Policy paper

Energy Bills Discount Scheme heat network supplier guidance

Updated 31 January 2024

This was published under the 2022 to 2024 Sunak Conservative government

Guidance on EBDS requirements for heat networks in the UK – Energy Bills Discount Scheme

Overview

Heat networks usually purchase energy (gas or electricity) to produce heat through commercial contracts. This heat is then supplied to customers on heat networks. This means that domestic heat network customers will receive support from the Energy Bill Relief Scheme (EBRS) (for energy use between 1 October 2022 – 31 March 2023) and the Energy Bills Discount Scheme (EBDS) (for energy use between 1 April 2023 – 31 March 2024).

The EBDS aims to ensure that domestic customers on heat networks do not face disproportionately higher heat and hot water bills when compared to customers in equivalent households who are supported by the Energy Price Guarantee (EPG). The scheme will support the wholesale element of a heat network’s energy tariff, up to the point that the Minimum Supply Price (MSP) is achieved. The Minimum Supply Prices will be set as: 

For energy supplied prior to 1 February 2024, and for Fixed contracts entered into before 1 February 2024: 

• Electricity - £340 per MWh 
• Gas - £78.3 per MWh 

For energy supplied on or after 1 February 2024, including Fixed contracts entered into on or after 1 February 2024:  

• Electricity - £28.24p/kWh 
• Gas - £6.50p/kWh

The government brought into force the Energy Bills Discount Scheme Regulations 2023 (GB), the Energy Bills Discount Scheme Regulations 2023 (NI) and the Energy Bills Discount Scheme Pass-through Requirement (Heat Suppliers) Regulations 2023 (GB and NI) on 26 April 2023. These Regulations introduced the following requirements on eligible heat suppliers that have heat networks with at least one domestic end user:

• to apply for a specific higher heat network EBDS discount rate
• if they receive a discount under EBDS, to pass on the benefit of the higher heat network EBDS discount rate to end consumers
• to provide consumers with information on how the ‘pass-through’ will be effected

For heat suppliers in Great Britain

To register for the redress scheme, administered by the Energy Ombudsman, which will allow domestic and microbusiness consumers on heat networks to raise a complaint if they have not received the benefit of the EBDS.

From 26 April 2023, heat suppliers subject to consumer complaints will no longer need to pay the Ombudsman a case fee to cover the costs of investigating a complaint.

More information can be found on the Energy Ombudsman’s website. Heat suppliers can also contact [email protected] for more information on the redress scheme.

For heat suppliers in Northern Ireland

Domestic and microbusiness consumers on heat networks will be able to raise a complaint with the General Consumer Council for Northern Ireland (CCNI).

More information can be found on the CCNI website. Consumers can contact the CCNI at [email protected].

Pass-through requirements

The government also brought into force the Energy Bills Discount Scheme Pass-through Requirement Regulations 2023 on 26 April 2023. These Regulations introduced the following requirements on eligible heat suppliers that have heat networks with only non-domestic end users:

• if they receive a discount under EBDS, to pass on the benefit of the baseline EBDS discount rate to end consumers on eligible heat networks that supply only non-domestic end users

• to provide consumers with information on how the ‘pass-through’ will be effected - further guidance on baseline pass-through is available

Additional guidance

For heat networks that utilise Combined Heat and Power (CHP), accompanying legal guidance can be found in (Chapter 2 of Part 4 – Arrangements for Customer to deliver electricity to the grid (GB and NI Schemes)). The CHP guidance should be read in conjunction with this guidance.

For heat networks that consume gas (that is, natural gas or biomethane) or electricity supplied by wire or pipe from a license-exempt supplier, for which they pay a price that is pegged to wholesale energy prices (eligible energy), refer to the non standard cases guidance document.

A separate Energy and Trade Intensive Industries (ETII) discount will provide a higher level of support to businesses and organisations in eligible sectors. In circumstances where eligible ETIIs receive their heating or hot water through an eligible heat network, the ETII will receive the higher heat network EBDS discount rate, not the ETII discount rate.

Reference to the “EBDS” or “regulations” throughout the rest of this guidance means the Energy Bills Discount Scheme Regulations 2023 (GB), the Energy Bills Discount Scheme Regulations 2023 (NI) and the Energy Bills Discount Scheme Pass-through Requirement (Heat Suppliers) Regulations 2023 (GB and NI).

