Heat Network Regulations: Turning up the heat

With minimal fanfare, the Heat Network (Metering and Billing) Regulations 2014 came into force on 18 December 2014. You wouldn’t be alone in missing these at the time (let’s blame the Christmas parties), but there are clear implications for developers, landlords and operators.

District heating and communal heating systems are becoming a common feature of developments in the UK. According to Department of Energy & Climate Change figures, there are over 2,000 heat networks in the UK supplying heat to up to 400,000 dwellings, commercial premises and public building. With this level of interest, it was inevitable that legislation would follow. The new regulations implement the EU Energy Efficiency Directive – which promotes energy efficiency and seeks to overcome market failures.

The regulations place obligations on heat suppliers, being a party supplying and charging customers for heating, cooling or hot water through communal heating or a district heat network.

Don’t be fooled into thinking that this just applies to large-scale, city-wide heat networks. Although larger schemes are caught, the definition of “communal heating” goes much wider. As drafted, the regulations apply to a supply of heating, cooling or hot water within a building which is occupied by more than one final customer. While it may not have been the intention, this covers a wide range of systems in multiple occupancy residential buildings, commercial property and retail units where multiple customers are supplied from a central source. Helpfully, guidance on the scope of the regulations was published in April 2015.

The good news is that not all the obligations come into force immediately, so there is time to consider the more onerous requirements. But there are some key points to note:

• Heat suppliers must notify certain details of each district heat network or communal heating system to the enforcement authority (being the National Measurement & Regulation Office). This includes details of the system capacity, number and type of buildings supplied, number and type of meters installed, number of customers, the results of any analysis into cost-effectiveness/technical feasibility carried out and details of the billing information provided to customers.
• The deadline for notification of existing systems has been extended to 31 December 2015, which gives a little more time for compliance. For new systems completed after that date, the information must be notified on or before the date it commences operation. Updated notification must be submitted every four years after first notification.
• Heat suppliers with larger portfolios (including commercial landlords) may need to collate a significant quantity of information in a relatively short timeframe. Going forward, the obligation to submit updated information could be passed down to managing agents.

Don’t be fooled into thinking that this just applies to large-scale city heat networks

From 18 December 2014, existing district heat networks supplying a building occupied by more than one customer must have building level meters installed to measure the supply. Where there is a single occupier, then an individual meter must be installed to measure consumption by that customer (provided it is cost effective and technically feasible). There is also the requirement to install meters where a newly constructed building is connected to a district heat network, or where a building supplied by a district heat network undergoes major renovations. These obligations should be considered as part of redevelopment or major capital works programmes.

By 31 December 2016, each district heat network or communal heating system that supplies a building with more than one customer must have meters to measure each customer’s consumption (again provided it is cost effective and technically feasible). There are detailed requirements for determining cost effectiveness and technical feasibility, which examine the building characteristics, projected energy savings and wider costs of installation. Where determined not to be cost effective or technically feasible, then the heat supplier must install heat cost allocators, thermostatic radiator valves and hot water meters (again provided it is cost effective and technically feasible). The heat supplier must repeat its determination every four years and include details within the information notified to the NMRO .

Where individual heat meters are installed, they must accurately measure, memorise and display consumption. Heat suppliers must also ensure that billing information is accurate and based on actual consumption. They must also meet certain minimum requirements (including frequency of bills and provisions of specific information). There are also wider obligations in respect of the billing process and the charges that can be levied.

Failure to comply with the regulations could result in fines, and other non-compliance penalties. Despite the quiet introduction of these regulations, they need to be considered for all existing and future schemes.

Chris Paul is a partner in the energy and sustainability group at law firm Trowers & Hamlins