With thanks to one of our members for this one.
There seems to have been little publicity about The Heat Network (Metering and Billing) Regulations 2014 (as amended by the The Heat Network (Metering and Billing) (Amendment) Regulations 2015) which are being phased in but the majority commenced on 18 December 2014 and 31 December 2014.
The regulations impose (onerous) duties on landlords of shared accommodation where the heating or hot water is “billed” individually to their tenants. The regulations do not apply where the heating and / or hot water is included in the rent although they will be triggered if there is some fair use policy which would cause a bill to be sent.
Where there is “communal heating”, the landlord must submit a notification to the National Measurement and Regulation Office (NMRO) providing details about the heating system by 31 December 2015 , install meters and / or heat cost allocators (if not already) by 31 December 2016 and will have ongoing duties in relation to maintenance and billing. We have however been notified by Regulatory Delivery of the Department for Business, Energy and Industrial Strategy that this date of 31 December 2016 may be amended.
Who does the regulations apply to?
The duties under the regulations apply to a “heat supplier”.
A landlord is a heat supplier if ALL of the following apply-
- there is distribution of thermal energy in the form of steam, hot water, or chilled liquids from a central source in a building (e.g. a gas boiler)
- the thermal energy is used to provide heating, hot water or cooling
- the building is occupied by more than one final customer
- the landlord bills more than one occupier for the heat or hot water that that person has used (or a proportion of).
This type of system is known as “communal heating”. To take a fairly typical example, if-
- there is a communal boiler in a house
- the house is let to multiple sharers
- each tenant is on their own tenancy agreement per room.
- the landlord pays the gas bill to the suppliers directly and
- more than one tenant pays a proportion of the bill for their use of the heat or hot water generated by the communal boiler to the landlord.
In this example, the landlord is a “heat supplier” and the regulations apply. This is confirmed by the Heat Network (Metering and Billing) Regulations 2014 Scope Guidance issued by Regulatory Delivery (a directive within BEIS (The department of Business, Energy and Industrial Strategy) –
A rented accommodation with a single heat source supplying multiple dwellings including houses converted into flats/bed-sits relying on the original heating system
The Heat Network FAQ’s states in respect of shared accommodation:
Charging for the supply of heat/hot water/cooling includes the supply as part of a package, paid for indirectly perhaps through ground rent, a service contract or other means. Such a payment does not need to explicitly mention the supply of heat but there will be a reasonable expectation by the final customer that heat supply is part of the service.
Where a tenant currently has space heating, hot water or cooling implicitly included in their rent payments, they are still being charged for heat and the person receiving the rent payment is a heat supplier.
If the landlord pays the total bill but has a fair use policy and then sends the individual tenants a small bill representing usage over what the landlord regards as “fair”, the regulations will be triggered.
Further, it is the position of the Department for Business, Energy and Industrial Strategy that where rent includes the use of heating, even if there is never a bill made to a tenant regardless of occupation or usage, the regulations apply.
We’re not entirely convinced this is what the legislation says (although it may well have been the intention but that’s a different matter). The legislation is only triggered where there is more than one final customer. If there is no final customer and the landlord simply pays the entire heating bill without ever seeking payment from occupiers, for example a joint and several single tenancy agreement, the position within the regulations is not clear.
In an email to us, the BEIS say:
The Regulations apply where there is fair expectation for the provision of heat. Therefore, it does apply where the cost of heating is included in the rent.
It doesn’t matter if only one tenant is paying portion. If there’s more than one tenant and agreement then the cost of heat needs to be recovered from each individual party. One of the aims of The Regulations is to ensure consumers are billed fairly for what they actually use.
Note: the BEIS seem to confirm our view of a joint and several single tenancy as they say “… If there’s more than one tenant and agreement then the cost of heat needs to be recovered …”
We have asked the BEIS to confirm the position where there is never a bill issued (remember there must be more than one final customer) and they have not replied at the time of updating this article..
The regulations aren’t triggered by electric heating in individual rooms where the landlord supplies an electric heater – even if the electricity is billed individually. This is because in order for the regulations to apply, the distribution of thermal energy must from a central source in the form of steam, hot water, or chilled liquids.
There is one other situation similar to above which triggers the regulations known as a district heat network:
“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;
Duty to notify
Where the landlord is a “heat supplier” as defined above, the landlord must notify Regulatory Delivery (RD) which is a directive within the Department for Business, Energy and Industrial Strategy by 31 December 2015. The notification must contain certain prescribed information including:
- the location of the communal heating;
- the estimated total heating capacity, heat generated, and heat supplied;
- the number of dwellings supplied;
- the number of meters or heat cost allocators installed;
- the number of final customers supplied;
- the name and business address of the heat supplier;
Although there is no prescribed form for this notification, the RD has produced a template that is suitable for this purpose.
The notification must be done at least once every four years.
Duty to install meters / heat cost allocators
By 31 December 2016 (or later if amendments are introduced), in a building with communal heating, the heat supplier must ensure that meters are installed to measure the consumption of heating, cooling or hot water by each final customer.
This only needs doing if it is cost effective and technically feasible to do so and the RD has produced a tool to help establish whether installing meters will be cost effective and technically feasible.
If it’s not technically feasible to install individual meters in each room, the heat supplier must still notify as above and must also install-
- heat cost allocators and thermostatic radiator valves at each room heating radiator in order to determine and enable the control of the consumption of heating by each final customer, and
- a hot water meter.
Again these only need installing if cost effective and technically feasible but we expect thermostatic radiator valves would always need installing given the relative low cost and ease of installation.
A review of cost effectiveness and technical feasibility must be carried out at least once every four years.
Where anything is installed which would be required by these regulations (meters, heat cost allocators etc.) they must be continually operational and properly maintained.
Where any bill is provided to a final customer, it must be accurate and based on actual consumption. If requested by the customer, the bill must be supplied electronically.
- at least once a year the bill must be based on an actual reading (exceptions apply where an estimated reading can be used)
- bills must be issued at least quarterly if provided electronically or at least six monthly otherwise
The bill must contain certain information including-
- current energy prices charged to the final customer by the heat supplier;
- information about the final customer’s energy consumption;
- where available, comparisons of the final customer’s current energy consumption from the heat supplier with consumption for the same period in the previous year, if possible displayed in a graph; and
- contact information, including website addresses, for organisations from which information may be obtained on available energy efficiency improvement measures and technical specifications for products which use energy.
A charge may be made for producing a bill but no profit may be made from the charge.
This is only a summary of the requirements of any bill that is issued and the regulations (including the amendment regs.) should be consulted.
The regulations contain requirements for new build blocks of flats or bedsits requiring meters to be installed where the heating is to be billed separately.
The guidance page on the heat networks legislation provides a more useful guidance for landlords who may be affected by these rules.
- See the amendment regulations which changes the date from 30 April 2015 to 31 December 2015. ↩