Heat suppliers

The heat supplier is the body responsible for supplying and charging for the supply of heating and/or hot water to premises supplied by the heat network. In most cases, this will be the body that holds a heat supply contract or equivalent with the consumer.

The following examples will help illustrate who the heat supplier is:

A housing association has a heat supply contract with its residents, stating that it is responsible for the supply of heat. The housing association contracts out the metering and billing services to a billing agent. The housing association is still classed as the heat supplier under these Regulations as it has a contract to supply heat network customers with heating and hot water.

A landlord charges its residents for the supply of heat via a service charge. The landlord enters into a contract with an energy service company (or management company), for the purchase of energy and to calculate the heat billing on the service charge. The landlord is still classed as the heat supplier under these Regulations as it holds the contract with the heat network customers to supply heating and hot water, via the leasehold and tenancy agreement which also holds details of the service charge arrangements.

Under the Energy Bills Discount Scheme the heat supplier is responsible for:

• submitting an application for the higher heat network EBDS rate through the EBDS application portal
• meeting requirements to pass on the benefit of the EBDS to end users for energy used between 1 April 2023 to 31 March 2024
• if it has not already done so, registering for the Energy Ombudsman’s redress scheme should a complaint be made by a consumer

End users

Consumers on the heat network who purchase heating and hot water for their own consumption (‘heat network consumers’) are referred to as end users. These consumers are the ultimate beneficiaries of the benefit of EBDS. Heat suppliers should pass this benefit on to them. Ordinarily, consumers do not need to do anything to receive the benefit.

However, if they do not receive the benefit or their heat supplier does not otherwise comply with the regulatory requirements, domestic and microbusiness end users will be able to make a complaint and will be able to have recourse to civil proceedings (see ‘Actions a heat network consumer can take if their heat supplier does not comply with the requirements’ section for more information).

There will be circumstances where the intermediary (the heat supplier) is also an end user (a heat network consumer), for example where a building owner responsible for the supply of heat to residents in that building also lives in that building. In such circumstances, that person has all the obligations of heat suppliers and all the rights of heat network consumers as set out in the regulations.

Requirements on all eligible heat suppliers, whether benefiting from the EBDS or not

Heat suppliers will be eligible for the higher level of support if their heat network:

• meets the definition of a heat network as defined in the EBDS Regulations

• is supplied gas or electricity by a licensed supplier for the purposes of generating heat (this criterion can also be met where there is a “chain” of energy supply – for example, where a heat supplier served by a licensed energy supplier provides bulk heat to a residential building landlord who in turn acts as the heat supplier to residents)

• serves one or more domestic end consumers

Where these eligibility criteria are met, the heat supplier must comply with the application requirement.

Application requirement

These Regulations require all eligible heat suppliers with at least one domestic customer to apply for a specific higher heat network EBDS rate. This applies even if a heat supplier has secured prices cheaper than the EBDS supported variable fuel cost.

Heat suppliers will have until 25 July 2023, 90 days from the scheme introduction date (26 April) to apply for the higher support. If a heat network they supply becomes eligible after the scheme opening date they will have 90 days to apply from the date at which that heat network becomes eligible (or, if later, from the date on which they became aware of its eligibility).

Eligible heat suppliers that have already submitted notifications to OPSS under the Heat Network (Metering and Billing) Regulations 2014 are still required to register for the Energy Bills Discount Scheme Heat Network Support. Doing this will pause the requirement to submit the more comprehensive notification under the Heat Network (Metering and Billing) Regulations 2014 until 25 July 2023. From 25 July 2023, the requirement to notify will apply again.

The Department for Energy Security and Net Zero (DESNZ) has built a digital system to manage the application process. The system is used for:

• applicants to check their eligibility
• applicants to apply
• applicants to upload documentation needed for evidence

Note that applicant information may be shared between organisations. A privacy notice, setting out how personal data will be handled, has been published on the application website.

Information required when applying

For heat suppliers with more than 10 heat networks, you can use the bulk upload application.

Applications cannot be saved and restarted later. Therefore, before starting the application process, applicants may find it helpful to have the following information easily accessible to them.

