Social housing tenants could face huge spike in energy bills

Hundreds of thousands of households connected to heat networks – which is particularly common in social housing – could soon see their energy bills more than double, research suggests.

In a new report, analysis by the Social Market Foundation think tank reveals that heat networks – which provide energy from a single source and share it across several buildings – could be serving up to 900,000 homes.

This is almost double the most recent government estimate of 480,000 households, with one in 25 homes now thought to be part of a heat network, and one in 12 in social housing.

These households have not benefitted from the government’s Energy Price Guarantee, which typically caps bills at £2,500, since heat networks’ energy purchases are treated as business sales.

Most have been protected because heat networks tend to purchase energy at rates fixed for a year or two, however, as those deals expire, the report warns that households face bills doubling, or even increasing by as much as 700%.

One pensioner in Lambeth has already seen their heating and hot water bill increase from £700 to £3,500.

“The problems in heat networks disproportionately affect the worst off families,” the report’s author, Will Damazer, said. “They have to put up with higher prices, worse regulation and less control over their heating and energy use.

“Heat networks have a significant role to play to get the UK to net zero – but they are not living up to that potential.”

The report explains how a lack of metering in households served by heat networks is leading to excessive use and unnecessary costs.

Poor energy efficiency and high maintenance costs, and a lack of regulatory protection from Ofgem – since energy bills for those in housing networks are treated as housing service charges – are also key challenges, according to the report.

In order to secure a fairer deal for those living in heat networks, it recommends that the government:

• Improve the bill support scheme, with more generous help, pegged to domestic energy prices, targeted help for schemes in deficit, and a cap on service charges
• Accelerate the transition to metered networks, removing exemptions, increasing grant funding and encouraging the uptake of support
• Set a target for Ofgem to start regulating heat networks by April 2024, and incentives to improve efficiency
• Dismantle inefficient and outdated networks, mandating operators to run feasibility studies and providing funding for households in dismantled networks to transition to heat pumps

“The government has belatedly recognised the problem, and is starting to take action – but the scale and timing is not good enough,” Damazer continued.

“Increasing the pace of metering would not solve everything, but would be a crucial step in the right direction, reducing bills for households whilst helping the UK reduce its carbon emissions.”