The Heat Network (Metering and Billing) Regulations 2014

The Regulations implement the provisions of the European Energy Efficiency Directive into UK law and will potentially have a big impact on landlords of multi-let buildings, both commercial and residential, due to a number of obligations which they create.  The impact will begin to be felt by the end of April 2015.

Who is affected?

Compliance with the obligations contained within the Regulations is the responsibility of the ‘heat supplier’.  The 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 (a) communal heating or (b) a district heat network”.

Communal heating is likely to be the most relevant heating system and is defined as “the distribution of thermal energy in the form of steam, hot-water or chilled liquids from a central source in a building which is occupied by more than one final customer, for the use of space or process heating, cooling or hot water.”

Essentially, heat suppliers are the parties who sell heat, cooling or hot water.  This could be a building owner, service provider or other third party responsible for supply.  This can also include situations where the supply of heat is part of a package and is paid indirectly (i.e. through ground rent or service charge). Guidance indicates that air-conditioning systems relying on local compressors or purely ducted air are not caught by the regulations.

A final customer is defined as a person who purchases heating, cooling or hot water for their own end consumption from a heat supplier.  The Regulations do not explicitly require a contractual arrangement to exist between the heat supplier and final customer – the requirement is that a payment is made. There must be at least two final customers for the regulations to apply.

Examples of situations which will fall within the ambit of the Regulations include:

  • shared offices
  • shopping centres
  • university halls
  • rented accommodation with a single heat source supplying multiple dwellings
  • sub-let space such as gyms or restaurants in hotels

The requirements

The Regulations subject the heat supplier to three key obligations:

  • Notification – heat suppliers are required to provide specific information to the Secretary of State about their heating system including location, capacity, heat generated, heat supplied and metering equipment installed.  This duty must be complied with by 30 April 2015.  Where the operation of a heating system commences after this date, notification should be provided on or before the first date of operation. A heat supplier must submit an updated notification within every four-year period thereafter from the date of the previous notification.
  • Installation – from 31 December 2016, the heat supplier will be under the obligation to install meters into affected buildings which measure the supply of heating, cooling and hot water to each individual occupier, provided it is cost-effective and technically feasible. The Regulations provide a comprehensive schedule to determine cost-effectiveness and technical feasibility.  Matters to be taken into account include cost, projected energy savings and the construction of both the building and heating system. Where it is not cost-effective or technically feasible, the heat supplier will be under a duty to install heat cost allocators, thermostatic radiator valves and hot water meters, unless, again, it is not cost-effective or technically feasible to do so.  Heat cost allocators are instruments which measure the amount of energy consumed by a room-heating radiator. The heat supplier is under a continuing obligation to ensure that any of the equipment referred to above which is installed is continuously operating and properly maintained. Where the heat supplier determines that it is not cost-effective or technically feasible to install the required equipment, a further determination must be repeated within four years from the date of the previous determination.
  • Billing – Where the installation requirement has been complied with, the heat supplier must ensure that bills and billing information sent to a final customer are accurate and based on actual consumption, provided that the cost of meeting this requirement for each occupier does not exceed £70 per year. This will obviously provide issues where meters are installed but heating is provided for within a service charge which is based on floor space, rather than actual consumption. This obligation applies from 19 December 2014, however any breaches before 30 April 2015 are not punishable by criminal prosecution.

Enforcement & Penalties

The Regulations are to be enforced by the Secretary of State and it is an offence for the heat supplier to fail to comply with the requirements outlined above.  In addition to the usual civil remedies available to a regulator, an offender under the Regulations will also be subject to criminal sanctions including fines (subject to the statutory maximum).  Where the offender is convicted on indictment, the level of fine is potentially unlimited.

Next Steps & Compliance

If they have not already done so, landlords who will be affected by the Regulations should:

  • Start to collate the required information in respect of their heating systems and ensure that this is provided to the Secretary of State by 30 April 2015.
  • Assess the extent of the installation required at their properties.  Where work is required, any provisions within leases which could adversely impact upon installation should be considered. 
  • Review billing procedures to ensure that they do not breach the Regulations.