One policy area which has been under review by the UK government is the Heat Network (Metering and Billing) Regulations. These regulations apply to heat networks – defined as shared heating systems where water is heated or chilled at a central source of production and distributed to more than one building or customer through a pipework network for the provision of heating, cooling or hot water use.
Legal obligations fall on heat suppliers, the operators of these heat networks, encompassing many landlords and property management companies. The regulations aim to increase the use of heat meters so that more building occupiers connected to heat networks are billed according to their actual consumption. This would be instead of these costs being incorporated within a service charge or rent, as is often the case. Not only will it provide more fair and transparent billing, but it will also provide occupiers with both the data and the incentive to make behavioural changes to reduce their energy use/costs and associated carbon emissions.
What’s changed?
Long-awaited changes to these regulations finally came into force in November 2020, which will see the requirement for many heat suppliers to undertake cost effectiveness assessments for the installation of heat meters by 27 November 2021, and to install heat meters by 1 September 2022, if deemed to be cost effective via a new building class system. While this was always an intended requirement when the regulations were first introduced in 2014, it was originally put on hold by the government pending further review due to challenges with the assessment tool.
Businesses may incur capital expenditure where heat meters are required, and timescales for meeting compliance are short. High demand for meters and meter specialists could also cause long lead times. It is therefore advisable for businesses to act as soon as possible to ensure that compliance deadlines are met and to enable heat meter costs to be factored into budgets.
While there are recent amendments to the regulations, most of the original requirements also remain in force. The key obligations on heat suppliers include the following requirements:
1) Registrationof heat networks with the government via four-yearly notifications;
2) installation of heat meters/metering devices, where required;
3) maintenance and periodic inspection of heat meters/metering devices, where installed, to ensure they remain operational and record accurately; and
4) calculation of occupiers billing based on actual consumption, where heat meters/metering devices are installed.
The regulations focus on the metering of energy outputs from heat networks to incentivise behavioural change from occupiers through access to better data and accurate billing for their own demised space. However, one criticism of the regulations is that they fail to also consider the energy inputs. When assessing the overall efficiency of heat networks, and to understand the true costs associated with the generation of each kWh of heat/coolth, it is necessary to understand both the energy inputs and outputs of the network.
Pragmatic approach
For those landlords looking to go beyond ticking the compliance box and drive action through energy efficiency, we would advocate looking at your metering strategy as a whole for the network. This will ensure that you are managing your network in the most efficient way and your recharging methodology for heating and cooling is accurate, robust and will stand up to scrutiny from occupiers.
The changes made through the consultation go some way to providing a more pragmatic approach to the assessment of meter cost effectiveness through the introduction of building classes, ruling out the need to undertake cost effectiveness assessments in instances where the feasibility or applicability of heat metering is never likely to be viable. However, the regulations fall short on maximising opportunities to assess overall network efficiency to drive meaningful action. That said, the opportunity does still exist for landlords to voluntarily go beyond compliance requirements as part of their own net zero journeys, which we actively encourage.
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Estates Gazette: https://www.egi.co.uk/news/landlords-race-to-meet-new-regulatory-requirements-but-do-they-stack-up/