British consumer agency highlights need for regulated district heating market

Date: 08/04/2015

The need for the UK’s district heating industry to be properly regulated has been emphasised by a survey from leading consumer watchdog, Which?

The watchdog has called on the British government to reconsider allowing the UK’s emerging district heat market to operate without regulation, after research revealed that many customers feel ripped off and confused by contracts they cannot escape from.

The report, unveiled yesterday, said some district heat providers effectively create monopolies because properties linked into the networks cannot switch suppliers if they are unhappy with the service.

The news, which comes just at a time when the Association for Decentralised Energy is pushing its new code of practice, called Heat Trust.

Around 210,000 homes in the UK are currently connected to the networks and this is expected to rise to eight million by 2030 as part of efforts to reduce greenhouse gas emissions from the heat sector.

More advanced consumer protection schemes are in evidence where the industry is more mature, across continental Europe, North America and Korea. Success in Denmark means that nearly two-thirds of people there receive their heat via networks.

But the UK market is still at early stages and, unlike electricity and gas, heat is not regulated. This decision was taken as part of the government’s efforts to drive investment in the sector by avoiding red tape.

Which? says this voluntary code of conduct scheme drawn up by the industry may not go far enough to protect consumers and that regulation will be required in the long term.

Richard Lloyd, Which? executive director, said in a statement. “We found widespread consumer dissatisfaction with costs and poor customer service among the key concerns.

“Our report raises a number of red flags, and government and regulators must act to improve consumer protection and review pricing to ensure it is fair.”

Researchers at Which? conducted a series of focus groups and telephone interviews with consumers on district heating networks. It also collected price data on more than 50 schemes supplying heat to around 87,000 households.

Price was identified as the overriding issue for consumers, with some consumers saying they are being unfairly charged. One social housing tenant in London was paying £40 per month despite keeping the heating switched off. The differences in technology to gas networks also make it difficult for consumers to compare costs.

Other tenants said they were frustrated by the lack of transparency about what was covered in their bills. Consumers on one district heating scheme said they did not understand why the cost of running a biomass boiler was being used to calculate their tariff, given that the biomass boiler on their scheme was switched off.

There also appeared to be little chance for redress over poor customer service and complaints, as many have no access to Ombudsman schemes, unlike gas or electricity markets.

Dr Tim Rotheray, director of the Association for Decentralised Energy, said Heat Trust would tackle many of Which?’s concerns.

“Heat Trust will give consumers peace of mind and comparable levels of protection as for gas and electricity, cementing district heating’s role as the UK’s third energy network,” he said in a statement.

“A new code of practice will ensure all heat networks can be built and operated at the highest efficiency. And new metering and billing regulations will give both customers and policy makers better information about UK heat networks.

“District heating is a small and growing industry in the UK, and we welcome the Which? report’s recognition that these measures represent an important step forward.”

Source: COSPP