1. Details of the heat supplier:

• registered name (if you have previously submitted a Heat Network Metering and Billing notification, use the same details if possible)
• contact details (including email address and phone number)
• address (if you have previously submitted a Heat Network Metering and Billing notification, use the same details if possible)
• company registration number (if they have one)

2. Details of the individual completing the application:

• name
• contact details

3. Details of the heat network:

• name (if you have previously submitted a Heat Network Metering and Billing notification, use the same details if possible - if you have not submitted a notification, use the building name where possible)
• postcode of the heat network’s primary energy centre (if you have previously submitted a Heat Network Metering and Billing notification, use the same details if possible)
• the type/s of energy used to power the heat network (gas, electricity, or both – this can include energy used in generation of heat as well as in distribution of heat around the system such as pumps)

4. Details of the person(s) providing energy to the applicant

• name
• whether that person is a licensed supplier
• details of any intermediaries such as landlords if bills are not paid directly to an energy supplier
• the gas or electricity meter point numbers (MPRN or MPAN) for the meters supplying the energy centre, found on bills from suppliers - this is not the same as meter readings or meter serial numbers
• whether your meters measure anything else other than heat supply

Applicants will also need to provide a declaration letter stating that all the information in the application is accurate to the best of their knowledge signed by one of the following:

• a named director of the heat supplier
• (if not a company) a person whose authority in relation to the organisation is most akin to that of a director of a company
• (if not a company) the heat supplier themself if a person

Applicants may need to provide further evidence that the heat network for which they are applying has domestic customers. This will be the case where the information you provide as part of your application does not satisfy initial checks.

You may be asked to upload documents that prove a contractual relationship between the heat supplier and its domestic customers.

This could include:

• a domestic heat supply contract
• residential agreements with provision of heat or hot water
• metering and billing agreements

You will only need to upload pages that show the name of the heat network and that it provides heat or hot water to domestic customers. An organisation may only submit documents that are representative of their current circumstances.

If you are unable to provide documents which include the name of the heat network, you should provide a diagram or explanation. This needs to show how the heat network is related to the named entity along with evidence of this relationship. This may include, but is not limited to, contracts and invoices.

You can also provide any other evidence to support your application, for example, energy bills showing 5% VAT and the supply address.

Bulk upload applications for heat suppliers with more than 10 networks

A separate application process has been introduced for heat suppliers who have more than 10 heat networks. A bulk upload template has been developed to allow these heat suppliers to apply for multiple heat networks within a single application.

If you are a heat supplier that supplies more than 10 heat networks you can use this bulk upload template.  You may instead apply for each of you networks individually through the application portal if you prefer. We will accept applications submitted by either method.

How does the bulk upload template work?

Heat suppliers should download the excel template, fill it in and send it to [email protected] with a signed  declaration letter, complete with witness signature. Heat suppliers only need to submit one declaration letter alongside their bulk upload template, confirming the truth and accuracy of the information pertaining to all heat networks within the template.

Heat suppliers do not need to submit additional evidence alongside this but may be asked for it if any heat networks within the application do not pass initial verification checks. To maximise the chance of the initial verification being successful, please use the same details that have been submitted as part of your most recent Metering and Billing notification.

If the application is then successful, heat suppliers will receive individual qualifying heat supplier certificates for each eligible heat network.

After a heat supplier has applied for support

Once the applicant has successfully submitted an application it will be reviewed and a decision will be made on eligibility for the scheme. Once a decision has been made DESNZ will inform the applicant of their eligibility status via email.

If the information you provide as part of your application does not satisfy the initial checks, you will be required to submit further evidence. If you are unable to provide sufficient evidence of eligibility your application will not be accepted and you will be notified of this outcome.

Confirmation of eligibility

If the applicant is deemed eligible they will be issued with a Qualifying Heat Supplier certificate to confirm that they qualify for the higher heat network EBDS rate. The certificate will display the:

• heat supplier’s application reference number
• heat supplier’s name
• heat supplier’s company registration number (if applicable)
• heat supplier’s contact details
• heat network name
• certificate number
• certification date
• date the application was submitted

A heat supplier will receive a separate Qualifying Heat Supplier certificate for each eligible heat network they have applied for. If deemed eligible for QHS support the certificate (and the entitlement to the higher heat network EBDS support rate) will be backdated to the latter of:

• commencement of the scheme
• commencement date of eligible activity

The covering email sent with the certificate will set out any next steps required and where to obtain further support. If the heat supplier is supplied directly by a licensed supplier, they will have provided details of their energy supplier and applicable meter point references during their application. DESNZ will pass these to the relevant supplier.

