Heating bills could hit as much as £1,000 a month for some households this winter.
A consumer body 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 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 more government 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 – over £1,000 a month for the winter months.
Ofgem currently sets its price cap unit rate for gas at 7.3p/kWh, which is expected to double to about 14.8p/kWh from 1st October 2022.
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 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 means almost £1,000 a month over the winter.
“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 take account of the fact that some households are seeing much larger increases. Families and flat-shares will need more support before the 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.”