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Calls for heat network protection as government’s backstop fails to protect these customers

As approximately 22 million customers brace themselves for Ofgem's price cap rise today, more than half a million households on communal and district heating networks remain locked out of any protection – leaving them exposed to even bigger, unrestricted price rises.

Consumer protection body Heat Trust is warning that urgent government action is needed to support those living on heating systems that are not protected by the price cap.

Heat Trust, the independent national consumer protection scheme for heat networks, says those living on communal or district heating systems are set to be amongst the worst affected by the soaring cost of gas – with residents facing the prospect of being unable to afford to heat their homes.

The government’s price cap does not currently apply to the heat network market, where operators buy gas on the commercial rather than the regulated domestic gas market.

The Director of Heat Trust, Stephen Knight, has written to Kwasi Kwarteng, Secretary of State at BEIS, to request that 500,000 households are not overlooked as the government looks to ease the financial pressure on families and has been promised a meeting with the Secretary of State, alongside others from the sector, later this month.

Heat networks are seen as a major part of the UK’s decarbonisation plans, and can deliver low-carbon, low-cost energy to homes. However, as the market is currently unregulated, consumers are not protected in the same ways as other energy markets. 

The wholesale gas price, which until last autumn had averaged around 1.5p/kWh for decades, peaked at 27p/kWh at the start of March and has averaged around 10p/kWh in recent weeks. This means that when heating operators renew their commercial gas contracts, they are seeing massive increases, which are often passed straight on to consumers.

Consumers and landlords operating heat networks are already reporting examples of price rises of up to 700% - the equivalent of the price of a pint of milk rising from 60p to £4.80.

Heat Trust is calling for government intervention to include:

• Ensuring heat network operators and their consumers receive government support to ensure that their bills rise no faster than those of domestic gas customers.
• Bringing forward its plans to regulate the heat network market via Ofgem which were confirmed in December last year,
• Bringing forward plans to help heat networks improve their efficiency to reduce heat wastage.

Stephen Knight, Director of Heat Trust, said: “The government is committed to making heat networks a key part of its energy policy, and must not leave families living on these schemes behind.

“Heat networks have the potential to offer low-cost, low-carbon heat, but without intervention, hundreds of thousands of families are facing horrendous and unaffordable heating bills.”

Heat network operators are keenly awaiting further news of the government’s Heat Network Efficiency Scheme (HNES) aimed at improving the performance of communal heating projects.

The HNES Demonstrator £4.175m grant scheme has already supported a number of communal networks to improve their performance, but the full scheme is not currently due to be launched for another 12-months (spring 2023), and Heat Trust wants to see this scheme brought forward and expanded to cut bills by reducing heat wastage.

Heat Trust is also calling for changes to the Landlord and Tenant Act rules which currently make it difficult for landlords to buy gas more than 12 months in advance, making them vulnerable to price fluctuations. If they could buy gas for longer periods of time, it might protect consumers from market volatility.

Knight added: “Our mission is to protect heat network customers.

“Commercial gas price increases of this magnitude are simply not sustainable for heat network customers. They are driving up household bills in unprecedented ways – many people will have to choose between heat and food.

“Heat networks are commonly used in blocks of flats and are becoming increasingly common with social landlords, meaning the most vulnerable people in society are the ones most affected by the current crisis. We can’t let that happen.”

ENDS

Heat Trust is the national consumer protection scheme and customer champion for those living and working on heat networks.  To fund our activity, we levy two fees on Registered Participants: the Scheme Annual Fee and the Site Registration Fee.  As a not-for-profit organisation, both these fees are set based on an assessment of our fee income and cost of our ongoing operations for the forthcoming year.

We are mindful of the importance our operations have for ensuring customers benefit from heat networks that are fit for the future.  We are also aware that our operations impose a cost on Registered Participants, a cost which is ultimately borne by those same customers.  We are therefore committed to ensuring we continue to provide high levels of customer assurance whilst also delivering that assurance at the lowest reasonable cost to consumers.

In the light of these factors, our Board has now agreed a budget for the forthcoming year and we are in a position to confirm our fees for the twelve-months from 1^st April 2022.

Scheme Annual Fee

From 1^st April 2022 the Scheme Annual Fee will reduce by 14.3% from £4.61 to £3.95 per connection, exclusive of VAT.

Site Registration Fee 

The site Registration Fee for all new sites registered with us will remain unchanged from 1^st April 2022 at £100.00 per site, exclusive of VAT.

Despite this reduction, made possible by the continued growth in membership of the scheme, we have ambitious plans to increase in our activity for the coming year, including continued engagement with industry, Ofgem and BEIS to help shape the future regulatory framework.

2022/23 will be a very important year for both the wider heat network sector and the customers who rely on it.  We expect to see legislation introduced to implement regulation of the sector, set against the backdrop of continuing rising energy costs having a significant impact on consumers.  We remain committed to increasing our impact for customers, raising standards, and ensuring a minimum level of protection.

If you have any questions regarding these changes and how they may impact you or your organisation, please do not hesitate to contact us.

Reports of bills rising by up to 700% on some schemes

More than half a million households on communal and district heating networks will be locked out of Ofgem’s price cap (set to be announced tomorrow), leaving them exposed to huge and unrestricted price rises.

As many homes around the country brace for a jump in bills when Ofgem announces April's price cap increase, consumer protection body Heat Trust is warning that urgent government action is needed to support those living on heating systems that are not protected by the cap.

Heat Trust, the independent national consumer protection scheme for heat networks, says those living on communal or district heating systems are set to be amongst the worst affected by the soaring cost of gas – with residents facing the prospect of being unable to afford to heat their homes.

The government’s price cap does not currently apply to the heat network market, where operators have to buy gas on the commercial rather than domestic markets.

