Rating Manual section 6 part 3: valuation of all property classes

Section 360: domestic fuel installations

This publication is intended for Valuation Officers. It may contain links to internal resources that are not available through this version.

1. Scope

Domestic fuel installations (DFIs) date from the 1960s and provide oil or gas for domestic central heating from a central storage tank or tanks connected to customers by a network of underground pipes. Operators are small fuel companies, customer consortia and local authorities.

The installation

a. Oil

There are two oil systems in general use - gravity feed and pump ring main.

Gravity feed systems are simpler and cheaper to operate than pump systems but they have the disadvantage that a tank has to be on the highest, and usually most conspicuous point. In order to preserve visual amenities the main tank is often sunk into the ground leaving a smaller tank, holding one day’s supply, at the required height: oil is then pumped daily from the larger to the smaller tank.

However, for many housing estates, because of their situation, the gravity feed system is not suitable; hence the wide use of the pump ring main system, where the oil is pumped around the main with a branch serving each house.

The aim of the oil companies was to install tanks capable of receiving a complete load from the larger type of road tanker (4,000 gallons), i.e. tanks of 5,000 or 6,000 gallons capacity.

In a typical pump ring main system the pumping chamber normally houses two pumps, one acting as standby for the other, and the oil is maintained at a pressure of 15 psi in the supply line. Pumping capacity is adequate to keep up the supply when all boilers are operating and safety devices ensure that if one pump fails the other automatically starts up. If the oil pressure falls below a certain level both pumps shut off and if the oil pressure rises to 20 psi an automatic pump by-pass comes into operation. A fireman switch near the tank enables the entire system to be isolated in an emergency.

The main supply pipe is normally of 1 inch diameter with 3/8ths inch or ½ inch pipes branching to individual houses. The pipes, usually of best quality mild steel with welded or screwed joints and wrapped in bituminous lagging as a protection against corrosion, are normally laid below ground.

Before reaching the control box the oil passes through isolating and fire valves. The isolating valve enables the oil supply to the house to be shut off at any time, while the fire valve will cut off the supply if for any reason an excessive rise in temperature occurs adjacent to the boiler. The sensing bulb of the fire valve is situated inside the boiler room. From the fire valve the supply line passes into a control box which is really the heart of the entire system. The function of the control box is to filter and meter the fuel and to reduce the mains pressure of 15 psi to the level necessary for successful burner operation. A pressure cut off valve shuts off the oil flow if the oil pressure in the system becomes too great. The box is locked to prevent mis-handling of the components inside it and the meter is read through a small window in the face of the box.

b. Gas

Systems are available which use gas instead of oil. A pressurised tank is installed, usually below ground, and gas is piped to the individual properties in much the same way as for oil except that all of the installation is under pressure. Before reaching the burners, pressure is reduced and the supply metered. Due to the nature of the liquid gas stored stricter safety precautions are necessary. There is no requirement for a complicated pumping system.

At the present time this type of system is not common, and so if found full details of the installation should be forwarded at an early stage to the Class Co-Ordination Team.

c. Local pipe network

It is important to note that there are situations where a company will operate a small local network of gas distribution pipes. In such operations the network of pipes link the nearest Gas main pipe to the various premises served. There is no gas storage tank in such a system. These are NOT Domestic Fuel Installations, but local pipe networks. If VOs discover a local pipe network as described above full details should be forwarded to the Class Co-Ordination Team for further advice.

d. General

In some cases installations are administered by a small fuel company, which purchases oil from the large oil companies, and sells it on to customers. These fuel companies normally read the meters, render accounts, arrange supply agreements, provide servicing facilities for the householder’s boiler, maintain the installation and generally supervise the running of the system. In other cases, local residents administer the installation themselves by way of a special association founded for the purpose. In a few cases installations are operated by local authorities.

The price charged for oil is often the bulk schedule price (i.e. the normal rate for 500 gallon deliveries) but the supply agreement frequently provides for a standing charge to be paid in addition which has the effect of raising the price to, or often above, the rate charged in respect of small deliveries.

2. List description and special category code

The R2017 Special Category Code 090 should be used. As a specialist class the appropriate suffix letter should be S.

The description “Domestic Oil Installation and Premises” or “Domestic Gas Installation and Premises” should be used in the Rating List as appropriate.

3. Responsible teams

The valuation and referencing of this class of property is the responsibility of the specialist team within the NDR Unit.

