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As large energy suppliers announce household gas prices will go up by around 8%, just days after Ed Miliband’s price freeze promise, it is questionable as to whether regulated competition adequately protects customers and delivers value for money.

 A small but growing number of customers have their heat demand met by suppliers not covered by the gas or electricity regulations, with no role for Ofgem or the Energy Ombudsman in customer protection. In the UK, 97% of householders currently heat their homes and water through individual gas boilers, but around 2% of demand, is now served by heat networks. Heat networks (also called district heating) deliver heat from a local energy centre through a system of insulated pipes to homes and businesses. With radiators and thermostats heat network customers have the same experience as they would have with an individual solution, but with the advantage of not needing to purchase, maintain or insure a gas boiler or electric heaters. 

Recent estimates forecast investment in heat networks of about £500m in the coming years, which could mean that 14% of heating and hot water needs will be met by heat networks by 2030. This investment is likely to attract new suppliers and it is therefore a useful point at which to consider how to ensure that heat customers, who cannot switch suppliers, will receive appropriate standards of service and protection. With a one-in one-out approach to regulation established by this Government’s red tape challenge, is there an alternative to statutory protection for heat customers?

The district heating industry has been working with consumer representatives since 2012 and has drawn up proposals for a form of self-regulation. The Independent Heat Customer Protection Scheme proposals, launched for consultation last week, set out quality standards that suppliers must attain across all aspects of their domestic and micro-business heat supply agreements and supports this with proposals for an independent adjudication service; dispute resolution at no cost to the customer.

Price and price transparency are key concerns for all energy consumers. Under the Independent Heat Customer Protection Scheme proposals suppliers must provide customers with transparent heat charge calculations, indicate how prices might change in the future and provide an industry-wide heat charge comparator. The comparator would illustrate, for the heat network customer’s demand, what their costs would have been if they had a gas boiler or electric storage heater. The proposals also specify that suppliers must have alternative arrangements in place to ensure that customers continue to receive heat in the event that the supplier fails.

The consultation seeks views on whether these heat customer protection proposals are appropriate for a fledgling industry and whether they go far enough in terms of customer protection. Will the proposals help reduce perceived risks in the minds of heat network investors, thereby reducing the cost of capital? And will this, in turn, help to secure affordable heat for future network customers, putting consumers at the heart of the energy system, and delivering a better deal than state regulated electricity and gas markets?

Join us at Heat 2013 to have your say or submit your views through the consultation; open until 29 November. 

 


Nicola is the Policy and Development Manager at the Combined Heat and Power Association. The CHPA convenes meetings and provides secretariat to the Independent Heat Customer Protection Scheme. 

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The British public is increasingly concerned about the cost of heating their home this winter.

A survey commissioned by the BBC showed that 38% of people are worrying about how they will pay for their heating bills this year, with 25% saying that they had endured ‘unacceptably cold’ homes due to rising heating bills in the past year. 

Which? Consumer Tracker recorded that worries about energy bills topped the polls again this month, with 79% expressing their concern.  

Whilst consumer concern about how our energy system can keep heating costs affordable is growing, the centre of the debate continues in the opposite direction with a focus on the electricity market and the regulator. Just last week, MPs in the House of Commons debated the increases in the average household energy bill and the financial challenges for consumers, but the vast majority of discussion focussed on electricity which accounts for about a quarter of a typical household's energy needs.

The debate among MPs saw little discussion regarding heat and how consumers' needs will be met in a low carbon energy future.

With half of the UK's energy use coming from heat, debate on this issue must become front and centre.

Heat 2013 provides the opportunity to explore these questions and give space to the heat debate. In the first session of the conference we’ll be considering the consumer’s perspective. Is improving switching between suppliers sufficient to deliver affordable heat for consumers, or do we need to do more to address the worries they are currently expressing?

And, against a backdrop of rising concern about how we can access to affordable heat, can we create consumer demand for a transition to low-carbon heat supply?

We hope you will join us at Heat 2013 to debate, learn and inform.


Tim Rotheray is the Director of the Combined Heat and Power Association, read his biography here

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