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.”