District Heating Networks: The Legal Landscape

23/08/2017

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Nathan Bradberry

Partner

If you are involved in the procurement, installation or operation of district heating networks, do you know how the legislation impacts on your organisation?

The mandatory legislation

The Heat Network (Metering and Billing) Regulations 2014 form the key piece of mandatory legislation that directly governs the operation of district heat networks in the UK. The overarching aim is to enable end users to be aware of how much energy they use, which in turn will help to manage, and ultimately reduce their consumption.

The regulations impose obligations on a range of organisations that are not typically considered to be heat suppliers – for example, Registered Providers, Local Authorities and Developers (as Landlords) and/or their management companies. However, all organisations that supply and charge for heating, cooling or hot water to a final customer through a district heating network (DHN) must comply with the obligations in the regulations. Failure to do so could result in a fine or, in some circumstances, a criminal penalty.

Broader legal considerations

A number of additional legal requirements will apply to any organisation involved in the procurement, installation, operation and/or maintenance of a district heating network. This can range from procurement and state aid compliance for public bodies, through to landlord consultation requirements, planning, third party consents, licences/permits for installation and maintenance, wayleaves and easements.

One common theme with district heating networks where a public or private concession agreement model is involved, is the length of term required for returns on investment. This is typically in excess of 20-25 years.

These long-term arrangements can increase the risk of unknown events occurring through the life of the project. They can also impact upon the cost of running the network, such as a change in law, increase in taxes or rates.

Where rates of returns are low, the investor or Energy Supply Company will seek to pass the increased costs on to the customer. However, customers will not want to be tied into a long-term arrangement, or pay considerably more for heat than through an alternative heat source.

Therefore, measures seeking to "future proof" a district heating scheme are important. This is likely to consist of a combination of technical, financial and legal techniques including, for example:

  • Ensuring a robust, efficient and flexible design at the outset
  • Making provision for sinking funds to deal with lifecycle, changes in technology and upgrade of energy generating equipment
  • Implementing consumer protection measures similar to other utility supplies
  • A fair and responsible apportionment of risks and identifying a supplier of last resort.

 

Nathan Bradberry, Partner at Bevan Brittan LLP will be presenting with Secure Meters at Bristol Heat on 27 September at Bristol M-Shed. To hear more on this subject, register online for your complimentary delegate pass.

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