Law of Ukraine “On Commercial Metering of Heat Energy and Water Supply”: Contents, Reality and Speculations
The Law of Ukraine “On Commercial Metering of Heat Energy and Water Supply” was enacted on 2 August 2017. It is one of the package of legislative acts aimed at bringing the market of the housing and communal services in Ukraine to the civilized condition, promoting energy saving, therefore – energy independence of this country. And right after publicizing of the new Law on Internet, there appeared numerous speculations around it.
We propose to understand together why this Law was passed, what it actually provides for, and why it is not worth believing rumors and thoughts around it.
What caused appearance of the Law of Ukraine "On Commercial Metering of Heat Energy and Water Supply"?
It is not a secret to anyone that Ukraine is one of the "leaders" of the sad anti-rating on inefficient use of energy resources. Wasteful, inefficient use of resources has a direct negative impact on the energy independence of this country, the state of the national economy and the welfare of each individual family.
That is why in recent years much attention is being paid in Ukraine to saving energy and other resources. However, it is impossible to save resources without full metering of their consumption. So the task was to equip 100% of buildings with the heat energy, hot and drinking water metering units.
This task is to be solved by the Law of Ukraine "On Commercial Metering of Heat Energy and Water Supply" (issues of electricity and natural gas metering are already regulated by the Laws of Ukraine "On Electricity Market", "On Ensuring Commercial Metering of Natural Gas" and "On Natural Gas Market,” respectively). Moreover, the Law is not limited to the narrow approach – just the requirement to install the metering units. Instead, it also provides for a number of organizational requirements and incentives to ensure that 100% metering will save resources rather than remain an "asset in itself."
Thus, the Law gives the following basic "messages":
1. First of all, for the multi-apartment buildings, the Law lays down a principle that can be formulated as follows: "Everything that entered the house must be paid for." It means that the rational use and saving of the resources – whether it is heat energy, or water – after it gets into the internal building networks of a multi-apartment building, is the responsibility of the co-owners.
Why did the Law choose such an approach? So far, the apartment owners paid for the communal services according to the apartment-level meters and did not care about the condition of their common property outside the apartment. Losses of water and heat energy in the house "on the way" to the apartment actually were responsibility of the supply companies. Meanwhile, the internal building networks, as well as the building envelope, belong to common property of co-owners of a multi-apartment building – owners of the apartments and non-residential premises in it. The heat and water supply companies cannot (and have no authority to) repair the damaged pipes in the basements in order to stop water leakages, or insulate the building walls in order to save heat; it is the responsibility of the co-owners in the multi-apartment building.
From now on, the Law has established the principle that the amount of heat energy and water fixed at the entrance to the building should be paid by the consumers in such a building. Another thing is how exactly this amount will be distributed among them, but we will talk about it below.
2. The Law requires that all buildings connected to the district heating and water supply networks should be equipped with the commercial metering units for heat energy and water, respectively (so-called "building-level" meters). This is logical if we take into account the previous principle that "everything must be paid for." The metering units are necessary to know the true amount of this "everything".
Note that the requirement on equipping with the commercial metering units applies not only to the multi-apartment buildings but also to one-family (individual) houses and others, including non-residential (so-called "office", industrial, etc.) buildings – all those connected to the district heating and water supply networks. The determining factor is the very fact of connection of the building to the indicated networks.
The Law has envisaged the following deadlines for installation of the metering units:
- heat energy in all buildings (residential and non-residential) – within one year from the date of enactment of the Law (2 August 2018),
- hot and drinking water for non-residential buildings – within one year from the date of enactment of the Law (2 August 2018),
- hot and drinking water for residential buildings – within two years from the date of enactment of the Law (2 August 2019).
The Law obliges the operators of external utility networks (in most cases, these are the heat supply and water supply utilities) with obligation to install the building-level metering units. In fact, the metering units will be installed at the expense of the building owner (co-owners) who will also own the metering unit. The Law says that the operator must notify the owner (co-owners) on intention to install the metering unit, and on cost of such installation. Should the building owner (co-owners) not express the wish to install the commercial metering unit independently, it will be installed by the operator, and the money spent will be collected from the building owner (co-owners) in the form of a special fee payment of which is spread for 5 years.
Co-owners of the multi-apartment building may not wait for such “chain letter” from the operator, but install the metering unit independently already now. Especially because in this case they will be able to find better proposal in the market, and ultimately spend less than the operator of external utility networks.
3. The Law requires all premises in the buildings connected to the district heating and water supply networks, and those with autonomous heat and/or water supply (own boiler house, water well) to be equipped with the distribution metering units for heat energy and water, respectively (so-called “apartment-level” meters).
These provisions were included in the Law to create incentives for separate owners of the apartments and non-residential premises to save heat energy and water in their premises. Though all consumers in the building have to pay for the full amount of heat energy or water supplied to the building, but who will pay how much depends on amount of consumption. The general rule envisaged by the Law says that amounts of consumed services identified with the help of the building-level metering unit are distributed between the consumers for payment purposes proportionally to readings of the apartment-level meters. This means that it makes sense to save both in the building (for example, to close the doors and windows in common areas through which heat “escapes” the building, to insulate the building), and in a separate apartment (to seal the window gaps, to equip radiators with the control valves, etc.).
