Recent amendments to the UK's Heat Network Regulations (HNR) affect UK communal heat, and cooling systems for those identified as energy providers. Learn more about your responsibility as an energy provider in the UK.
So, there you are quietly keeping your tenants comfortably cool in the summer, warm throughout the winter months and providing hot water for them to wash their hands in, if they want to, without too much concern about the ‘Heat Network (Metering and Billing) Regulations’ (HNR) that came into effect in 2014.
Because, at the time, the government’s calculation tool, which would have identified whether you were required to install additional heat meters or measuring devices to record the amount of heat or cooling energy you were supplying to your tenants, simply didn’t work and was withdrawn soon after publication. Therefore, the installation of measuring devices and the knock-on effect on your billing methods didn’t arise at that time.
All that has changed with the publication of amended regulations which became effective on 27 November 2020.
If you have more than one tenant in your building (or you have multiple buildings) that you supply with heat (by distributed water or steam) or cooling (by distributed chilled liquid) from centralised sources and they pay you for this service directly by identified charges or indirectly within e.g., a rental or service agreement, the amendment regulations are likely to affect you.
Under the Heat Network regulations where you have more than one tenant (person or organisation i.e., legal entity) paying for the services, they would be the ‘Final Customers’ and you as the supplier of the services are the ‘Heat Supplier’.
Heat Networks: The Heat Network regulations cover two specific types of Heat Network.
- District Heat Network: Distribution of heating / cooling services to multiple buildings with a minimum of at least one Final Customer on the network.
- Communal Network: Distribution of heating / cooling services within a single building with a minimum of two Final Customers.
Final Customers: Final Customers can be Domestic or Non-Domestic users.
- Domestic: Final Customers would have a partitioned private space intended for use as a domestic dwelling and has a bedroom, bathroom and kitchen.
- Non-Domestic: Final Customers would have access to a partitioned private space for the purposes of carrying out their activities. In this case, some services such as sanitary or reception areas may be shared.
Sites with no partitioned space, such as open plan areas serving multiple tenants, are not considered part of a network for the purposes of the Regulations. Sites where only communal areas (stairwells, corridors etc.) are heated are also discounted.
Final Customers: Can be a person or organisation paying for the distributed service for heating, cooling, hot water or use in processes, while Heat Suppliers can be a person or organisation either directly supplying the services or recharging the services they have paid for (but which are not for their own use) to their tenants accordingly.
In this way, an organisation can be both a Final Customer, receiving and purchasing heat / cooling services (from their own Heat Supplier) and a Heat Supplier, distributing heat / cooling services to their own Final Customers. There are two ‘Heat Networks’ in this arrangement.
Heat Suppliers: Where multiple parties are involved in running a network, the heat supplier is the beneficiary of the customers’ payments. Typically, this is the party using customers’ payments to pay fuel bills to keep the network running.
As the Heat Supplier, the regulations impose a number of duties on you with specific deadlines for compliance.
- Duty to notify: You are probably already aware that before it (The Heat Network) starts operating, a notification must be sent, in the prescribed format, to the ‘Office for Product Safety & Standards’ (OPSS) which must also be reviewed / resubmitted every four years after the initial notification.
- As part of this notification, you must now also identify the ‘Building Class’ of each building to identify whether metering should be installed (N.B. below is a summary of definitions for the three classes):
- Viable (not in the Open or Exempt classes)
- District Heat Networks - Essentially new buildings (from 17 November 2020) or new buildings since December 2014 where metering had been mandatory, and buildings where, since December 2014, major renovations have included the building’s technical services.
- Communal Networks – new buildings with communal heating/cooling, connected to the network on or after 1 September 2022 (with a single-entry point for the pipes).
- Open (not in the Viable or Exempt classes)
- District Heat Networks – Existing buildings now connected to a District Heat Network
- Communal Networks – New buildings connected to the network on or after 1 September 2022 but with more than one entry point for the pipes. Any other building, including those where heat meters or heat cost allocators (to measure radiator output) have already been installed.
