3rd January 2023
The Department for Business, Energy & Industrial Strategy (BEIS) has recently updated its guidance and template letter on heat networks pass-through requirements in order to reflect the ratification of the Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (Amendment) Regulations 2022 (SI 2022/1280). The updates in question cover a number of additional requirements on heat suppliers. Walker Morris Infrastructure & Energy Partner, Ben Sheppard, explains.
Heat suppliers are responsible for supplying and charging for the supply of heating and/or hot water to premises through a heat network. Heat networks usually purchase energy to supply heat to buildings and their occupants through commercial contracts, and, as non-domestic consumers, will receive support from the Energy Bill Relief Scheme (“EBRS”).
The EBRS aims to ensure that non-domestic energy customers receive support on their consumption of energy. Under the EBRS, licenced energy suppliers are required to offer a discount per kilowatt hour on the wholesale gas and electricity element of prices to all non-domestic customers in the UK.
A key component of the EBRS is the requirement that intermediaries (within which heat suppliers are included) pass-through the benefit of subsidised energy prices to end users. Intermediaries are entities (whether individuals or organisations) that possess an electricity and/or gas contract, and pass on these costs to an end user. Examples include electric vehicle charge point operators, combined heat and power operators, landlords, and local authorities, to name a few.
The UK Government brought into force regulations in Great Britain on 1 November 2022, regulations in Northern Ireland on 5 November 2022, and further regulations on 7 December 2022 (“the Regulations”), introducing the following requirements on heat suppliers:
A test of reasonableness is also applied to the pass-through amount, so that if the heat supplier decides not to extend the full benefit it receives from the EBRS to end users, they are at least obligated to pass through a just and reasonable amount as calculated in accordance with the Regulations .
A non-domestic customer may, itself, be an intermediary (e.g. a landlord who receives and pays for a heat supply on behalf of its tenants). If so, the non-domestic customer would need to pass on the benefit it receives from the heat supplier to the ultimate end users.
The notice must include:
The various new heat networks pass-through Regulations and BEIS’ updated guidance are complex and wide-ranging. They require heat suppliers and intermediaries to take imminent legal, practical and procedural steps to ensure compliance. Walker Morris’ specialist, dedicated Infrastructure & Energy lawyers can help businesses to successfully navigate every step of the process. We can help in an advisory capacity, keeping you fully informed as to legal/regulatory requirements and undertaking contract- and policy/procedure- reviews to highlight where changes are needed. Where necessary, we can help with contractual negotiations and with drafting new contractual arrangements or variations as required. If/when complaints or queries do arise, we can provide strategic and dispute resolution advice and we can guide businesses through any investigations or complaints-handling processes.
Please contact Ben Sheppard for further information.
 For more information on how a heat supplier can ensure that a pass-through amount is reasonable, please visit the Government website.