The initial findings from its market investigation revealed heat network customers are not getting the same levels of protection that gas and electricity customers receive.
The Competition and Markets Authority (CMA) found for many, 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.
However, some customers – mainly those living in privately owned or rented properties – pay more for their heat through a heat network.
Heat networks – around 14,000 currently in the UK and together providing around 2% of buildings’ heat demand – distribute thermal energy to multiple properties for the use of heating, cooling or hot water.
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.
Monopoly of supply: Customers often have no alternative sources of heat and may be locked into long term contracts and therefore cannot hold suppliers to account on price or quality.
Low transparency: People often don’t know their energy will be supplied by a heat network before they move into a property and once they are living there, customer bills often fail to set out key information.
The CMA is therefore proposing the sector should be regulated, which would mean protection for all heat network customers, steps to improve the design and build of networks and all suppliers adhering to mandatory rules and criteria around price and quality in long term contracts.
CMA Senior Director Rachel Merelie 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.”