CMA: Ofgem should regulate UK heat networks

The competition watchdog believes customers on heat networks have less protection if things go wrong

The Big Zero report

The UK’s heat networks should be regulated to protect all customers and government should give Ofgem that role as it is “well placed” to take it on.

That’s the recommendation from the Competition and Markets Authority (CMA) as it published the final findings of its seven-month study into the industry.

Heat networks provide homes with heating and hot water form a central source via insulated pipes but unlike other energy services, they are not currently regulated.

The CMA believes customers, therefore, have less protection if things go wrong.

Its findings also revealed for many, heat networks offer prices which are the same or lower than people on a gas or electricity tariff, however, some customers – mainly those living in privately owned or rented properties – pay more for their heat through a heat network.

There are around 14,000 heat networks in the UK – of which more than 2,000 are district heating and the rest communal – and together provide around 2% of the buildings’ heat demand.

The CMA’s report suggests 450,000 customers are on privately operated networks and the number is expected to grow significantly as investment in energy efficient technology increases.

It is therefore recommending that once a regulator is established, it must introduce protection for all heat network customers so they receive the same level of protection as those in the gas and electricity sectors and ensure customers are aware of what they are paying as it is often unclear.

The competition watchdog is also suggesting the regulator to address low levels of transparency so customers know they are on a heat network with clear agreements in place and ensure they are protected from developers that use cheaper options to meet planning regulations that end up being paid for by the customer over the long term.

Chief Executive Andrea Coscelli said: “With 14,000 heat networks supplying 450,000 people with heating across the UK, they can be an efficient and environmentally-friendly way for people to heat their homes. But there are problems with how some operate, especially for those in private housing. People must benefit from the same level of protection as those using gas and electricity and not be penalised either by paying too much or receiving a poor quality service.

“There is currently no regulator for this part of the energy sector – we think that is one of the key problems to be addressed and we recommend Ofgem is given this role.”

Extending Ofgem’s remit to include heat networks would require new primary legislation to be introduced by the UK Government.

Ofgem welcomed the CMA’s study and agreed heat network customers should receive the same level of protection.

Chief Executive Dermot Nolan added: “We look forward to continuing to work with the government to address the current and future challenges in decarbonising heat and would welcome the opportunity to contribute to the development of the future regulatory arrangements for heat networks.”

BEIS said it is investing £320 million in heat network projects which will help create energy efficient central heating systems for towns and cities in the 2020s.

A spokesperson told ELN: “We share the CMA’s objective of a heat network sector that always works for consumers as it continues to grow. As such, we’re reviewing the CMA’s recommendations and will respond in the autumn.”

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