Amendments to the Model Waste and Recycling Collection Contract

Amendments to the Model Waste and Recycling Collection Contract

Local Government Association of South Australia – Explanatory notes

Carbon Price Mechanism

Explanatory notes to amendments to the

LGA Model Waste and Recycling Collection Contract

The following clauses in paragraphs A-E (inclusive) are to be inserted into the Model Waste and Recycling Collection Contract. By way of explanation, the clauses operate as follows:

A – these amendments relate to the definition of the costs covered by the relevant clauses and the definition of relevant documents to be produced by the Contractor to the Council to justify the claim for carbon costs from time to time.

B – this clause ensures that the Clean Energy Act 2011 is incorporated within the list of relevant obligations covered by the Contract.

C – this clause requires the Contractor to maintain records which are required to satisfy the Council as to the amount of the carbon costs which will be claimed from time to time under the Contract.

D – this is the operative clause relating to the payment of carbon costs. The clause creates an obligation for Council to reimburse the Contractor for costs actually incurred in purchasing carbon units. Unless and until the carbon units have been purchased by the Contractor, there is no liability for the Council to make a payment on account of those costs.

The clause provides that the Contractor will make a claim for those costs spelling out in documentary form the information necessary to enable the Council to determine the accuracy of that claim. The information will be sufficient for the Council to determine the carbon intensity of the waste, the volume of the waste and the emissions from the waste that are to be paid for in that particular year. The information will also enable the Council to determine the price for the carbon units that the Contractor has paid. There is a positive obligation in clause 14.4 for the Contractor to secure the lowest cost emission units available on the market at the relevant time.

There is an obligation on the Council to pay the claim for carbon costs if it does not dispute the amount within 20 business days. Equally, if there is a dispute about any part of the claim then the dispute resolution procedure in clause 13 of the Agreement applies.

It is important to recognise that the emissions from the waste covered by the Agreement will continue to be generated beyond the term of the contract. A mechanism is required to account for those carbon costs that will be paid by the Contractor after the expiry of the Contract.

Clause 10.5 gives Council the option to make a lump sum payment to the Contractor at the end of the contract to cover all future liabilities associated with future emissions or alternatively continue to pay the Contractor as the emissions are generated. It is a commercial matter for the Council as to whether the Council wants to finalise all existing liabilities with the landfill operator with a lump sum payment or whether it wants to continue to pay for the emissions as they are generated. The clause provides that the Council needs to make that election prior to the termination of the agreement.

E – this clause requires the Contractor to secure the lowest cost emission permits so that the costs that are passed on to the Council to the mechanism of this clause is the lowest cost possible.

Carbon Cost Contractual Clause

1. To be inserted into clause 1.2.1 of the Model Waste and Recycling Collection Contract – Section C Conditions of Contract:

"Carbon Costs"means all costs incurred by the Contractor under the Clean Energy Act 2011 (Commonwealth) for the purchase of Emissions Units to acquit the Contractor's liability associated with the Waste.

"Claim for Carbon Costs"means an annual statement prepared by the Contractor, containing such information as the Contract Administrator may require, which sets out the Carbon Costs which are due and payable for the previous financial year.

"Emissions Units" means an Australian Government Carbon Unit, an Australian Carbon Credit Unit or an Eligible International Emissions Unit.

"Future Carbon Costs" means the cost required to compensate the Contractor for the ongoing liability under the Clean Energy Act 2011 (Commonwealth) associated with the Waste.

"Statement of Future Carbon Costs"means the statement prepared by the Contractor in the form described in clause 10.5.1.

B.To be inserted into clause 4:

4.1Contractor to comply with Statutory and Legal Obligations

(c)...including but not limited to the:

• Clean Energy Act 2011 (Commonwealth);

C. To be inserted as clause 4.4 after the existing clause 4.3:

4.4Contractor to Maintain Records of Carbon Costs

The Contractor must maintain:

(a)records of Carbon Costs it incurs from time to time in connection with the Waste;

(b)copies of all invoices for Emissions Units purchased to account for emissions for which the Contractor is liable under the Clean Energy Act 2011 (Commonwealth), in connection with the performance of the Services;

(c)records detailing the:

• composition and volume of the Waste;
• remaining life of the landfill that receives the Waste;
• price of Emissions Units at the time of purchase by the Contractor; and
• efficiency of gas collection systems at the landfill that receives the Waste.

