Energy Metering – are all of your ducks in a row?

Ofgem Legislation

This month we’re exploring Ofgem legislation P272 and DCP161, how they may affect your business, what you need do to ensure you’re meeting the rules, and where you can benefit from them.

P272- Let’s Review the Facts

P272 is a piece of Ofgem legislation and is considered one of the biggest changes in the business electricity market since the deregulation of the energy sector.

The change is seen as being a key step towards a smarter and more energy efficient economy. It achieves this through changing the way all electricity suppliers settle electricity consumption for businesses; in particular resulting in sites being migrated from non-half hourly meters (NHH) to half hourly meters (HH), enabling suppliers to produce more accurate bills.

“Suppliers can produce more accurate bills”

When did this come into effect?

From 5th November 2015
If you have Profile Class 05-08 supply contracts up for renewal after this date must be migrated to HH (half hourly) Settlement within 45 days of renewal. (Profile Class can be found as the first two digits in the top line of the MPAN)
By 1st April 2017
All relevant metering systems must be migrated to the HH market by 1st April 2017 – although some supplies are only just falling out of contract still…

Does my business need to appoint a Data Collector?

The legislation was put on electricity suppliers to ensure that the new meters are in place. There was no onus to make sure:

  • That you are on the right tariff
  • That you are being efficient with your energy supply
  • That you are correctly predicting your energy usage
  • That you are with the best energy supplier

 

So, when considering external Data Collectors, rather than the supplier’s own panel collector (conflict of interest?), make an informed choice and do plenty of research, choose one that can provide you with an all-round impartial service including reviewing your energy usage, tariff and supplier.

“Are you on the right tariff?”

If you appoint UK Energy Manager (UKEM) as your Data Collector the process can be managed for you. as well as receiving energy planning advice from an experienced adviser.

The alternative is that your supplier can appoint a Data Collector from their panel of providers; the main drawback being that many such appointed providers have little experience and may not be able to provide you with that all-round service to meet your requirements.

DCP161- What is It?

DCP161 was introduced by Ofgem on 1st April 2018 as the next step in its drive for energy efficiency.

It is a change to the existing Distribution Connection and Use of System Agreement (DCUSA) where those with Half Hourly (HH) electricity meters, greatly increased following the implementation of P272, who exceed their agreed capacity from the energy supplier will now have to pay excess capacity charges.

What does this mean for your business?

If you have a half hourly (HH) meter installed, your energy consumption data is automatically sent to your energy supplier and they can see exactly what your consumption is and when it is being consumed. So the supplier can clearly see whether you are meeting the agreed timing and level of energy consumption.

“Before if a business exceeded their capacity level, only Standard Capacity rates applied”

Before the introduction of DCP161, if a business exceeded their capacity level, only the excess usage charge would apply (charged at the standard capacity rate). With the implementation of DCP161 there is now the ability for the suppliers to recover the higher cost of supplying that unexpected excess at a punitive rate of up to three times the standard rate.

This pushes the responsibility on managing capacity to the end user. Where they only had to pay standard rates for any excess, there was no incentive for businesses to review their usage. That has now changed, with higher bills being received from April, and there is a clear need for businesses to manage their usage and to ensure they have arranged it at the right capacity level.

Businesses also need to bear in mind the need to avoid setting the capacity level too high, you might avoid paying the penalties, but you’ll still have to pay for the expected demand.

Get help

Quite simply this need to balance your capacity level to avoid hefty fines and paying for unused capacity leads to the need to work with an expert. Our expertise in this area means we can help our clients achieve the best outcome. We’ll review your set capacity levels with your provider to ensure you’re not hit with high penalty rates and that you have the right energy contract and supplier for your business.

“You need to regularly review your capacity to avoid paying hefty fines”

Most of businesses are too busy with day to day tasks to think about their energy usage, and only really notice it once it starts to hit cash flow and the bottom line. Energy is a key part of any business’s planning; if you don’t have an in house expert you need to work with an expert such as UK Energy Management (UKEM). We will look at the points we have already covered but also take a holistic approach such as looking to see whether you can change how and when the business is consuming energy, increase energy efficiency, etc. to save the business money.

UK Energy Management deliver:

    • Expert impartial advice
    • Established and trusted suppliers and installers

 

“We can provide the expertise you need”

We will be your hub throughout the process utilising the relationships we have with other experts who may need to be involved. Your business can be energy efficient and cost effective with our help.

If you are unsure where you stand regarding this legislation, then contact us for an initial consultation on 020 3893 8108 or contactus@ukenergymanagers.com today.

What is the Minimum Energy Efficiency Standard?

In this month’s blog we’ll explore another of the key pieces of energy legislation that has recently been introduced. The Minimum Energy Efficiency Standard (MEES) which came into force from 1st April 2018.

