Government U-turn leaves families facing heating bills double that of those protected by the Energy Price Guarantee

The national consumer champion for heat networks is criticising the government’s decision, announced on Friday, to scrap a promised emergency £100 payment to households on heat networks. It leaves 500,000 homes on communal or district heating systems paying around twice as much for heat as those with their own gas boiler heating system.

While Thursday’s fiscal statement announced some support for struggling families this winter, BEIS has since made a U-turn on specific help for heat networks customers.

Heat Trust, which runs a consumer protection scheme for homes that share communal or district heating systems, is asking the government to think again.

The consumer body previously warned that residents could receive winter heating bills as high as £1,000 a month.

Following the Autumn Statement, Stephen Knight, the Director of Heat Trust, said: “When we heard that the government would be doubling the ‘alternative fuel payment’ from £100 to £200, we thought that finally, it was good news for the 500,000 homes in this situation.

“To hear now that the meagre amount of support that had been promised to heat network customers has been snatched away at the 11th hour is a kick in the teeth for these customers, many of whom have been struggling to pay inflated and un-capped bills for the past year.”

These families are excluded from the Energy Price Guarantee because heat networks are not regulated by Ofgem. Although Heat Trust is already working with the government and Ofgem to design regulation and bring down bills, they say help cannot come soon enough.

Mr Knight confirms he has repeatedly heard promises of extra support from the then Business and Energy Secretary Jacob Rees-Mogg during the Second Reading debate of the Energy Prices Bill, as well as from BEIS civil servants since.

“With at least half a million households on heat networks who will have to choose between eating and heating their home, these payments are a lifeline. It’s essential that the government rethink its decision and immediately reinstate this vital support.”

The government plans to expand the number of heat network schemes to cover up to 5 million households as part of its strategy to decarbonise heating.

Billing best practice guide coverWith more than half a million households living with unregulated communal heating systems that fall outside of the energy price cap, a consumer body is advising landlords and heat network operators on handling concerns around soaring bills.   

Heat Trust, which runs the voluntary consumer protection scheme for heat networks, is urging heat providers to offer flexible payment plans among other measures to help support families struggling to pay their bills.

The body had warned that residents could receive winter heating bills as high as £1,000 a month before the recently announced government support.

As heat network operators await news on how their tenants and leaseholders will receive financial help promised by Liz Truss, Heat Trust is still expecting energy providers and landlords to experience an influx of billing disputes and complaints.  

Stephen Knight, Director of Heat Trust, who is currently working with Ofgem on upcoming regulation for the sector, said: “As we enter the heating season during a time of unprecedented energy prices, it is vital that heat suppliers make sure they bill customers accurately.  

“Even with the government support, residents with communal heating could still face bills twice the price of those with traditional gas central heating. 

“This means energy providers need to be prepared to accommodate reasonable customer requests for flexibility in payment arrangements.” 

A new best practice guide issued by Heat Trust highlights the advantages of dealing with complaints in a reasonable timeframe and the value of feedback for making improvements. 

Complaints best practice cover

By resolving issues on a case-by-case basis and, when appropriate, offering reparation reflecting the inconvenience caused to the customer, suppliers will not damage trust and give families the best chance of avoiding fuel poverty. 

The guidelines also emphasise the importance of having well-equipped teams to respond to customers across all communication channels with empathy, efficiency, and professionalism.   

Stephen Knight added: “We understand that heat network operators – such as social landlords and local councils – are also experiencing financial challenges. 

“But these families are not protected by a price cap, or the Energy Price Guarantee.

“These guidelines will ensure better support is in place for those struggling with their bills. 

“It is also the chance to review processes and improve customer service – which is all the more important given the upcoming regulation. We encourage any operators who haven’t done so already to register their heat network with Heat Trust to provide their customers with the best possible protection.” 

Access the guides on the Heat Trust website here.

District and communal heating suppliers must do more to address reliability issues and heat losses according to Heat Trust, which today published annual monitoring data on the sector.

The 104 heat networks registered with Heat Trust recorded 808 unplanned interruptions to supply caused by issues with the generation or distribution of heat around the networks, implying that the average customer would have experienced around six such interruptions in the year, this represents a significant increase on the 2020 figures, but is similar to the 2018 and 2019 figures.

