District heating network sector should be regulated, according to competition watchdog

The Competition and Markets Authority (CMA) has published its recommendations following a study which set out to establish whether heat network customers were getting a good deal in areas such as price, quality and service levels.

It found that heat networks offer prices which are the same or lower than people on a gas or electricity tariff and have comparable levels of customer service.

But some customers – mainly those living in privately owned or rented properties – pay more for their heat through a heat network and, across the board, heat network customers aren’t getting the same levels of protection that gas and electricity customers receive.

The study found three main areas of concern:

• Design and build – 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. Heat networks may also be installed where they are the best way to meet planning requirements, rather than the best solution for customers.
• Monopoly of supply – because customers often have no alternative sources of heat and may be locked into long-term contracts, they cannot hold suppliers to account on price or quality.
• Low transparency – before moving into a property, people often don’t know that their energy will be supplied by a heat network and once people are living in the property, customer bills often fail to set out key information.

To address these issues, the CMA have proposed the introduction of the following measures:

• consumer protections for all heat network customers, providing benefits such as complaints handling and access to an ombudsman and support for vulnerable customers
• steps to improve the design and build of networks.
• all suppliers adhering to mandatory rules and criteria around price and quality in long-term contracts.
• measures to improve transparency including better information on networks, provision of heat supply agreements or contracts and clearer and more detailed bills.

Rachel Merelie, senior director at CMA, 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.’

The CMA says they are working closely with the UK government as well as the Scottish and Welsh governments to develop their recommendations.