ESCOs Take The Heat Away From Landlords, But Not Entirely

ESCO models for heat network management help landlords ensure the responsibility for heat supply is passed on to specialists, but landlords should ensure ESCO contracts are managed on their side to ensure their residents receive a fair service and their assets are protected.

Much of the legal and commercial risk for supplying heat to residents can be passed on to an ESCO by a landlord in a long-term concession agreement.  Their specialist skills and supply chains can provide residents with long-term certainty on the quality and fairness of heat supply if the agreement between the landlord and the ESCO is well thought through and reflects the specifics of the network.

However, landlords must be cognisant that they play a critical role in ensuring residents are protected in this agreement all the way from the initial tender through to the ongoing operation of the contract.  Ignoring this role could lead to residents taking action against the landlord.

KPIs are key to this and should be agreed at the outset.  Thereafter, scrutiny of these through (at least) annual reporting, inspections and regular meetings with the ESCO will go a long way to ensuring resident’s interests are protected, and landlords will avoid the risk of any challenge due to the agreements they have in place with the ESCO.