In the light of the current crisis in gas prices, Heat Trust also highlighted that more needs to be done to address heat network heat losses, which are currently leading to very high heat prices for some customers.

Today’s report reveals that more heat providers are signing up to Heat Trust’s customer protection standards ahead of planned statutory regulation due in around 2024. Heat Trust is working closely with government and Ofgem to help develop these future regulations and the government has urged all heat networks to sign up to the scheme to ensure they are regulation-ready.

Heat Trust is the consumer protection champion for the heat network sector and aims to put customers at the heart of the rapidly expanding heat network market. It sets consistent customer service standards for the sector, equivalent to the legal standards set by Ofgem for domestic gas and electricity suppliers. The Scheme Rules ensure that customers who experience the worst supply interruptions receive compensation.

Up to five million homes could be reliant on the heat network infrastructure by 2050, a ten-fold increase from the estimated 500,000 homes currently on heat networks in the UK.

In its sixth annual report covering the year 2021, it found that:

  • In 2021 Heat Trust provided protection to customers living in around 61,000 homes, up from 52,000 the previous year.
  • There were 808 unplanned interruptions to supply caused by issues with the generation or distribution of heat around the networks, implying that the average customer would have experienced around six such interruptions in the year;
  • Supply suspensions for debt have risen to their highest level since 2018; and
  • The number of complaints taken to the Energy Ombudsman that were within their remit (Terms of Reference) increased from 80 in 2020 to 124 in 2021.

2021 AR Infographic

The government has called on all heat network providers to register with Heat Trust in advance of forthcoming statutory regulation to provide assurance to their customers and to ensure they are ready for regulation. More councils and housing associations are now registering their heat networks with the scheme.

Heat Trust Director Stephen Knight said: “Heat networks have a vital role to play in the decarbonisation of heating systems in the UK, as they can enable surplus and waste heat to be used to keep homes warm.  They can also be used to reduce the capital costs associated with decarbonisation of heating, by enabling the sharing of expensive low carbon infrastructure.

“However, to be widely accepted by customers, the industry needs to do more to address consumer detriment issues with existing heat networks, to build public confidence in this important technology.

“Our data shows that heat network customers continue to experience far too many supply interruptions, and we also know that high heat losses can lead to customers paying too much for heat.  These two issues must be addressed if the sector is to provide the ultra-reliable, affordable heating that customers need.

“When heat networks are registered with Heat Trust, consumers get a better experience. That needs to be at the heart of the sector’s growth plans.

“Regulation is only a few years away, so it is essential that heat network providers get prepared and have guaranteed service standards in place.

“Heat Trust is continuing to work with the Department of Business, Energy and Industrial Strategy and Ofgem on plans for regulation, and we will play an important role in making sure the sector is ready for this.”

Heating and hot water bills could hit as much as £1,000 a month for some households this winter.

Heat Trust, the consumer body for heat networks, is sounding the alarm for more than half a million households who will not be protected by Ofgem’s October price cap, with some potentially facing bills as high as £1,000 per month for heating and hot water alone this winter.

Households living on communal and district heating networks – a key part of the government’s plans to deliver low carbon heat to the UK – are currently excluded from any protection created by the price cap, leaving them exposed to unrestricted price rises dictated by the wholesale gas market.

Heat Trust, the national consumer protection scheme for heat networks, is calling for emergency government financial support and investment to increase efficiency on district heating systems to mitigate against impossibly high bills that many residents will not be able to afford.

It reports that some heat network customers are already seeing bills as high as 50p/kWh – or around £5,000 per year for the average* household – and is predicting that could rise as high as 70p/kWh, or £7,000 a year for the average household – with winter heating and hot water bills of almost £1,000 a month for some households.

The Ofgem price cap unit rate for domestic gas customers from 1st October 2022, announced today, is around 15p/kWh.

Stephen Knight, Director of Heat Trust, said: “There is a huge amount of concern for how households will be able to cope with the rise in the price cap.

“Yet for more than half a million households the situation is much worse as they remain unprotected by the cap and paying for heat based on the wholesale cost of gas.

