Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op) I beg
to move, That this House has considered the energy price cap and
residential buildings with communal heating systems. It is a
pleasure to serve under your chairmanship, Mr Pritchard. I should
declare an interest, as I live in a leasehold flat in a block with
a communal heat network. I also represent a constituency with one
of the highest numbers of multiple dwelling blocks in the UK, a
number of which...Request free trial
Dame (Hackney South and Shoreditch) (Lab/Co-op)
I beg to move,
That this House has considered the energy price cap and
residential buildings with communal heating systems.
It is a pleasure to serve under your chairmanship, Mr Pritchard.
I should declare an interest, as I live in a leasehold flat in a
block with a communal heat network. I also represent a
constituency with one of the highest numbers of multiple dwelling
blocks in the UK, a number of which have community heat
networks.
The problem is very simple. I think I should lay that out, and
then I want to lay out what I am asking the Government to do and
hope to get a positive response from the Minister. Quite simply,
we all know about the cost of living crunch and the increased
price of energy bills, and of course the Government have put in
certain measures to try to mitigate that, but constituents who
live in residential buildings with communal heating systems—also
known as heat networks—are not protected by the energy price cap
as other energy purchasers are.
(Lewisham East) (Lab)
In my constituency there are many Barratt homes that have
district heat networks and I have continually raised that issue
in Westminster Hall and on the Floor of the House. Does my hon.
Friend agree that it is even more important that the Government
introduce regulation to put protections in place for residents
where they have these heating networks, given the fuel crisis
experience that the country is going through and the increases in
fuel costs?
Dame
My hon. Friend is absolutely right. About half a million people,
as an estimate, live in such blocks—not only new developments
such as those that she has highlighted, but some older
developments that would take a lot of retrofitting to get
individual heating systems in place; but that is not the answer
and I will come to that in a moment.
(Strangford) (DUP)
I thank the hon. Lady for securing this debate. She is right, and
such bodies as Ginger Energy have highlighted that domestic
customers of communal heating networks should be included within
the energy price cap’s protection. The Government were committed
to introducing legislation. This affects some 14,000 heat
networks in Great Britain—2,000 district heat networks and 12,000
communal heat networks. Half a million customers suffering, half
a million homes unheated, half a million reasons for us to take
action. Does she agree?
Dame
The hon. Gentleman is absolutely right. When I get to my asks of
the Government, I shall be very clear, as the hon. Gentleman and
the hon. Lady have highlighted, that the issue has been raised in
the House before—indeed, it has been raised since 2018. I will
get on to the timeline, and my question to the Government is
this: we know about this, so why is it taking so long to resolve
it?
The key issue is quite a simple definitional issue: the energy
price cap sets a price limit on domestic supplies of electricity
and gas, but not on domestic supplies of heat. So developments of
the type that my hon. Friend the Member for Lewisham East () referred to will often have
wood-chip burners or an equivalent in the basement, or some other
source of supply, and they provide heat to the home, but it is
purchased for the building and then sold on to an individual.
Ofgem, as we know, regulates the supply of gas and electricity
but not, at present, the supply of heat. That means that while
the supply of gas to a heat network is regulated, the supply of
heat from the heat network to homes is not, because Ofgem
classifies supplying heat to a heat network as a commercial
arrangement, not domestic. But let us be clear: the end user of
this is someone living in a home—a flat, an apartment—who
benefits from the communal heating system, often arranged for
good reason, sometimes in an attempt to provide green energy, but
it has actually left individual residents, whether they are
homeowners or tenants, in the lurch.
(Bethnal Green and Bow)
(Lab)
I want to cite an example. There are many such cases in my
constituency. A junior doctor who wrote to me said that her
heating price went up by a staggering 400% and every day she has
to pay an additional £7 a day. She wrote to me in the winter, in
December, because of this policy, and up to half a million people
are affected. This is not a difficult thing for the Government to
address—to make sure that the regulator can encompass heating in
this form so that they are protected—so I hope the Minister will
address it and will have some good news for us today.
Dame
My hon. Friend highlights another important point, which has been
mentioned by other hon. Members—that of course the individual,
the resident, gets a bill that is directly related to their
property, to their energy use, so it is very personal, yet that
is seen as a commercial supply and clearly it is not; it is about
someone living in their home.
