Ofgem tells CMA: peg district heating bills to natural gas equivalent

Heat network customers should have their bills capped to ensure they are charged no more than customers using natural gas, energy regulator Ofgem told the Competition and Markets Authority, which is conducting a market study into district heat networks.

In a response to the investigation, Ofgem said, “we share the CMA’s concerns that certain features of heat networks may lead to poor outcomes due to the monopolistic nature and potentially inadequate or inconsistent consumer protection.”  Citizens Advice also said the district heating sector was not delivering value for money or consistently good customer service. It had received complaints about high fixed charges. It added, “This situation is exacerbated by a number of factors including a lack of regulatory scrutiny or intervention and a clear disparity in consumer protections.” Although the industry has worked with the Association for Distributed Energy (ADE) to set up Heat Trust, a customer protection scheme, and the Heat Networks Code of Practice (jointly with CIBSE) with are voluntary schemes. Ombudsman Services said membership of voluntary Heat Trust redress schemes should be made mandatory.

Ofgem said price regulation, as with gas and electricity networks, could prevent the abuse of a monopoly position and compared heat networks with independent gas transporters (IGTs) and independent distribution network operators (IDNOs). “These are licensed entities and subject to price caps, which typically involve requirements that they do not charge more than the local incumbent network. For heat networks, one option might be that consumers connected to heat networks are charged no more than if they were using natural gas for heating,” the regulator said.

Can district heating charges be compared? Fuel Poverty Action said it was usual elsewhere in Europe for at least part of a scheme’s costs to be made public for comparison. It called for standard measures to allow schemes to be compared. Ombudsman Services noted that complaints data should be used systemically to provide industry feedback and information for consumers. 

Fuel Poverty Action also asked for the CMA’s scope to be extended to capital costs, highlighting “the situation of leaseholders who, having bought homes in good faith, are being asked for huge additional sums to cover replacement or improvement of district or communal heating systems.”

Further reading

CMA’s Heat Networks Market Study

 

 

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