The Heat and Network Regulations: What you need to know

It is a well-known fact that the property sector is being heavily regulated on energy efficiency measures, such as ESOS, EPCs and P272 among many others. However, there are other regulations, which have outstanding implications for the UK property sector that have slipped under the radar.

In particular, the Heat Network Regulations 2014 would have a great impact in multi-tenanted buildings. These Regulations state new rules in regards to installing meters for recording details of communal heat schemes or monitoring usage.

Currently, tenants in multi-tenanted buildings pay a fraction of the overall building’s heating, cooling and hot water costs. Unlike electricity, sub-metering is limited and the floor area is used to estimate a reasonable percentage of the total costs. Although this method is simple and straight forward to calculate, it presents no incentives for turning the heating off on each floor, if no one else does the same. Consequently, energy bills become higher under this scenario.

The Network Regulations suggests that this methodology may not be acceptable, and landlords will be required to give tenants actual information based on their real gas consumption. This approach will significantly contribute to further improve energy efficiency.

These Regulations are beneficial to building tenants and occupiers, although application falls directly to the landlords. The main responsibilities for heat suppliers under these regulations are the following:

  • Notify the National Measurement Office (NMO) accordingly of the operative heating systems that are subject to the regulations. The notification has to include full information of the final customers, building supplies and location of the heat networks.
  • Fit individual heat meters if technically feasible and cost-effective. If the installation of heat meters is not feasible or cost effective, then the heat supplier must fit heat cost allocators and thermostatic radiator vales (TRVs). The feasibility of fitting heat meters has to be evaluated every four years.
  • Provide customers with a bill based on accurate data at least once a year.

Implications for the property sector

Both communal heating and district heat networks are subject to the Heat Network Regulations. A district heat network is regarded as a centralised system for the generation of hot water, cooling or heat that is supplied to at least two buildings. In the UK, there are approximately 1,800 district heat networks. However, there is likely to be an extensive number of facilities that provide communal heating, such as distribution of hot water, cooling and heating from a central source to two or more customers within a building, and hence all the multi-tenanted commercial buildings will be included.

Some of the provisions of the regulation are already in force. There have been legal obligations on heat suppliers to supply tenants with accurate heat billing information and to inform the NMO of the heating systems that are included in the regulations.

The next target date is close: By 31st December, Landlords of multi-tenanted properties are required to assess the feasibility and fit heat meters. The Government estimates that for the majority of the existing facilities with communal heating, heat metering will be both technically feasible and cost-effective. The NMO has facilitated a Heat Network Viability Tool and further information to assist with the evaluation and implementation of the Regulations.

Implications for the property sector

The UK property sector has to take action in order to reassure that Landlords are complying with the regulations in order to catch up with the regulations in a timely fashion. Nevertheless, there are six key steps that every Landlord should take in order to comply with the regulations successfully:

  • Record all the buildings where there is communal hot water, air conditioning and heating. These properties should have been registered with the NMO by 30th April, 2015.
  • Evaluate the feasibility of installing heat meters. A Heat Network Viability tool is available to assist with this assessment.
  • Fit heat meters by default when a property is refurbished.
  • Get advice on how to charge tenants for the hot water and heating.
  • The Heat and Network Regulations give full control to building users. Consequently, replacing the central hot water systems with electric heaters would be a simple and cost-effective alternative.
  • Better metering provides good quality data and better energy management. Landlords could use this data to develop trends and patterns of use to minimize the gas consumption or to optimize the Operation & Maintenance of the hot water systems, i.e. identify potential leaks or when the pumps are due to be changed.

The ultimate aim of the Heat Network Regulations is to make users of hot water, cooling and heating aware of their gas consumption levels. This would not only optimize Operation & Maintenance strategies, but, most importantly, would encourage better approach to energy management.