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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 1^st 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.”

In response to the unprecedented increase in wholesale gas prices, and the knock-on impact this has had on the cost of heating for those with communal or district heating systems, a new report reveals the current levels of customer support provided by communal and district heat network operators and highlights best practice for the sector.

Heat Trust, the national consumer protection scheme for heat networks, undertook a compliance project to check that its registered heat suppliers were providing adequate support to customers at risk of financial difficulty.

The report found that over 70% of heat networks surveyed had compliant procedures for identifying customers in need of extra support when regulation comes in [1].

Another positive finding was that almost four-fifths of heat networks surveyed have easily accessible support in place for customers, greatly reducing the likelihood of non-compliance. [2]

The report also highlights suggested best practice, such as heat networks forming partnerships with debt support charities, making it a useful guide for the whole heat network industry.

The aim is that all heat network operators will review their current practices and processes in this area and, where necessary, make changes and improvements in advance of winter to provide the best possible support to their customers.

The report considers best practice under three main themes and provides guidance as to how heat suppliers should have:

1. Systems to identify customers in need of additional support.
2. Support mechanisms in place that are clearly communicated to customers, easily accessible, and tailored to their needs.
3. Processes in place to review, monitor and improve their provision of customer service and support based on customer feedback.

As the industry awaits the passage of the Energy Bill, being debated in the House of Lords, Heat Trust believe it is likely that heat network operators will need well developed processes aligned with these themes to meet the requirements of the formal regulatory framework that Ofgem will operate in the future.

Commenting, Richard Bellingham, Head of Compliance and Audit at Heat Trust, said: “It was gratifying to see so many of the heat suppliers registered with Heat Trust are compliant with the scheme rules in this area and, in some cases, go beyond the requirements and demonstrate strong support for customers that are struggling financially.

“It was also greatly insightful to see the areas where heat networks are most at risk of non-compliance, and this will help us shape the support we provide.”

Stephen Knight, Director of Heat Trust, added: “Communal and district heating customers aren’t protected by a price cap and so the recent massive increases in wholesale gas prices are often resulting is much larger price rises than domestic gas customers are experiencing. In this context, it is critical that operators do everything they can to support customers in financial difficulty.

Whilst we are delighted that the Energy Bill now before Parliament includes price protections for customers in the future, these protections will not help customers this winter or next. In the meantime, we hope that this report will help network operators put appropriate support in place for those struggling with their bills.

We also encourage more operators to register their heat networks with Heat Trust to provide their customers with protections and to give them a head start with the upcoming regulations.  It’s the best way they can become regulation-ready!”

Read the full report here.

[1] 71% of heat networks surveyed have identification processes that are at low risk of non-compliance (green or gold, Outcome 1). 'Supporting customers in financial difficulty Compliance assessment and best practice', Heat Trust, July 2022, p. 9.

[2] 79% of heat networks surveyed have readily accessible support and communication that puts them at low, or very low, risk of non-compliance (green or gold, Outcome 2), p. 15.

The Government’s new Energy Bill, which is the first new energy sector legislation for nearly 10 years, includes powers to regulate district and communal heat networks to improve customer protection and will be debated for the first time in the House of Lords on 19^th July.

Heat Trust, the national consumer protection scheme for heat networks, has long advocated statutory regulation of the sector, and so welcomes this important milestone.

Regulation is needed to address existing problems with the sector as well as to ensure customers are protected as this important sector grows to meet the Climate Change Committee’s (CCC) objective of 18 per cent of national heat demand being met via heat networks by 2050, in line with the UK’s net-zero targets.

In the absence of regulation, Heat Trust reports that there are too many examples of poorly executed heat networks that are unreliable (leading to frequent interruptions to supply) and extremely inefficient, which in the light of currently inflated gas costs, can result in very expensive heat being delivered to consumers.

Heat Trust has been working closely with BEIS and Ofgem to help shape the regulatory framework and expects the consumer protection regulations to closely match its existing Scheme Rules, which are themselves modelled on consumer protections in the gas and electricity sector.

The Government (BEIS) has said: “We want the Heat Trust voluntary scheme to have an important role in preparing the industry as we move towards regulating the market, and we strongly encourage heat networks to register with the scheme now to prepare for regulation.”

Heat Trust also welcomes that statutory regulation will go beyond areas covered by Heat Trust Scheme Rules, to include matters such as heat pricing and technical standards, which will further protect consumers.

