UK: If You Can’t Stand the Heat…

Are you a developer or landlord of commercial or residential multi-let premises?

Are those premises supplied with heat by either a communal heating system or a district heating system?

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If the answer to these questions is 'yes' then you already need to be complying with parts of the Heat Network (Metering and Billing) Regulations 2014 and may have work to do for future compliance.

What are the Heat Network (Metering and Billing) Regulations 2014 (the 'Regulations')?

The aim of the Regulations is to give consumers better control over the heat they consume and seek to identify heating systems which are inefficient. The Regulations apply to 'heat suppliers' of commercial and residential premises. This means that they will affect developers and landlords who are responsible for building, supplying and running communal heating networks.

Are you a 'heat supplier'?

A 'heat supplier' is defined as 'a person who supplies and charges for the supply of heating, cooling or hot water to a final customer through communal heating or a district heat network'. This heat supplier could therefore be a developer or a landlord and could include something as simple as a multi-let building with a central boiler providing hot water to taps or radiators for the building occupiers.

What do I need to do?

The Regulations impose the duties to bill on the basis of consumption, fit meters to measure that consumption and before 30 April 2015 to register as a 'heat supplier'. Here are the detailed obligations on the heat suppliers –

  1. From 18 December 2014 – in relation to district heat networks:
  2. fit building level meters on multi-occupancy buildings (where more than one final customer is charged for the heat supplied);
  3. install meters in any newly constructed building or during a major renovation of a building
  4. From 31 December 2014 – ensure all billing information is accurate and based on actual consumption, with a customer receiving a bill at least once a year (and potentially quarterly). The bill must also include specified information as set out in the Regulations (eg information on how the bill was calculated, the customer's final energy consumption, current energy charges, contact information etc). There is no guidance on how this regulation will interact with existing leases. Often the costs of the 'communal heating networks' will currently be part of the service charge and the apportionment of the costs may not be based exactly on the tenant's consumption. We might hope that the Government would address this in the amendment regulations but they do not have a track record of making environmental regulations work with the usual landlord/tenant relationships and CRC is an obvious example of that.
  5. Before 30 April 2015 (and at least every 4 years thereafter) – notify the National Measurement Office ('NMO' – on behalf of the Secretary of State) of the operation of a communal heating or a district heating network. The notification must include specified information such as the location, number and type of buildings and meters supplied, the number of customers, heating capacity and name and address of the 'heat supplier'. Also required is an estimate of the annual total of installed heating capacity, heat generated and heat supplied. The government encourages the notification to be done by email and using the Notifications Template which is on this government website

NB: any new system completed after 30 April 2015 must comply with this notification procedure before it commences operation.

  1. Before 31 December 2016 – install (if cost effective and technically feasible):
  2. individual meters in buildings where there is more than one final customer and the building is supplied by a communal heating system, to measure consumption by each final customer (this extends to all existing and new communal heating systems); or
  3. heat cost allocators and thermostatic valves on each radiator in order to calculate and allow each final customer to control its consumption. Hot water meters must also be installed.

There are detailed guidelines set out in the Regulations to determine whether installation of the meters or valves is cost effective and technically feasible. In a nutshell, the cost effectiveness of the installation is assessed by considering the net present value ('NPV') of the projected energy savings over the 10 year period post installation of the meters against the NPV of the estimated reasonable costs of installation. If the NPV for the energy savings is greater than the NPV for the installation costs then the proposed works are cost effective. Any feasibility study must be completed by 31 December 2016 and then repeated at least once every four years.

What is Excluded?

The Regulations do not apply to air conditioning systems. The catch only the provision of steam, hot water or chilled liquids. There are also excluded premises such as hotel rooms, nursing homes, hostels and industrial sites where heat is generated and distributed within the site as part of the industrial process.

What If I Don't Comply?

Compliance with the Regulations is mandatory. There are powers of entry and civil and criminal sanctions for non-compliance. The Government has set 30 April 2015 as a commencement date for the introduction of criminal liability. Offences committed before this date will not be subject to criminal prosecution but may be subject to civil enforcement action.

What To Do Next?

  • Notify the NMO of the operation of a communal heating or a district heating network. If you don't have all of the information you need then we recommend registering and supplying all that you do have currently.
  • Go to https://www.gov.uk/heat-networks for the Government Guidance.
  • We recommend that you move to update any non-compliant bills and billing systems and see if you have any conflicts between the Regulations and what any existing leases specify.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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