This will help energy suppliers identify which heat networks will need to receive the higher heat network EBDS rate. If an energy supplier receives a certificate, they must inform the relevant heat supplier within 5 business days.

Heat suppliers must retain this certificate as evidence of their eligibility for 5 years from the end of the scheme.

In some circumstances a heat supplier is not supplied directly by a licensed supplier and there is one or more intermediaries between the eligible heat supplier and the licensed energy supplier. For example, some eligible heat networks receive their heating through wider district heat networks. In these circumstances, and where the eligible heat supplier does not know who their supplier is they must pass their certificate to the intermediary that is providing them energy and the certificate must then be passed up the chain of intermediaries until it reaches the licensed energy supplier who originally supplies the energy to the heat supplier. If the heat supplier’s immediate intermediary cannot be contacted, the heat supplier may be asked to send their certificate to the energy supplier directly.

Changes in circumstance

Heat suppliers must declare any change in circumstances that might result in loss of eligibility or any other changes to the information they submitted in their application by contacting the EBDS customer support team. If a heat supplier has made a mistake on their application they must also inform DESNZ.

Email: [email protected]
Telephone: 030 0400 5251
Monday to Friday, 9am to 5pm
Find out about call charges

These circumstances may include, but are not limited to:

• the heat network on their certificate ceases to supply domestic end users
• the heat network on the certificate switches from gas supply to biomass
• the heat network on their certificate switches from licensed to non-licensed energy supply
• if the heat supplier ceases to operate the heat network on the certificate
• adding or changing meter numbers
• change of supplier
• change of energy supply from gas to electricity or vice versa
• change in organisation or business type
• change of registered business address
• change in application contact person
• change in application contact person email or telephone number
• change of Heat Supplier postcode

Heat suppliers will need to make a new application if a heat network becomes eligible. These circumstances may include, but are not limited to:

• beginning to supply a new heat network that has at least one domestic end user
• a heat network solely non-domestic serving acquires at least one domestic end user
• a heat network switches from Energy from Waste heat generation to gas supply

Heat suppliers will also need to reapply if the heat network on the certificate changes its name.

Fraud and error

The government will not accept deliberate manipulation and fraud. All declarations and evidence will be subject to enforcement action that would support the scheme and therefore any information submitted by these parties would be within the scope of government powers, under the EBDS regulations, to gather information for audit and compliance purposes. Those engaging in fraud or gaming the regime would be subject to penalties and support being withdrawn or clawed back where relevant, if their activities are subsequently discovered.

Should applicants be found in breach of their duties they will be subject to civil sanctions and penalties set out within the EBDS regulations. This will take the form of fines as well as the reduction of the discount. The necessary appeals and dispute resolutions processes that will be set out in rules.

Enforcement

If an eligible heat supplier does not submit an application

The Office of Product Safety and Standards (OPSS) will enforce the EBDS application requirement in the UK. OPSS’ functions include maintaining a UK-wide heat supplier database (which is not publicly accessible), pursuing outstanding application submissions and undertaking enforcement action in response to non-compliance. OPSS will undertake its functions in line with its published Enforcement Policy and standards of service, which will be updated to reflect these Regulations.

If a heat supplier fails to submit a valid application, OPSS will engage with them to bring them into compliance. OPSS has access to a range of enforcement powers to support this process where necessary. This includes an Information Notice, likely used where OPSS suspects that an entity is operating as a heat supplier but has not applied. Typically, those subject to an Information Notice will have 10 working days to respond, providing information to help confirm whether they act as a heat supplier. Anyone in receipt of an Information Notice should contact OPSS to ensure they are able to respond effectively and in a timely manner.

Should a heat supplier fail to respond to this Information Notice, the OPSS may instigate enforcement actions to ensure:

• information is provided to OPSS clarifying whether they are in fact operating as a heat supplier without applying

• an application is made for the Energy Bills Discount Scheme (EBDS)

Should a heat supplier fail to undertake corrective action further enforcement action may be taken and a heat supplier may face a penalty notice(s) of up to £5,000.

