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:
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.”