On 8th September 2022, the UK Government announced additional support measures to help mitigate the soaring cost of energy prices, but what do these additional measures mean for customers on communal heating schemes?
The energy price cap, which is usually set every three months by energy regulator Ofgem, will see a two-year freeze under the Energy Price Guarantee. However, for customers who are supplied heat and hot water via communal heating, also known as a heat network, they are not currently protected by the energy price cap or by the Energy Price Guarantee.
Why are heat network customers not protected by the energy price cap?
Customers who live in flats that are being served by heat networks are supplied by a single energy provider who procures and operates the energy for that network. This means that their supply is considered to be ‘commercial’ rather than ‘domestic’ and operators of heat networks, or associations, buy their gas on the open market and are not protected by the price cap.
Commercial gas prices are currently around five times pre-crisis levels, and for customers who are currently supplied by a heat network, because they are supplied by ‘commercial’ rather than ‘domestic’ gas, it is likely that they have been exposed to the increases much sooner than domestic gas customers who are protected by the price cap.
However, following the Government announcement on 21st September, under the new Energy Bill Relief Scheme, commercial heat will be capped for six months. This means that, as gas supplied to heat networks is classed as 'commercial' customers on heat networks will benefit from this new cap.
Are heat networks regulated?
At present, heat networks are not regulated. This means that customers who are served by a heat network do not get the same levels of customer protection as standard utility customers.
Some heat network customers may live on a scheme which is registered with the Heat Trust, an independent, non-profit consumer champion for heat networks, whose aim is to benefit everyone involved in the network. Although the Heat Trust can provide consumers with some reassurance, they are not a regulator.
Heat network regulation is changing, however. In 2014, the Government introduced the Heat Network Metering & Billing Regulations which aim to ensure that customers supplied by heat networks are only charged on their usage and have access to clear, transparent billing with heat meters installed into properties.
As the Government foresees growth in heat networks as a low-carbon way to provide heat and hot water to homes, they realised that more needs to be done to protect consumers. In December 2021, after consultation, the Heat Network Market Framework was introduced, which appointed Ofgem as the dedicated regulator for heat networks.
This is good news for customers on heat networks, and Switch2 welcome the news, however the transition to Ofgem is ongoing which means that for the moment, customers remain unprotected.
Are heat network customers eligible for any of the Government support measures?
Under Government plans to support households with the rising cost of energy bills, heat network customers a may be eligible for support via the Energy Bill Discount Scheme (EBDS). The EBDS which runs from 1st April 2023 until 31st March 2024, replaces the Energy Bill Relief Scheme (EBRBS).
How will I benefit from the Energy Bill Discount Scheme?
For residents to benefit from the discount, heat suppliers (the organisation who is purchasing the energy) must apply for the for the discount through the Government portal which opened on 26th April 2023. All applications for the EBDS must be completed by heat suppliers no later than 25th July 2023.
Please note Switch2 will only be responsible for registering and passing on any discount to eligible schemes for which we purchase the energy and set the tariff. If Switch2 are your billing agent but do not set your tariff, you will need to contact the relevant organisation e.g. your housing association, managing agent or local authority about the EBDS, as they will responsible for ensuring registration on the portal.
If you would like any further information, please visit https://www.gov.uk/guidance/energy-bills-discount-scheme-heat-networks-support
What can Switch2 do to help with energy bills?
We understand the financial impact the price rises are having on household budgets, and are committed to supporting our customers throughout this difficult period. If your residents need support with the rising energy costs, our dedicated customer service teams are here to help.
Switch2 operate in line with the Heat Trust and can provide customers with independent advice based on their individual circumstances, or set-up payment plans to make managing the cost easier. We also work alongside many charities and not for profit organisations, who can provide expert energy advice and financial assistance to customers, including energy efficiency tips on how to reduce bills and financial grants for eligible households, to help with future payments.
If you’d like any further information about the rising cost of energy bills, please visit our energy crisis page which provides answers to frequently asked questions and support information.
We understand it’s a difficult time for many households and we will do what we can to support throughout.