4. Co-ordination

The Specialist Industrial classes Co-ordination Team and the Industrial Valuation Panel have responsibility for this class ensuring effective co-ordination across the business units. The team are responsible for the approach to and accuracy and consistency of DFI valuations. The team will deliver Practice Notes describing the valuation basis for revaluation and provide advice as necessary during the life of the rating list. Caseworkers have a responsibility to:

  • follow the advice given at all times

  • not depart from the guidance given on appeals or maintenance work, without approval from the co-ordination team

Regulations for the purposes of the 2017 Rating List are the:

Valuation for Rating (Plant and Machinery) (England) Regulations 2000 No 540 as amended.

Valuation for Rating (Plant and Machinery) (Wales) Regulations 2000 No 1097 as amended.

These regulations are considered in detail in Rating Manual: Section 6: Part 5 to which reference should be made for guidance as to the rateability of plant and machinery.

6. Survey requirements

The preferred basis of measurement will be GIA for buildings, as recommended in the VO Code of Measuring Practice.

7. Survey capture

The hereditament to be valued consists of the tank or tanks, the tankhouse, the pipes and valves and the branch pipes to the individual houses up to but excluding the control box which is a householder’s chattel. Beyond this point the equipment becomes part of each householder’s domestic property.

Survey details should be measured to GIA with plan and survey details placed in EDRM. Plant and machinery is dealt with in Section 6: Part 5.

8. Valuation approach

When using a throughput basis it is desirable that figures of actual throughput should be obtained wherever possible. Where actual throughput figures are not available it may be necessary to make an estimate.

When actual figures of annual throughput are provided it is necessary to examine these closely in order to ensure that they represent a normal year’s supply. Once a figure of throughput is adopted, it should not be reviewed unless there is a physical change which affects the hereditament, such as a decline in the number of customers connected.

The shortened profits valuation basis, previously adopted in previous lists should be adopted for the 2017 Revaluation.

9. Valuation support

Guidance on this class can be obtained from the Class Co-Ordination Team or by raising a query via the NSU inbox.

Practice note: 2017 - domestic fuel installations

1. Market appraisal

Domestic fuel installations (DFIs) date from the 1960s and provide oil or gas for domestic central heating from a central storage tank or tanks connected to customers by a network of underground pipes. Operators are small fuel companies, customer consortia and local authorities.

DFIs were developed by the major oil companies to enable them to compete with gas and electricity in providing a fuel for domestic central heating. However the optimism of the 1960s and 1970s, when the majority of these systems were installed, has generally proved to be too great for the circumstances prevailing today. As a result the major oil companies have withdrawn from such undertakings.

The storage of oil is subject to the general requirements of the Oil Storage Regulations. Most DFIs were installed in the 1960s and 1970s and many are now in a poor state of repair, and require relatively high maintenance costs. DFIs are occasionally prone to leakage, and action against operators by the Environment Agency has resulted in fines.

The number of DFIs remaining has reduced dramatically in recent years. Those still operating have also suffered a decline in the number of households connected to the system. Once a scheme’s customer base reduces beyond a certain level the operator may attempt to close the scheme. To do this the operator may pay the last few remaining customer’s cost of switching to an alternative fuel, such as the cost of a new gas boiler, or the operator may raise the price of fuel to encourage those last customers to change.

Costs of decommissioning are borne by the operators; they may in some cases be mitigated by the sale of the site to one of their former customers.

Many customers who leave a DFI scheme continue to use oil as a source of fuel, but have their boilers supplied by fuel tanks installed within the curtilage of their own dwellings. Due to the workings of the oil market it is often cheaper for somebody to have their own fuel tank than to continue to be connected to a DFI.

Where a single oil tank is situated within the curtilage of a dwelling and supplies fuel to that dwelling only, it should be considered to be a part of the dwelling. In this instance the oil tank is not a DFI, and should not appear as a separate entry in the Local Non-Domestic Rating List.

Due to reduced economic benefits and changes in technology the total number of DFIs continues to be in decline and this is reflected in the remaining networks experiencing a loss of customers to alternative fuel supply arrangements.

Given the declining nature of the sector no new schemes are known to have been constructed in recent years.

2. Changes from the last practice note

There are no significant changes.

3. Ratepayer discussions

No discussions have been undertaken with ratepayers or representatives for this class.

