The Competition and Markets Authority (CMA) has launched a study into domestic heat networks, in response to cost and service concerns.
The CMA said many customers may be unable to easily switch suppliers or are locked into very long contracts – some for up to 25 years.
“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.
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 study is scheduled to be completed within the next 12 months, and is planning to examine three broad themes:
● Whether customers are aware of the costs of heat networks both before and after moving into a property
● Whether heat networks are natural monopolies and the impact of differing incentives for builders, operators and customers of heat networks
● The prices, service quality and reliability of heat networks
The CMA 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.
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 the CMA 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.”
Citizens Advice welcomed the announcement. Chief executive Gillian Guy 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.”
Elsewhere 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.
This study follows a similar investigation and subsequent report that was published by the CMA last year, whereby the entire GB energy market came under scrutiny.