Teal blue graphic

Heat suppliers - what action is required?

The Heat Network (Metering and Billing) Regulations 2014 (the Regulations) apply to both district heat networks (DHNs) and communal heating systems. 

We look at the steps heat suppliers need to take to comply and the challenges of meeting these obligations.

What do heat heat suppliers need to do?

The operators of DHNs and communal heating systems are already under various obligations:

  • Building-level meters must be installed if heating, cooling, or hot water is supplied from a DHN to a building occupied by more than one final customer;
  • If an existing meter is replaced (where there is either a DHN or a communal heating system), the replacement meter must accurately measure, memorise and display the consumption of heating, cooling or hot water. The heat supplier does not have to comply if it would be technically impossible to do so or the estimated cost would be unreasonable; and
  • If a connection is made in a newly constructed building supplied by a DHN or a building supplied by a DHN undergoes major renovations, building-level meters must be installed.

From 31 December 2016, provided that it is cost effective and technically feasible to do so, a heat supplier will have to install meters to measure individual consumption of heating, cooling and hot water. 

If it is not technically feasible or cost effective the supplier must install heat cost allocators and thermostatic radiator valves at each room heating radiator so that each final customer can control its consumption of heating. A hot water meter must also be installed. If it is not technically feasible and cost effective to do install these measures, the heat supplier may employ alternative methods of determining charges for the supply of heating and hot water.  

The test for economic feasibility is currently fairly low but will be tightened up over time so even if a heat supplier does not have to install individual meters in December 2016 it is likely that it will have to do so at a future date.

What are the challenges of meeting these obligations?

Obligation to install building-level meters 

The meter must be at a heat exchanger in the building or at the point of entry of the DHN pipes into the building. This may sound fairly simple, but what if the pipes are buried under metres of concrete? Installing a meter could be quite an expensive and disruptive task. The installation of building-level meters is not linked to a test of economic viability or technical feasibility; it is an absolute obligation.

Major renovations

Major renovation is defined as costing greater than 25% of the value of the building, excluding land. It may be difficult for owners of large estate to easily determine the value of individual buildings. It is also envisaged that some owners will try to circumvent the requirement to install meters by carrying out renovation works in a piecemeal fashion so that the 25% threshold is not reached in relation to any one set of works.

Flexible space 

It is common for buildings to be designed so that the space can be used in a variety of ways. An office building may be entirely occupied by one organisation or it may be occupied by a number of final customers. It will not be a communal heating system if there is only one final customer in the building. However, if that occupier moves out and two or more move in, it will become a communal heating system and fall within the scope of the Regulations.  

Rights for the landlord to enter to install individual meters

Whether or not the landlord has a right to enter a property to install a meter will depend upon both the type of tenancy and the terms of that tenancy agreement. The lease may have been drafted to give the landlord a right of entry to carry out works that are required under statute. If no such right has been reserved, it is unclear what happens. The landlord could be legally obliged to install the meters but not have the necessary rights to do so under the lease. Do the Regulations override what the lease says? The position is not clear. Clarification on this point would be welcome.

What if the landlord wants to install meters before it is legally obliged to do so?

A landlord may decide that it wishes to install individual meters although it is not yet legally obliged to do so. This could be because the installation does not meet the test of cost effectiveness in the Regulations. It would be unusual for a lease to give the landlord a right of entry to install meters in such circumstances. This is the case with energy efficiency improvements generally, and we will be looking at this in a further article in this series.

Charging according to actual consumption

The Regulations require occupiers to be charged according to their actual consumption and disregard the fact that it is common for leases to provide for a fixed sum to be paid by the tenant in relation to energy costs. Those occupiers with a low energy consumption will want to be charged in accordance with the provisions of the Regulations. Those with high energy consumption will prefer the figure set out in their lease. Whilst there is a statutory regime for the variation of leases, its application is restrictive and the procedure is time consuming and cumbersome. It would be simpler for the Regulations to make it clear what happens in cases where the terms of the lease differ from the obligations set out in the Regulations.

In the next article, we will look at obstacles to installing energy efficiency improvements generally.

Contributor: Alexandra Holsgrove Jones

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at August 2015. Specific advice should be sought for specific cases. For more information see our terms & conditions on www.TLTsolicitors.com

Insights & events View all