More than 500,000 customers on heat networks are to be protected from unfair energy price hikes from this week when they finally come under Ofgem regulation.
The previously unregulated industry involves firms heating multiple buildings from a central heating source, such as taking excess heat generated from a data centre or factory to connected properties through pipes.
It comes under Ofgem’s remit from January 27.
New rules will bring heat network customers in England, Scotland and Wales more closely in line with those living on traditional gas and electricity connections.
Ofgem will have powers to act if a heat network operator puts up prices unfairly or delivers poor service, with compensation available to customers who suffer an outage.
Homes and businesses on heat networks will also see clearer, itemised billing and there will be greater support for vulnerable customers, the Department for Energy Security and Net Zero (DESNZ) said.
Some heat network customers have seen energy prices rises of up to 450% following the increase in gas prices.
Minister for energy consumers Martin McCluskey said: “For too long customers on heat networks have been unprotected, being hit with unfair price rises and having to manage with hugely inconvenient service outages.
“It’s simply not good enough – and that is why from today, we’re giving Ofgem new powers to act and hold heat network suppliers operating a poor-quality service to account.
“Support is already available through the Energy Ombudsman, and I would encourage anyone with an ongoing issue with their heat network to get in touch with them and take advantage of these new consumer rights.”
The Government also announced more than £47 million of funding through the Green Heat Network Fund to support the development of four heat network projects in Waterloo and Hounslow in London, Sunderland, and Media City in Salford.
The project in Waterloo will take heat from the River Thames to supply connected buildings, while the Media City project will take heat from wastewater source heat pumps.
Helena Charlton, director of heat networks at Ofgem, said: “Ofgem is committed to putting consumers first, and the beginning of heat network regulation marks an important step towards better protections.
“This change means customers will begin to benefit from stronger protections on billing, complaints and support for those in vulnerable situations.
“Heat networks can deliver efficient, cost-effective heating – but there are instances where this is not the case. This framework will set important standards for consumers to rely on, backed up by our oversight.”
Simon Francis, co-ordinator of the End Fuel Poverty Coalition, said: “Bringing heat networks under Ofgem regulation is an important and long-overdue step.
“These networks should be able to deliver low-cost energy for some of the poorest households in the country, but for years heat network customers have effectively been second-class energy consumers, facing huge price hikes, poor service and little meaningful protection.
“But regulation alone won’t fix everything. Ofgem and ministers must now make sure these powers are used robustly, vulnerable households are properly protected, and that heat networks genuinely deliver what they promise: affordable, reliable heat that helps tackle fuel poverty, not deepen it.”
Gillian Cooper, director of energy at Citizens Advice, said: “New protections for people who rely on heat networks are a pivotal moment.
“For too long, people on heat networks have faced gaps in support and fewer safeguards than households using gas or electricity.
“As the official advocate for heat network consumers in England and Wales, Citizens Advice is dedicated to providing tailored support through our specialist advice service.
“Our priority is clear: heat network consumers must get the same outcomes as other energy consumers, and our advice and representation will work to turn that tide.”
Dhara Vyas, the chief executive of Energy UK, which represents firms, said: “Ensuring households on heat networks are protected in the same way as other energy customers will raise standards across Britain’s thousands of existing heat networks and lay a foundation from which the sector can grow.
“Last week’s warm homes plan set out an ambitious goal of doubling the amount of heat demand met by heat networks over the next 10 years.
“This new framework of consumer protections will provide confidence for customers and investors and serve as a launchpad for the development of new large-scale developments like city-wide, low-carbon networks.”
