Our real estate experts provide information on the Heat Network (Metering and Billing) Regulations 2014 and provide action points to help you and your organisation
Scope of the Regulations: who must comply?
The Regulations affect owners or landlords of multi-let buildings or those who supply heating to more than one building from a common source. For the purposes of the Regulations, a heat supplier is a person who supplies and charges for the supply of heating, cooling or hot water to a final customer through a district heat network or communal heating. The final customer is the end user who buys them from the supplier under a direct financial arrangement.
""District heat network" means the distribution of thermal energy in the form of steam, hot water or chilled liquids from a central source of production through a network to multiple buildings or sites for the use of space or process heating, cooling or hot water ". The minimum size for a district heat network is two buildings and one final customer.
""Communal heating" means 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". Communal heating systems serve one building only and must have at least two final customers.
According to the Guidance published by the National Measurement Office (NMO) (the enforcement authority for the Regulations): "generally, whoever is supplying the end user with heat is the Heat Supplier, whether they are the owner, service provider or another party responsible for supply. This includes the supply of heat as part of package, paid for indirectly perhaps through ground rent, a service contract or other means..."
Examples given include: shared offices; shopping centres; university halls of residence; sheltered and social housing; residential care homes; single heat source supplied to multiple rented dwellings; sub-let space in part of larger commercial premises (e.g. fitness centres or restaurants in hotels; third party business within supermarket); heat contractually supplied on an industrial site through a network.
The Guidance indicates that there are many thousands of heat networks in the UK, supplying hundreds of thousands of dwellings, commercial premises, and public buildings. Owners or landlords of buildings who pass on the costs of such supply (typically through a lease service charge) will generally be subject to the Regulations.
Obligations and duties imposed
There are various duties imposed on the heat supplier under the Regulations:
Duty to notify (Regulation 3)
Notification must be given to the NMO with detailed information about district heat network or communal heating arrangements, including the heat supplier's name and address, the building location, building type and numbers, heat generation capacity and supply, metering, frequency of billing information and other relevant information.
Such notification must be given by 31 December 2015 for heating supplies already being made; or on or before the first date of generation for supplies commencing after that date.
The NMO has produced a recommended template to use for notifications, which should be submitted to the NMO via email at email@example.com - click here to access the NMO guidance page, which has a separate link to the template.
Duty to install meters (Regulation 4)
- Where the building is occupied by more than one final customer and is supplied from a district heat network: installation of meters which measure heating, cooling or hot water to the building.
- Where the building is occupied by only one final customer and is supplied from a district heat network: installation of meters which measure consumption by that final customer.
- Where there is more than one final customer in a building supplied either from a district heat network or by communal heating: installation of meters which measure consumption by each final customer.
Compliance with duties in (ii) and (iii) is only required where cost effective and technically feasible. Where there is non-compliance on this basis, the assessment of cost-effectiveness and feasibility must be repeated no less often than every four years.
Compliance with duty (iii) is not required until 31 December 2016 (Regulation 4(4)).
Duty to install meters: measurement etc. (Regulation 5)
The heat supplier must ensure that meters installed accurately measure, memorise and display consumption by a final customer.
Duty to install heat cost allocators, thermostatic radiator valves and hot water meters (Regulation 6)
Where a heat supplier supplying both heating and hot water to a building with more than one final customer has determined that the installation of meters is not cost effective and technically feasible, it must install heat cost allocators and thermostatic radiator valves at each room radiator (to determine consumption and control of heating by each final customer) and install a hot water meter, unless it is determined that it is not cost effective and technically feasible to do so (in which case alternative methods of determining supply charges may be employed).
The heat supplier must ensure that heat cost allocators accurately measure, memorise and display consumption of heat by a room heating radiator.
Assessment of cost-effectiveness and feasibility must be repeated no less often than every four years.
Compliance with Regulation 6 is not required until 31 December 2016.
Standard of meter replacement (Regulation 7)
Replacements installed for existing meters must be such as accurately to measure, memorise and display consumption by a final customer, unless it would be technically impossible to do so or the estimated cost would be unreasonable. There are also additional duties to install meters to measure consumption in relation to newly-constructed buildings or buildings subject to major renovation.
Ongoing operation and maintenance (Regulation 8)
In respect of meters and heat cost allocators installed, to ensure as far as possible continuous operation, proper maintenance and periodic checks for errors.
Billing (Regulation 9)
Bills and billing information based on meters or cost allocators must be accurate, based on actual consumption and meet the minimum statutory requirements as set out in Schedule 2 to the Regulations, in so far as it is technically possible and economically justified to do so. Regulation 9 specifies various other criteria and conditions that must be met in relation to bills and billing.
Prosecution and penalties (Regulations 11-14/Schedule 3)
Non-compliance with any of the duties in Regulations 3-4 and 6-9 are criminal offences, punishable on summary conviction or indictment by a fine. However, no criminal prosecution in relation to those duties may be brought in respect of any non-compliance occurring before 30 April 2015.
Under Schedule 3, various powers of entry are provided for authorised persons to enter premises for the purposes of inspection and testing, to ascertain if there have been breaches of the Regulations, etc.. Compliance notices, enforcement undertakings, or payment of civil non-compliance penalties may also arise.
The Regulations came into force in December 2014, with the exception of the duties in item (iii) under regulation 4 and regulation 6 as referred to above, which both come into force on 31 December 2016.
What should you be doing now?
In the short-term, the first key date to note is 30 April 2015. Although compliance with most of the obligations as to meters and billing has been legally required since December 2014, criminal prosecutions can only be brought in respect of non-compliance which occurs on or after 30 April 2015.
Where the Regulations apply - and subject to the various caveats mentioned above as to technical feasibility, reasonable cost, etc., - you should ensure compliance as follows:
- ongoing compliance with the metering requirements for measuring building heat supplied to district network buildings (with at least two end users) from 30 April 2015
- ongoing compliance with other obligations in relation to meters and billing from 30 April 2015
- make the required notifications under Regulation 3 to the NMO by no later than 31 December 2015, in respect of any existing district heat network or communal heating
- make the required notifications under Regulation 3 to the NMO on or before the first date of generation for supplies commencing after that date, in respect of any new district heat network or communal heating
- assess your affected properties in relation to the metering requirements in Regulation 4(4) and the duties to install heat cost allocators, thermostatic radiator valves and hot water meters in Regulation 6, ahead of those obligations coming into force on 31 December 2016
Given both the financial (fines) and reputational (criminal liability and publicity) issues arising from non-compliance, affected property owners and occupiers need to assess which of their properties may be caught by the Regulations and familiarise themselves with their duties and as to the need to ensure ongoing compliance.