Difficulties with Communal Heating Schemes

How communal heating schemes are causing headaches for housing associations

By Katherine Moore – Energy Consultant

Many housing associations have been dropped into the position of becoming energy suppliers to hundreds of tenants, with no management strategy in place to deal with all the administrative aspects, such as collecting meter reads, working out unit rates and actually producing and distributing invoices to tenants.
As utility billing is not a housing association’s area of expertise many of them have found it necessary to enter into contracts with an external metering and billing agent who will for a fee read the meters and issue bills to those households living in communal heating schemes.  It has to be made clear that the metering and billing agent is NOT an energy supplier.  The provision of supplies to each household remains the responsibility of the housing association. 

The housing association will retain responsibility for setting the tariffs (although most of them will rely on the assistance of the billing agent or an independent consultant to help with tariff setting) and depending on the type of contract in place, the housing association is also responsible for managing any debt incurred.  Debt management can be included in the metering and billing contract but a premium is charged for this service which most housing associations are unwilling or cannot afford to pay.
I understand my colleague at Origin Housing has been in contact with various housing associations in an effort to organise regular meetings and updates, purely for the management of utilities.  I have worked closely with Origin for nearly fifteen years, and have seen their utilities strategy and team develop over the years, to encompass a wide range of utilities management initiatives, including procurement, budgeting, maintenance of plant and meters and policymaking.  I myself have worked with the current utilities manager for several years.  Our latest project has been the development of one of Origin’s KPI’s, which can be summed up in two words – meter reads.  This is an area and a project I would like to cover in my next newsletter, as it is only slightly relevant here.

The difficulties for a housing association when managing schemes with communal heating systems can be as follows:   

  • A lack of understanding on the subject of utility management.  Most housing associations mop up utilities as part of their overall organisational budgets, but managing communal heating schemes cannot stack up if the costs of running the system are not known.  This can only be done by separating out the utility budget.
  • Type and number of meters installed.  It is not unheard of for a single scheme to have 3 or four different meters per property e.g. an electricity meter, a cold water meter, a hot water meter and a heat meter. All of these meters have to be read. 
  • Cold water could be measured by pulse.  The meter is set up to ‘pulse’ when a certain amount of water is used e.g. 1 cubic mere (m3).  If the meter is faulty, there is no way of knowing how many pulses occurred whilst it was non operational. 
  • Meters are usually read via a ‘Meter-Bus'(M-Bus) system.  This is a system which enables meter readings to be transmitted electronically.  Every household is wired to the M-Bus data reader which collects the readings on a regular basis (daily, weekly, monthly) which is then transmitted to the metering and billing agent who uses it to calculate the bills for each household.
  • M-Bus equipment can fail.
  • The meters have been installed using ‘daisy chain’ wiring.  This means that a number of flats (usually in numerical order) are linked together in the same way as you would put together a daisy chain.  If there is a break in the wiring , then it needs to be located and repaired but until then all the meters in the chain may continue to work, but the data reader cannot transmit the reads to the metering and billing agent.  Preferred installation is where every flat is wired individually to the data reader, but this is often not done as it increases capital costs during construction of the building.  Daisy-chaining is cheaper and quicker method of wiring.
  • Budget management. The housing association pays the associated bills for the scheme, but residents in turn may not pay their bills, this leads to most housing associations sitting on significant amounts of bad debt.  In addition arrears pursuance can be difficult and lengthy with limited avenues for recovering a household’s outstanding debt.

The difficulties for the household living in schemes are as follows:

  • The costs of having heat and/or hot water via a communal system are generally more expensive than being supplied by one of the big six utility companies.
  • The cost per unit (kWh) of heat the household pays is substantially higher than the cost per kWh that the housing association pays for the gas feeding the communal boiler.  
  • The housing association is not selling gas, but is usually selling heat or hot water and there are costs incurred in conversion of gas to heat.
  • These costs are only shared by the number of households in the scheme whereas British Gas or EDF can split their costs over 6 million + customers. 
  • The costs for the metering and billing agent services are shared by the households.
  • The customer cannot switch energy supplier.  The supplier is effectively the housing association. 
  • Until very recently, schemes were designed and built in such a way that prepayment meters could not be installed.  For households struggling with utility poverty and/or other debt problems having a prepayment meter assisted with managing limited finances.  The fact the prepayment meters cannot be installed means that utility costs become less of a priority and debt builds up quickly.

How we can help

In order to better help housing associations manage their communal heating systems and costs more effectively CostAdvice is now able to offer a specific tailored service around landlord supplies, including regular reporting, budget keeping and issuing actual invoices that have been validated and quality checked before being issued. 

We have the experience and the systems to be able to act as your billing and metering agent.  If you would like to see some sample reports or invoices, please do email me and I will be pleased to provide them.  The key is just to get in touch with us, we charge nothing for talking to us, and seeing what we can do to transform your communal heating schemes into clear, well run, and accurately billed, low maintenance properties.

Call me: 01246 252794

Email me: katherine.moore@costadvice.co.uk