One of my constituents, based in the East Wick and Sweetwater
development, has their heat supplied via a heating network from
East London Energy. From April, this month, East London Energy is
increasing its usage fee by 103%, and other Londoners on heat
networks are reported to see price increases of over 700% in the
worst cases.
The National Housing Federation, which has a lot of these
properties in a portfolio of housing associations generally but
represents housing associations at a national level, says that
around 150,000 of the people affected are housing association
residents. These are people on lower income, of course, but we
also know that there is a strong correlation particularly between
new tenants of social housing and the ability of a household to
pay.
Peabody, a large landlord in my constituency—obviously it is also
a housing association—has 172 operational heat networks across
its whole portfolio, and it says that in general the price of
energy has increased by over 300% since April 2021. Peabody has
managed to mitigate up to a point by buying multi-year deals from
its supplier. However, that is not universal and clearly it does
not always help, because it depends at what point in the market
the energy is bought. There are 32 of Peabody’s operational heat
networks that cover over 100 homes each, so these are quite large
scale. Someone could live in a development next door to a person
in another development; one could benefit from the energy price
cap while the other, by accident of housing allocation, bought a
property with a communal heat network, not realising what the
consequences would be. We would not have predicted that the
energy prices would have increased so much. Nevertheless, that is
the problem now.
What has been happening? In 2018 the Competition and Markets
Authority conducted a study that concluded that the market should
be regulated. Here we are in 2022, with energy bills having gone
up in April and going up again in October—considerably. In
December of last year the Government, as part of their response
to the heat network’s market framework consultation, published
proposals to regulate the heat network sector. It is a welcome
move but it has taken a long while to get there. I am sure that
the Minister is aware how pressingly urgent that is for people,
particularly those on low incomes who are crippled by the extra
costs they are having to pay.
The Government tell us that they are committed to introducing
legislation in this Parliament, so it would be helpful if the
Minister could indicate when that might be—he will get my
wholehearted support if it is in the Queen’s Speech. He might get
a quick win; he can sell it to the business managers in
Government as something that he can get through quickly with
little opposition, if he does it well. The Government also intend
to appoint Ofgem as the heat network’s regulator, and they have
already highlighted that Citizens Advice could be the consumer
advocacy body. A lot of pieces of the jigsaw are beginning to
come together, but we need to know when it is going to
happen.
I am not alone in asking for regulation: the Heat Trust has
called for it to happen; the Business, Energy and Industrial
Strategy Committee, as part of a recent report on decarbonising
energy, called for heat networks to be regulated; and crucially,
it is in Ofgem’s forward programme for 2022-23. It could stretch
out for quite a long time to come, but that is not fast enough
for those residents who are sorely affected.
The Government need to make faster progress. In the meantime,
there are a couple of things they might consider. I would be
interested to know whether the Minister has considered these
things, given that the Government have professed their desire to
support households and insulate them against energy bills. The
National Housing Federation has called on the Government to
provide targeted financial support for housing associations—the
150,000 residents I mentioned earlier—that covers the expected
rise in energy bills. We have had a rise in April, but there is
an expected rise coming in October as well. It would be for those
who are not protected by the energy price cap, to create a level
playing field for residents of the same landlord who often have
very different energy bills. It could be a dedicated hardship
fund; there is precedent for that during the covid pandemic, when
local authorities managed similar funds. Although the Public
Accounts Committee has not looked into it in full, those funds
had quite good assurance procedures to ensure that the money was
targeted. I think some has even been returned to the Treasury—not
for energy, but for other hardship. There are also existing
schemes that could be extended.
All individuals have a bill that comes, so there is an easy way
of attaching the cost to the household to the household’s name.
There must be a creative way that the Government could look at as
a stopgap while the more detailed work is done. That also
highlights the constant need, which I want to reiterate again,
for insulating and retrofitting homes, because some of those heat
networks are in quite old buildings and it is a real issue.