OPSS may instigate enforcement actions against a heat supplier, with no prior Information Notice. This would happen when OPSS has reasonable grounds to believe you are a heat supplier but have not applied for the higher heat network EBDS rate.

Heat supplier pass-through requirement

In the Energy Prices Act 2022, the government established a requirement that energy price support is passed on to end users. This means that intermediaries that have been provided with support from the Energy Bills Discount Scheme are required to pass the support obtained to the end users who are the intended beneficiaries.

Relevant intermediaries are any individual or organisation that holds an electricity and/or gas contract and passes on the costs of the energy supplied under this contract to an end user of the energy supplied (or heating or hot water supplied using that energy).

All qualifying heat suppliers are intermediaries. Heat supplier intermediaries therefore may include:

• landlords
• social housing providers
• residential building managers
• local authorities (for housing associations)

It is possible for an intermediary to also be an end user. For example, a landlord who owns and supplies heating or hot water to a block of flats and lives in one of them will be both an end user and an intermediary to the tenants of the other flats.

Determining if heat suppliers have been provided with the EBDS benefit

A heat supplier has been “provided with the scheme benefit” when their energy provider has both:

1) applied the discount required

2) informed the heat supplier that it is now benefitting from the relevant scheme

There are links to the relevant regulations at the end of this page.

For most heat suppliers (and other business customers), information about the EBDS discount on their energy costs will come as part of their regular energy bills from their energy provider. Where it is not provided as part of the bill, the EBDS Regulations require that it be provided within 15 calendar days of issuing the bill.

Energy suppliers are under no obligation to update their customers of the discount outside of regular billing periods. Therefore, if a heat supplier is only billed quarterly, they will not be informed of the EBDS impact on their charges until this scheduled quarterly bill is issued.

It is therefore difficult to specify a precise date by which every heat supplier eligible for EBDS relief will have been notified of the discount applied to its energy charges, and therefore be deemed to have been provided with the ‘scheme benefit’.

The EBDS scheme applies to energy usage between 1 April 2023 and 31 March 2024.

Supplier redetermination events

If the proportion of energy supplied under a supply contract that attracts the higher heat network EBDS rate changes significantly during a billing period, a supply redetermination event may occur. A supply redetermination event occurs when an energy supplier recalculates their bills to account for this change. Usually, this will occur every three months if needed. In some cases where a change has a very significant impact an energy supplier will need to recalculate their bills within a month.

Heat suppliers will need to ensure supplier redetermination events are reflected in the discount amount passed on to end users.

Obligations on heat suppliers

Once a heat supplier has been notified by its energy supplier, as described above, that it will benefit from the EBDS, the heat supplier must provide its customers with the notice outlined in the section ‘The information which a heat supplier needs to provide to its consumers’. This must be done within 30 days of the heat supplier being provided with the EBDS benefit by its energy provider.

The requirements on a heat supplier benefiting from the EBDS – initial notice and effecting the pass-through

A heat supplier must notify their consumers if it has benefitted from the EBDS.

It is the responsibility of the heat supplier to notify each of its consumers in writing that the heat supplier has been provided with a benefit under the EBDS. Communication methods can include but are not limited to:

• letter
• email
• text or instant message
• a newsletter

The notice must be given to consumers within 30 days of the EBDS benefit being provided to the heat supplier.

In this context, benefitting from the EBDS means the heat supplier has received a billing update from their energy provider, setting out the reduced tariff they are paying. The 30 days starts from the first day the business receives this bill, not the date they are in receipt of the new tariff, as stated by the billing update. See the section ‘Determining if heat suppliers have been provided with the EBDS’ for more details.

The notice must set out:

• the amount of EBDS benefit provided to the heat supplier

• the period of time to which the benefit relates

• a summary of the requirements to pass on the benefit to consumers

• when and how the amount will be provided to the heat network consumer

• details of how the consumer may resolve any dispute it has with the heat supplier about how it has complied with the requirement to pass on the benefit, which may involve the heat supplier sharing its complaints handling procedure

• that a consumer can make a complaint to the Energy Ombudsman (in GB) or the General Consumer Council for Northern Ireland (in NI) on the grounds set out in the section below

• that a consumer can recover the pass-through amount as a civil debt if the heat supplier does not provide the consumer with that amount

We have published an example letter to comply with this notice requirement. This is an illustrative example of how a heat supplier can provide a notice to its consumers. Heat suppliers are not required to use this letter template or use this method of communication (see above for examples of acceptable forms of communication).

