E.ON Heat Supply

Hello neighbours. Ben Collins, Chair of our residents association, recently wrote to Barratt Homes with a number of questions regarding our contract with E-on to supply heat to the Square. Steve Thompson, Technical Director for Barratt Homes (East London Division), has sent a reply. As this is a subject that affects us all, we felt you would be interested in this response:

Thank you for your letter dated 14 May, 2012, and received by this office on 22 May, 2012.

 To respond to your letter, I have considered the questions you have raised and my response follows:

·         Is E.ON fully responsible for the running and maintenance of the CHP system in our building?

E.ON is contracted to undertake the operation and maintenance of the entire communal heating system at the Dalston Square development up to and including the Heat Interface Unit within each apartment.  This responsibility includes for the replacement of any defective plant or plant which has reached the end of its service life during the course of their contract.

·         For how many years does the current E.ON heating contract for Dalston Square run?

E.ON are contracted for a period of 25 years.  The term of the contract is in line with similar ESCo Contracts being placed in the market place at this present time.  Some are actually for a longer period.  The principle reason for this is in order for the Energy Service Company to operate and maintain the communal heating system efficiently, and to ensure that the risks associated with plant replacement in the long term can be adequately financed.  It should be borne in mind that one of the principle benefits of an ESCo is that residents are not subjected to unforeseen and substantial costs associated with major plant replacement.

·         To whom is E.ON accountable?

E.ON is accountable to the residents as part of their direct contract for the supply of heat to each resident’s property.  Additionally, E.ON are responsible to the landlord of the Dalston Square Development which currently is Barratt Homes.  Should Barratt Homes dispose of its interest in the future, E.ON’s responsibility would transfer to the new landlord.  However, E.ON also have an affiliated responsibility to the Building Management Company who maintain the building on behalf of the landlord.

·         Who at present monitors E.ON’s performance as the heat generator for our buildings?

Part of the contract obligations on E.ON require annual reporting which covers the running of the system to ensure compliance with the development’s planning obligations.  Additionally, as part of E.ON’s Guaranteed Standards for heat supply they commit to reporting to customers on an annual basis.

·         Who, at present, negotiates with E.ON over the price set for the hot water/heat energy?

The contract with E.ON places stringent controls on the methodology for establishing the heat price.  There are two variables within the formula for ascertaining the heat price which include for the variable gas tariff as purchased by E.ON, together with the ability to increase the price annually based on RPI relative to E.ON’s Management costs only.  Heat prices are set annually on 01 April and are calculated in accordance with a heat price formula which is set out within customer contracts.  The price formula provides strict rules on how E.ON can change prices and ensures transparency.  In addition to the price formula, E.ON provide a price comparator to demonstrate how heating bills compare to heating similar properties via a standard gas boiler system.  E.ON have informed us that based on this comparator methodology, residents at Dalston Square are currently achieving savings of over 30%.

·         If Barratts agreed the original contract for the hot water supplied by E.ON, what information was brought to the table by E.ON and Barratts to use to establish a fair price for heat energy in first instance?

The original heat price and pricing formulas as referred to in the point above were set to provide savings to residents.  This methodology was thoroughly tested throughout the contracting process via industry experts.  This price formula methodology coupled with the price comparator is designed to provide residents with both price protection and transparency.  It is worth pointing out that the price covers the full service to residents including maintenance of Heat Interface Units within apartments and therefore, the comparison is against a similar complete service cost for gas heating.

I trust I have addressed your concerns, however, please do not hesitate to contact me should you wish to discuss further.

Kind regards

Steve Thompson