The UK is facing an unprecedented energy crisis. With households and businesses struggling to cope with fluctuating energy prices, and with regulation and guidance constantly changing, it is more important than ever for landlords to keep up to date with evolving energy policy – both to ensure they receive any available support and comply with any obligations to their tenants.
Energy Bill Relief Scheme
Established by the Energy Prices Act 2022, the Energy Bill Relief Scheme (EBRS) provides a discount per kilowatt hour for all non-domestic customers on wholesale gas and electricity prices. This applies retrospectively to the period from 1 October 2022 – 31 March 2023.
All licenced suppliers are obliged to apply reductions directly to bills of all eligible non-domestic customers and the Government will compensate suppliers for the discounts they are passing on. To calculate the discount, the wholesale portion of the Unit price is compared to a Government supported price (£211 per megawatt hour (MWh) for electricity and £75 per MWh for gas).
For fixed contracts agreed on or after 1 December 2021, the discount will reflect the difference between the supported price and the wholesale reference price the day the contract was agreed. For variable, deemed and other contracts, the discount will reflect the difference between the supported price and the relevant wholesale price, subject to a maximum discount of £345 per MWh for electricity and £91 per MWh for gas.
Pass-through requirements
The Energy Prices Act 2022 introduced regulations that require intermediaries to pass on the EBRS to final customers. Landlords that benefit from the EBRS and charge residents (either directly or indirectly) for electricity or gas in common areas or heat supplied through a heat network must consider if this benefit should be passed through to final customers.
The Energy Bill Relief Scheme Pass-through Requirement (England and Wales and Scotland) Regulations 2022 require a "just and reasonable" amount of the EBRS benefit to be passed through to end users.
Residents must be notified in writing of specific information including:
- The amount of EBRS benefit that the landlord/intermediary has received;
- The amount that will be passed through to residents;
- Details of how such pass-through amount has been calculated and the basis on which it has been determined to be "just and reasonable".
Additional requirements for heat networks
As heat suppliers typically purchase energy required for the supply of heating or hot water through a commercial contract, heat networks will receive the benefit of the EBRS.
Under the Energy Bill Relief Scheme Pass-through Requirement (Heat Suppliers) (England and Wales and Scotland) Regulations 2022 (as amended) heat suppliers are required to:
- Submit an EBRS pass-through notification to the Office for Product Safety and Standards (OPSS) by 6 January 2023. This is separate and additional to the more comprehensive notification requirements under the Heat Network (Metering and Billing) Regulations 2014 (as amended), although the deadline for any new or updated notifications under these Regulations has been extended until 31 March 2023.
- Register with the consumer redress scheme administered by the Energy Ombudsman.
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 is still considered a "heat supplier" and subject to these obligations.
Upcoming changes
The EBRS was intended to be a temporary measure and the six-month scheme will come to an end on 31 March 2023. The Government has announced its replacement: the Energy Bill Discount Scheme (EBDS), which will run from 1 April 2023 – 31 March 2024.
Whilst the concept is similar to the EBRS, the level of support is significantly reduced. Eligible non-domestic customers will receive a discount only if wholesale prices exceed a specified threshold, subject to a maximum discount. Although at the date of this article, we are awaiting further details of the proposed regulations, it is likely the pass-through obligations will continue to be applicable for any EBDS benefit.
Next steps for landlords
With a flurry of new energy-related regulation, and increasing scrutiny from regulators and residents alike, don't get left behind:
- Assess your properties – Landlords will need to review their portfolio to consider their approach. How are residents charged for heat, gas and electricity? Are there properties with communal and/or district heating schemes? The calculation of the pass-through amount will depend on the specific details of the property arrangements and this may be a good opportunity to review the efficiency of existing energy arrangements.
- Communications with tenants – Alongside regulatory requirements, landlords must consider how the benefit is communicated to residents. Where it is "just and reasonable" for the Landlord to retain a proportion of the EBRS benefit, careful consideration must be given to how this is conveyed to residents, to minimise the risk of potential challenge.
- Review the regulatory position - The EBRS Notification form should have been submitted on or before 6 January 2023 (for existing heat suppliers). We recommend any existing landlords that are heat suppliers who have not submitted the required notification do as soon as possible. Landlords should also take this opportunity to review compliance with the Heat Network (Metering and Billing) Regulations 2014. Failure to comply with regulatory obligations could lead to enforcement action by the OPSS.
