HEAT NETWORK BILLING AGENTS
Ginger Energy provide a complete outsource billing and customer services interface solution to building owners and managers of buildings which operate a heat network.
METERING AND BILLING SERVICES
- MAIN METER PROCUREMENT
- READ DATA RETRIVAL
- BILLING SERVICES
- ACCOUNT MANAGEMENT
- TENANT PAYMENTS
- FINANCIAL MANAGEMENT
- CUSTOMER SERVICES INTERFACE
- DEBT COLLECTION
Sometimes referred to as a communal heating, district heating, combined heat and power, or communal energy, is a centralised heat source, often located in a plant room of a building, which delivers heat and hot water ( and sometimes cooling ) to its occupiers through a series of insulated pipes.
There are currently about 14k heat networks delivering supply to half a million customers in the UK. About 12k of these are communal schemes serving multiple residences in one building and the remaining 2k are district schemes delivering heat to several separate buildings be they residential, commercial, industrial or a combination of all.
It is predicted that 5 million homes (24% of residential heat demand), will have heat supplied by heat networks by 2050.
The most noticeable difference when operating a block which has a heat network is that residents will no longer receive a direct supply from the traditional retail suppliers such as SSE, British Gas, EON, EDF, etc; Instead, the building’s owner is responsible for the mains supply, which supplies the entire block including INSIDE the apartments and as such is required to recoup these costs from the residents, along with other costs associated with running the heat network.
In effect, building owners or managers take on the responsibility of onward charging and invoicing residents. Additionally, they carry the risk of any unpaid invoices from residents and need to have robust processes in place for debt recovery. Unpaid invoices will cause cash flow issues risking insufficient funds to cover the mains supplier invoices, which could, if not resolved, jeopardise the main incoming supply to the building.
How can Ginger Energy help?
Ginger Energy provide a complete outsource billing and customer services interface for owners and managers of buildings who operate a heat network.
Ginger Energy work with many residential block managers and owners who outsource the heat network billing, customer service and debt collection responsibilities, so they can focus their attention on core services, safe in the knowledge that residents are being compliantly invoiced and given the very best in customer service support.
We can adopt existing infrastructure and take over responsibility or can start afresh on new developments.
Having worked with many data platforms we can provide impartial advice on the most appropriate solutions to meet the needs of each building and its occupiers.
Our on-boarding process includes a sponsored resident evening, giving a presentation on heat networks and providing opportunity to meet the Ginger Energy team and ask any questions. We find this minimises the disputes and creates a collaborative feel for all parties.
Our service can encompass:
- Read data retrieval
- Invoice production and delivery for heat (and any other utilities)
- Customer service help desk
- Banking and financial reconciliation
- Debt collection services
- Daily, weekly and monthly reporting as set by the client.
Essentially, we can support your business and the residents who occupy a heat network building. Residents will be compliantly invoiced and receive support services from Ginger Energy’s billing team.
Why heat networks, why now?
The UK has made a clear commitment to be net zero by 2050. Heat is currently responsible for 37% of UK carbon emissions and although since 1990 it is down 25%, there is still a long way to go to decarbonise the industry. Half of these heat emissions are from domestic buildings, which are mostly heated by traditional gas boilers. Large scale changes in heat generation and consumption are required nationally, as the UK government moves away from natural gas dependency and single residency heat production.
Reaching net zero will not only mean embracing low-carbon technologies such as heat pumps, fuel cells, energy from waste, and biomass, but also using our existing gas network in a new way, through heat networks.
The key benefits of a heat network are the ability to use thermal storage and local renewable resources at a larger scale, power co-generation potential leading to high efficiency, and heat source flexibility. Although many heat networks are currently supplied by natural gas, they are better equipped than single household boilers to make use of renewable fuels when they become available, and they provide the long term capability of using a national hydrogen or biogas network.
The UK government has actively encouraged change by injecting £320 million into heat schemes between 2017 and 2021. Developers are to be banned from installing domestic gas boilers from 2025, so alternatives such as heat pumps, hybrid systems, and hydrogen-ready boilers are being installed instead.
In the majority of cases, a residential block will have a communal heat supply located in the heart of the building in the plant room, which, through a series of insulated pipes, is delivered to its residents.
When is CHP not CHP?
Don’t you just love an acronym? NO! because in this sector it can be very confusing.
CHP – Combined Heat & Power. These are large scale electricity generators usually running on natural gas, which capture the heat created from the process that would normally go to waste. The heat is then used to produce hot water and, in a heat network, distributed to the local homes or businesses while the electricity goes into the national grid. The generator will usually be paid a fee for generation. This is often called co-generation and is much more efficient than separate electricity and heat generation.
CHP – Communal Heat Plant. These are the plant rooms often buried in the basement of a building which contain the heat generation equipment. The heat generation equipment could be CHP, commercial gas boilers, biomass, or heat pumps.
