The Heat Network Regulations: what landlords need to do now

This guide was last updated in March 2015

The Heat Network (Metering and Billing) Regulations 2014 are UK-wide regulations implementing some of the requirements of the EU's 2012 Energy Efficiency Directive, and apply to anybody who is a 'heat supplier'. A heat supplier is a person who supplies and charges for the supply of heating, cooling or hot water through either:

• a district heat network (DHN) involving 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. A DHN requires at least two buildings and one final customer;
• a communal heating (CH) system, involving the distribution of thermal energy in the form of steam, hot water or chilled liquids from a central source in a single building for the use of space or process heating, cooling or hot water. For a CH to exist, at least two final customers in a single building must be using the energy source. This will likely include many multi-let buildings and shopping centres, where tenants share a common heating or hot water supply.

The regulations will have a far-reaching impact that many landlords may not have appreciated, as they will apply to many multi-let buildings where the landlord recharges the cost of heating, cooling or hot water supplied through a DHN or CH to at least two final customers.

The aim of the regulations is to allow users of heating, cooling and hot water supplies to be aware of the level of their consumption and as a result be incentivised to reduce that consumption. The largest share of CO2 emissions from UK buildings come from space heating and water heating.

Landlords' main duties under the regulations

Duty to notify by 31 December 2015

Heat suppliers must provide certain detailed information in relation to each of the DHNs and CHs that they operate to the National Measurement Office (NMO) by 31 December 2015. The information then needs to be updated every four years.

Required information includes the estimated total, per calendar year, of the installed heating capacity, heat generated and heat supplied; the number and type of buildings supplied by that system; the number of final customers supplied by that system; and the number and type of meters or heat cost allocators installed in the buildings supplied. There is no charge for making this notification but the NMO can impose civil sanctions for non-compliance with the notification requirements. These sanctions may include compliance notices or enforcement undertakings, and financial penalties for non-compliance with these notices.

Duty to install meters by 31 December 2016

Where there is more than one final customer, heat suppliers that operate DHNs or CHs must ensure that meters are installed in that building to measure the consumption of heat, cooling or hot water by each final customer by 31 December 2016, unless it would not be technically feasible or cost effective to do so. This assessment has to be repeated every four years.

The regulations set out how to determine whether the installation would not be technically feasible and set out a method for calculating cost effectiveness, essentially listing specified costs to take into account versus notional energy savings over a 10-year period. However, it is not yet clear whether this will cover compliance with the regulations if the tenant refuses to give the landlord access to the property to install meters as the regulations do not grant the heat supplier a statutory right to enter to do the work.

Where it is not technically feasible or cost effective to install the meters then the heat supplier must instead install heat cost allocators and thermostatic radiator valves, unless again it would not be technically feasible or cost effective to do so. Again, this has to be reassessed every four years.

Other duties

Where a new DHN connection is made in a newly-constructed building or where a building supplied by a DHN undergoes a major renovation then individual meters for each final customer must be installed. Additionally, where there is a DHN supplying a building occupied by more than one final customer, meters need to be installed now at building level to measure the amount of heat coming into the building as a whole. These duties apply now, with no technical feasibility or cost effectiveness exceptions.

Where only one final customer occupies a building supplied by a BHN, the heat supplier must install meters to measure the consumption of heating, cooling or hot water by that final customer. This duty applies now, but is subject to the technical feasibility and cost effectiveness test.

Any meter installed to comply with the regulations must accurately measure, memorise and display the consumption of heating, cooling or hot water by the final customer. Additionally any bills and billing information provided to the final customer must be accurate and based on actual consumption where meters or heat cost allocators have been installed. This may not correspond to a typical service charge arrangement where payment is based on proportionate floor area.