In circumstances where a heat supplier is charging through a ‘price-promise’ linked to domestic electricity and gas, and therefore charging for heat at prices lower than would have been the case had it simply charged at an amount to recover commercial energy prices, they will not be required to make any further reductions to consumers’ heat charges following receipt of the EBDS. However, these suppliers will still have to submit an application.

How heat suppliers must pass on benefit on to its customers

Under the Energy Prices Act 2022, the government established a requirement that any energy price support is passed on to end users, as the intended beneficiaries of the relevant schemes.

As with the EBRS, the Regulations require a heat supplier which has benefitted from the EBDS to pass that benefit on to heat network consumers in a just and reasonable way. The heat supplier must ensure the benefit is passed on as soon as reasonably practicable. This could be done by showing the reduction in a consumer’s bill resulting from the EBDS. The supplier must do this as soon as reasonably practicable and no later than the date the next bill is issued, unless this fell within 30 days of the supplier benefitting from the EBDS.

We recognise that some heat suppliers bill on an annual basis, such as a social landlord that sets a fixed service charge at the start of each financial year. Where possible, heat suppliers in this scenario should take all reasonable steps to recalculate the heating and hot water charge to take account of EBDS and issue a new bill.

Where this is not possible, heat suppliers should apply the savings as a rebate to the following years’ service charge and take this factor into account should heat network customers experience financial difficulties in the intervening period.

In this context, benefitting from the EBDS means the heat supplier has received a billing update from its energy supplier setting out the reduced energy price which the heat supplier is paying. The 30 days starts from the first day the heat supplier receives this bill, not the date it has calculated the new heat price for the end user. See the section ‘ Heat supplier pass-through requirement’ for more details.

The Regulations require a heat supplier to provide either the full benefit it receives from the EBDS, or if less than the full benefit, a just and reasonable pass-through amount calculated in accordance with the Regulations. See the section ‘Determining if heat suppliers have been provided with the EBDS’ for more details on receiving the EBDS as a heat supplier.

This section sets out how a heat supplier can ensure that a pass-through amount is just and reasonable. In circumstances where a supplier is, before the implementation of the EBRS, charging through a ‘price-promise’ linked to domestic electricity and gas, and therefore charging for heat at prices lower than would have been the case had it simply charged at an amount to recover commercial energy prices, then this should be communicated to its heat consumers. An example (c) is given below.

The heat supplier must provide consumers with evidence showing what factors it has taken into account in determining that the pass-through amount was just and reasonable. The factors which a heat supplier can take into account are:

• the amount which the heat supplier paid for the energy which was subject to price reductions under the EBDS

• any other costs which the heat supplier incurred in supplying heating and hot water during the period it benefits from the EBDS - this includes costs from distributional heat losses, efficiency of generation, operational, maintenance, and capital costs, and set-up and operation costs of effecting the EBRS pass-through

• any losses which the heat supplier has incurred as a result of the cost of purchasing energy exceeding the amount charged to consumers for the supply of heating and hot water during the period for which the scheme benefit was provided (the EBDS will apply to existing fixed price gas and electricity contracts where the price was agreed on or after 1 December 2021)

In addition, the regulations specify that a pass-through amount is just and reasonable if it is calculated on the same basis used by the heat supplier when calculating charges to the consumer when it was provided with the EBDS benefit. Specifically, if when it was provided with the scheme benefit, the heat supplier was calculating the price of heat charged to the consumer based on:

• the consumer’s heating and hot water consumption
• an amount which represents a proportion of the cost incurred by the heat supplier when purchasing the energy needed to supply heating and hot water
• the heat supplier’s calculation of the pass-through amount for each consumer must reflect this approach

To provide further clarity, we have set out examples for (A) and (B) below for how this would work in practice. In addition, example (C) further explains the price-promise scenario described above.

Example (A)

Scenario: A heat supplier supplies heating and hot water to five consumers on a district heat network. Each consumer pays a standalone heat tariff which consists of a variable charge based on consumption and a standing charge, meaning that each consumer is charged a different price for heat.

