21 May 2024

Councils risk falling foul of new heat network laws

Councils risk falling foul of new heat network laws  image
Image: Kitreel / Shutterstock.com.

Anthony Coates-Smith, Managing Director of Insite Energy, a heat network metering & billing agent working with many local authorities and housing associations, highlights important changes in heat network regulation.

After spending a lot of time at local government events relating to social housing and supported living, it’s a worrying number of councillors I have met who are unaware of their legal obligations when it comes to the heat networks they manage.

While understandable, given the scope and scale of the competing responsibilities they’re juggling and the rapid pace of change within the heat network sector, this won’t protect them from civil or even criminal penalties if their housing developments fail to comply with new legislation they may not even know about.

With heating the UK’s 28 million homes accounting for 18% of all UK greenhouse gas emissions, heat networks are viewed by the Government as a vital component of the UK’s net zero strategy, thanks to their potential to provide highly efficient, low carbon heat to large numbers of people. They’re fast becoming the norm in modern social and private housing developments; by 2030, we can expect them to meet 14-20% of the UK’s residential heat demand, rising to 43% by 2050.

Until now, heat networks were loosely regulated compared to other parts of the energy and utilities industries, leaving consumers unprotected in significant areas. That’s now changing. Following Ofgem’s recent appointment as regulator for the heat network sector in Great Britain, more stringent legislation, backed up by stronger enforcement measures, is imminent. And councils are soon to be in the firing line.

As the operator and maintainer of their heat network infrastructure, local authorities are generally the designated ‘heat supplier,’ which, simply put, means the buck stops with them.

It’s concerning how many wrongly believe this legal liability can be ‘outsourced’ to third party suppliers. It can’t. And the usual 'energy teams' many councils rely on to look after the heat and power of their housing stock simply will not go near heat network developments anyway, as they’re unfamiliar with the technology.

Meanwhile, Ofgem will begin monitoring heat suppliers’ operational and financial performance, and rolling out the first tranche of customer protection measures next year. So, time is running out to ensure compliancy.

What you need to know about the new rules

Areas that Ofgem will be seeking to control more closely include energy pricing, quality of service, metering, billing & payment, information that must be provided to consumers pre-contract and during residency, and support for people who are vulnerable or in financial difficulties.

In all areas, guaranteed standards of performance will be applied, and heat providers will be expected to ‘behave fairly, honestly, transparently, appropriately, and professionally.’ Benchmarked tariff breakdowns will be required, including asset depreciation, repairs, administrative costs and variable fuel and production costs.

What this means in practice is that there will no longer be anywhere to hide system or managerial inefficiencies – every penny charged must be effectively and transparently used to ensure the best value for bill-payers. Residents will have access to robust support from the Energy Ombudsman and advocacy bodies to ensure failings are swiftly rectified and any compensation due may need to be paid in full.

As well as consumer protection, the new regulations encompass technical standards, carbon emissions and step-in arrangements for when things go badly wrong. Heat network zoning – designating geographic areas where heat networks are expected to provide the lowest cost solution for decarbonising heat – is also being rolled out nationally.

What you need to do

The single most important thing housing providers can do to prepare for the new regime is ensure their system is working well and being properly maintained. Many UK heat networks run at only 35-45% efficiency, primarily due to ineffective operation and management. As well as sky-high energy bills, this leads to shorter repair and replacement cycles, impaired comfort for users and even potential safety issues.

Implementing a thorough maintenance regime, ideally via a planned preventative maintenance (PPM) contract, is crucial. This should cover every aspect of the system, including the energy meters and heat interface units (HIUs) in every connected property.

Another crucial area to get on top of is metering. Precise consumption measurement is essential for correct and transparent billing, and Ofgem’s incoming reporting requirements. Smart meters should be installed as standard across all properties, barring a small number of exemptions. Heat suppliers need to ensure they’re capturing all of their meter data and have the facility to report the data to Ofgem in order to meet new requirements.

It’s also a good time to review practices around communications with tenants. In future, heat suppliers will be expected to provide a welcome pack for new residents and all communications must be ‘in plain language, complete, not misleading, and sufficient for informed choices.’

Modifying processes always takes time, and residents need notice of any changes that affect them, too. So, if you haven’t already begun to prepare for the new regulations, don’t delay.

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