Frith Resource Management (FRM) has been following the recent publications from Defra on updated guidance on the methodology and procedure for calculating Year 1 (2025 to 2026) – Methodology and procedure for calculating Year 1 (2025 to 2026) payments - GOV.UK together with very similar guidance on the methodology and procedure for calculating Year 2 (2026 to 2027) payments – Methodology and procedure for calculating 2026 to 2027 (year 2) payments - GOV.UK

PackUK is the official UK-wide scheme administrator for pEPR to manage household collected packaging waste, shifting recycling costs from taxpayers to producers by collecting fees from businesses and distributing funds to local authorities.

pEPR started with Producer Payment Schedule invoices for the 2025/26 financial year (based on 2024 data) being sent to obligated producers in October 2025 with 50 day payment terms. Producers could pay the year in full or opt to pay in four quarterly instalments. Incoming payments by producers are to be finalised by June 2026.

For the first year (2025/26), producers were to pay a flat base fee per tonne of material, which is adjusted in 2026/27 to account for the recyclability of the packaging.

Under the pEPR Regulations (The Producer Responsibility Obligations (Packaging and Packaging Waste) Regulations 2024) PackUK must assess local authority pEPR payments for 2025 to 2026, including:

1. Efficient disposal costs in total and for each packaging category - including all expenses relating to the proper disposal, recycling, or treatment of waste.
2. Waste income from the expected sale of household packaging waste for each packaging category.
3. Net efficient disposal costs for each packaging category - this is calculated by considering the efficient disposal costs minus the expected income from the sale of household packaging waste.
4. Chargeable disposal costs - for the 2025 to 2026 assessment year, this will be the total net efficient disposal costs for all packaging categories.

Under pERP Regulation 70(6), “efficient disposal costs” are disposal costs that an authority would incur providing an efficient waste management service. Efficient disposal costs include: costs incurred for the collection (from kerbside, communal collections, bring sites and household waste recycling centres (HWRCs) where relevant); and costs incurred for the handling, sorting, treatment, and disposal of household packaging waste net of relevant income, including administration and communication costs.

Costs incurred by local authorities in the management of household packaging waste have been assessed using the Defra LAPCAP model which calculates the net efficient waste management costs of managing household packaging waste for each individual local authority. The LAPCAP model considers for each relevant area:

• frequency, pattern and type of collections of household packaging waste
• population density
• type and accessibility of dwellings
• levels of deprivation

Currently LAPCAP does not include costs associated with business waste, street bin waste or litter, which are currently out of scope, in accordance with the regulations.

Payments are to cover the cost of the packaging element of the waste stream for eight high-level packaging material types: glass, aluminium; steel, paper and card, plastic, wood, fibre-based composite, and other materials. Textiles are not currently included. Drinks containers made from polyethylene terephthalate (PET), steel, or aluminium between 150ml to 3l in size are excluded from pEPR until 2028. They will be in scope from 2028 only if the Deposit Return Scheme (DRS) is not in place by then. Any packaging collected in the food and garden waste streams are also excluded. 

The net disposal costs calculated in the LAPCAP model:

• include transfer station and vehicle costs
• exclude costs related to ‘Tipping away payments’
• includes Recycling Credits paid by WDAs to WCAs, although the WCA cannot claim the cost of recycling that material as part of its own disposal costs
• account for WDAs with Private Finance Initiative (PFI) contracts
• calculate any LA FlexCollect Scheme payments for flexible plastics trials
• have a supplementary calculation for the Welsh only statutory recycling target.

The Defra guidance on pEPR payment groups local authorities based on:

• Geographic factors: Rural vs. urban, which affect collection efficiency.
• Collection Systems: Frequency of collection and type of recycling system (e.g., source-separated vs. mixed dry recycling), and
• Contractual data The model uses benchmarked costs rather than the actual contractual prices of individual authorities, which has raised concerns about underpayment for some LAs

Frith Resource Management can support local authorities with the inclusion of pEPR in waste flow and cost models to assess the most effective waste collection and treatment methodologies. We can assess the shortfall between PackUK pEPR payments and the actual waste management costs, and advise on methods to streamline the services and reduce shortfalls. Email: info@frithrm.com or tel. 01746 552423