Five million households could be hit by huge increases in energy bills as a result of the rollout
MORE than five million households are facing huge increases in energy bills as a result of the major network rollout.
It is because the government wants to quickly expand the number of heating networks throughout the country.
The Climate Change Committee estimates that 5.5 million homes could be supplied with heat by 2050.
But homes supplied by communal heating systems do not receive the same protection as homes with conventional gas and electricity supplies.
Heat network operators and heat suppliers are currently unregulated and this means that prices can fluctuate significantly because there is no price ceiling.
Stephen Knight, head of non-profit consumer organization The Heat Trust, has warned that the expansion of the heating network will leave many households with higher bills if a price cap is not introduced.
He told The Telegraph: “If we have another energy crisis that drives up gas prices in the commercial sector, more and more consumers will be exposed to volatile energy markets and uncapped prices – and that is a concern.”
An estimated 480,000 households are currently connected to a heating network, and many of these residents have a low income and live in tower blocks owned by the municipality.
However, since the energy crisis began, prices have remained high and at one point some households were stuck paying as much as 50 cents per kWh for gas.
This equates to 42.58 cents more per kWh than those with a conventional gas supply and protected by Ofgem's price cap.
In response, the government introduced the energy bill discount scheme in April 2023, capping gas bills for those on heating networks at 7.8 cents per kWh.
However, this price cap is still higher than Ofgem's price cap for those with a conventional gas supply.
And heat network operators or property managers can still get away with adding a 'heat loss' surplus due to a lack of regulation, according to The Telegraph.
The energy bill discount scheme expires on March 31, and there are renewed fears that these households will face another major increase in their energy costs.
The way in which the bill is usually calculated for homes that are supplied by a heating network is complex.
The common costs are usually divided among the residents based on the number of hot water taps and radiators in each home.
But this method does not take into account how many people live in the house or how much energy the house uses.
It means that even if someone uses no energy at all, they still have to pay the same as everyone else on the network.
The good news is that the government plans to make Ofgem the regulator for heating networks in the future.
The Energy Act 2023 gave ministers the power to legislate in partnership with Ofgem and the government is currently consulting on how to protect consumers of heating networks.
However, watertight regulations will probably not come into force until 2025 at the earliest.
A spokesperson for the Department for Energy Security and Net Zero denied fears of future bill increases, saying: “Families on heating networks pay on average £100 less per year than families using gas boilers.”
“They are also protected from price increases by the Energy Bill Discount Scheme, which caps the amount suppliers pay for energy, which they are then legally required to pass on to consumers. Businesses, including heating network operators, received £7.5 billion in support last winter.
“From spring 2025, we will put Ofgem in charge of regulating heating networks, giving them the power to intervene where prices appear unfair, so families can benefit from cleaner, cheaper heating.”
What is a heating network?
Heat networks (also called district heating) supply heat from a central source to consumers, via a network of underground pipes that transport hot water.
Heat networks can cover a large area or even an entire city, or be fairly local and supply power to a small cluster of buildings.
This avoids the need for individual boilers or electric heaters in each building.
If your home is connected to a heating network:
- You cannot switch heating network supplier
- You may pay your heating costs to a management company or housing association. If you rent, this may be part of your rent.
- You may have to pay for maintenance costs. How much you have to pay may change over time
Help with communal heating bills for homes
Unfortunately, reducing your energy consumption will not affect costs for people on a communal heating network, as the bill is shared by all homes regardless of consumption.
However, if they are concerned that their supplier has not passed on government support, they can file a complaint.
Under the upcoming Energy Act, Ofgem is the regulator of heating networks and will have the power to investigate and intervene in networks where prices appear unfair to consumers.
A source of help for households could be the Household Support Fund.
This is a pot of money available to vulnerable households in England.
The money is disbursed through local councils, which set the criteria for accessing the support.
It means that your eligibility and how much money you can get depends on where you live.
Typically, homes must receive certain benefits to access the scheme.
But contact your municipality for the exact criteria.