Revealed: Struggling families see energy bills soar by 350% in cost of living 'loophole'

29 April 2022, 07:26 | Updated: 29 April 2022, 07:46

Residents in so-called ‘heat network’ schemes have seen bills rise by as much as 350%
Residents in so-called ‘heat network’ schemes have seen bills rise by as much as 350%. Picture: Alamy/Google Street View
Matthew Thompson

By Matthew Thompson

Struggling families are seeing their energy bills rise by as much as 350%, due to a loophole in the energy price cap, LBC can reveal.

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Across the UK, as many as 500,000 homes are not given the protections of the Ofgem price cap, which limited energy cost increases this month to 54%.

They are the customers of so-called heat networks. Under these schemes, which have been promoted by Government in recent years as a greener alternative to traditional energy, homes do not have their own boilers, but receive their heat from a central source, that can often serve multiple buildings. Customers are locked into these contracts, and are unable to change their energy provider.

The problem arises because the energy regulator, Ofgem, regulates the supply of gas and electricity, but not the supply of heat. The supply of heat directly to homes is considered a commercial arrangement. So even though these are homes, lived in by ordinary tenants or leaseholders, they are left paying commercial rates, and there is simply no regulation or protection in law.

Customers at Paynes and Borthwick Wharf have seen bills soar
Customers at Paynes and Borthwick Wharf have seen bills soar. Picture: Other

It means that customers at developments like Paynes and Borthwick Wharf, or the Royal Arsenal in South East London, have seen their bills rise by 350% and 117% respectively.

Local resident Afreen Bamba described living in an “energy prison”. She said: “We can afford to put the heat on on payday, but the rest of the time we’ll have to use blankets. There are a lot of vulnerable people in my development, and I can’t think how these people will be able to cope. We’re locked in and we have no other way out other than moving out, or taking a loan to pay the bills.”

Labour’s Shadow Housing Minister Matthew Pennycook, who is also the MP for Greenwich and Woolwich, which has several of these schemes, said the Government needs to step in immediately.

“People are under severe pressure, which is why our argument to Government is they must step in with a targeted package for these 500,000 customers across the country in these schemes. It’s an anomaly that it’s unregulated. They can’t pay the price for the fact that the Government hasn’t got around, as it’s promised to do, to legislating.”

Customers have seen bills soar by 350%
Customers have seen bills soar by 350%. Picture: Alamy

In December last year, the Government promised to introduce legislation to regulate heat networks within this Parliament. But that has not yet happened, leaving customers out in the cold, with no protections against rampaging prices.

Communal Energy Partners Ltd, who operate the network on Paynes and Borthwick Wharf, did not respond to a request for comment.

SSE, who provide heat to the Royal Arsenal development said: “As a heat networks provider our aim is always to provide affordable energy to our customers.

"The rise in global gas prices means we will now be increasing our tariffs for heat networks customers for the next 12 months from May 2022 until May 2023.

"The tariffs SSE set are linked to Ofgem’s price cap for domestic gas users; but we would encourage anyone who is struggling with their energy bills to contact us immediately to discuss how we can help them.

"We also welcome regulation in heat networks that will help maintain high standards for both customers and service providers.”

Maisey Bull lives in Lyon Square in Harrow. They have not yet had their latest bill but are expecting their costs to double or triple. She said: "In a one bed flat, I'm potentially looking at a £180 bill each month for just hot water and heating. That doesn't include electricity. It's absolutely staggering, it's going to push people into debt and I honestly believe the Government needs to step in and do something. We need a price cap."

A Government spokesperson said: "We are committed to legislating to regulate the market within this Parliament.

"The vast majority of heat network customers will receive £200 off their energy bills from October as part of the £9.1 billion Energy Bills Rebate and a further £150 Council Tax rebate."