All of those solutions we would like to see instantly, of course,
but my simple ask for the Minister today is that some of the most
vulnerable customers need support right now. Someone like me can
manage. It is the people who really cannot, and who are going to
have to choose between eating and heating—the extra £7 per day
highlighted by my hon. Friend the Member for Bethnal Green and
Bow ()—that are the real concern. I
hope the Minister can give us assurance not only that this is
being looked at, but that we are going to get action sooner
rather than later.
5.34pm
(Cities of London and
Westminster) (Con)
It is a pleasure to serve under your chairmanship, Mr Pritchard.
I start by thanking the hon. Member for Hackney South and
Shoreditch (Dame ) for securing this important debate. I declare an
interest: I live in a building that has shared heating, although
I do not have that shared heating—I have my own heating system.
We are all affected by the increase in energy prices. However, it
is being most keenly felt by those who are not protected by the
energy price cap because they live in apartments within buildings
served by heat networks. Indeed, those affected are now facing,
or are due to face, a staggering increase of around 300% in their
heating bills. It is incredible how many people in Cities of
London and Westminster and constituencies like mine are affected
because their buildings, whether mansion blocks, social housing
blocks or new, larger developments, are part of heat networks. I
can assure you, Mr Pritchard, that this is a very real issue for
my constituents.
Many have outlined the positives of such heating systems, and
while I appreciate the potential of heat networks and the fact
that many blocks are commercial enterprises with their own
targets, their end users are ultimately residents, not
businesses. Those residents, through no fault of their own, are
fully exposed to extreme market changes, with little recourse to
any help. This cannot be left for any longer. Right now, Europe
faces its worst energy crisis since the Arab oil embargoes of the
1970s. In turn, consumers and landlords operating heat networks
are consistently reporting extreme examples of energy price rises
to me. Figuratively speaking, people whose homes have communal
heat networks are being charged up to four times their previous
energy bills, purely because their building has one communal heat
source.
It is for that reason that I was grateful to meet recently with
the Minister in the Lords, Minister Callanan, alongside my hon.
Friend the Member for Kensington (), to discuss these issues
for central London in more detail. It was a very interesting
discussion, made all the richer for having some of our
constituents in attendance to speak directly with the Minister
about how difficult it is for them at the moment. I thank Richard
Cutt and for their time representing
Cities of London and Westminster on this matter. It was promising
to hear from the Minister that the Department for Business,
Energy and Industrial Strategy is considering looking at options
to legislate for Ofgem to be given powers to intervene when
prices are significantly higher for consumers. I would welcome
such powers, which would go a long way to protect residents in
buildings with communal heating.
That said, the question that remains is how long it will take for
legislation to resolve the issue. As I have said, I have spoken
to those affected, and I do not think residents can afford such a
long lead-in time for the relevant laws to come to fruition. I
appreciate that we need to wait for the Queen’s Speech, which I
hope will contain the much anticipated energy Bill. However, even
if we prioritise that Bill, we will only see results on the
ground within a year or two. After all, BEIS will need ample time
for policy development. We would then legislate for transparency
on costing, so that we can see what organisations are paying and
Ofgem can then make sure that consumers are not ripped off, so
there is a huge time lag in this.
(Washington and Sunderland
West) (Lab)
The hon. Member is making an excellent speech. In my constituency
of Washington and Sunderland West, I have over 1,000 properties
attached to one of these heating systems, and they do not benefit
from the energy price cap or anything like that. I agree with her
that the Government need to bring forward that legislation, but
in the meantime those people need help now, as she is saying.
Does she have any suggestions for what that help could be from
the Government?
I hope that the Minister might address that very well made point.
We can live in hope.
Through all the good and necessary steps that the Government are
taking to protect consumers through the energy cap, the
timescales are quite difficult for our residents who are facing
the cost here and now. It will be interesting to hear what the
Minister has to say about what help, if any, can be given to
those on heat networks now. I hope that if there is a
consultation and it is a quick one, it will also throw up lots of
secondary concerns. For example, how can we address the detail of
meters? Can any price cap in this area take into account
different monitoring systems as technology evolves? Can we have a
cap on the wholesale price for consumers as well as domestic
users with a single supply? It is not an easy task to resolve
this.