4. Valuation scheme

The shrinking nature of the DFI sector and the attraction of alternative fuel supply arrangements means the shortened profits approach produces low levels of rateable value. Accurate assessment therefore depends upon obtaining up-to-date details relating to each hereditament.

4.1 Survey requirements

The preferred basis of measurement will be GIA for buildings, as recommended in the VO Code of Measuring Practice.

4.2 Plant and machinery

The rateability of Plant and Machinery is dealt with in Section 6: Part 5.

4.3 Basis of valuation

The hereditament to be valued consists of the tank or tanks, the tankhouse, the pipes and valves and the branch pipes to the individual houses up to but excluding the control box which is a householder’s chattel. Beyond this point the equipment becomes part of each householder’s domestic property.

When using a throughput basis it is desirable that figures of actual throughput should be obtained wherever possible. Where actual throughput figures are not available it may be necessary to make an estimate.

When actual figures of annual throughput are provided it is necessary to examine these closely in order to ensure that they represent a normal year’s supply. Once a figure of throughput is adopted, it should not be reviewed unless there is a physical change which affects the hereditament, such as a decline in the number of customers connected.

4.4 Valuation guidance

The shortened profits valuation basis, previously adopted in previous lists should be adopted for the 2017 Revaluation.

Application of the 2017 throughput basis.

The RV for the hereditament is found by taking the total annual throughput for the whole installation (in litres) and multiplying it by the factor

£2.00 / 1000

The calculated RV may then require rounding before being entered into the Rating List.

Examples

A DFI has an annual throughput of 16,750 litres.

RV = 16,750 x (£2.00 / 1000) = £33.50

4.5 Estimating throughput

Where an actual annual throughput figure is not available it may be estimated by multiplying the rates shown below by the total number of homes connected to a DFI.

Houses located Annual Oil Consumption (litres)
South 1350
Midlands 1485
North 1575

4.6 Valuation consideration

If the number of houses connected to a DFI falls to five or less, it generally becomes uneconomical to run, and operators will usually try to close such installations. Accordingly where the number of houses connected to a DFI falls to five or less consideration should be given as to whether or not the value of such a scheme should be regarded as de minimis.

4.7 Revaluation practice

Due to the continued decline, of the numbers of dwellings connected to DFIs, VOs are advised, where necessary, to contact operators to update their throughput records prior to commencing the revaluation of this class.

Practice note 1: 2010 - domestic fuel installations

1. Co-ordination arrangements

This is a Group Class.

Co-ordination responsibilities are set out in Rating Manual : Section 6 : Part 1

The R2010 Special Category Code 090 should be used. As a Group Class the appropriate suffix letter should be G.

2. State of the industry

Domestic Fuel Installations (DFIs) are operated by small fuel companies, customer consortia and local authorities.

The storage of oil is subject to the general requirements of the Oil Storage Regulations. Most DFIs were installed in the 1960s and 1970s and many are now in a poor state of repair, and require relatively high maintenance costs. DFIs are occasionally prone to leakage, and action against operators by the Environment Agency has resulted in fines.

Many DFIs have ceased to operate, and the number of DFIs remaining has reduced dramatically in recent years. Those still operating have also suffered a decline in the number of households connected to the system. Once a scheme’s customer base reduces beyond a certain level the operator may attempt to close the scheme. To do this the operator may pay the last few remaining customer’s cost of switching to an alternative fuel, such as the cost of a new gas boiler, or the operator may raise the price of fuel to encourage those last customers to change.

Costs of decommissioning are borne by the operators; they may in some cases be mitigated by the sale of the site to one of their former customers.

Many customers who leave a DFI scheme continue to use oil as a source of fuel, but have their boilers supplied by fuel tanks installed within the curtilage of their own dwellings. Due to the workings of the oil market it is often cheaper for somebody to have their own fuel tank than to continue to be connected to a DFI.

Where a single oil tank is situated within the curtilage of a dwelling and supplies fuel to that dwelling only, it should be considered to be a part of the dwelling. In this instance the oil tank is not a DFI, and should not appear as a separate entry in the Local Non-Domestic Rating List.

3. Valuation guidance

The shortened profits valuation basis, previously adopted in previous lists should be adopted for the 2010 Revaluation.

Application of the 2010 throughput basis.

