Amendment of Heating Supply Decree and Heating Supply Regulation
On 22 May 2017 a bill to amend the Heating Supply Act was introduced in the Lower House of the Dutch Parliament. The amendments necessitate changes to the Heating Supply Decree (the "Decree") and the Heating Supply Regulation (the "Regulation") as well. An online public consultation is now being held on the proposed changes to the Decree and Regulation. You can participate in this consultation up to and including 31 August 2017.
The amendments to the Decree and Regulation elaborate on various provisions of the Heating Supply Act, with the aim of broadening the scope of the heating supply rules and bringing them more into line with the desired energy transition. Collective heating systems have great potential as a replacement for the current individual systems based on natural gas. The government therefore foresees growth in the number of heat networks. However, it is apparent from the evaluation of the Heating Supply Act and input from stakeholders, experts and three advisory reports that customers experience collective heating systems as insufficiently reliable, safe and affordable. Eliminating the existing bottlenecks is therefore important for gaining customer confidence and convincing professional parties to undertake new initiatives and make investments.
Many of the amendments now covered by the consultation relate to technical and other details. We therefore limits ourselves here to a selection of the most notable changes.
Currently, the Authority for Customers & Markets (ACM) calculates the maximum price that suppliers may charge customers based on the average fixed rates of the three largest gas suppliers. Under the new rules, the calculation will be based on the weighted average of the fixed rates of the ten largest Dutch gas suppliers (sections 3 and 4 of the Decree, as amended). It is assumed that this will give a truer picture of the average gas price and will usually be lower. Because the heating value of natural gas is expected to change in the future, the amended Decree (section 4(3)) provides that further rules for establishing its higher heating value will be set out in the amended Regulation. Consequently, it will be easier for the Minister of Economic Affairs to change this parameter in the future.
Heat can be delivered at various temperatures. This means that in some cases it can be used immediately by the customer to heat rooms and water and in other cases must be upgraded, at the customer's own expense, to heat which is suitable for these purposes. To take into account the customer's extra expense in the latter situation, the amended Decree (new section 1a and amended sections 3 and 4) will enable the ACM to set different maximum prices depending on the temperature at which the heat is delivered. The methods of setting these prices are worked out in greater detail in the amended Decree and amended Regulation.
The amended Heating Supply Act will regulate the one-time connection fee for connections to new heat networks and no longer only the fee for new connections to existing networks. The proposed section 5 of the amended Decree therefore distinguishes various types of connections, for each of which the ACM may set a maximum one-time connection fee. With respect to the disconnection of a customer from a heat network, section 5a of the amended Decree will introduce a new element in the rate rules. In the event of a temporary disconnection, the supplier's activities are more limited than in the case of a permanent termination and a lower rate will apply. In addition, under the amended Heating Supply Act the ACM will also be able to set different maximum fees for activating the "delivery sets" (afleversets). The amended Decree lays down rules on how the ACM must determine these fees depending on the type and additional features of the particular set (section 5b, as amended).
Regulation of cooling
The supply of cooling is not covered by the current Heating Supply Act. However, section 4a of the amended Heating Supply Decree lays down special rate regulation rules for heating systems that must also supply cooling in order to function effectively. More specifically, the maximum price that suppliers will be able to charge customers for the cooling component of such systems may not exceed a specific percentage – to be set by the ACM – of the maximum price that may be charged for the heating component. The aim is to prevent the overcharging of customers who are required to use heating/cooling systems – in other words, users who cannot, or not easily, switch to a different type of heating system. Once the new rules take effect a supplier may, in relation to new projects, elect to give customers a choice as to whether or not to use cooling. Since the use of cooling is then no longer mandatory, the supplier is not bound by the maximum price for the cooling component if they nevertheless choose to do so. For existing projects, the maximum price for the supply of cooling will remain unregulated for a period of up to 15 years from the date on which the project became operational.
Supplying heat at more than the maximum price
The amended Decree will make it possible, under strict conditions, for suppliers to offer heat at a rate in excess of the legal maximum rate, but this must be justified by the customer's personal situation (section 5c(1)). According to the amended Regulation, any such determination must be based on the most recent available information about the customer's use. Furthermore, the supplier must inform the customer clearly and in writing that the protection offered by the maximum price provision will not apply (section 5c(2)) and that a fixed-term contract will, after the term ends, be automatically converted into a contract to which the maximum price applies (section 5c(4)). In addition, the offer – like all offers – must provide transparent information about rates and conditions, including in any event information about (i) the duration of the contract, (ii) what will be supplied, (iii) the price, (iv) how to terminate the contract and (v) the consequences of expiration (section 5c(1) and (3)). More detailed rules on these subjects are set out in the amended Regulation (section 3a).
Information in permit holders' records
The amended Decree (section 6(2)) increases the reporting obligations of permit holders. They will soon be required to also report on the costs they have incurred and the price they charge customers for, among other things, heat cost allocators, cost allocation systems and temporary or permanent disconnections. The ACM needs this information to set maximum rates, which means that customers who fail to keep good track of this information will be spotted by the ACM immediately.
Information about sustainability in management reports
The government's aim is to achieve a climate-neutral energy supply. Against that background, it seeks to gain greater insight into the sustainability of heat networks. To this end, the amended Decree and amended Regulation further specify the supplier's obligation to include in its annual report reliable and clear information about the sustainability of the heat it supplies. The amended Decree (section 7(2)-(4)) states that the information provided must include, at a minimum, a description of the heat network as well as information about energy performance, CO2 performance and the energy balance. The amended Regulation provides further details about this obligation, in a new section 7a (1)-(3).
Compensation for interruptions of service
As a result of an amendment to the Regulation (section 4(1-2)), financial compensation in the event of an interruption of service – which starts at € 35 – will be payable after eight hours instead of four. For each succeeding four-hour period during which the interruption continues the supplier must pay affected customers € 20. Only in the event of an extreme situation, which requires that a number of cumulative conditions have been met, can a supplier or network manager invoke an exception.
The aim of this compensation scheme is to induce the supplier or network manager to resume supplying heat as soon as possible, but this of course only works in situations where the cause of the interruption is within its control. The new rules define the beginning and end of an interruption more precisely. Under the amended Regulation, an interruption starts when (i) a customer reports the interruption to the supplier or network manager or (ii) a supplier or network manager determines that there is an interruption in a heat network. An interruption ends when the heating supply is restored for all affected customers.
The amendments to the Heating Supply Act are given concrete effect through the changes to the Decree and Regulation. The impact of the new Heating Supply Act for the target group is therefore determined in large part by this secondary legislation. This makes it especially important to take advantage of the ongoing consultation procedure and provide input on these changes. You can do so through 31 August 2017 via this link (available in Dutch). You can see the proposed rules here (available in Dutch).