- Exempt (not in the Viable or open classes)
- District Heat Networks – An existing, mainly non-domestic, building (not in the Viable class) using a transfer system other than water. An existing building, not in the Viable class, where any part of the building is used for supported housing, almshouse or purpose-built student accommodation. Some, mainly non-domestic buildings, with pre-27 November 2020 restrictive leaseholds.
- Communal Networks – An existing, or newly constructed building (connected after 27 November 2020) of mainly non-domestic units, using a transfer system other than water. An existing building where any part of the building is used for supported housing, almshouse or purpose-built student accommodation. Some, mainly non-domestic buildings, with pre-27 November 2020 restrictive leaseholds.
- Viable (not in the Open or Exempt classes)
- For all ‘Open’ class buildings, a Technical feasibility and cost effectiveness assessment must be carried out by 27 November 2021.
- There are new ‘Transitional arrangements’ in place and if you were due to re-notify between 27 November 2020 and 1 September 2022 then you can now notify at any time up to the end of the period (as you must adhere to the new, revised, arrangements).
- If you have taken on a building that is operating a Heat Network (and you are the Heat Supplier), then this does not alter the original 4-year cycle of notification. Therefore, when taking on a building, the existing HNR notification cycle must be identified and adhered to etc.
- When notifying for any ‘Open’ class building, the ‘Technical feasibility and cost effectiveness assessment’ must have been completed and results included in the notification.
- Duty to install meters: Building level meters are mandatory for District Heat Networks (only in multi occupation buildings) but are not generally used for rebilling, only for efficiency monitoring etc.
- Final customer meters measure the consumption of heat / cooling / hot water for possible charging purposes.
- The requirement to carry out a ‘Technical feasibility and cost effectiveness assessment’ depends on the Building class (see above) in which the network is operating.
- For each Building class, the metering requirements differ as follows:
- Viable class – Final Customer meters are always mandatory (no technical or feasibility assessment required)
- Open class – meters, heat cost allocators (HCAs) and/or thermostatic radiator valves (TRVs) are required if assessed to be technically feasible and cost- effective by the scheme’s ‘Cost Effectiveness Assessment Tool’.
- Exempt class – no requirement to install metering devices and no assessment is required.
- Duty to install heat cost allocators, thermostatic radiator valves and hot water meters
- Where either classed as Viable or Open (and the Cost Effectiveness Assessment Tool indicated it is cost effective and feasible to do so) HCAs, TRVs, and water meters must be installed as applicable.
- There are much more within the regulations than can be discussed here relating to the Installation of Heat Meters, Heat Cost Allocators (used to record the consumption of heat by a room-heating radiator), TRVs (used to give a customer control over the consumption of heat by a room-heating radiator) and Hot water meters (used to record the consumption of hot water by a customer) surrounding specification, accuracy, recording ability, maintenance and replacement etc. Reference should be made to the regulations themselves for more detail.
- Duty to ensure Final Customers’ bills are accurate, based on actual consumption and comply with the minimum requirement
There are mandatory billing requirements which must be in place by 1 September 2022.
- The billing must include the current energy prices you are charging the Final Customer, Information about the final customer’s energy consumption, where available, comparisons of the final customer’s current energy consumption with consumption for the same period in the previous year, if possible, displayed in a graph.
- It should also provide a clear explanation of the information contained in the billing, including how it was calculated and specifying fixed and variable charges, 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 bill must be issued using actual consumption at least once per year (unless the Final Customer does not provide readings when expected in which case estimates can be included) and additional Billing information must be issued at least twice per year. The frequency of Billing information rises to at least quarterly where electronic information is requested/issued.
- At the request of a Final Customer, a heat supplier must:
- Supply a Final Customer’s billing information to an energy services provider
- Provide electronic billing and billing information
- Ensure that information and estimates of energy costs are provided to a Final Customer promptly and in a format, which enables customers to compare charges of different energy suppliers.
By now, you should have a good idea of whether the regulations affect your operation and what responsibilities you have to take.
The whole thrust of the Heat Network Regulations is to provide Final Customers with regular, transparent information, based on actual consumption of heat/cooling data and the means to control that consumption, reducing this where they wish to.
Laudable objectives but this could place a severe burden on your existing tenancy operation.
If these regulations affect you, contact NUS Consulting to discuss how we can help.