I have been holding off writing this post as I was hoping for the Government to provide more clarification. Despairing of this I have been forced to trawl through the murky world of EU Directives….

The Heat Network (Metering and Billing) Regulations 2014 were passed near the end of 2014 by the Government. They have been starting to excite interest after the production of a scoping document in April 2015 which attempts, badly, to explain their application.

Outline
The principle of the regulations are simple and relatively uncontroversial. They essentially state that where someone is being provided with heat energy whether as hot water, heating, gas or power from a central source they should be able to get a metering of their individual use and only be asked to pay for that use. The people providing those services must also register with the government and this will be done by way of a new quango, the NMRO. Metering or heat cost allocators must be installed wherever possible and a bill must be provided based on these systems and linked to the actual usage of the occupant. Where a major renovation is planned then it should be carried out in such a way that metering can be installed. Failure to comply is an offence with a level 5 fine, unlimited in England & Wales.

District Heating
I have long been a hater of district heating networks. In particular the increasingly inefficient and elderly systems operated by some local authorities. These often have extremely dubious and obscure charging mechanisms and a serious lack of control for end users. These regulations will effectively bring that kind of system to an end. This is because it will be a duty on the relevant local authority to install metering for every person they are charging for these services and so they will be more directly charged for their use. Where the local authority is not to do this then they will need to show that it is technically infeasible or not cost effective.

The Issue
The problem here is one of scope. The way the UK Regulations are drafted pretty widely and the NMRO appears to be giving them a wide interpretation. The scope appears to include all situations where someone is provided with heat or hot water from a central system which they do not control directly. And therein lies the problem. This encompasses large district heating schemes on Central London Housing Estates. However, it also encompasses a small HMO landlord operating a small house converted into bedsit accommodation. The NMRO guidance is clear that it does cover these situations as it states that the regulations encompass:

Rented accommodation with a single heat source supplying multiple dwellings including houses converted into flats/bed-sits relying on the original heating system

The NMRO is also of the view that the fact that the heating is paid for as part of the rent is not particularly relevant.

Is This Right?
This has caused a bit of upset to private landlords who are now worried that they will be landed with substantial costs to convert properties. They are trying to assert that the regulations cannot possibly be meant to apply to them. To some extent I think that there is an element where this is a case of reading something in a way you want it to be rather than looking at what it says. However, we are all guilty of this from time to time. Ironically, it may be the case that private landlords are right. The pre-amble to the original EU Directive is not very supportive of the NMRO interpretation. The Directive is very careful to make clear that it is not intended to impose substantial financial burdens on smaller business. It is worth noting here that the EU does not consider the average small landlord, even one with ten or so properties, to be a small business, they are micro businesses in terms of the sizing commonly being used. The Heat regulations as implemented here are also clear that metering is not required where it would not be economically practicable. Tellingly here, the Directive clearly states that in some property “the use of accurate individual heat meters would be technically complicated and costly due to the fact that the hot water used for heating enters and leaves the apartments at several points”. A similar point could be made for electrical and other energy. This alone will exclude the majority of small HMO conversions as the entry of hot water from the taps will be distinct from its entry through a radiator and there will usually be more than one such entry point for both. It may actually also exclude some of the more archaic large district heating systems which can use multiple points of entry.

Upshot
There is a long way to go here. It seems that the NMRO guidance note needs reconsidering. Larger schemes are undoubtedly caught by this and I would tend to see this as a good thing as it will end the levying of obscure fixed service charges for heating and hot water on social tenants with limited means to challenge them. Small HMO landlords almost certainly are caught by the regulations in a technical sense and should probably register with the NMRO. However, having regard to the wording of the EU Directive it is unlikely for such metering to be “technically feasible” for those landlords unless they are carrying out a substantial renovation of the relevant property.