The heat supplier’s energy supply contract, which commenced in August 2022, now benefits from the EBDS. This means that the supplier is now paying 20% less for energy than it was under its previous energy supply contract.

Just and reasonable test: Having taken into account other factors, such as wider costs associated with supplying heat and hot water, the heat supplier estimates the overall variable cost of supplying heat has reduced by 15% due to the 20% EBDS discount. The heat supplier applies a 15% reduction on the variable charge of each consumer’s bill.

Result: Each consumer receives an equal percentage reduction in their variable charge in November, with consumers who consume more and therefore pay more receiving a larger reduction in £ terms. Within 30 days of being provided with the EBDS benefit (or on 26 May 2023, whichever is later), the heat supplier issues a bill, explaining to each consumer the pass-through amount they will receive and how the heat supplier determined that this amount is just and reasonable. The heat supplier also explains details of how the consumer can resolve any disputes, including the grounds on which the consumer may raise a complaint with the Energy Ombudsman or General Consumer Council for Northern Ireland.

Example (B)

Scenario: A landlord is the heat supplier to its block of ten flats which is connected to a communal heat network in the building basement. When the landlord purchases energy, they then recover the cost of that energy from the ten leaseholders, with the cost split equally across each leaseholder (meaning there is no variation in charge based on consumption, size of dwelling, or number of occupants). Prior to the EBDS, each household had been paying the landlord £400 per year for heating and hot water as part of ‘all inclusive’ rent.

The landlord’s energy supply contract, which commenced in April 2022, now benefits from the EBDS. This means that the supplier is now paying 30% less for energy than it was under its previous energy supply contract.

Just and reasonable test: Having taken into account other factors, such as wider costs associated with supplying heat and hot water, the landlord believes the overall cost to supply heat has reduced by 25% due to the 30% gas discount. A 25% reduction to the heating charge is made to reflect the reduction in heating costs.

Result: Each leaseholder receives a £100 per year reduction for the price of heating and hot water for the duration of the EBDS. Within 30 days of receiving the EBDS benefit, the landlord issues a new bill to each leaseholder, explaining the pass-through amount they will receive and how they determined that this amount is just and reasonable. The landlord also explains details of how the consumer can resolve any disputes, including the grounds on which the consumer may raise a complaint with the Energy Ombudsman or General Consumer Council for Northern Ireland.

If these scenarios do not apply, the heat supplier must apply the best available information to allocate the benefit of the EBDS amongst its consumers. The supplier can take into account the basis on which it was allocating charges to consumers at the time it received the benefit from the EBDS.

Example (C): heat supplier has already lowered prices through a ‘price promise’

Scenario: A heat supplier has linked its heat prices to domestic electricity and gas rates in a way that reduces the heat price for the consumer compared to a scenario where the heat supplier charged on a ‘cost recovery’ basis to recover the cost of commercial energy prices plus a margin for their operational costs.

The heat supplier purchases energy through commercial contracts but is committed to charging its consumers for heating and hot water at 7.2p/kWh via a ‘price-promise’. This commitment is made despite the price per kWh of heat being lower than the cost to supply heat.

Just and reasonable test: Having taken into account other factors, such as the loss it is incurring and wider costs associated with supplying heat and hot water, the supplier decides to continue charging for heat at 7.2p/kWh and communicates to its consumers this rate in comparison to the best estimate of what consumers would have paid (the ‘pass-through amount’). Making no reduction in prices is justified if prices charged are equal to, or below, the cost to supply heat.

Result: Each consumer is informed that the heat supplier will continue to charge at 7.2p/kWh. This includes a ‘best-effort’ explanation of this rate as a discount to what the consumers would have been charged without the EBRS and how they determined that this discount is just and reasonable. The heat supplier also explains details of how the consumer can resolve any disputes, including the grounds on which the consumer may raise a complaint with the Energy Ombudsman or General Consumer Council for Northern Ireland.