D.To be inserted into clause 10 as sub-clauses 10.4 – 10.6 with the remaining sub-clauses to be renumbered accordingly:

10.4Payment of Carbon Costs

10.4.1Submission of Claims for Carbon Costs

(a)On or before the date nominated by the Contract Administrator for each year during the Contract Term, the Contractor shall deliver to the Council a Claim for Carbon Costs in respect of the previous financial year together with a copy of the records maintained by the Contractor under clause 4.4.

(b)The Claim for Carbon Costs must be supported by written evidence of the amount claimed by the Contractor, as shown in the records maintained by the Contractor under clause 4.4.

(c)The Council shall approve or dispute the Claim for Carbon Costs in writing to the Contractor within ten (10) Business Days of submission of the Claim for Carbon Costs.

(d)Where the Council disputes a Claim for Carbon Costs, the Council shall notify the Contractor in writing of its objection, setting out grounds for the dispute, within ten (10) Business Days of submission of the Claim for Carbon Costs by the Contractor.

(e)Upon receipt of written notification by the Council, the parties must resolve the dispute in accordance with the procedure set out at clause 13.

10.4.2Payment of Claims for Carbon Costs

The Council must:

(a)within twenty (20) Business Days of approval of the Claim for Carbon Costs, pay to the Contractor the amount set out in the Claim for Carbon Costs.

(b)within (20) Business Days of the resolution of any dispute in connection with a Claim for Carbon Costs, pay the Contractor the amount due and payable as determined in accordance with the procedures set out in clause 13.

10.5Option to Pay Future Carbon Costs

10.5.1Statement of Future Carbon Costs

(a)Within one year of expiry of the Contract Term or termination under clause 11, the Council may require the Contractor to deliver to the Council a Statement of Future Carbon Costs, which sets out the:

• quantity of Waste collected or to be collected by the Contractor until the date of expiry of the Contract or termination under clause 11.

• volume of projected emissions to be generated by the Waste after the expiry of the Contract or termination under clause 11.
• cost required to compensate the Contractor for the ongoing liability under the Clean Energy Act 2011 (Commonwealth) associated with the Waste after the expiry of the Contract or termination under clause 11 (Future Carbon Costs).

(b)The Contractor must deliver, with the Statement of Future Carbon Costs, a copy of the records maintained by the Contractor under clause 4.4 over the duration of the Contract Term.

(c)The Future Carbon Costs must be supported by written evidence, as shown in the records maintained by the Contractor under clause 4.4.

(d)The Council shall approve or dispute the Statement of Future Carbon Costs in writing to the Contractor within ten (10) Business Days of receipt of the Statement of Future Carbon Costs.

(e)Where the Council disputes theStatement of Future Carbon Costs, the Council shall notify the Contractor in writing, setting out grounds for the dispute, within ten (10) Business Days of delivery of the Statement of Future Carbon Costs by the Contractor.

(f)Upon receipt of written notification by the Council, the parties must resolve the dispute in accordance with the procedure set out at clause 13.

10.5.2Payment of Future Carbon Costs

(a)The Council must:

• within twenty (20) Business Days of approval of the Statement of Future Carbon Costs, pay to the Contractor the Future Carbon Costs.
• within (20) Business Days of the resolution of any dispute in connection with the Statement of Future Carbon Costs, pay the Contractor the Future Carbon Costs, as determined in accordance with the procedures set out in clause 13.

(b)This payment is a full and final payment by the Council for all Future Carbon Costs.

(c)In accepting payment of the Future Carbon Costs, the Contractor relinquishes any future claim for payment in connection with the Carbon Costs associated with the Waste.

10.6Survival of Clause 10.4

(a)Clause 10.4 shall survive termination or expiration of the Contract unless the Council exercises its right under clause 10.5.

(b)Clause 10.4 shall expire when the Contractor is no longer liable under the Clean Energy Act 2011 (Commonwealth) in respect of the Waste.

E.To be inserted into clause 14 which is to be renamed "TAX PAYMENTS AND CARBON COSTS":

14.4Payment of Carbon Costs

(a)The Contractor shall comply at all times with the requirements of the Clean Energy Act 2011.

(b)When purchasingEmissions Units to account for emissions produced in connection with the performance of the Services, the Contractor agrees to purchase Emissions Units with the lowest cost available on the market as at the date nominated by the Council.

DME 83338

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