Right now, we in Parliament need to ensure that there is interim
support that takes into account the nuances of those locked into
heat networks—they are literally locked into this. Indeed, I was
concerned to hear reports from some of my constituents who are
currently excluded from the otherwise comprehensive package of
support being offered by the Treasury, precisely because they are
on a heat network.
I am sure that the Minister will be relieved to hear that I do
not think that a solution will necessarily require more money. We
just need to ensure that Government support is allocated fairly
and takes into account the complexities of people locked into
heat networks with no price caps.
I hear time and again that transparency is key to resolving this
matter, and right now I am concerned that Ofgem does not quite
have the capacity to target the support that is needed to
residents who are affected. In fact, that was brought up in the
responses to the Government’s “Heat Networks: Building a Market
Framework” consultation. It seems that some of those previous
concerns are now transpiring, and I suspect that we are seeing
the additional complexity of a top-down approach when the market
really requires a bottom-up approach.
To conclude, I hope that the Minister can address a few of the
concerns that I have mentioned. I know that the Government are
committed to making heat networks a key part of their energy
policy. After all, heat networks have the potential to offer
low-cost, low-carbon heat. But without intervention now, hundreds
of thousands of families are facing horrendous and unaffordable
heating bills. What is important here and now is that we must not
leave families living on these schemes behind.
(in the Chair)
I do not wish to impose a hard time limit, but quite a few Back
Benchers would like to contribute and we would like to hear
everyone if possible, so I would be grateful if Members could
practise self-regulation and stick to about four minutes if
possible. I call Rushanara Ali—[Interruption.] You are on the
list. Okay, you have withdrawn. I call Sharon
Hodgson—[Interruption.] Well, you are on the list. We are going
to go home earlier; that is fine by everybody, I am sure. I call
Janet Daby—[Interruption.] You are on the list as well, but that
is fine. , I know you will want to
speak.
5.43pm
(Mitcham and Morden)
(Lab)
Thank you, Mr Pritchard. Anyone would say that I was garrulous
after those comments.
I thank and congratulate my hon. Friend the Member for Hackney
South and Shoreditch (Dame ) on bringing forward this really important debate.
For households across our country, the cost of living is soaring.
We have seen the biggest tax hike since the 1940s, the largest
drop in living standards since the 1950s, public sector net debt
reaching the highest level since the 1960s, and real earnings
growth facing the largest one-year drop since the 1970s. Rising
inflation, a hike in national insurance, and rocketing energy
costs are putting unprecedented pressure on the pockets of
hard-working families in all our constituencies.
However, as we have heard, approximately 150,000 housing
association residents have heating and hot water delivered to
their home via a communal or district heating network, rather
than an individual boiler. Their way of paying energy is not
regarded as domestic but business use. When it comes to energy
payments, some might call them non-doms—perhaps we had better not
go there. The Ofgem price cap does not protect those residents,
so housing associations face the prospect of either absorbing
soaring energy costs or passing them on to tenants and
leaseholders.
This issue was first raised with me by my constituent Mr Johnston
at the beginning of the year. He was worried that the lack of
price cap protection and the soaring costs of energy may mean
that he and his neighbours at Sadler Close in Mitcham could face
an up to tenfold increase. They currently pay an estimated cost,
with leaseholders paying through service charges and tenants
through their rent. Mr Johnston lives in a Clarion-owned housing
block and, despite my recent criticism of Clarion, I was
delighted and relieved to learn that it has a commodity-capped
agreement in place with its energy provider for another two
years, so tenants and leaseholders will experience little
increase, if any, in their gas charges. I am, of course,
concerned about what will happen in two years’ time.
Right now, however, other tenants in similar situations will not
be as fortunate. On 16 February, I wrote to the chief executive
of Notting Hill Genesis regarding the Meadows estate on Mitcham
Common to seek clarity that my constituents in those blocks would
not face the same issue. Given the urgency of the energy price
rises, I had hoped for a speedy response but, unfortunately, two
months later I am still awaiting a reply. Even if those tenants
are fortunate, thousands of others will not be.
