Regulate heat network sector, urges Competition and Markets Authority

The heat network sector should be regulated to provide greater protection for consumers, according to a new report from the Competition and Markets Authority (CMA).

The report found that heat networks, which distribute thermal energy to multiple properties for the use of heating, cooling or hot water, often offer similar or lower prices than gas or electricity tariffs, but warned that some customers, particularly those living in privately owned or rented properties, pay more for their heat.

It also found that heat network customers are not generally getting the same levels of consumer protection as gas and electricity customers.

Calling for greater regulation of the sector, the CMA said some property developers may try to cut the upfront costs of installing a network, resulting in higher ongoing operating costs, usually paid for by customers.

It also warned the sector could lead to a monopoly of supply, with customers locked into long-term contracts and left without alternative sources of heat.

Meanwhile the CMA also highlighted a lack of transparency, with customer bills often failing to set out key information.

Citizens Advice Scotland welcomed the report.

Consumer spokesman Sam Ghibaldan said: “The CMA’s provisional conclusion that district heating should be regulated is good news for the 40,000 households in Scotland that could be connected to heat networks by 2020. Last year we recommended that heat networks in Scotland should be licensed, and we are delighted that the CMA are considering a similar approach.

“District Heat consumers currently lack the protections that gas and electricity consumers have, and to ensure that they have confidence in the heat market, and that it grows in line with Scottish and UK Government targets, it is critical that consistent protections in areas such as billing, metering, complaints and pricing are put in place, as set out in our research.

“We will continue to engage with the CMA to ensure strong protection for heat consumers."

There are currently around 14,000 heat networks in the UK, with 2,000 providing district heating and 12,000 communal, which provide around two per cent of UK building heat demand.

Rachel Merelie, Senior Director, said: “Heat networks can play an important role in cutting carbon emissions and keeping down energy bills, but some customers are not getting a good deal for this essential service.

“There is currently no regulator with responsibility for heat networks, so customers do not automatically benefit from the rights and protections that gas and electricity customers receive.

“Our current view is that regulation is now needed, to ensure that heat network customers receive equivalent levels of protection to gas and electricity customers.”

The CMA is consulting on today’s recommendations until 31 May 2018 and will publish a final report in the summer.