Insite Energy, the heat metering and billing specialist, is calling for tougher regulations to protect consumers whose homes are attached to heat networks. The company warns that rising numbers of complaints are proving that self-regulation is inadequate and the time has come for change.
Peter Westwood, Managing Director of Insite Energy, said: “District heating is in danger of getting itself a bad name. Increasing numbers of heat network end-users are complaining about poor service, exorbitant costs, and unreasonably long contracts. If we don’t address these issues, the UK will fall further behind other developed countries in adopting a heating technology which cuts carbon emissions and reduces energy bills.”
These concerns are voiced at a time when there are mainstream media reports of heat network end-users facing heating costs two or three times higher than those for identical levels of energy consumption in flats or houses with their own boiler. There are also reports of one contract locking residents to the same heat supplier for 40 years and another for 80 years.
Mr Westwood commented: “Some industry insiders believe it’s better to rely on self-governance, through the voluntary Heat Trust scheme, rather than invite government intervention. We disagree. Although Heat Trust serves some useful purposes, consumer protection is not one of them. Safeguards for customers need enshrining in law. If we don’t take action soon, customers will begin to shun residential developments with district heat networks and investors will lose faith in the sector.”
The Heat Trust scheme was set-up in 2015 and describes itself as “supported by government as a self-regulation initiative that recognises best practice.” The scheme claims to be “leading customer protection for the district heating sector” and says it aims to “place a common standard in the quality and level of customer service that is provided to domestic and micro-businesses by their heat energy supplier.”
In reality, however, Heat Trust’s focus on heat energy suppliers is too narrow. Of the two types of business model running district heat networks, the scheme is concerned only with one. The non-ESCO (energy service company) business-model, which provides services at an agreed cost to the heat supplier and makes no profit out of the heat supply, is outside the Heat Trust scheme.
The Heat Trust looks only at businesses operating under the ESCO-model, in which landlords typically assign ownership and operation of the heat network to an external third-party on a very long-term contract but retain little or no control over customer service or pricing of heat supply. The Trust makes no attempt to regulate prices and contract lengths, which are the biggest cause of customer complaints. And although the Trust can give consumers access to the Energy Ombudsman, this has no statutory powers over heat suppliers other than ensuring compliance with the Heat Network (Metering and Billing) Regulations, which don’t regulate prices.
The Heat Trust also fails to address the important issue of heat network inefficiencies. Some district heat networks, old and new, are set-up, operated and maintained in ways that fall far short of optimal efficiency. This increases consumers’ energy costs.
Heat networks are important because centrally-generated supplies of space-heating and domestic hot water are more energy efficient and environmentally-friendly than having individual heat-generators, such as boilers, in each home. Heating accounts for about 45% of the UK’s energy consumption and 30% of carbon emissions. The Committee on Climate Change estimates that if 20% of UK heating requirements can be met by low-carbon heat networks by 2050, they could help achieve a 450% reduction in heating emissions. Currently only 2% of the UK’s heat is supplied via heat networks, compared to 6% in France, 10% in Germany, and 63% in Denmark.
The Association for Decentralised Energy (ADE) is currently examining “what additional consumer protection measures may be needed as part of enabling new district heating investment.”
Mr Westwood said: “It is Insite Energy’s considered opinion that there is the need for a regulator to set standards for good practice, measure performance, and eliminate poor performance by introducing penalties. It is difficult to imagine the Heat Trust willingly dispensing punitive action to its own members. Regulation and enforcement really has to be independent.” http://www.insite-energy.co.uk/