The form in which the EBDS benefit pass-through should be provided to heat network consumers

The pass-through of the EBDS benefit to consumers can be effected in the following ways:

• application of a credit in the next heat bill provided by the heat supplier to the heat network consumer

• a payment in cash or by any other means, including a bank transfer

• reducing the fixed and variable charges in the next bill provided to the end user

• adjusting the amount of money taken as part of a direct debit or standing order

• a reduction in debt level that the consumer owes to the heat supplier at the time the heat supplier receives the EBDS

• a combination of the methods set out above

The requirement to pass on the benefit of the EBDS also applies where a heat supplier charges for heat as part of wider service or rental charges (such as where a freeholder is the heat supplier and charges leaseholders for heat consumption as part of a biannual service charge).

Where the owner of a dwelling rents out that dwelling to a tenant and charges a rental charge, the owner only needs to pass through the benefit of the EBDS if the heating and hot water charges were included in that rental charge at the point the benefit was provided.

If the contract between the heat supplier and the heat network consumer expires or is terminated before the supplier has passed on the benefit (like if the consumer moves out of the property), the supplier must pass on the amount of benefit which the consumer is entitled to as soon as reasonably practicable following the expiry or termination.

A heat supplier has complied with the pass-through requirement if it has taken all reasonable steps to effect the pass-through to the consumer but is unable to do so.

Actions a heat network consumer can take if their heat supplier does not comply with the requirements

First action: contact your heat supplier using template letter

If you believe that you should have received a benefit, did not receive enough benefit, or reasonable steps were not taken to inform you of your entitlement to the benefit, you should raise this in writing with your heat supplier in the first instance. The heat supplier should provide justification as to how they have complied with the pass-through requirement. You can use the letter template to contact your supplier.

Consumers can identify their heat supplier by:

• reviewing their heat supply contract, lease or tenancy agreement, which should specify the body responsible for the supply of heating and hot water to the premises

• contacting their developer, landlord or managing agent, which will have details of the heat supplier for the building

• contacting the organisation that issues their bills, if that organisation is not itself the heat supplier

If you are unable to come to an agreement with your heat supplier over the pass-through amount, there are options available to resolve this, including raising a complaint to the Energy Ombudsman or Consumer Council and civil enforcement of the payment as outlined below.

Second action: raise a complaint with the Energy Ombudsman or Consumer Council

If you are a domestic or microbusiness customer and cannot come to an agreement with your heat supplier, you can raise a complaint with the Energy Ombudsman if based in Great Britain or the General Consumer Council for Northern Ireland (CCNI) if based in Northern Ireland. A consumer can make a complaint to the Ombudsman or CCNI on the following grounds:

• their supplier has not notified the consumer that it has benefited from the EBDS
• their supplier has not notified the consumer of when and how it will pass on the benefit from the EBDS
• their supplier has not passed on the scheme benefit within the timeframe required by the regulations
• their supplier has not otherwise complied with the requirements to pass on the EBDS benefit

All heat suppliers in Great Britain are required to join the Energy Ombudsman’s consumer redress scheme. If a consumer raises a complaint against a heat supplier that has not joined the redress scheme, the Energy Ombudsman will contact that supplier requiring them to become a member. A refusal to join the scheme at this point could lead to enforcement action by the OPSS and may result in a penalty notice of up to £5,000.

More information on the Ombudsman, the complaints process, and the registration process can be found on the Energy Ombudsman’s website. Consumers can also find out more information by contacting [email protected].

For customers in Northern Ireland, more information on complaints can be found on the Consumer Council’s website. Customers can also contact the Consumer Council at the following address: [email protected].

Third action: recovery of civil debt

The consumer can begin civil debt proceedings to recover the EBDS benefit from the heat supplier. Should a court rule in the consumer’s favour, they will be entitled to the payment, plus interest. Interest is set at 2% above the Bank of England’s base rate and will begin to accrue from 60 days after the relevant scheme benefit is provided to the intermediary.

Find support on civil debt proceedings or further guidance.

Relevant legislation and other links

• Energy Prices Act 2022
• The Energy Bills Discount Scheme Regulations 2023
• The Energy Bills Discount Scheme (Northern Ireland) Regulations 2023
• The Energy Bills Discount Scheme Pass-through Requirement (Heat Suppliers) Regulations 2023 (GB and NI)
• The Heat Network (Metering and Billing) Regulations 2014
• Template letters for heat network pass-through
• Guidance on the pass-through requirements for energy price support provided to intermediaries
• Heat supplier bulk application template for EBDS heat network support