The Competition and Markets Authority (CMA) has today
published the final findings of its 7
month study into
this industry, which set out to establish whether heat
network customers are getting the right level of
protection.
Heat networks provide homes with heat and hot water
from a central source via insulated pipes, but unlike
other energy services are currently not regulated. As a
result, heat network customers in general have less
consumer protection if things go wrong.
The CMA found many heat networks offer prices that are
the same or lower than those paid by people on gas or
electricity, and customers receive comparable levels of
service.
However, a number of those on privately operated
networks are getting poorer deals in terms of price and
service quality, and there is a risk this problem could
grow.
There are currently about 450,000 customers of these
services, and that number is expected to grow
significantly as investment in energy efficient
technology increases.
The CMA is therefore recommending that the regulator
once it is established:
- introduces consumer protection for all heat network
customers so they get the same level of protection as
customers in the gas and electricity sectors
- addresses low levels of transparency so customers
know they are on a heat network and there are clear
agreements or contracts between customers and heat
network operators
- makes sure customers are aware of what they are
paying as this is often unclear
- protects customers from poorly designed, built and
operated heat networks by preventing developers from
using cheaper options to meet planning regulations that
end up being paid for by the customer over the
longer-term
CMA Chief Executive Andrea Coscelli, said:
With 14,000 heat networks supplying 450,000 people
with heating across the UK, they can be an efficient
and environmentally-friendly way for people to heat
their homes.
But there are problems with how some operate,
especially for those in private housing. People must
benefit from the same level of protection as those
using gas or electricity, and not be penalised either
by paying too much or receiving a poor-quality
service.
There is currently no regulator for this part of the
energy sector – we think that is one of the key
problems to be addressed and we recommend Ofgem is
given this role.
Dermot Nolan, chief executive of Ofgem, said:
Our principal aim is to protect the interests of
current and future energy consumers. We welcome the
CMA’s Market Study on heat networks and agree that
heat network customers should get the same level of
protection as customers in the gas and electricity
sectors.
We look forward to continuing to work with the
government to address the current and future
challenges in decarbonising heat and would welcome
the opportunity to contribute to the development of
the future regulatory arrangements for heat networks.
Ahead of these regulatory changes being introduced, the
CMA has also today written an open
letter to the industry, reminding energy
suppliers of their obligations under relevant consumer
and competition law. It has also
published advice for
existing or prospective heat networks customers.
Notes to editors:
- The CMA launched its market study into domestic
heat networks on 7 December 2017.
- Heat networks provide homes with heat and hot water
from a central source via insulated pipes. There are
around 14,000 heat networks in the UK (of which more
than 2,000 are district heating and the rest communal),
together providing around 2% of UK buildings’ heat
demand.
- Extending Ofgem’s remit to include heat networks
would require new primary legislation to be introduced
by the UK government.
- The study looked at: a. Whether customers are aware
of the costs of heat networks both before and after
moving into a property b. Whether heat networks are
natural monopolies and the impact of differing
incentives for builders, operators and customers of
heat networks c. The prices, service quality and
reliability of heat networks
- The study covers the whole of the UK and the CMA is
working closely with governments and stakeholders in
all four nations. Heat policy is devolved to the
Scottish Government but not to the Welsh Government.
Competition and consumer powers are reserved matters
for the UK Government and are not devolved. Energy
policy is devolved in Northern Ireland (NI) and there
are only a small number of networks in Northern Ireland
and no current plans to significantly expand the
number. Should there be an expansion of heat networks
in NI, the CMA would recommend the NI Utility Regulator
and Department for the Economy and Communities to
consider equivalent regulation.
- Market studies are carried out using powers under
section 5 of the Enterprise Act 2002 (EA02) which
allows the CMA to obtain information and conduct
research. They allow a market-wide consideration of
both competition and consumer issues. Market studies
take an overview of regulatory and other economic
drivers in the market, and consumer and business
behaviour.