The Director of Heat Trust, Stephen Knight, has written to Kwasi Kwarteng, Secretary of State at BEIS, to request that 500,000 households are not overlooked as the government looks to ease the financial pressure on families.

Heat networks are seen as a major part of the UK’s decarbonisation plans, and can deliver low-carbon, low-cost energy to homes. However, as the market is currently unregulated, consumers are not protected in the same ways as other energy markets. 

Commercial gas saw a 1000% price increase last year, rising from 1.5p/kWh to 15p per unit before Christmas. The price is currently hovering between 6p and 7p per unit (c.175-205p/Thm).

Consumers and landlords operating heat networks are already reporting examples of price rises of up to 700% - the equivalent of a price of milk rising to £3.85.

Heat Trust is calling for government intervention this winter to include:

• Ensuring heat network operators and consumers are able to access any government support aimed at helping families forced to choose between eating and heating
• Bringing forward its plans to regulate the heat network market via Ofgem which were confirmed in December last year
• Bringing forward plans to help heat networks improve their efficiency to reduce heat wastage.

Stephen Knight, Director of Heat Trust, said: “The government is committed to making heat networks a key part of its energy policy, and must not leave families living on these schemes behind.

“Heat networks have the potential to offer low-cost, low-carbon heat, but without intervention hundreds of thousands of families are facing horrendous and unaffordable heating bills this winter.”

Heat network operators are keenly awaiting further news of the government’s Heat Network Efficiency Scheme (HNES) aimed at improving the performance of communal heating projects.

The HNES Demonstrator £4.175m grant scheme has already supported a number of communal networks to improve their performance, but the full scheme is not currently due to be launched until later in 2022 or 2023, and Heat Trust wants to see this scheme brought forward and expanded to reduce heat wastage.

Heat Trust is also calling for changes to the Landlord and Tenant Act rules which currently make it difficult for landlords to buy gas more than 12 months in advance, making them vulnerable to price fluctuations. If they could buy gas for longer periods of time, it might protect consumers from market volatility.

Knight added: “Our mission is to protect heat network customers.

“Gas price increases such as those experienced at the end of 2021 are simply not sustainable for heat network customers. They are driving up household bills in unprecedented ways – many people will have to choose between heat and food.

“Heat networks are becoming increasingly common with social landlords, meaning the most vulnerable people in society are the ones most affected by the current crisis. We can’t let that happen.”

Reports of bills rising by up to 700% on some schemes

A consumer protection body has warned that more than half a million households on communal and district heating networks should not be locked out of any government support to protect people against spiralling gas prices.

Heat Trust, the independent national consumer protection scheme for heat networks, says those living on communal or district heating systems are set to be amongst the worst affected by the soaring cost of gas, which is driving up heating bills. 

The government’s price cap does not currently apply to the heat network market where operators have to buy gas on the commercial rather than domestic markets.  Commercial gas prices are currently around 4 times pre-crisis levels.

Heat networks are seen as a major part of the UK’s decarbonisation plans, and can deliver low carbon, low cost energy to homes. However, as the market is currently unregulated, consumers are not protected in the same ways as other energy markets. 

Commercial gas saw a 1000% price increase last year, rising from 1.5p per unit to 15p per unit before Christmas. The price is currently hovering between 6p and 7p per unit.

Consumers and landlords operating heat networks are already reporting examples of price rises of up to 700% - the equivalent of a price of milk rising to £3.85.

Heat Trust is calling for urgent government intervention by:

• Allowing heat network operators to purchase gas at the capped domestic tariff rates and pass on the saving to consumers
• Ensuring heat network operators and consumers are able to access any government support aimed at helping families forced to choose between eating and heating
• Bringing forward its plans to regulate the heat network market via Ofgem which were confirmed in December last year

Stephen Knight, Director of Heat Trust, said: “The government is fully committed to making heat networks a key part of its energy policy, and must not leave families living on these schemes behind.

“Heat networks have the potential to offer low-cost, low-carbon heat, but without intervention hundreds of thousands of families are facing horrendous and unaffordable heating bills this winter."

Heat Trust is also calling for changes to the Landlord and Tenant Act rules which currently makes it difficult for landlords to buy gas more than 12 months in advance, making them vulnerable to price fluctuations. If they could buy gas for longer periods of time, it would further protect consumers from market volatility.

Knight added: “Our mission is to protect heat network customers.

“Gas price increases such as those experienced at the end of 2021 are simply not sustainable for heat network customers. They are driving up household bills in unprecedented ways – many people will have to choose between heat and food.

“Heat networks are becoming increasingly common with social landlords, meaning the most vulnerable people in society are the ones most affected by the current crisis. We can’t let that happen.”

 

Responding to the government’s announcement that it intends to push ahead with regulation of heat networks, Stephen Knight, the Director of Heat Trust, the national consumer protection scheme for heat networks, said:

“We welcome the government’s commitment to regulating heat networks and the news that Ofgem will have new powers to oversee the sector.

“In the absence of regulation, a growing number of consumers are being left unprotected. As the reliance of the country on heat networks grows, so will the scrutiny of their performance and service standards. Legislation to protect consumers is essential and overdue. 

“To avoid any further delays, we now need government to commit to including the legislation to enact these changes in May’s Queen’s Speech.

“We welcome the government’s continued support for the Heat Trust scheme and its recognition of our ‘important role in preparing the industry as we move towards regulating’. We are already working closely with Ofgem to help them develop the regulatory framework and will continue this work in 2022. 

“Heat network operators, from energy companies to social landlords and councils, now have an opportunity to prepare for and help shape the future regulation by registering their networks with Heat Trust. 

“We will continue to work closely with operators, government and Ofgem to ensure a seamless transition to regulation and make sure consumers remain central to that journey.”