David Howe
Posted on 7 Jul 2015

Heat Network Regulations: Q&A with David Howe

The Heat Network (Metering and Billing) Regulations 2014 throw up some tricky situations for landlords and other 'heat suppliers', not least whether or not they are actually caught by the Regulations. Given that failure to comply with the Regulations can result in civil and criminal penalties – predominately fines – for the heat supplier, it is important for you to understand your obligations and how to comply with them. 

The sheer number of multiple occupancy properties and potential variations between them mean that it is impossible to produce detailed advice without knowledge of the property in question and the arrangements by which it is let. However, in this Q&A I hope to help you identify when you might need to take advice.

Q: Am I a heat supplier subject to the regulations?

A: The Regulations apply to multi-let buildings. If you have a building divided into more than one unit, and you supply heat, hot water or cooling through a central system, it is likely that this will be classed as a communal heating system, and you will be a 'heat supplier' for the purposes of the Regulations. This does depend on the type of heat, cooling and/or hot water system that you have, and will need to be examined on a case-by-case basis.

Q: I share the building I lease with my tenant, so there is only a single let. Does this mean I am exempt?

A: Unfortunately not – you will be the heat supplier. The building is a multi-let building for the purposes of the Regulations, so long as you are responsible for providing the services. 

Q: My building has a communal system for the common areas, but each unit has its own system. Will the system for the common areas be subject to the Regulations?

A: This is not clear from the Regulations or the guidance to them. However, there has been some indication from the National Measurement and Regulations Office (NMRO) that systems only serving the common areas of a building will not be subject to the regulations

Q: Do I need to install meters to each unit to comply with the Regulations?

A: Whether or not you need to install meters will depend largely on the circumstances. The Regulations state that by 31 December 2016 meters must be installed in all buildings with a communal heating system where it is cost effective and technically feasible to do so. There is detailed guidance as to whether installation will be cost effective and technically feasible, and I recommend you take advice on whether this applies to you.

It is also worth considering that from 18 December 2014, if an existing meter in a communal heating system is being replaced it must be replaced with one suitable for the purposes of the Regulations unless it is technically impossible or unreasonably costly to do so.

Where it is not technically feasible or cost effective, heat allocators or other equipment may be installed. Again, the appropriateness of these measures will need to be properly assessed on an individual basis.

Q: My lease says that charges for services are to be apportioned at fixed percentages – what can I do to ensure compliance?

A: Unfortunately, it is unclear at the time of writing whether the lease or the Regulations will take precedence. Guidance released to date does not answer this question, and at this time it is not clear how this will be resolved.

I would suggest that it is important to review your lease in conjunction with your advisors to establish if anything can be done to bring charges for the services into line with the Regulations.

Q: My tenants pay lump-sum rent for their units, which include all bills, but I don't specifically charge for heat, hot water or cooling. 

A: There does not need to be a specific contract, or even any formal contract, for the provision of those services for the regulations to apply. All there needs to be is a relationship between the final customer (i.e. the tenants) and the heat provider by which the final customer reasonably expects to receive the services and pays for them. The situation above will be caught by this. The guidance also gives the following examples of where this might apply:

  • Flat tenants in a converted house;
  • Student rooms in halls of residence;
  • Units in a shopping centre; and
  • Shared offices.

Q: What does this mean in terms of my billing?

A: The Regulations require that bills must comply with certain requirements unless economically justified and technically impossible. These are:

  • Be accurate
  • Be based on actual consumption
  • And comply with the standards of schedule 2 of the Regulations (which sets out what information is to be provided, what billing on actual consumption means under the regulations and what is meant by technologically impossible and economically justified).

You will also have to produce bills at least once per year. 

Q: What is the duty to notify in the Regulations?

A: if you are a heat supplier you are under a duty to notify the NMRO by 31 December 2015 of a number of details relating to the communal heating system, including the location, details of the heat supplier, details of the final customers, meters installed and any technical analysis conducted under the Regulations. You should take steps to ascertain what you need to notify the NMRO of swiftly, to ensure any analysis or information gathering can be done in time to meet the December notification guidelines.

If you have any questions about the contents of this article please don't hesitate to get into contact with me at david.howe@michelmores.com