The problems of unregulated energy supply are threefold. First,
the monopoly of supply means that customers in shared blocks may
be locked into long-term contracts with no way of holding
suppliers to account on quality or price. Secondly, there is a
lack of transparency. Residents often do not know that their
energy will be supplied by a heat network. I took it upon myself
to share the Clarion information outlined earlier in my speech
with my constituents, fearful that many of them may not be aware
of the impact of energy costs on their income. Who would have
thought that a letter saying that their energy prices would be
the same for two years could be heralded as such brilliant news?
Thirdly, higher ongoing operating costs caused by property
developers trying to cut the up-front costs of installing a
network may simply result in higher costs for customers.
Minister, we need to examine the cost increases faced by
residents in shared blocks and consider who has been hit
disproportionately. We need to look at the regulation of energy
costs paid in this way and quickly, because the clock is ticking
towards the next big price hike in October. Warm words will not
ensure warm homes, and without action the problem will get worse
very quickly.
(in the Chair)
Do we have any other takers?
5.47pm
(Greenwich and Woolwich)
(Lab)
I will be incredibly brief—I think we will be voting shortly—and
will pick up on a couple of points made by others in this debate.
I have been raising issues about the lack of consumer protection
for customers of communal heat networks since I was elected in
2015. It is a very long-standing issue, and there has been a
tangible lack of progress in addressing it.
The first issue is the statutory regulation of the sector. We
have come a long way. I remember raising this matter when I was a
member of the Select Committee on Energy and Climate Change
before the Department was abolished, and Ministers would tell me
that statutory regulation of the sector was not required, that
introducing it risked strangling an emerging industry at birth
and that they were not going anywhere near it. I remember asking
the CMA—[Interruption.]
(in the Chair)
Order. I have to suspend the sitting for a Division, and I
understand that we will be having a lot of them. The first
suspension will be for 15 minutes, but it will be 10 minutes for
subsequent votes. If Members could make their way back a little
faster after the final vote, we can get off to a quick start.
5.48pm
Sitting suspended for Divisions in the House.
8.30pm
On resuming—
[Mr in the Chair]
(in the Chair)
The sitting is resumed. Our new finish time is no later than 9.10
pm.
Thank you, Mr Hollobone. As I was saying, I recall asking the
Competition and Markets Authority to carry out an area of
investigation study into this sector. As the Minister will know,
the CMA eventually carried out a market study, which recommended
statutory regulation. We then had the “Heat Networks: Building a
Market Framework” consultation, which closed in June 2020. We had
the Government response in December 2021, but no sign of any
legislation.
All I will say to the Minister is that this is an issue that has
become incredibly pressing as a result of the energy crisis but,
as I have said before, it predates that. For a range of reasons,
we need to see statutory regulation as a matter of some urgency
and I hope that he can give us some sense that in the next
parliamentary session time will be found for it.
This is a pressing issue now, as a result of the energy crisis
and the pressures that households are consequently facing. It has
already been mentioned by several speakers that, as commercial
contracts, these heat networks are not covered by the default
tariff Act. Therefore, customers who source their energy from
heat networks are not protected by the energy price cap.
That is a serious problem because, as others have said, customers
who get their heat from these networks are experiencing
shockingly high price rises. I recently wrote to the Minister
about one case that is illustrative of what is happening in
numerous buildings in my constituency. I have a huge number of
buildings that are affected, because of the number of new build
properties constructed over recent years, whether that is the
Royal Arsenal in Woolwich, Enderby Wharf in east Greenwich or the
Greenwich Millennium Village. All of them are facing the same
problems.
I put to the Minister a case from the Paynes and Borthwick
development in my constituency, where the unit energy charge on
the development has gone up by 367%. I repeat: 367%, uncapped.
Residents are really feeling those increases in their bills. We
need the Government to step in and provide an immediate stop-gap
solution for these customers, because they cannot handle the
increases in the bills that they are experiencing.
Ultimately, I want to see the energy price cap extended to these
customers. I realise the difficulties that would entail, in
potentially driving more small energy suppliers out of the
market, which we do not want to see. However, it is really for
the Government to find a way to support those suppliers if they
were to bring in such a price cap.
