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We want to change how we buy communal energy so that we can give you better value. 

Section 20 dispensation granted

We have great news! Our application to dispense with the consultation requirements imposed by Section 20 of the Landlord and Act Tenant 1985, in respect of our procurement of gas and electricity, has been successful!

This means that we can procure gas and electricity for the period 1st October 2024 to 30th September 2028 using any mix of strategies (i.e. fixed or ‘wholesale portfolio strategy’), and with flexibility as to the length of the contracts.

This is good news because it lets us choose from a broader range of products so that we are more likely to be able to get a better deal – meaning the costs that we pass onto residents are more likely to be lower. 

Unfortunately, due to current market conditions, after going out to tender for our new energy deals to start in October 2024, we have only been offered one year contracts.  However, we hope that market conditions will become more favourable into next year, and if this is the case, the dispensation will let us enter into longer term contracts after the shorter term one ends (that will run from 1st October 2024 to 30th September 2025).

Although we had hoped to be more offered longer term deals to commence from this October, the new contracts which we have secured will nevertheless offer better value than the existing ones, and the vast majority of residents will see improved tariff rates reflected in their service charges.

If you would like more background information, please refer to the FAQs below and the archived documents outlining the process.

Section 20 dispensation – update for residents and FAQs

In January 2024 we told residents about the long-term contract for energy which we are aiming to enter into (see ‘archived documents’ for more details). We’re looking at ways to get better value for money for the gas and electricity which is supplied to the communal areas you share with other residents, and in some cases, to your home, through our energy supplier. To make sure we get the best deal we are hoping to enter a new long-term contract, for better value for money than a short-term contract.

To enter a long-term contract, we would usually need to consult with you by following the process set out in Section 20 of the Landlord & Tenant Act 1985. This process usually takes several months. However, because energy suppliers are only able to ‘lock in’ the best available prices that they can offer for a very short time (usually one working day), we aren’t able to follow the usual consultation process. Instead, we submitted an application to the First Tier Tribunal (Property Chamber) (the Tribunal) for what’s known as dispensation from these requirements.

Section 20 Dispensation

We submitted our application for Section 20 Dispensation in February 2024 and are waiting to hear the outcome of this from the First Tier Tribunal.

As part of the Tribunal’s consideration of the Section 20 Dispensation, the Tribunal has directed us to provide all of the affected tenants and leaseholders of the 1,220 affected homes with a bundle of specified documents associated with our application for Section 20 Dispensation. We have emailed or posted letters to those residents with the information, which includes:

  • The Directions issued by the Tribunal ordering a bundle to be sent
  • Our application for Section 20 Dispensation and any accompanying documents
  • A statement of case explaining why we have made this application to the Tribunal
  • Copies of any other documents we seek to rely on as evidence as part of our application

Please contact consultationobservations@castlesandcoasts.co.uk if you do not receive this information by 12th June 2024, and you would like the information to be sent to you.

Update on long-term contract for energy and electricity

Our energy broker, Inenco, has advised that due to current conditions in the energy market, it has not been possible to secure a four-year contract using a ‘wholesale portfolio/purchasing strategy’ starting from 1st October 2024 as planned.

We also have not yet been given Tribunal approval for the Section 20 Dispensation, which means that we haven’t been able to take advantage of recent low energy price rates, by entering into a long-term fixed price agreement for the supply of electricity and gas.

For both of the above reasons, we now aim to enter into a 12-month fixed price ‘bridging contract’ from 1 October 2024, to then enter into a contract for up to four years using a wholesale purchasing strategy from 1st October 2025.

 

If you have any questions, please contact us:

  • By telephone on 0800 085 1171
  • By email at consultationobservations@castlesandcoasts.co.uk
  • By post to Castles and Coasts Housing Association, 5 Paternoster Row, Carlisle, CA3 8TT

 

We’ve put together some updated FAQs below to help explain our current position.

Section 20 Dispensation Update - FAQs

Most of the energy which CCHA has a contract in place for, is for the communal areas in the buildings where you live. For example, for lighting the stairs leading to your flat, external lighting or for powering a door entry system. In some schemes, as there is one boiler serving your whole building, this also includes the gas that you use for your personal heating and hot water.

Due to current conditions in the energy market, we aren’t able to secure a four-year contract using a ‘wholesale portfolio/purchasing strategy’ starting from 1st October 2024 as planned. The delay in getting Tribunal approval for the Section 20 consultation dispensation means that we also haven’t been able to take advantage of recent low energy price rates, by entering into a long-term fixed price agreement for the supply of electricity and gas.

For both of the above reasons, we now aim to enter into a 12-month fixed price ‘bridging contract’ from 1 October 2024, to then enter into a contract for up to four years using an energy purchasing strategy (including any combination of fixed commodity price, wholesale capped or active trading, as is appropriate in the market at the time) starting on 1st October 2025. You can learn more about some of the different terms used for energy on the Ofgem website here.

This means we can buy electricity in a mix of different ways to get the best value for money that we can at any given time, and could include any combination of fixed commodity price, capped or active trading.

This is a shorter term contract than we had originally planned. In this case it will be up to 12 months.

This is a contract which gives a fixed rate for the ‘non-commodity’ charges (the energy itself) for the duration of its term. Even then, prices can vary because this type of contract may also include what’s called a  pass-through rate - the charges made by the energy providers for distributing the energy – and these can vary.

Our wholesale purchasing strategy does not apply to gas. We’ll be seeking prices for between twelve months and four years for gas, subject to the tribunal agreeing to the Dispensation we are applying for. The benefits of doing this are to take advantage of the current lower prices and for improved budgeting.

Using a wholesale purchasing strategy spreads the risk and maximises opportunities for buying blocks of electricity at improved prices, so the aim is not to be in that position.

Previous contracts for energy have been for one year at a time, which means that there have been no Section 20 consultation requirements. They only apply  if the annual cost per resident is above a certain threshold, which may not have been reached before.

Yes, due to the nature of the energy market, lots of Housing Associations like CCHA are now requesting dispensation from the First Tier Tribunal to let them put better value, longer term energy contracts in place.

No, it doesn’t. The contract we want to put in place will not change any arrangements you already have with the energy suppliers for your home.

We will work with a specialist energy consultancy to make sure energy prices are kept as low and stable as possible. The contract will cover our offices and community centres too.

Nothing, unless you don’t agree that it is a good idea for us to enter into a long-term agreement to get the best possible prices for energy.

We will communicate with you again once the application to the Tribunal has been submitted, to give you the chance to make your own representations using the Tribunal’s reply form.

We will need to carry on buying energy on shorter-term contracts, which will sadly mean that we won’t be able to guarantee getting the best deal for you.

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