Landlords of multi-let properties often supply gas and electricity to their tenants via a single network, rather than the tenants being supplied directly by a third party gas or electricity supplier. Such networks are classed as “exempt distribution systems”: the landlord transports electricity and gas to its tenants, and charges the tenants a proportion of the cost of the supply, but is exempt from the usual legal requirement to obtain a supply and distribution licence.
Under the current law, the landlord has the right to choose the supplier for an exempt distribution system. However, proposed changes to the law in the draft Electricity and Gas (Internal Markets) Regulations 2011 mean that:
- third party suppliers will have access to distribution systems to enable customers connected to those systems to switch supplier;
- the landlord will only have limited rights to refuse access to the third party supplier; • the landlord may charge for use of its distribution system by the third party supplier, under a tariff structure to be published by Ofgem;
- there will be no obligation on landlords to do anything unless they receive a request from one of their tenants;
- if a request is made by a tenant, the landlord must respond in writing within 10 working days to confirm that either (a) it will provide the third party supplier with the necessary information or (b) in its view, the obligation to provide third party access does not apply, perhaps because the network does not have enough capacity, or is not a distribution system
- the landlord’s reasonable expenses in making alterations to the building to accommodate the change in supplier will be met by the person requiring the connection; and
- the landlord must liaise with and co-operate with the third party supplier so that the tenant can switch suppliers within three weeks.
The changes are required in order to implement the EU third internal energy package and will be incorporated through amendment of the Gas Act 1986 and the Electricity Act 1989. The Department of Energy and Climate Change (DECC) will issue guidance on how to interpret the requirements. Draft guidance is available at http://www.decc.gov.uk/assets/decc/11/meeting-energydemand/ energy-markets/3109-draft-guid-prov-of-thirdparty- access.pdf and a final version is expected by the end of October.
Where tenants have a meter installed in their premises and are billed by the supplier directly, it should not be difficult to allow the tenant to change supplier. It may be more difficult for landlords to facilitate a third party supplier where the landlord is the sole supplier to multilet premises via a single distribution system.
In practice, take-up by tenants of the new rights may be low, at least initially, because where a landlord bulk-buys electricity or gas that is likely to result in lower prices for tenants than where a tenant pays directly.