Introduction

On July 7 2016 the minister of economic affairs published a draft bill amending the Heat Act (which entered into force on January 1 2014) for public consultation. The draft amendment bill was announced in response to a recent evaluation of the act, which revealed a number of bottlenecks resulting from its existing application. The consultation closed on August 17 2016 and the final amendment bill is expected to be presented to the House of Representatives at the end of 2016. This update provides an overview of the draft amendment bill's key points.

Heat Act

The premise of the Heat Act is that consumers are bound to their local heat supplier. In this respect, consumers cannot – for example – switch to a different supplier that supplies natural gas. In the absence of a viable alternative, consumers are put in a vulnerable position. In this context, the act aims to protect consumers by imposing regulations on heat suppliers – for example, a tariff regulation (for further details please see "New Heat Act is entered into Bulletin of Acts and Decrees").

Evaluation

In his April 2 2015 'Heat Vision' the minister announced an evaluation of the Heat Act (for further details please see "The heat is on: Heat Vision proposes open heat grids and third-party access"). In a February 17 2016 letter to the House of Representatives, the minister announced the results of the evaluation, which had exposed 23 bottlenecks – particularly regarding tariff protection and the act's scope – as well as a number of smaller issues, such as the act's definitions.

Draft amendment bill

Aim

The draft amendment bill aims to:

  • eliminate the bottlenecks caused by the Heat Act; and
  • align the collective heat supply regulations with future developments in the energy transition framework.

Tariff regulation

To protect bound consumers, the Heat Act regulates tariffs for the supply of heating, including:

  • the maximum price for the supply of heat;
  • the reasonable costs for a heat exchanger; and
  • the metering tariff.

The Netherlands Authority for Consumers and Markets determines the maximum price for the supply of heat (for further details please see "New Heat Act is entered into Bulletin of Acts and Decrees"). In order to further improve consumer protection, the draft amendment bill introduces the following regulated tariffs:

  • a connection tariff;
  • a disconnection tariff; and
  • a delivery tariff.

In addition, the draft amendment bill states that the supplier and consumer (under conditions) can enter into tailor-made price arrangements in respect of the maximum price.

The draft amendment bill also enables the establishment of a separate maximum price for different temperatures – for example, for the supply of cold water as an integral part of the supply of heat and for the supply of low-temperature heat.

Scope

The draft amendment bill exempts two categories of heat supplier from the scope of the Heat Act. The first exemption is for associations of owners or entities of an equivalent legal status (eg, a cooperative association). The second concerns suppliers (within the meaning of the Heat Act) that also act as a lessor for consumers, under the condition that the heat supply is a part of the lease agreement.

Further, the draft amendment bill amends the definition of 'consumer' to mean a person to whom heat is supplied through a heat network who:

  • has a power connection of no more than 100 kilowatts; or
  • has a power connection of more than 100 kilowatts and simultaneously:
    • acts as a lessor for a consumer who has a power connection of no more than 100 kilowatts; or
    • is an association of owners or an entity with equivalent legal status to which a consumer who has a power connection of no more than 100 kilowatts is connected.

Third-party access

The draft amendment bill contains opportunities for new producers to gain access to heat networks and introduces a model of so-called 'negotiated access'. Under the Heat Act, the operator of a heat network cannot enter into negotiations on network access with interested third parties. In order to strengthen the position of new producers, the draft amendment bill ensures that, at the request of a producer, the operator of the heat network provides basic network features, including:

  • available transport;
  • transport tariffs; and
  • technical characteristics.

In most instances, the heat supplier is also the heat network operator. The draft amendment bill does not provide for third-party access for suppliers. Therefore, consumers cannot choose from multiple suppliers.

Miscellaneous

Further, the draft amendment bill increases the opportunities for parties to conduct experiments that may lead to a more sustainable heat supply. In this respect, the minister can grant an exemption from the provisions of the Heat Act for experiments that:

  • are in the renewable energy field;
  • relate to energy conservation or will increase the efficient use of the network; or
  • will provide practical knowledge of market models.

The draft amendment bill also introduces a reporting obligation on the sustainability of delivered heat.

Further, the draft amendment bill introduces exemptions to the supplier obligation to pay compensation in case of an outage. Suppliers are not obliged to pay outage compensation:

  • in cases of force majeure;
  • if an outage lasts less than 24 hours, provided that no failures occurred during the 12 months preceding the outage; or
  • the cause of the outage is not in the heat network of the supplier or heat network operator.

Comment

The amendment bill is expected to be presented to the House of Representatives at the end of 2016. The draft bill addresses some bottlenecks, but also raises new questions and issues that will require further clarification in the parliamentary debate on the bill.

For further information on this topic please contact Léone Klapwijk at Loyens & Loeff NV by telephone (+31 10 224 62 24) or email (leone.klapwijk@loyensloeff.com). The Loyens & Loeff website can be accessed at www.loyensloeff.com.

Delila Fejzovic assisted in the preparation of this update.

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