The Bill includes the power to set a domestic heat network price cap, although the Government says that Ofgem will not initially set a price cap, but instead intervene where it considers heat prices are “disproportionate”. High heat prices are often driven by high inefficiencies and heat losses due to poorly performing networks and so regulation of prices and of technical standards are closely linked.

The regulation of technical standards should deliver improved efficiency of heat networks, to keep heat costs down for consumers, as well as improved reliability, to deliver a better overall consumer experience.

The details of regulations will be set out in future secondary legislation, which will be subject to consultation, and Heat Trust will respond to these consultations with detailed comments when they arise.

In the meantime, Heat Trust is committed to working with industry and government to ensure a smooth transition to regulation and to making sure consumers remain central to that journey.

Ahead of the second reading of the Energy Bill on 19^th July, Stephen Knight, Director of Heat Trust, said:

“Heat Trust supports the government’s commitment to regulating heat networks, which will bring greater consumer protection to the sector. This long-awaited Energy Bill is the first step in this process.

“Sadly, in the absence of such regulation, not all heat network customers are currently receiving a good service, with too frequent supply interruptions, and in recent months many have seen enormous, uncapped price rises.

“At Heat Trust, we work with operators who are committed to providing a good service and hold them to meeting minimum service standards, but sadly too few operators are registered with our scheme.  Those that are registered will be uniquely prepared for regulations when they come into force and I encourage others to contact us about registration so that more can become regulation-ready over the coming months.

“We are looking forward to helping government and Ofgem to deliver a set of regulations that can deliver real improvements for all heat network customers. In the meantime, we will continue to work with district and communal heat network operators and the government to prepare the sector for regulation.”

Heat Network regulation must be included in Queens Speech

Heat Trust is calling on the government to announce urgent new financial support for half a million households that currently have no protection against energy price rises and are experiencing much more severe increases than regular domestic gas customers.

Heat Trust, the national consumer protection scheme for heat networks, which protects households on communal and district heating networks, is warning that without government help, hundreds of thousands of people in the UK could be left unable to afford to heat their homes.

Heat Trust’s Director, Stephen Knight, has recently met with Business Secretary Kwasi Kwarteng and Energy Minister Lord Callanan to explain the dire position of communal and district heating customers: “Many communal heating customers are experiencing price increases of 400% - likely to take their heating bills next winter from £50 a month to £250 a month.

“Communal and district heating customers aren’t protected by the Ofgem price cap and operators buy gas at commercial prices, which have seen extraordinary increases in the past year. Without government support, customers simply won’t be able to afford to pay their bills.

“Sadly, ministers have so far offered little comfort that they are prepared to offer help to these customers, many of whom are flat tenants of councils and housing associations on low incomes.”

Heat Trust is urging the government ahead of the Queen’s Speech to fulfil its promise to regulate the heat network market and confirm Ofgem’s new powers to oversee the sector.

Stephen Knight said: “The government has been promising to regulate heat networks to bring in consumer protections and price regulation for some years and it is time this promise was finally fulfilled.  Sadly, such regulation will take several years to take effect and in the meantime  hundreds of thousands of people will face limitless price rises and have no access the consumer protections in place for other energy customers.”

Heat Trust says some residents and landlords operating heat networks are reporting potential rises of up to 700% - the equivalent of a pint of milk rising from 60p to £4.80.

Stephen Knight, Heat Trust’s Director, said; “Government gave us reassurance last year that regulation of heat networks would be going ahead and we are urging them to ensure this commitment is followed through in the Queen’s Speech.

“Regulation is absolutely vital for the 500,000 households which are currently overlooked, many of which include older people, social tenants, people with health conditions and other groups which are even more vulnerable to the harsh impacts of the cost-of-living crisis. We cannot let these households slip through the net of support and financial protection.”

Heat Trust is the independent national consumer protection scheme for heat networks and was set up to protect customers who receive their heating via such systems.

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, without the regulation the government has previously promised, consumers are not protected in the same ways as other energy markets.

Heat Trust is calling for government intervention to include:

• Ensuring heat network operators and their consumers receive government support to ensure that their bills are capped in the same way as those of domestic gas customers.
• Bringing forward its plans to regulate the heat network market via Ofgem.
• Bringing forward plans to help heat networks improve their efficiency.

Knight added; “Government has recognised the huge potential benefits of heat networks and how they can form a key part of its decarbonisation plans.  

“However, without intervention, hundreds of thousands of families are facing financial ruin and worse. We trust that the government will see the bigger picture and introduce the infrastructure needed to make heat networks effective for people and the planet."