Is regulation on the way for heat networks?

What are the CMA's concerns?

As heat networks are essentially natural monopolies - in most cases, customers have no option to switch away if unhappy - there's a concern providers have very little incentive to offer more competitive prices or levels of service.

While the initial CMA findings note that, on average, heat networks are currently offering prices around the same level or lower than those of a standard gas and electricity supplier, those living in privately owned or rented homes are paying more.

On average, those on privately operated schemes paid 7.8p a kilowatt hour (kWh), compared with 4.9p/kWh across all heat networks, while the annual heat charge was about £30/year higher. 

The key concern, however, is that across the board, heat network customers have few consumer protections.

The CMA found three main areas of concern: 

• Design and build - the CMA says there's a concern that property developers may have the incentive to go for a network with cheaper upfront costs and higher longer-term operating and maintenance costs. Cheaper systems tend to be less efficient, leaving consumers with higher prices as they usually foot the bill for operating costs.
  
  It also said heat networks may be installed where they're the best way to meet planning requirements, rather than because they're the best option for consumers.
  
  
• Monopoly of supply - as there are no alternatives for customers for their supply and they're usually locked in to long-term contracts, they cannot hold suppliers to account on price or quality. 
  
  
• Low transparency - before moving in to a property, people are often not told their heating will be supplied by a heat network, and once they're in, bills are confusing and fail to set out important information such as inflation-linked price increases and system maintenance charges. 

What are the issues?

A number of concerns have been raised about heat networks in recent years, with Citizens Advice, Fuel Poverty Action and Which? all pointing out failures in some of these schemes. 

In 2015, Which? raised concerns that those with district heating can't switch supplier and have no right to redress for customer service failings. Other concerns included high prices, mis-selling and poor service and complaints handling. 

In 2016, Citizens Advice called for price regulation of heat networks, explaining that there was little information available to assess if they're good value compared to traditional gas and electricity supply.

Citizens Advice also pointed out that there seemed to be huge variations in the way in which customers are billed and that there's no route to redress, if there are problems. 

Fuel Poverty Action has also covered the issue, raising the point that some leaseholders who have bought homes with a heat network have been asked for substantial sums to cover replacements or improvements for the heating systems - sometimes upwards of £20,000.

The campaign group also published a detailed report last year on two schemes in London,  highlighting the lack of consultation and information before the heat network was introduced, unreliable supply and repair service, unaffordable and inaccurate bills, and poor customer service. 

Plus, we've heard of a number of issues from users. Darren emailed us on billing, price and contract length: "We all seem to be paying more for service charges than actual usage, and that's with a service that has not been very reliable from the start.

"Tried to complain to E.on, only to be faced with lengthy queues for their contact centre.

"Residents of E.on-supplied homes are locked in on contracts for 75 years, so E.on have a monopoly over us and are currently unregulated."

Others have complained about unexpected increases in charges: