This article first appeared in 24housing on 1 June 2015.
Social housing providers may need to act on the new Heat Regulations. Winckworth Sherwood’s Colin Hall and Niall Carey explain.
Social housing providers managing existing or developing new buildings of any type will need to ask themselves two questions well before the end of this year:
- Are any of those buildings heated, cooled or supplied with hot water from a central internal or off-site boiler or chiller?
- If so, is it caught by The Heat Network (Metering and Billing) Regulations 2014?
If the answer to these two questions is yes, you could be what the regulations call the ‘Heat Supplier’. Heat Suppliers have four new duties:
- To tell the National Measurement and Regulation Office that your central system exists and to provide them with technical details so that they can build a map.
- Consider putting in meters to measure the heat consumption.
- To maintain meters so that they remain accurate and always in operation.
- To use the meters to provide customers with detailed information on the heat bills.
For new developments, the first duty has to be performed before the heating system first operates; and for an existing building by the end of this year (2015). This will be for many social housing providers a significant and time-consuming information gathering exercise, particularly affecting asset managers of existing buildings where records may be spread around and information needing to be gathered from scratch. For example, the installed heating capacity, heat generated and heat supplied might have to be measured by professionals if the system is old and unrecorded.
What buildings are caught by the new regulations?
A building is probably is caught by the Heat Regulations if it receives its heat from a boiler shared with other buildings, known as a district heat network, or if the building has its own boiler which serves more than one customer. This covers a very wide range of possibilities such as:
- Residential/commercial and mixed use developments
- Existing blocks of flats
- Flat conversions and bedsits (with a central boiler)
- Leisure centres (with concession holders)
- Supermarkets (with concession holders)
- Shopping centres
- Office buildings with more than one tenant
- Some university campuses
Are meters needed in all buildings?
The question of when to put in the meters depends on the type of building. New buildings must have them installed from the start. For existing buildings, there is time to consider whether it is feasible to install them. There are various rules and exceptions, but if the building is caught, the meters must be installed by 31 December 2016. Feasibility depends on two questions – would meters be cost effective, and are they technically feasible? These require specialist guidance because they depend on the use of the building and its fabric. Once the meters are installed, the duties kick in to maintain their accuracy and issue bills fully loaded with the required information. If meters are not feasible, you have to consider whether “heat cost allocators” would be a feasible alternative.
Who is responsible?
The “Heat Supplier” must perform these new duties – that is the person who sells the heat (or cooling) to a ‘final customer’ – or the person who actually consumes the heat. The Regulations do not alter the terms of an existing lease or any of the existing service charge legislation for residential tenants. Therefore, landlords will want to consider carefully their duty to consult, their ability to gain access for works and whether they can recover the costs of complying with the Regulations from their tenants. So what action should you take if you think you have a district heat network or a community heating scheme? The starting point is to look at the heat supply contracts to decide if you are the Heat Supplier. On a big residential development the management company may fulfil that role, unless they have outsourced it all to an energy services company. Either way, the developer will want to make sure that somebody has agreed to perform the duties for them. In a smaller entity, such as a small block, residential conversion, or bed-sits the landlord itself may have the role, in which case they need to make sure they know who is performing the duties. Enforcement of the new duties is by an escalating regime that includes a formal Compliance Notice, possible compensation to tenants, civil penalties and criminal sanctions as well as publication of offenders’ names.