Following the launch of the Heat Networks (Metering & Billing) Regulations 2014, landlords who supply heat to their tenants have new legal duties as heat suppliers. The practical implications for some of these duties have been in a state of flux over recent months as published feasibility mechanisms for heat metering solutions have been withdrawn for reappraisal. Meanwhile some compliance dates associated to the new regulations have passed and others creep closer; with a substantial proportion of managing agents, developers and landlords risking non-compliance.
In light of the faltering start to the implementation of this aspect of the EU Energy Efficiency Directive, SMS is consulting with customers, industry bodies and the regulator to help organisations put together practical plans for their building portfolios. From these discussions there are a few key points that we are keen to clarify / share:
- The deadline for notifying the Government (National Measurement and Regulation Office) of the existence of a communal or district heating system passed on 31st December 2015
- There is a current legal requirement for any existing heat network (which counter-intuitively includes cooling by chilled water as well as shared supplies for domestic hot water and heating) to be identified and described to the NMRO through their notification process
- Under the legislation, each of these heat networks will require a feasibility assessment to be undertaken to consider the case for heat metering for each tenant area based on a practicality and cost effectiveness test. While a tool and methodology relating to this assessment had been published, it has now been withdrawn pending review
- By our calculations (and assumptions may vary), the declared methodology would typically have classed heat metering as not cost effective unless the individual domestic tenants paid £800 per annum for heat or commercial tenants paid £1600 per annum for heat (& cooling if delivered by chilled water). These circumstances are rare and it is considered that a revised feasibility tool would lead to the mandating of meters in a greater number of circumstances
- Currently the deadline for feasibility assessment stands at 31st December 2016, but without the existence of an approved assessment tool there is no practical way to meet this requirement. News on the release of a revised tool is expected during the early part of the summer, with an expectation that the deadline will be deferred
- Heat metering and billing for new buildings is legally required in some cases (multi-building networks) and highly recommended in others (multi-tenanted buildings). Ensuring these meters and tenant billing strategies are integrated into the development process will avoid potentially costly retrofit projects
While the regulations are the significant driver for organisations seeking to maintain their license to operate, there are regularly other tangible benefits to heat metering on all levels: landlord; tenant; and for wider society. From our experience, the deployment of monitoring systems and transparent billing processes can benefit landlords by shrinking the service charge pot, while ensuring tenants pay for what they use and can hence self-regulate their usage. It is often the case that saving opportunities can also be recognised through this process.
For organisations that need to better understand what impact this legislation will have, SMS are offering free briefings and consultations. We highly recommend that organisations get plans in place as soon as reasonably possible, so that changes to tenant billing, heat metering systems and official notifications can be managed to ensure continuous compliance.
For more information please feel free to contact our energy experts us on 02920 739 540 or email us.