HHundreds of thousands of apartment dwellers are facing ‘totally unaffordable’ increases in their energy bills because their district heating supply is not protected by the government’s price cap.
While households with conventional heating systems have been told they could face increases of more than 50% in their gas and electricity bills when the cap is raised on April 1, people who bought or rented flats in any of the 17,000 blocks across the UK that rely on community heating and hot water systems are facing quadruple increases as suppliers pass on huge wholesale price increases without check .
Up to 500,000 people are thought to live in housing estates where at least some heating or hot water is provided by a centrally controlled system, usually administered by the company running the estate.
The apartments in these developments are all supplied by a single energy supplier, and as this is a commercial arrangement rather than a domestic supply, residents have not had bills protected by the price cap of Ofgem.
Among those affected are residents of the high-profile Chips building in the New Islington area of Manchester, who saw some of their energy loads triple after the building’s energy supplier collapsed in November.
Those who live in the nine-story building control the heating of their individual apartments and the amount of energy they use, but not over who supplies the electricity or what tariff they are on. All their hot water is supplied centrally from a green boiler.
A resident described finding neighbors in tears after they all received huge bills on December 21.
In some cases, bills, which are based on usage rather than estimates, have more than tripled. A landlord of a two-bedroom apartment saw his bills rise from £80 in November to £260 in December. Others received even higher bills, as the unit price of gas tripled, along with rising electricity costs.
“The cost of our energy has tripled overnight,” says Magdalena, an academic who lives in the block, who declined to give her last name.
“The gas supplier we previously had went bankrupt and Ofgem has appointed a new supplier. As the building I live in has a community heating system, we (residents) are not allowed to switch suppliers.
“A lot of people in the building, which is a mix of landlords, tenants with option to buy and tenants, just can’t afford this sudden and huge increase in costs. It’s so bad that some have started looking for alternative accommodation, while others just don’t use their heating.
“People are saying they will have to move because paying thousands of pounds for heating just isn’t an option. This was all done by the management company with residents looking helpless to stop it, or even stop it. have a say… It’s incredibly unfair,” she says.
Switch2 Energy, the Chips program’s billing service provider, and the building’s new energy provider, Pozitive Energy, say the increases experienced by residents stem from the failure of the previous provider and reflect higher wholesale prices. .
Chris Wright*, who lives in the Deptford Landings complex in south-east London, which also has a community hot water system, contacted Guardian Money to say he and other residents of the huge site have been told that their hot water costs are about to increase by 464%.
“For some families in the neighborhood who use more hot water than us, this is going to be a big financial hit. How come everyone has their bills capped, but not apartment dwellers like us? ” he asks.
Lisa Gregory, who runs Birmingham-based consultancy Ginger Energy, which is a major player in the industry, says this “truly appalling” situation is an injustice that will have serious consequences for those affected.
“It is highly likely that many will struggle to pay the new costs and then go into debt,” she says. “We are about to have to tell residents in certain blocks that they will pay four times the previous unit price for their energy. While normal residential consumers are protected – at least for a period – by the price cap, consumers in these blocks are fully exposed to market changes.
She says the classification dates back to a 2012 decision by industry regulator Ofgem and predates the current turbulent market conditions and price cap.
“We are calling for a complete review of the price cap. This does not include our residents; it doesn’t work for vendors. The system is completely broken,” she says.
At the end of December, the government announced that it wanted Ofgem to take over as regulator of the heating networks, as they are called. However, it looks like it will be months or even years before this is activated as it will require legislation. In the meantime, those living in unregulated homes could face years of higher bills than if their building had conventional heating.
This week the boss of parent company British Gas warned that the problem of high energy bills could linger for another two years.
Stephen Knight, director of Heat Trust, the national consumer protection scheme for heating networks, says legislation to protect consumers who rely on district heating systems is long overdue.
“We welcome the government’s commitment to regulate heating networks and the news that Ofgem will have new powers to oversee the sector. In the absence of regulation, a growing number of consumers are left unprotected. As the country’s reliance on heating networks increases, scrutiny of their performance and service standards will also increase. To avoid any further delay, we need the government to commit to the legislation in the May Queen’s Speech,” he said.
Ofgem said it was committed to taking over the regulation of heating networks, but said the timings were beyond its control.
Mark Thomas, managing director of Communal Energy Partners, which supplies energy to Deptford Landings, says suppliers have no choice but to pass on rising wholesale costs.
“I would ask the government and the regulator to help smooth out the cost to the customer through business loans, or by removing green levies or VAT from invoices. All of that would be very welcome,” he says.
“We fully understand that this is a worrying time for Chips residents,” Switch2 said in a statement. “The new tariff reflects market increases recorded over the last 12 months, which has seen the wholesale price of gas increase fivefold since January 2021.”
RMG, the managing agent for the Chips building, told the Manchester Evening News it was ‘not involved in the procurement or placement of utility contracts’.
Pozitive Energy said it had great sympathy for the residents, but said it inherited the contract and was therefore obligated to purchase gas to supply the building at the current market rate.
District heating is seen by ministers as a proven, cost-effective way to provide reliable, low-carbon heat at a fair price for consumers. The UK government has said it is working to develop the district heating sector, which supplies around 2% of UK heat demand but could meet around a fifth by 2050.
* This is not his real name