The Law charges the owners of separate premises with an obligation to equip these premises with the distribution metering units (“apartment-level” meters). In order to create incentives for them to observe these obligations, the Law envisages that in a number of cases the difference between readings of the building-level meter and sum of readings of the apartment-level meters should be distributed between owners of the premises not equipped with the metering units. This means that a person who procrastinates installation of the apartment-level meter is at risk of paying for all “imbalances” in the building.
4. The Law has directly identified key principles for distribution of the amounts of communal services consumption determined with the help of the building-level metering unit between the consumers in the building.
Detailed description of these principles would take a lot of time – and it is not the purpose of this article. But we can formulate briefly the basic approach: first, to deduct from amount of consumption according to the building-level meter the amount consumed for common needs of the building (for example, heating of common areas for heat energy, or watering the lawn for water supply), then the balance is distributed between the consumers proportionally to the readings of their apartment-level meters. If part of the premises is not equipped with the meters, those with the apartment-level meters pay only according to the meters, and remaining difference between readings of the building-level meter and sum of readings of the apartment-level meters is distributed between all “non-metered” consumers; usually this is worse than paying according to readings of the apartment-level meter.
Though full-scale application of these distribution principles will only be possible when Minregion approves the relevant methodology, as required by the Law.
5. Taking into account that from now on accrual of payment for communal services will be based on readings of the building-level metering units to which the consumers usually have no access, the Law has envisaged a number of requirements to provide the consumers with metering information.
The Law envisages that in the bills for the relevant communal services and in annexes to it (or on the web sites of the communal services providers) the following information should be provided to the consumers:
- amount of consumed heat energy and water for the current period (both for separate premises, and for the building in general), as well as readings of the relevant metering units, or applied estimated or average consumption,
- state of settlements with the consumer for consumed communal services, including debts on payment for services (if any), periods in which this debt appeared, data on calculation of its amount, privileges/subsidies (in case of their granting/appointment),
- average consumption amount and average amount of payment for the communal service by other consumers of the relevant category (also with breakdown by classes of buildings), to whom the communal service is provided by this provider, and
- recommendations on possible measures for improvement of building energy efficiency, information on the state targeted and other programs for energy efficiency improvement, contact information and procedure for obtaining additional information.
The provider shall also give access to the consumers to information on dynamics of communal services consumption (by giving access to the consumers to the electronic systems of consumer accounts or through interface of the metering units):
- information on monthly amount of communal services consumption in the last three years, and
- information on daily, weekly, monthly and annual amounts of communal services consumption in the last two years, if the metering units allow to obtain such information.
Such requirements of the Law are expected to allow the consumers to effectively control the correctness of service fee accrual by the provider (and the correct distribution among the consumers of the amount of consumed services), as well as to adjust their behavior and habits in order to save resources.
Upon brief description of the main content of the Law, let us now consider the widespread speculations around it.
Part of the "myths" about the new Law, we have already reviewed and refuted earlier.
One of the most widespread lately was the speculation that the Law of Ukraine "On Commercial Metering of Heat Energy and Water Supply" supposedly requires revision of previously concluded agreements on provision of the communal services in the multi-apartment buildings. The logic of purveyors of this information is as follows: if the Law provides for calculations on the basis of the "building-level" metering units, then from now on, the agreements on provision of the communal services should be concluded only as "collective", "for the building as a whole", and not with each individual owner of the apartment or non-residential premises. Developing this logic further, some companies have already contacted, in particular, the HOAs with a requirement/proposal to conclude a "collective" agreement on provision of the communal services.
In fact, the Law of Ukraine "On Commercial Metering of Heat Energy and Water Supply" generally does not touch on the issues of concluding, changing or terminating the agreements on provision of the communal services – this is simply not its sphere of regulation (remember that this is the sphere of regulation of the Law of Ukraine "On Housing and Communal Services"). The Law also does not contain any requirements or permits to change or terminate the previously concluded agreements on provision of the communal services. Therefore, the communal services providers are obliged to continue fulfilling their conditions, and to provide services in accordance with the previously concluded agreements.
Concerning HOAs, it should be noted separately that the question of choosing a model of contractual relations for provision of the communal services (one "collective agreement" or individual contracts with each apartment owner), in accordance with Article 22 of the Law of Ukraine "On Homeowners Associations", falls within the competence of a HOA general meeting and is a free choice of co-owners.
Another speculation is that allegedly in order to install a commercial metering unit in a multi-apartment building, the co-owners themselves (or HOAs) should contact the operator after adoption of the corresponding decision at the meeting of co-owners or at the general meetings. In fact, as we have already shown above, the Law imposes an obligation on the operator to initiate installation of the building-level metering unit, and the "default" consent of the co-owners is presumed, and there is no need to convene the meeting.
Finally, note that those operators who are already contacting HOAs with the letters on installation of the metering units are somewhat ahead of the events. After all, the Law requires that the operator of external utility networks should inform the owners (co-owners) of the building (and not the HOA) about an intention to install a commercial metering unit according to the procedure determined by the Cabinet of Ministers of Ukraine. And this procedure has not been approved yet.
USAID Municipal Energy Reform Project in Ukraine