What do I need to know about looking after a building with a heat network?
The building owner or manager becomes the heat network operator and takes on the responsibility of complying with all relevant legislation. The Heat Network (Metering and Billing) Regulations 2014 (Amendment 2020) affect owners and managers of heat networks in the UK. More information can be found here https://www.legislation.gov.uk/uksi/2014/3120/made
The first part of the regulations, launched in 2014, requires heat network operators to complete a notification of data from all qualifying heat networks to notify the Secretary of State through The Office for Product Safety Standards (OPSS) which is part of The Office of Business Energy and Industrial strategy (BEIS). The process must be repeated every four years from the date of the original submission. Future notifications require additional information regarding building classes.
You can find a link the notification template here Heat networks notification template 2020
The second part came into effect 27 November 2020 and requires heat network operators to determine if they must install heat meters or heat cost allocators into their buildings.
To define which networks will be required to install these, BEIS has introduced three building classes:
• Viable – Those who must install heat meters
• Open – Those who must complete a viability exercise to determine if they are required to install meters or heat cost allocators
• Exempt – No action required
If buildings fall into the open class, heat network operators have until 27 November 2021 to complete a tool Full input cost-effectiveness tool to assess whether it is cost effective to install heat metering devices. If heat meter or heat cost allocator installation is required, installation of all required devices must be completed by 1 September 2022.
Most modern buildings have a Heat Interface Unit (HIU) inside each apartment and the HIU will usually include a heat meter that works just like a gas or electricity meter so that the more heat the resident extracts from the heat network, the higher the recorded number on the heat meter will be but there are some developments without heat meters or cost allocators and it is these buildings that the second, more recent regulatory requirements is aimed towards.
In addition to the above, and as you may expect, there is an ongoing requirement to maintain plant, metering or cost allocators and fix errors. Ensuring the plan is optimised and as such is efficient is also an important element, because unnecessary heat loss will result in high consumption charges which are passed onto residents.
Additionally, and importantly, there is the responsibility to produce compliant onward charging to residents and recover those charges.
In many cases, the building will receive gas to a single supply point, which will be used to create the heat. The building’s owner or manager will be responsible for payment of the gas, to the supplier and then can recover the charges from the residents for their share of consumption based on their heat meters recorded usage.
In effect, having a heat network, makes the building owner or manager, in their capacity as the heat network operator, a 2nd tier energy supplier.
To comply with The Heat Network (Metering and Billing) Regulations 2014 (Amendment 2020) you must, unless operating an exempt building, produce billing based on actual measured consumption.
This means obtaining readings, calculating consumption and associated transmission costs, producing invoicing, answering billing queries and recovering payments are all necessary when you operate a building with a heat network.
Most importantly it must be done compliantly, so the residents are protected.
If it sounds time consuming and onerous you are right, which is why many residential block managing agents, choose to outsource these responsibilities to a heat network billing agent.
What if the billing arrangements are written into the lease agreement with the tenant and I am unable to change them?
The Heat Network (Metering and billing) (Amendment) Regulations 2020 override the provisions of the lease; failure to comply with some parts of the Regulations constitutes a criminal offence.
Or put another way: the Regulations must be obeyed and insofar as a Lease conflicts with them it must be read as giving effect to the Regulations
Alert the freeholder and consult a legal expert to ensure the Lease is compliant and any the parties’ obligations under the law are clearly set out.
We recommend our trusted legal partner, https://www.catosolicitors.uk who are experts in this field.
What if my heat network does not have any heat meters or cost allocators?
In November 2020, BEIS released the second part of the regulations introducing three building classes. These classes allow heat network operators to define if they must install heat meters or heat cost allocators across their buildings.
If your building is exempt, you can continue to invoice on unmetered methods and do not have to install meters or cost allocators.
If heat meter or heat cost allocator installation is required, installation of all required devices must be completed by 1 September 2022 and you are required to produce invoicing in line with The Heat Network (Metering and billing) (Amendment 2020) Regulations.
The final thought
Building owners or managers should also consider that the liable party (leaseholder) may not live as a resident, but may instead sub-let. As such, there is no contractual obligation on the sub tenant to pay the consumption charges to the building owner or manager. In effect, leaving the leaseholder exposed to debts accumulated by their sub tenant and the building owner or manager having to ask for payment from a liable party that hasn’t drawn a supply.
This situation, if not managed correctly, can result in dissatisfied leaseholders and high debts for the building owner or manager. Particularly for blocks which have a high level of investors rather than owner-occupiers, it is vital to have a solution in place that can help to protect them as well as allow you as the block owner or managing agent, to control debt and reduce complaints.
Ginger Energy has developed a multi-level leaseholder and sub tenant billing platform and service for our communal heat schemes clients, ideal for schemes with a high volume of investor properties. Investors that might otherwise be put off purchasing a property in a heat network block.
For more information regarding our services please contact us as we would be delighted to talk.