Heat network regulations – time to re-evaluate?

The Heat Network (Metering and Billing) (Amendment) Regulations 2020 came into force on 27 November 2020, and make changes to the regulations that originally came into force in December 2014. The regulations place obligations on anyone that supplies and charges for the supply of heating, cooling or hot water to customers through a heat network. This is a broad definition covering landlords as well as heat network operators and ESCO providers.

Under the regulations, the operators of district and communal heat networks must submit notifications and, where required, install metering devices on those networks. Networks fitted with metering devices must also meet ongoing obligations, including using these devices to bill customers based on their consumption.

What has changed?

To assist heat suppliers to determine whether buildings are subject to the regulations, the 2020 update introduces three classes of building:

a) Viable – must install heat meters.

• New buildings connected to communal heating from 1 September 2022 (not in the open or exempt class)
• New buildings connected to a district heat network since 27 November 2020
• Existing buildings connected to a district heat network undergoing major renovations relating to technical services since 27 November 2020
• Buildings that had mandatory meters installed prior to 27 November 2020.

b) Open – must complete a cost-effectiveness and technical feasibility evaluation to determine if heat meters or heat cost allocators need to be installed.

• New buildings connected to communal heating between 27 November 2020 and 1 September 2022 (unless exempt)
• New buildings connected to communal heating from 1 September 2022 where there are multiple entry points for the communal heating pipes
• New buildings connected to communal heating from 1 September 2022 and used for supported housing, almshouse accommodation or purpose-built student accommodation
• Buildings that do not fall into the viable or exempt class.

c) Exempt – No action required.

• New buildings (connected to communal heating since 27 November 2020) and existing buildings not consisting mainly of private dwellings where heating and/or cooling is distributed by a system that does not use water
• Buildings in which more than 10% of the total number of private dwellings and non-domestic premises are covered by a lease prior to 27 November 2020 that prevents billing based on actual consumption.
• Existing buildings used for supported housing, almshouse accommodation or purpose-built student accommodation.

The changes to the regulations have not affected the requirement to notify the Office for Product Safety and Standards (OPSS) of new heat networks and to renew the notification for existing systems. An updated notification template has been produced to support heat suppliers in making this notification.

The ongoing obligations have been extended to all meters and heat cost allocators that are currently installed on heat networks and are in scope of the regulations, regardless of whether or not they were installed as a requirement of the regulations. These include submitting a new notification every four years following the initial notification, ensuring meters or heat cost allocators are continuously operating, maintained and periodically checked for errors, and billing customers based on actual consumption where the threshold for billing cost is met. The threshold for billing cost has increased from £70 to £92 per final customer per year.

New deadlines

a) By 27 November 2021, heat suppliers of buildings under the “open” class must complete a cost-effectiveness and technical feasibility evaluation.

b) By 1 September 2022, where it is determined they are required, heat suppliers must ensure heat meters and/or heat cost allocators are installed.

c) From 1 September 2022, heat suppliers must ensure meters or heat cost allocators (as applicable) are installed as soon as it is determined that a building falls within the “open” class.

Given the changes to the regulations, heat suppliers (particularly landlords) should check each building’s metering requirements against the new building classes, and complete a cost-effectiveness and technical feasibility evaluation within the deadline. It is also a good opportunity to check whether all required notifications have been made to the OPSS for existing systems.

Enforcement – turning up the heat?

The regulations are enforced by the OPSS and the approach taken to date has largely focused on raising awareness of the regulatory requirements, explaining the scope of the regulations and providing guidance and support. With the reporting obligation now into its seventh year, however, it seems likely that the OPSS will look to enforce the requirements more closely. Failure to comply may result in financial penalties, although there is a notification process before these are issued.

Since the regulations came into force in 2014, the OPSS has primarily targeted heat network providers operating in the residential sector to raise awareness of the requirements, with a particular focus on local authorities and housing associations. On this basis, social landlords should ensure their heat networks are compliant.

Future developments

The decarbonisation of the heat sector was highlighted as a key priority under the government’s energy white paper, published in December 2020. The UK government ran a consultation on the development of a regulatory framework for heat networks in 2020 and the results are expected early this year.

Given the changes to the regulations, it is a good opportunity for heat suppliers to review the buildings under their control and assess their obligations more closely. As the government continues the transition to low carbon heating, it is likely that regulatory compliance will become an increasing area of focus.

Hannah Giebus is a solicitor in Trowers & Hamlins’ construction department