If the Government are not willing to go there, they need to look
at targeted support for these consumers because, as things stand,
the warm home discount, the energy bill rebate and the household
support fund—where it applies—are not enough to help them to cope
with rises of the magnitude that we are seeing. Minister, please
ensure that we get legislation, so that the sector is put on a
proper regulated footing as soon as possible. However, in the
short term, please do something for these consumers, because they
are really struggling with these increases and they need help
now.
(in the Chair)
We now come to the Front-Bench speeches.
8.33pm
(Southampton, Test)
(Lab)
I will try to be as brief as possible and I will also try to
recall, from what seems like an entire Session ago, the
discussion that we had earlier this evening and the valuable
contributions that hon. Members made to it.
Of course, I congratulate my hon. Friend the Member for Hackney
South and Shoreditch (Dame ) on securing this debate in the first place and
indeed on bringing to our attention the real issues of
regulation, price and redress that exist in the heat network
system.
Before I go any further, I will say that heat networks are a good
thing. They are not just a substantial part of the Government’s
plans for future decarbonisation of our heat systems but
provide—or should provide—a cheaper deal overall as far as heat
is concerned for those who get their heat through them. Also, of
course, the networks themselves are not necessarily dependent on
gas. A particular network can have any particular fuel—for
example, as I have said on several occasions, Southampton heat
network is fuelled by geothermal means—so it is not necessarily
the case that gas goes into the networks. However, it is a fact
that the vast majority of the 14,000 networks, either communal or
district, are gas-fuelled and will probably continue to be so for
quite a while.
This afternoon, hon. Members have emphasised the imperative of
getting the whole system regulated properly for the future. It is
a bit of an anomaly that this area of heat and power supply,
unlike pretty much anything else in the system, remains
unregulated. That does not mean that every network is a rogue
organisation trying to do the worst thing for its customers;
indeed, most heat networks do a very good job.
However, it is essential that customers have access to the proper
redress that they have by other means through the regulation of
the wider energy network, particularly because energy networks of
these kinds do not have the option of exit. They are run on an
entirely different basis, which is quite right—there cannot be an
individual exit from a collective system—but customers should
have a voice. They should have the ability to get a good deal,
and arrangements for redress and putting it right if they do not
get a good deal. I am afraid there are energy networks that run
their systems very inefficiently, put their prices up without
proper justification, or do a range of other things that we would
expect a regulator to intervene in and put right. The question of
regulation is an imperative foundation for the expansion of
energy networks, district heating networks and so on that we
expect to see over the next few years, as well as putting right a
number of the wrongs that are already in the system.
Members have already mentioned how long the Government have taken
to get the idea of regulation properly on board. I am pleased
that after the CMA inquiry, the Government’s original proposals
for consultation, and the response to that consultation—which
took over a year to come in—the Government have now committed to
proposals in regulation within this Parliament. I am anxious to
hear from the Minister what is meant by that. I emphasise, as I
have on previous occasions, that we just have to get on with it:
we have to do it now, as soon as possible. We have done all the
consultations, so there is now no impediment to getting that
regulation on the statute books other than ministerial clout and
will to make room for this in legislation as soon as possible. I
hope the Minister will be able to enlighten us about what will
come forward in future.
Of course, the other part of the regulatory process is that
because these systems are not regulated, they are not covered by
the price regulation that covers the rest of the system at the
moment through price caps and so on. When it comes to deciding
how we can give customers the benefit and protection of a price
cap in a way that is at least partly similar to the rest of the
market, we have a particular problem with the difference between
the regulation of the system as it stands and the regulation of
other systems. That is because the district networks that supply
the heat are effectively all miniature energy retailers, in as
much as they buy their gas—mainly—on the wholesale market, and
then supply the heat as a result of the purchase of the gas, and
obviously the purchased gas prices then go through to
customers.
If, indeed, we had a price cap regime, without any other
activities going on behind it, we may well see a whole series of
those miniature retail energy companies collapsing due to being
unable to make up the difference between what they were required
to pay—as far as the gas prices are concerned—and the price they
could charge to supply that heat. They would not be able to
balance up their purchase costs.
