With energy prices remaining high, Hannah Giebus reviews the Energy Bill Relief Scheme and looks at when landlords should pass through discounts to tenants.
Although spring is approaching, global energy prices remain difficult to predict. With a rush of new energy-related regulation and enhanced scrutiny from both regulators and customers, it is increasingly challenging for landlords to keep up-to-date.
The Energy Prices Act 2022 established a requirement that any energy price support provided by the government should be passed on to end users. This means landlords that benefit from the Energy Bill Relief Scheme and charge tenants (either directly or indirectly) for providing utilities such as heating, cooling, hot water or electricity must consider if this benefit should be passed through to final customers.
Energy Bill Relief Scheme
The EBRS is secondary legislation made pursuant to the 2022 Act and provides a discount for non-domestic customers on wholesale gas and electricity prices. This applies retrospectively to energy usage in the six-month period from October 2022 to March 2023.
Reductions will be automatically applied to the bills of eligible customers, with licensed suppliers compensated by the government. To calculate the pence per kilowatt hour discount, the wholesale unit price for gas or electricity is compared against a government-supported price of £211 per megawatt hour for electricity and £75 per MWh for gas, subject to a maximum discount.
Pass-through requirements – have you complied?
The 2022 Act introduced regulations that require intermediaries to pass on a “just and reasonable” amount of the EBRS discount and provide certain information to end users.
Landlords must take reasonable steps to notify tenants in writing that they have received support and how much they are intending to pass on (or, if the landlord decides it is just and reasonable to retain all or some of the benefit, how that has been calculated). This must be provided within 30 days of receipt of a billing update from the intermediary’s energy provider, setting out the reduced tariff and application of the discount.
In determining whether the pass-through amount is “just and reasonable”, existing energy arrangements need to be examined – predominantly how residents are charged for consumption. Where the landlord has absorbed the burden of increased energy costs (for example, if the tenant has been shielded from energy prices by an annual rent that is inclusive of energy costs), it is likely that the EBRS benefit can be retained.
This may be a good opportunity to review the efficiency of existing energy arrangements, particularly where separate service providers are responsible for managing billing arrangements with tenants. Where the landlord intends to retain a proportion of the EBRS benefit, careful consideration must be given to how this is communicated to tenants to minimise the risk of potential challenge.
Heat networks – additional obligations
The 2022 Act also introduced EBRS regulations with additional requirements for heat suppliers that provide heating or hot water to end users through a heat network. This includes to:
- Submit a notification to the Office for Product Safety and Standards – for all existing heat networks, this should have been submitted on or before 6 January 2023 and, in future, notifications should be submitted within 30 days of a heat network becoming operational.
- Register with the Energy Ombudsman redress scheme.
This is in addition to the wider requirements to pass through the EBRS benefit and provide prescribed information to heat network customers.
Government guidance highlights that even if a landlord has appointed a separate billing provider or charges residents for heat supply via service charge, the landlord could still be considered a “heat supplier” and remains subject to these obligations.
Turning up the heat on compliance
For some landlords, the EBRS notification requirements have highlighted gaps in compliance with the obligations under the Heat Network (Metering and Billing) Regulations 2014 (as amended), particularly the requirement to re-submit a notification to the OPSS every four years.
Enhanced scrutiny around heat networks is to be expected in the lead-up to the implementation of a regulatory market framework, likely to be introduced in 2024. The heat network pass-through requirements present an opportunity to review existing arrangements and ensure these are future-proofed for upcoming regulation.
Looking forwards
The EBRS was intended to be a temporary measure and the six-month scheme will come to an end on 31 March 2023. Its replacement, the Energy Bill Discount Scheme, will run for 12 months from 1 April 2023 and offers a reduced level of support. The support is subject to a maximum discount and will only be applied where wholesale prices exceed a specified threshold.
The cost of living crisis is forcing all businesses and households to take a closer look at their costs – making challenges from tenants more likely. Although the implemented timeframe is relatively short, the EBRS obligations should not be overlooked. In a volatile market, this presents an opportunity to review existing energy arrangements to ensure best value is achieved for both landlord and tenants.
Hannah Giebus is a solicitor in the energy & sustainability group at Trowers & Hamlins LLP
