Agenda item

The commission then received a report from officers’ Hakeem Osinaike, Strategic Director for Housing, Simon Holmes, Head of Engineering, Paul Gathercole, Gas and Water Contracts Manager, Tom Vosper, Strategic Project Manager, on Heating & Hot Water Outages across the London Borough of Southwark.

The commission then asked questions on the following topics

·  Sustainability and affordability of heat networks over medium and long terms; local government financing of heat networks and future risks

·  Compensation Scheme for outages, compensation payments for shorter periods of outage; recording multiple shorter outages

·  Improvements and feasibility study criteria for areas; contract management of service provider OCO and penalties; conflicting reports of repairs issues between public and council staff; operational risk of implementing new projects and technology in heating systems considering reliability.

The commission heard from Tom that individual heat networks across the borough are options appraised on the basis of customer service and environmental aspects when compared alternative heating systems such as individual boilers and electric heaters. Existing heat network are being retained in line with the government’s target of increasing heat networks from 2 % to 20% nationally. The initial investment in heat networks can be expensive as underground mains and distribution systems are needed as part of the infrastructure, however over the life cycle of a heat network they are more cost effective when compared to traditional heat systems.

Furthermore, local government target of net zero carbon is 2030 and central government target is 2050 is a future risk as conflicting priorities, de-carbonising of heat networks are done by connecting heat networks to low carbon source such as SEL-CHIP and heat pumps. However, such risks also exist in replacing existing boilers with individual heat pumps whilst trying energy costs low for the consumers’.

Simon explained to the commission that the current call centre recording for heating outages are not setup for shorter periods, and only more than 24 hrs outages are compensated. The challenges in recording shorter outages lies in whether it’s an individual property outage or block wide outage. A recent paper on compensation to scrutiny in October 2023 evaluated the payments for outages considering rising energy costs.

Paul informed the commission that in Appendix.1 data for 2022, shows availability at block level, however shorter outages could be recorded in the future with changes to the process, percentage of outages at block can also be recorded.

The commission learned from Hakeem that it’s recognised that residents are having issues with heating outages, however the data in Appendix. 1 shows the overall good availability and reliability of heating systems as a whole. These heating systems have been in place since 1960’s and are susceptible to breaking down and the challenges are in responding quickly and effectively.

The commission discussed that the data shown in Appendix 1. shows boiler room data across the heating systems and network and understands this can be drilled down to plant room level, however plant rooms could serve multiple blocks.

Tom informed the commission that calculating outages is currently done manually, furthermore the heating contracts for repairs are expiring soon and the re-procurement exercise would be an opportunity to recommend adding better reporting standards from contractors so that outages can be calculated more accurately.

Paul explained to the commission that even though data is recorded at boiler room level, compensations are paid at more specific plant room level which could serve one or more blocks, all of whom would receive compensation in case of an outage.

The commission heard from Tom that feasibility studies are data driven and carried out on the basis of availability statistics; concerns at individual sites with a view to prioritise top 20 sites. Secondly, efficiency is assessed based on the boilers rooms in question compared to its capacity to serve a number of properties. Lastly, heating inspectors and term contractors’ work together to produce a risk rating to individual heat networks which is also a part of the decision making process. The repairs to failed boilers are done on an urgent basis factoring in availability of parts and time required to complete the repair. Currently there 7 feasibility studies out of which 2 have been completed by consultants, once all seven have been completed a prioritisation exercise will determine the priorities for investment.

Paul informed the commission that contract management for OCO and its improvement plan has been in place since January 2023, there has been positive improvement across the key performance indicators (KPI) such as resourcing, repairs completions, reduced overdue repairs. Monthly meeting with owners to discuss progress and change in higher management has seen significant progress. Contracts do legally have the power to impose fines and even termination of the contract.

The commission learnt from Hakeem that this report does highlight areas where heating networks are working well, but it’s also recognised that there are areas where public facing significant issues with outages, It is also important to note there is an expectation with aging heating systems to fail at some point, procuring new parts sometimes is not possible or heavily delayed, wherein alternative heating system are put in place. The team is constantly endeavouring to respond better to outages.

Tom explained to the commission that pilot projects in estates such as Windham have had new technology where in water from groundwater aquifers are pumped into heat pumps for heat extraction and circulated across the estate whilst leaving old boiler rooms in-situ as a back-up, this has worked in providing more resilience in heating networks. Overall reliability is prioritised over low carbon but team are still working on the low carbon sources in line with the Council’s commitment. Installation of individual property heat meters and heat interface units does have advantages of accurately calculating outages and more control to the consumer, however in heat interface units, an outage could the property lose heating and hot water when compared to only loss of heating in boiling cylinders which store hot water.

The commission then asked further questions on the following themes

·  Recommendation to improve contract management; Timings, process, cost, penalties, terminations, quality and social value for procurement of contracts

The commission heard from Hakeem that the new contracts being procured could some of the stipulated KPIs’ mentioned by Tom previously with better reporting standards, in addition experience from ward councillors and feedback from friends relatives living on council estates will also contribute towards this work.

Paul and Simon informed the commission that a bigger pool of service providers and contracts could increase flexibility resilience, coverage and timely repairs completion.

Officer agreed to provide details on contract procurement timings, process, cost, quality and social value outside of the meeting.

Paul and Hakeem explained to the commission that there is no preclusion that contractors that have had their contracts terminated or not renewed can’t provide other services to the council for 18 months. However local government procurement rules are followed while tendering which tends to ask the right questions before a bid is entered. A good mechanism to keep outages in check would be for the contracts to include compensations payment to come from the service providers. There is some work being done to resource the team appropriately to speed up the procurement process. The size of the housing stock in Southwark does make it a challenge to procure contracts with multiple providers and existing contractors need to be place until the new contractors have mobilised and started operations.

Furthermore, the commission noted that the extension of the current contracts would be a rolling contract and could result in termination if new contracts are procured earlier. However the commission also notes that the procurement exercise should have started earlier to coincide with the date of termination of the existing ones; and a more timely approach to procure faster is due to the complexities of the local government procurement process.

Hakeem informed the commission that procurement work is on the highest priority within the team, the large size of the service and the volume of work being delivered by contractors is enormous, procurement resourcing and its associated costs needs to be factored in to costs of the delivery of the housing repairs works.

The commission heard from Paul that the current contracts till 2026 is 3 year plus 2 year contractual arrangement and is not a new extension but conditions from the original contract.

The commission learnt from Hakeem that the new contractors that are procured will have the same ground staff transferred (TUPE) over from OCO and Smith & Byford, thus retaining knowledge and expertise of the local area. The aim is to have contractors that can manage better, have better resources, equipment access to sub-contractors.