The RV for the hereditament is found by taking the total annual throughput for the whole installation (in litres) and multiplying it by the factor

£2.20 / 1000

The calculated RV may then require rounding before being entered into the Rating List.

Example

A DFI has an annual throughput of 16,750 litres.

RV = 16,750 x (£2.20 / 1000 ) = £36.85 say £37

Estimating throughput

Where an actual annual throughput figure is not available it may be estimated by multiplying the rates shown below by the total number of homes connected to a DFI.

Houses located Annual Oil Consumption (litres)
South 1500
Midlands 1650
North 1750

4. Valuation consideration

If the number of houses connected to a DFI falls to five or less, it generally becomes uneconomical to run, and operators will usually try to close such installations. Accordingly where the number of houses connected to a DFI falls to five or less GVOs should give serious consideration as to whether or not the value of such a scheme should be regarded as de minimis.

5. Revaluation practice

Due to the continued decline, of the numbers of dwellings connected to DFIs, VOs are advised, where necessary, to contact operators to update their throughput records prior to commencing the revaluation of this class.

Practice note 1: 2005 - domestic fuel installations

1. Co-ordination arrangements

This is a Group Class.

Co-ordination responsibilities are set out in Rating Manual - section 6 part 1.

The R2005 Special Category Code 090 should be used. As a Group Class the appropriate suffix letter should be G.

2. State of the industry

Domestic Fuel Installations (DFIs) are operated by small fuel companies, customer consortia and local authorities.

Most DFIs were installed in the 1960s and 1970s. Many are now in a poor state of repair, and require relatively high maintenance costs. DFIs are occasionally prone to leakage, and during a period of increased environmental concern action against operators by the Environment Agency have resulted in fines.

Many DFIs have ceased to operate, and typically those still operating have suffered a decline in the number of households connected. Once a scheme’s customer base reduces beyond a certain level the operator may attempt to close the scheme. To do this the operator may pay the last few remaining customer’s cost of switching to an alternative fuel, such as the cost of a new gas boiler, or the operator may raise the price of fuel to encourage those last customers to change. Further environmental legislation may speed up the rate of decommissioning.

Costs of decommissioning are borne by the operators; they may in some cases be mitigated by the sale of the site to one of their former customers.

Recent research reveals that there has been a decline in the average quantity of fuel consumed per household. This is thought to be partly due to the fact that those households who consume most fuel, and hence have the highest bills, will be more inclined to switch to cheaper alternative fuels, principally gas. An improvement in standards of domestic insulation has also contributed to the decline in average fuel consumption.

Many customers who leave a DFI scheme continue to use oil as a source of fuel, but have their boilers supplied by fuel tanks installed within the curtilage of their own dwellings. Due to the workings of the oil market it is often cheaper for somebody to have their own fuel tank than to continue to be connected to a DFI.

Where a single oil tank is situated within the curtilage of a dwelling and supplies fuel to that dwelling only, it should be considered to be a part of the dwelling. In this instance the oil tank is not a DFI, and should not appear as a separate entry in the Local Non-Domestic Rating List.

Recent research has indicated that the operator’s margins remain very similar to those identified in the research under taken prior to the 2000 List.

3. Valuation guidance

The shortened profits valuation basis, previously adopted in the 2000 Rating List, should be adopted for the 2005 Revaluation.

Application of the 2005 throughput basis.

The RV for the hereditament is found by taking the total annual throughput for the whole installation (in litres) and multiplying it by the factor

£2.20 / 1000

The calculated RV may then require rounding before being entered into the Rating List.

Example

A DFI has an annual throughput of 16,750 litres.

RV = 16,750 x (£2.20 / 1000 ) = £36.85 say £37

Estimating throughput

Where an actual annual throughput figure is not available it may be estimated by multiplying the rates shown below by the total number of homes connected to a DFI.

Houses located Annual Oil Consumption (litres)
South 1500
Midlands 1650
North 1750

4. Valuation consideration

If the number of houses connected to a DFI falls to five or less, it generally becomes uneconomical to run, and operators will usually try to close such installations. Accordingly where the number of houses connected to a DFI falls to five or less GVOs should give serious consideration as to whether or not the value of such a scheme should be regarded as de minimis.

5. Revaluation practice

Due to the continued decline, of the numbers of dwellings connected to DFIs, VOs are advised, where necessary, to contact operators to update their throughput records prior to commencing the revaluation of this class.