Over five million households could be hit by huge energy bill hikes due to roll-out which leaves prices ‘uncapped’

OVER five million households face huge energy bill hikes due to a major network roll-out.

It comes as the government looks to rapidly expand the number of heat networks across the country.

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The Climate Change Committee estimates that 5.5million homes could be supplied by a heat network by 2050. 

But homes supplied by communal heating systems don’t get the same protections offered by those with a conventional gas and electricity supply.

Heat network operators and heat suppliers are currently unregulated and this means that prices can fluctuate substantially as they don’t abound to a price cap.

Stephen Knight, head of non-profit consumer champion The Heat Trust, has warned that without introducing a price cap, heat network expansion will leave many households with higher bills. 

He told The Telegraph: “If we have another energy crisis that pushes gas prices up in the commercial sector, there will be more and more consumers exposed to volatile energy markets and uncapped prices – and that is a concern.”

Right now, an estimated 480,000 households are hooked up to a heat network, and many of these residents are on low incomes and live in council-owned tower blocks.

However, since the onset of the energy crisis prices have remained high and at one point some households were trapped paying up to 50p per kWh for gas.

This equates to 42.58p more per kWh than those with a conventional gas supply and who are protected by Ofgem‘s price cap.

In response to this, the government introduced the Energy Bills Discount Scheme in April 2023 which capped gas bills at 7.8p per kWh for those on heat networks.

However, this price ceiling is still higher than Ofgem’s price cap for those on a conventional gas supply.

And heat network operators or property management companies can still get away with adding a “heat loss” surplus because of a lack of regulation, according to The Telegraph.

The Energy Bills Discount Scheme expires on March 31, and there are renewed fears that these households face another punishing hike to their energy costs.

The way in which bills are usually calculated for homes supplied by a heat network is complex.

Communal costs are usually divided among residents based on how many hot water taps and radiators there are in each property.

But this method fails to take into account how many people live in the home or how much energy the home uses.

It means that even if someone uses no energy at all they still have to pay the same as everyone else in the network.

The good news is that the government intends to make Ofgem the regulator for heat networks in the future.

The 2023 Energy Act gave ministers the power to lay down regulations in collaboration with Ofgem and the government is currently consulting on how to protect heat network consumers. 

However, any water-tight regulation isn’t likely to come into force until 2025 at the earliest. 

A spokesperson for the Department for Energy Security and Net Zero denied fears of future bill hikes and said: “Families on heat networks pay on average £100 less per year than those using gas boilers.”

“They are also protected from price increases by the Energy Bill Discount Scheme, capping how much suppliers pay for energy, which they are then required by law to pass onto consumers. Businesses including heat network operators received £7.5bn in support last winter.

“From spring 2025 we will put Ofgem in charge of regulating heat networks, giving them the power to intervene where prices appear to be unfair, so that families can benefit from cleaner, cheaper heating.”

What is a heat network?

Heat networks (also known as district heating) supply heat from a central source to consumers, via a network of underground pipes carrying hot water.

Heat networks can cover a large area or even an entire city, or be fairly local supplying a small cluster of buildings.

This avoids the need for individual boilers or electric heaters in every building.

If your home is on a heat network:

• You can’t switch your heat network supplier
• You might pay your heating bills to a management company or housing association – if you’re renting this might be part of your rent
• You might have to pay for maintenance costs – how much you need to pay can change over time

Help with bills for communal heating homes

Sadly, cutting back your energy use won’t impact costs for people in a communal heating network because the bill is divided by all the homes regardless of usage.

However, if they are concerned their supplier has not passed on government support, they can complain.

Under the upcoming Energy Bill, Ofgem is the heat networks regulator and will have powers to investigate and intervene on networks where prices for consumers appear to be unfair.

One source of help for households could be the Household Support Fund.

This is a pot of money available to vulnerable households in England.

The cash is paid out through local councils which set the criteria for accessing the support.

It means whether you qualify and the level of cash you can get varies depending on where you live.

Usually, homes will need to receive certain benefits to access the scheme.

But check with your local council to find out the exact criteria.

This post first appeared on thesun.co.uk