More would need to be done, in terms of a price cap arrangement
within regulation, given the present volatile state of the gas
market, and the unlikelihood that prices will fall in the near
future. At the very least, it would need a Government arrangement
for pooled purchasing of gas by those district network operators,
or, perhaps better still, some form of purchase price cap,
allowing the wholesale purchased gas to be supplied to the
networks at a reasonable and stable rate over the next
period.
I think we may well have wider debates about how that works for
the market as a whole, but this is one area where we must be
clear. An intervention is needed to protect those 500,000 people
on district heating networks from the consequences of the
volatile gas market for the future, and also to protect those
people who are running those heat networks from the consequences
of a one-sided price cap. We must appreciate that they operate in
very different ways to the rest of the energy market, and need
different protections to ensure that they are fit for purpose
now, and are available for the future. We will certainly need
them to operate effectively within the low-carbon economy, and to
provide the low-carbon heat that we all know is desperately
needed as we decarbonise our energy systems as a whole.
8.42pm
The Minister for Energy, Clean Growth and Climate Change ()
I begin by congratulating the hon. Member for Hackney South and
Shoreditch (Dame ) on securing this important debate. I apologise, Mr
Hollobone, for having been late for the debate, which now seems
some time ago. I think it is the first time, in the 17 years I
have been in the House, that I have been late for a debate. It
may seem a bit academic, at 8.43 pm, to apologise for being here
at 5.25 pm instead of 5.24 pm, but I apologise none the less. I
was a guest speaker in the Boothroyd Room for the Net Zero
all-party parliamentary group, with the hon. Member for Leeds
North West (), but I of course apologise—as
you know better than anybody, Mr Hollobone, Westminster Hall
always takes precedence over APPGs.
I congratulate the hon. Member for Hackney South and Shoreditch
on securing this debate. I noted that there were, I think, seven
London MPs here, and all of the Back-Bench contributions were
from London MPs. My own constituency, of course, is also very
affected by this issue, as are other inner-city constituencies.
They tend to be the places where district heating networks occur,
so it is very much an issue for my constituents as well.
This Government recognise and understand the pressures people are
facing with the cost of living. This is of course a deeply
worrying time for many of our constituents, and for many their
fuel bill is perhaps their biggest concern. We know that the war
in Ukraine and the recovery from covid-19 have driven up
wholesale energy prices, and no Government can control the global
price of gas. UK consumers, like many others, are now feeling the
effects of that in their energy bills.
Turning to some of the points raised, the hon. Member for Hackney
South and Shoreditch asked if we would consider a targeted fund
to help those in heat networks. She will know that the Chancellor
announced an additional £500 million for the household support
fund at the spring statement, which will go towards those in
hardship, including heat network customers. There are other
measures in place to support vulnerable bill payers.
My hon. Friend the Member for Cities of London and Westminster
() asked if we could improve
the installation of meters. We introduced revisions to the Heat
Network (Metering and Billing) Regulations in autumn 2020, which
required a significant expansion in the heat networks required to
install heat meters, with an additional 84,000 customers
receiving heat meters over the following four years.
The hon. Lady also asked whether we could install a price cap on
wholesale prices being used by heat networks. When we introduce
new legislation, we will consider all options on price
regulation. I will come back to other points raised by hon.
Members.
Our energy price cap insulates millions of customers from
volatile global gas prices, but I recognise that, with heat
networks not being covered by the price cap, they are more
exposed to those increases. That means that a significant
minority of customers on networks are seeing price increases that
are far in excess of price cap rises. As commercial purchasers of
gas, heat networks can ordinarily purchase gas at cheaper prices
than individuals, which I think one or two hon. Members drew out.
I do not think it is fair to characterise heat networks as being
exploitative practices. In fact, they generally render cheaper
bills on average. However, without the price cap in place, when
the price rises come in, if customers are used to paying a lower
tariff, they are likely to be more affected. That ability, which
is beneficial when prices are low, is leaving many more exposed
to the current price increases, because the prices that customers
were used to paying were lower.
To provide immediate support to consumers, including those served
by heat networks, the Government have provided, as we know, a
£9.1 billion energy bill support package. That is in addition to
increases in universal credit, the warm home discount and a £200
discount on energy bills. All households in bands A to D in
England will also receive a £150 rebate on their council tax,
which will not have to be paid back.
