Collective Heat Supply Act: transitional law on existing heat systems

The draft bill and draft Explanatory Memorandum published on February 2, 2024 were used as a starting point for the preparation of this blog. We note with this blog that the arrival of the Act (in its current form) is certainly not yet a given. Indeed, a critical opinion from the Advisory Division of the Council of State was published on April 22. Based on the question marks that the Division places on the bill, in particular on the mandatory public majority interest and the law's contribution to socially affordable heat tariffs, it can be concluded that there is still work to be done.

Transitional law existing situations

The transitional law for existing collective heating facilities is contained in Article 12.2 Wcw. The basic premise of the transitional law is that the new regulations will apply one-to-one to existing situations and that existing agreements - to the extent that they do not violate the Act - will in principle be respected (p. 16 explanatory memorandum). In short: an operator of an existing supply area (i) will be designated as a heat company and (i) the existing supply area will be established as a heat lot. How - and within what time frames - this should be done is detailed below.

Article 12.2 Wcw distinguishes between the following 4 situations at the time the article comes into force:

_{Situation 1: There is an agreement (e.g. concession agreement/area agreement) in which a municipality has given a heat company for an area the right or obligation to transport and supply heat to consumers, operate a collective heat supply or connect consumers to a collective heat supply (paragraph 1);}

_{Situation 2: there is actual delivery while a contract is missing (para. 2);}

_{Situation 3: an agreement is missing and a heat company is not yet transporting and supplying heat in an area at that time, but the college has made one or more decisions on the basis of which a heat network may be built in that area (para. 3); and/or}

_{Situation 4: an agreement is missing and a heat company does not yet transport and supply heat in an area, but the heat company has concluded a connection agreement (as referred to in article12.2 paragraph 5 Wcw), whereby customers (landlords, housing corporations, VvEs, project developers, private individuals) are connected within 5 years (paragraph 4 and paragraph 5).}

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In all four of the aforementioned situations, after coming into force, the college will have one year to grant a designation for this area that determines the size of the heat lot, for the duration of not more than 30 years and not less than 14 years. The calculation of the exact duration of the designation is in Article 12.4 WCW. For the exact size of the heat plot, the size of the area is considered. This area does not have to be contiguous. However, article 12.3 Wcw proposes to merge areas (by changing a designation) if:

• without aggregation, the collective heat supply in one heat plot is dependent on access to the collective heat supply of the other heat plot to provide heat to consumers; and
• the same heat company is designated for the heat lots.

Specifically with respect to situation 4, multiple connection agreements relating to the same anticipated collective heat system results in one designation for a heat plot. Furthermore, for situation 1, the restrictions or regulations attached to the agreement are attached to the designation as restrictions in and regulations to the extent that they are not contrary to the Wcw. Based on article 12.2 paragraph 7 WCW, the agreement lapses at the moment the college has granted a designation (p. 100 explanatory notes).

Small collective heat system

Heat companies with an existing small collective heat system (a system - such as a CHP - with up to 1,500 consumers) also become - based on our reading of the WCw and explanatory notes - a designated heat company by Article 12.2 for the heat plot within which they supply heat. For example, landlords and VvEs that supply heat are also eligible for a designation. Whether this is actually intended to give a non-public heat company a heat plot as well is not entirely clear to us based on the explanatory note.

Since the regulation of designated heat companies involves a lot of burden, designated heat companies with a small collective heat system can apply for an exemption from the prohibition on supplying or transporting heat without a designation (p. 11, 17 and 100 explanatory notes and Article 12.11 WCw). This will only be rejected if it is not a small collective heat system.

Landlords and condominiums

After Article 12.2 comes into force, landlords and VvEs with an existing heat supply can report to the Municipal Executive within 6 months that they are supplying heat to their tenants or members. By doing so, they will also be deemed to fall under the operation of the law.

Legal Protection

Objections and appeals may be lodged against the designation and the decision to establish a heat plot pursuant to Section 11.5. The thrust of section 11.5 Wcw is that, for the purpose of legal protection, the designation and the determination of a heat plot are regarded as one decision. The same applies to the compulsory amalgamation of heat parcels pursuant to Article 12.3 Wcw: in this procedure any objections to the designation pursuant to Article 12.2 are also addressed (see p. 221 explanatory notes). However, it is unclear how a large time lapse between the designation and the establishment of a heat parcel is dealt with. This is also one of the criticisms of the Division in its April 22, 2024 opinion.

Closing

This blog is part of a series of blogs on the bill for the Collective Heat Supply Act. More blogs on the various topics will follow in the coming period. You can read the other blogs already published here.

Do you have questions about the Collective Heat Supply Act bill and how it will affect your business? The specialists at Straatman Koster Lawyers are ready to assist you.