“No-one can be asked to budget for these kind of price rises and it’s hard to see how these forgotten families are going to cope this winter.

“Although some operators such as councils and housing associations may try to subsidise bills, overall, there are some eye-watering increases coming.

“We have already seen one example of over 50p/kWh being charged to heat network customers and, with prices still rising, I would expect to see more at this level or higher this winter. We may soon see bills hitting 70p/kWh based on current commercial gas prices, which could means heating bills of almost £1,000 a month during the winter for some.

“A lack of a price cap – even a rising one – means heat network customers have no protection at all.”

Why are heat network customers excluded?

Heat networks are not currently regulated by Ofgem and the price they charge for heat is not subject to any price cap.  The network operators (usually the building owner/freeholder or their appointed energy company) buy the gas for the communal boilers on the commercial gas market, before converting it to heat for households.  Whilst in the past companies could buy gas more cheaply than individual domestic customers, this is no longer the case, as companies are not protected by a price cap.

In July, the Government introduced an Energy Bill into Parliament that will appoint Ofgem as the regulator for the fledgling heat network industry to ensure fair prices and a reliable supply of heat.

Heat Trust has already been working with Ofgem to design the regulatory framework for heat networks, but with the Bill currently at Committee Stage, a price cap or similar pricing measure is not likely to be in place for several years.

What can be done before then?

With customers on heat networks fuelled by gas unable to change supplier as their whole building, or street, is supplied by the same network operator, more government support is needed.

Knight said: “Heat Trust is committed to putting customers’ interests first in the heat network industry, and what we are seeing at the moment with skyrocketing bills is heartbreaking.

“Although the Energy Bills Support Scheme will help a little, at £400 it is clearly not on the scale needed to cope with these price rises and does not take account of the fact that heat network customers are seeing much larger increases.  Families and flat-shares will need emergency financial support this winter.”

As a way to reduce costs passed onto customers both now and in the future, Heat Trust is also calling for a planned government scheme to fund efficiency improvements to heat networks to be accelerated and scaled-up. Many heat networks have high heat losses, which means customers paying for heat they don’t even use.

Knight added: “The Heat Trust voluntary regulation scheme is an opportunity for heat network operators to improve their customer service and prepare for the forthcoming regulations, which is vital in the present environment.

“Families and flat-shares currently facing growing bills can support us by writing to their network provider or landlord to ask them to sign up to Heat Trust. It’s the best way they can gain consumer rights and have access to additional support and independent dispute resolution via the Energy Ombudsman.

END

* Average annual household gas usage is 12,000 kWh according to Ofgem’s Typical Domestic Consumption Values, which taking account of typical boiler efficiency equates to around 10,000 kWh of heat.

Heat Trust, the national consumer protection scheme for people living on communal and district heat networks, has welcomed today’s news that the government is to extend its Energy Bill Support Scheme to those 1% of households that don’t access their electricity from a domestic supply company, but instead pay via their landlord or site owner.

The Energy Bills Support Scheme will pay households £400 this winter towards their energy costs via a reduction in their electricity bills.  However, Heat Trust has raised the problem that those living on developments where the landlord or site owner supply electricity via a ‘private wire’ system would not have been able to access this funding.

The Department of Business Energy and Industrial Strategy has today confirmed that it will fund an equivalent support of £400 for these households, although the details of how this will be done have not yet been announced.

The Government estimates that around 1% of households do not have a direct relationship with an electricity supplier – this includes many heat network customers, who get all their utilities provided via their building or site management company.

Stephen Knight, Director of Heat Trust, said: “I am delighted that the Government has listened to calls from Heat Trust and others and accepted that those who do not receive their energy in traditional ways are also in desperate need of support at this time of spiralling prices.

“There was a real danger that a large number of families in the most need were going to be overlooked and locked out of this scheme. We are delighted they will be able to access the £400 support, and we look forward to hearing details on how this will be delivered to these households.

“Heat Trust will continue to provide a voice for those living on heat networks. Currently people on heat networks fall outside of Ofgem’s price cap, leaving many facing 300-400% increases in their heating bills as gas prices continue to rise.

“It is vital we ensure that families get the help they need, and we will be working closely with Government and the industry to ensure this happens.”