What is the Minimum Energy Efficiency Standard?

MEES was introduced in March 2015, originating from the Energy Act 2011. This brought in the requirement for landlords of both domestic and non-domestic properties to have Energy Performance Certificates (EPC), allowing the tenants to clearly understand the energy efficiency of the property before they agree to enter into the lease.

The certificates provide an energy efficiency rating between A and G, with G being the worst performing. This rating system is easy to understand as it closely resembles existing energy ratings such as those used for domestic electrical products.

Why the new legislation?

The government is implementing the next step in the MEES process. This is to move from solely using the increased demand from tenants for greater energy efficiency and add to it legislation that uses law to drive improvement.

“18% of all commercial properties hold the lowest EPC ratings of F and G”

In considering how they might achieve these goals, the government can now see through EPC data that around 18% of all commercial properties hold the lowest EPC ratings of F and G. While Building Regulations will ensure that new properties are more energy efficient that won’t deal with older properties; that is where the new MEES regulations will have their effect.

What are the new standards?

From 1st April 2018
landlords of buildings within the scope of the MEES regulations must not renew existing tenancies or grant new tenancies if the building has less than the minimum energy performance certificate rating of E
After 1st April 2023
landlords must not continue to let any buildings which have an EPC rating of less than E.

So landlords of those 18% of commercial properties need to look at their planning for making the required changes now. Of course those whose properties are rated E or higher cannot be complacent. We can be sure that the way ratings are measured will continue to become more stringent and also that any premium in rental income currently being received for having a D or E rating will diminish as this becomes the market minimum.

What are the penalties?

These will be set by reference to the property’s rateable value. For properties let out for 3 months or less in breach of MEES standards the penalty will be 10% of the property’s rateable value, subject to a minimum of £5,000 and maximum of £50,000. After being let for 3 months or more in breach the penalty rises to 20%, with a minimum of £10,000 and maximum of £150,000.

So another set of potential penalties the government are using to motivate action……

“maximum penalty of £150,000”

Note that being in breach of the MEES regulations doesn’t mean that the lease becomes invalid.

What do you need to consider?

While the above standards (and penalties) appear clear and straight forward to understand there are, unsurprisingly, additional areas that need to be considered.

Does MEES apply to your building/tenancy?

Being certain of this is not necessarily easy and is the starting point of any advice that we give to our clients. A couple of examples of buildings which MEES doesn’t apply to are agricultural buildings with low energy usage and certain listed buildings.

Exempt buildings

Landlords can let buildings below the new minimum standards if any of the exemptions applies. These need to be registered on the government’s PRS Exemptions Register; the exemptions are:

  • The Golden Rule: where an independent assessor shows that all relevant energy efficiency improvements have been made to the property. Or that improvements that could be made would not pay for themselves through energy efficiencies within 7 years.
  • Devaluation: where an independent surveyor shows that making the relevant energy efficient improvements that could be made are likely to devalue the property’s market value by over 5%.
  • 3rd Party Consent: where consent from parties such as planning authorities, tenants or superior landlords has been refused or offered with conditions which the landlord cannot reasonably meet.

Again there is the need to gain expert opinion and proof to see if you are able to qualify for any of these exemptions and ensure that they are correctly registered. As these exemptions are only valid for 5 years there is the need to review eligibility for further exemptions and reapply in good time.

“there is the need to gain expert opinion”

Who pays?

As the third exemption suggests taking the steps needed to meet the MEES regulations will require the landlord to have a conversation with the other parties involved. You can imagine that the question at the top of everyone’s agenda will be “How much will the improvements cost and will I need to pay for them?”

To answer the question of who will be responsible for bearing the cost of the improvements the first step will be the terms of the lease and likely move onto the discussion of whether these are repairs or actual improvements to the property. We can help guide you in your approach to initiating these discussions and the negotiations that follow.

For those entering new leases there is a clear need to look at the benefit of including wording dealing with this area. Again we are happy to work with you and your solicitor through this process.

“How much will the improvements cost and will I need to pay for them?”

What do you need to do?

As you would have realised by now there is a clear need to understand what your position is, whether you need to take any actions, and then get begin planning how and when the actions are implemented.

Here at UK Energy Management we have the expertise to provide you with the clarity of what is required to comply with the MEES regulations and set out how to achieve them in a cost-efficient way. UK Energy Management deliver:

  • Expert impartial advice
  • ROI calculations
  • Established and trusted suppliers and installers

We will be your hub throughout the process utilising the relationships we have with other experts who may need to be involved.

So if you are unsure where you stand regarding MEES then contact us for an initial consultation on 020 3893 8108 and mailto:contactus@ukenergymanagers.com today.