The UK’s competition regulator has announced that it is launching a comprehensive study into domestic heat networks to make sure that households are getting a good deal.
Competition and Markets Authority on Thursday said that heat networks – systems that heat multiple homes from one central source – currently supply about half a million UK homes through about 17,000 networks.
Between now and 2030, the number of customers using heat networks is expected to grow significantly to around 20 per cent of all households. But the sector is not currently subject to the same regulation as other forms of energy supply such as mains gas and electricity.
The CMA said that, as a result of that, it’s concerned that many customers, a large proportion of whom live in social housing, may be unable to easily switch suppliers or are locked into very long contracts – some for up to 25 years.
There’s a risk, the regulator said, that they may be paying too much or receiving a poor quality of service.
It said that its study into the networks would examine whether customers are aware of the costs of heat networks both before and after moving into a property and whether heat networks are natural monopolies. It would also look at the prices, service quality and reliability of heat networks.
“Heat networks can play an important role in cutting carbon and keeping down energy bills for customers. However, we have concerns that this sector may not be working as well as it could be for the half a million homes heated by these systems now and the millions that may be connected in the future,” said Andrea Coscelli, chief executive of the CMA.
“That is why we’re taking a closer look at this market to ensure that heat network customers get a good deal on their energy now and in the future.”
The CMA study will be completed within the next 12 months. It said that it would source evidence from a wide range of stakeholders, including heat network builders and operators, other government departments, local authorities, sector regulators and consumer groups.
An interim report updating on the CMA’s progress will be published in six months.
Heating networks can be better for the environment because they deliver lower carbon emissions, which can also result in cost benefits for households.
Because of this, heat networks have become an important part of the Government’s strategy to reduce carbon and cut heating bills.