Industry reacts to CMA heat network study

Consumer groups hope study will be a "welcome spotlight' on unregulated firms

Consumer groups have welcomed the news that the Competition and Markets Authority (CMA) is to launch a study into domestic heat networks, which they hope will be a "welcome spotlight on the unregulated firms heating thousands of people’s homes". 

The CMA said it has launched the study in response to cost and service concerns and deed many customers may be unable to easily switch suppliers or are locked into very long contracts – some for up to 25 years.

Within the next six months, an interim report detailing initial findings and views on potential remedies will be published.

After that, the CMA said: "Where issues of particular concern are found we may take further action during or after the end of the 12-month market study, such as opening consumer or competition enforcement cases or launching a full market investigation."

This came on the same day as the Heat Networks Consumer Survey was published by the Department for Business, Energy and Industrial Strategy (BEIS).

This surveyed 5,502 consumers (3,716 on a heat network and a comparison sample of 1,786 non-heat network consumers) across 2,218 different networks.

It found:

•             Nearly three-quarters were ‘satisfied’ or ‘very satisfied’

•             Key drivers of satisfaction were reported reliability of system, perceived fairness of price, satisfaction with information provided, and satisfaction with handling of complaints.

•             Median average suggested heat network consumers paid, on average, around £100 less for their heating and hot water compared with non-heat network consumers.

•             Heat network consumers who paid a separate heating and hot water or combined energy bill were as likely as non-heat network consumers to say they paid a fair price.

The chief executive of Citizens Advice, Gillian Guy welcomed the CMA announcement and said it would “shine a welcome spotlight on the unregulated firms heating thousands of people’s homes".

She added: “Customer service from district networks can be patchy because there are no agreed minimum standards and customers with a complaint can’t turn to an ombudsman when things go wrong.”

Also in reaction to the announcement, Kate Morrison, energy spokesperson for the consumer futures unit at Citizens Advice Scotland (CAS), said: “Earlier this year the CAS Consumer Futures Unit called for a statutory licensing scheme for district suppliers to protect consumers as the sector expands. We therefore welcome today’s announcement by the CMA that they will investigate the heat market.”

Alex Neill, managing director of home products and services for Which? said their own feedback had unearthed “widespread dissatisfaction with costs and poor customer service” from district heating schemes, and added he hoped the CMA’s study would result in a “better deal” for consumers.

Elsewhere, EDF said it was "looking forward to making its own contribution to the CMA study", adding, "regulation and standards for heating networks and more generally in the heating industry are vital in ensuring consumers have confidence in the market.” 

An Eon spokesperson said: “Eon has consistently voiced its support for appropriate regulation in the decentralised heat network, through the energy regulator Ofgem or another body, and we would look to play a part in any consultation on what that regulation would look like. Any regulation must protect customers as well as promote investment in what is a lower carbon and affordable source of heating our homes.”

“In the absence of regulation in this sector Eon believes it offers a market leading customer proposition designed to provide the highest levels of service combined with transparency and price protection. Our Guaranteed Standards of Service (GSOS) sets out exactly what our customers can expect of us – this includes the reassurance there will be no additional costs if something goes wrong and that if the service is not met compensation will be paid.”

The spokesperson added that Eon was a founder member of Heat Trust, a voluntary body committed to improving standards across the decentralised energy market. 

Utility Week spoke to Heat Trust, who said they welcome the launch of the study. "Heat Trust has taken the first steps in building a clear evidence base on the service that customers are receiving, and we look forward to engaging with the CMA on the forthcoming market study.

 “It is essential that customers have a voice in shaping the market and the Heat Trust is keen to see consistent and measurable industry-wide standards on customer service and protection.”

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