not affect the number of assessors or AOs, or their ability to carry out EPC assessments. We are not proposing any changes to the points at which an EPC is required under the Regulations.

The lodgement fee increase will be applied equally to all EPC assessments – therefore, not causing any market distortion or limiting the ability of suppliers to compete.

We do not envisage the proposals to limit suppliers' incentives to compete. AO handling and membership fees for assessors already vary between AOs, while EPC lodgement fees are applied equally (which we also envisage will likely be passed onto consumers, and reflected within the overall EPC cost).

Consumers will still have the ability to engage with the market and make their own choices with regards to who they wish to carry out any EPC assessment.

Finally, we do not envisage these proposals impacting any suppliers' ability and/ or incentive to introduce new technologies, products, or business models.

Consumer Duty

This consultation sets out the future level of EPC lodgement fees which we believe will be needed to pay for the costs of providing the following services to the users of the reformed EPC regulatory system:

• New Register of Certificates;
• New and updated Calculation Methodologies for generating domestic and non-domestic Certificates, respectively; and
• New on-site Audit & Inspection of Certificates to ensure reliability and accuracy of assessors' work, and to drive up the quality of assessments for consumers.

These three regulatory functions are those which most directly benefit users of EPCs: by enabling the energy performance of their property to be calculated, certified, registered and verified as part of the normal functioning of the property market when their properties are advertised for sale or for lease.

The impact on consumers would, likely, be an increase to the overall cost of an EPC – however, this will still represent a small overall % of the total EPC cost (<10%).

However, as noted within the accompanying consultation document, we expect that the strengthened audit arrangements will enhance quality assurance for all consumers: ensuring they have accurate, reliable information to base decisions on.

We do not envisage any harm to either domestic or non-domestic consumers as a result of these proposals. If fees had risen by the rate of inflation since 2017, they would already have risen to £3.38 and £15.71, respectively. The proposed lodgement fee increase detailed within this consultation, therefore, represents a small increase when taking this wider context into account.

The other options considered within this BRIA would not bring improvement to EPCs or the underpinning support infrastructure.

The proposal will help to protect consumers and avoid harm or consumer detriment – therefore, we expect it to have a positive impact on consumers. The only negative impact would be a projected small increase to the overall EPC cost. However, when taking into account the average cost of an EPC (£80-100), this represents a small proportion of the overall cost. Furthermore, these proposals would result in the Scottish Government keeping more in-step with other EU countries, and could be considered worthwhile if this results in better quality EPCs for consumers.