Heat Trust was pleased to respond to the consultation by BEIS on the Green Heat Network Fund. The decarbonisation of heat is a crucial challenge, and the heat network sector has a key role to play in delivering this. Upgrading existing heat networks and ensuring that new heat networks are fit for the future will also benefit customers, particularly with improvements to the reliability of their heat supply.

We responde emphasising that:

1. BEIS must embed ongoing assurance of customer protection provisions made by each applicant;
2. Technical performance and reliability of supply are key drivers of customer experience; and
3. High levels of customer satisfaction should be an additional factor throughout.

Our full response can be read here.

Heat Trust is the 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 the 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 efficiencies in our operations that reduce the costs of regulation for all.

Given this, and following development of our business plan for forthcoming year, we are now in a position to confirm our fees for the twelve-months from 1^st April 2021[1].

Scheme Annual Fee

From 1^st April 2021 the Scheme Annual Fee for all existing Registered Participants will reduce by 4% from £4.80 to £4.61 per connection, exclusive of VAT. 

This reduction masks a material increase in our planned level of activity for the coming year, and underlines the degree to which we have implemented, and continue to seek, efficiencies in the way in which we deliver that activity.

Site Registration Fee

From 1^st April 2021 the site Registration Fee for all new sites registered with us will increase by 17% from £85.31 to £100.00 per site, exclusive of VAT.

This increase follows an assessment of the average time it takes to complete each new site registration, and more accurately reflects the costs incurred.

2021/22 will be a very important year for both the wider heat network sector and the customers who rely on it.  We remain committed to increasing our impact for customers, raising standards, and ensuring a minimum level of protection - whilst also improving the efficiency of how we deliver that.  These changes reflect that commitment.

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

 

[1] As per Scheme Byelaw 3.1.1

Here are some key differences between heat networks and the regulated market (gas and electricity):

Heat networks	Traditional (natural)  gas/ electricity
Switching supplier
Heat networks in the UK are natural monopolies, run by a particular company, and typically have contracts that are in place for the period the customer owns or occupies the property. Because of this, minimum customer service standards to ensure customers are supported,  particularly those in vulnerable situations is even more important for heat networks. Transparency and regulatory oversight of pricing also become more important.	Customers can switch their gas and electricity supplier. Typically gas/ electricity customers have shorter contract lengths
In-property equipment
Heat network suppliers maintain the Heat Interface Unity (HIU) and meter within a customer’s property, including usually replacing it at end of life. This is usually included within the cost of the heat bill, so customers don’t need to pay for it. This is an opportunity for more customer interaction and therefore better identification and support for vulnerable customers. There is also an increased need for technical standards to ensure good performance.	The customer is typically responsible for replacing their boiler at the end of its life. Many customers will also arrange servicing of their boiler/heaters independently of the supplier. They will likely pay for this service.
Standing charges
Heat network customers’ standing charge includes the maintenance and repair of HIUs as well as pipework. They are consequently higher on average than they are for gas/electricity customers.  There is also a wider variance in what is included in the fixed and variable charges between different suppliers.	Because standing charges cover fixed costs such as metering, with other costs such as boiler maintenance being picked up separately by the customer, these charges are typically lower. There is also relatively little variation from one supplier to another.
Environmental impact
By utilising economies of scale heat networks are more efficient to run and can more easily make use of low carbon sources of heat such as waste heat. Their source of fuel is also more easily replaced by a lower carbon source, as there is one central energy centre.	Natural (mains) gas is a fossil fuel, which is burned to heat most of our homes and hot water but contributes to climate change. Electricity is increasingly becoming greener, however some low carbon heating that uses electricity require high levels of insulation to be efficient.
Access to independent redress
Pending regulation, access to the Energy Ombudsman, the independent dispute resolution service for the sector, when things go wrong are limited to those customers on sites registered with Heat Trust.	All customers with gas or electricity have access to the Energy Ombudsman if complaints cannot be resolved directly with their supplier.
Scale/ size
Heat network suppliers typically have a smaller number of customers than in the gas/ electricity market.  There are also far more of them, with approximately 2,300 in the market today.	Customers are often one of hundreds of thousands of customers for their supplier.
Regulatory protections
Only metering and billing of heat networks is currently under statutory regulation, although more wide-reaching regulation is being developed in the UK. All other aspects of assured customer protection specific to their energy supply are available only for customers on sites registered with Heat Trust.	All gas and electricity customers are protected through Ofgem’s licencing system.

Heat Trust ensures that suppliers adhere to the minimum customer protection standards set out in our Scheme. One way that assurance is provided is through an independent audit of whether suppliers are meeting these standards, something that takes place at least once for each site in every five year period. The COVID-19 pandemic has prevented this from happening for a number of sites in 2020 however.  At a recent meeting, the Heat Trust Board agreed to extend the five year deadline by one year for the sites affected.

The sites affected are: (E.ON) Greenwich Millennium Village; Romford Reflections; Waddon; Fulham Wharf; Myatts Field North; Canning Town 3; Cannon Wharf; Centenary Quay; New South Quarter; Blackwall Reach; Loampit Value; Bath Riverside; Maple Quay; St Andrews; Queensland Road; Scotswood; Barham Park; Greenwich Reach; Alie Street; Newbury Racecourse; Dalston Square; Trafalgar Place; Catford Green; West Hendon; Lincoln Plaza; Barrier Park; Enderby Wharf; and (SSE) Greenwich Square / East Greenwich; Woolwich Royal; Riverlight Heat.

The audits for each of these sites have now been replanned, and all will be completed by July 2021.

The introduction of statutory regulation will be the largest change in the sector for many years.  This will provide opportunities and risks for all parties involved in the sector.  BEIS are developing the proposals now and Heat Trust is working closely with them to share our experience of providing customer protection standards for the sector. 

It is vital that the industry understands and prepares for the changes that are coming.  In this regard, Heat Trust is partnering with Cornwall Insight to host a series of free webinars over the coming months designed to help you get the insight you need to make sense of the changes and how they will impact heat networks and the experiences of for customers.  These webinars will cover all the relevant issues under consideration, including regulatory design, compliance, costs, technical standards, investment perspectives, legal considerations, international examples and links with other policy initiatives in the space. 

Previous webinars

The links to webinars that have already taken place in this series can be found below:

1 Heat networks: building a market framework

2 What good looks like

3 A customer's perspective

4 A regulator's view on what is required

5 Technical standards

6 The investment perspective

7 International approaches

Upcoming webinars

The link to register for the next webinar can be found below:

8 Links with wider energy policy - August date TBC

9 The legal perspective - September date TBC

10 Innovation - October date TBC