Dame
I would just point out to the Minister that, while any support on
energy bills is welcome, and band A to D households are the
focus, many people caught by this issue in my constituency, and I
am sure in his, are living in properties in significantly higher
council tax bands, but that does not mean necessarily that they
are wealthy households by any means.
Yes, the hon. Lady is absolutely right. Her constituency, and
mine probably even more so, will have people in exactly that
category. That is why the Government also provided £144 million
in funds to local authorities to help those vulnerable customers
who do not live in band A to D properties—either they live in a
larger property or they do not pay council tax at all. That £144
million fund is available for local authorities to help those who
do not fall into the £150 council tax rebate.
We provided a total of £1 billion funding through the household
support fund, enabling local authorities to support—on top of
that—the neediest households with the cost of living, and all
that support will help people in the short term. Clearly, in the
long term, we need to see a more sustainable regulatory system
for heat networks. That is why the Government have committed to
introducing legislation within this Parliament, which will see
Ofgem regulate the heat network industry. With Ofgem having
regulatory powers over the heat network industry, legislation
will secure fair pricing for all heat network customers, as well
as ensuring that heat network operators secure the best possible
purchasing deals for their customers. Ofgem will also have powers
to investigate and intervene when networks appear to be charging
customers disproportionate prices.
Heat networks are part of the pathway to decarbonising heat. By
operating at scale and, in some cases, by making use of waste
heat sources, heat networks can supply heating more cheaply than
individual gas boilers. The study commissioned by my Department
in 2017 found that heat networks supply heating at a discount of
£100 per annum on average compared with individual gas boilers—it
is literally a case of economy of scale.
The Minister will be aware of the serious problem of standing and
capital replacement charges on many privately owned networks, and
that problem continues while consumers on those networks are
seeing increases in their unit energy price. I hope that he
agrees that that must be tackled, because although tariffs can be
well out of kilter and not provide the fair deal he is talking
about, which I concede is the case in many schemes, standing and
capital charges rise significantly year on year, placing an
additional burden on consumers.
I thank the hon. Gentleman for his intervention, and I am very
happy to look into that. I will speak with my ministerial
colleague , and perhaps he or I will
write to the hon. Gentleman about what has been going on with
standing charges on heat networks. It is a fair question and I
will get back to him on it.
To conclude, I reiterate the Government’s commitment, first, to
providing short-term support to those struggling with energy
prices and, secondly, to making the necessary long-term changes
to improve the heat networks market and make the UK
energy-independent at the same time. The heat networks market is
a key sector for our green ambitions, but it must also deliver
for consumers daily, so we will continue to ensure that prices
are as fair as possible.
(in the Chair)
I call Dame to sum up the debate.
8.51pm
Dame
Thank you very much, Mr Hollobone; it is a pleasure to serve
under your chairmanship—hours have passed between the beginning
and the end of the debate.
In many respects, the Minister summed up the feeling of
colleagues present. It is instructive that a lot of London MPs
were present for the debate. For all the talk about levelling up
and about other areas of the country being poor, the cost of
living in London is very high, and those on average incomes who
live in properties with energy supplied by a heat network are
doubly hit by the challenges of energy prices.
I am pleased that the Minister has reiterated that the Government
are going ahead with long-term change. I am keen, and will
continue to push, for additional support to be provided to those
consumers because of the extremely large increases in their
bills. The fact that local authorities are expected to use the
hardship fund to support households is an important point,
because that will be an extra drain on local authority budgets in
constituencies and boroughs where lots of residents live in such
properties. I undertake to do some more number-crunching in my
constituency.
indicated assent.
Dame
I see that my hon. Friend is nodding. I think we will come back
to the Minister on that, because that money should be distributed
in a way that recognises that those households and vulnerable
customers are hit hard by the additional high costs and really
need support right now.
I thank the Minister and the shadow Minister, my hon. Friend the
Member for Southampton, Test (Dr Whitehead), for their responses,
and I thank all colleagues who have been supportive, including
those who were unable to attend today.
Question put and agreed to.
Resolved,
That this House has considered the energy price cap and
residential buildings with communal heating systems.
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