District Heat Networks

Anne-Marie Trevelyan Excerpts

Wednesday 28th April 2021 Westminster Hall

[The Minister for Business, Energy and Clean Growth (Anne-Marie Trevelyan)]

It is a pleasure to serve under your chairmanship, Ms Ghani. Let me begin by congratulating my hon. Friend the Member for Carshalton and Wallington (Elliot Colburn) on securing this really important debate. I also thank the hon. Members for Greenwich and Woolwich (Matthew Pennycook), for Lewisham East (Janet Daby) and for Kilmarnock and Loudoun (Alan Brown) for raising issues of concern in their own constituencies. As ever, I thank my friend the hon. Member for Southampton, Test (Dr Whitehead), who turns out to be an expert and an advocate on the subject of domestic heat networks—who knew? He was able to take us from Denmark to Southampton in demonstrating why they can and should be an important part of the mix. I thank to all colleagues for their contributions to the debate.

I was very sorry to hear of the troubles experienced by the constituents of my hon. Friend the Member for Carshalton and Wallington in the New Mill Quarter of his constituency. They have had really awful challenges with their district heat network. I sympathise with the difficulties that has clearly caused them all and it is profoundly disappointing to hear that their Lib Dem-run council has failed them all so very badly. I absolutely agree with the need for protections for heat network consumers. The experience of my hon. Friend’s constituents highlights the importance of the Government’s commitment to regulate the heat networks market within this Parliament.

Heat networks play and will continue to play an important part in assisting us to meet our net zero challenge. They will unlock larger-scale renewable and recovered heat sources, both energy from waste heat and heat from rivers and mines. It was interesting to hear about the geothermal heat source being used in Southampton. When deployed effectively, they can bring greater heat efficiency than individual gas boilers, lower costs for consumers and support local regeneration. However, we recognise that we need to regulate the market to ensure that those outcomes are real, for which protections for heat network consumers are needed.

As colleagues have highlighted, in 2017 the Government commissioned a survey to quantify consumer experiences with heat networks in England and Wales. The results showed that consumers connected to a heat network have generally received good service and were as satisfied as non-heat network customers, which makes the terrible experiences of those in New Mill Quarter all the more upsetting. The results of the survey also showed that, on average, a heat network consumer was likely to pay £100 less per year for heating and hot water compared with consumers on other utilities. Again, this makes it all the more shocking that my hon. Friend’s constituents have got such a raw deal from their Lib Dem council’s activities.

The Government also noted, however, a report by the Competition and Markets Authority in 2018, which showed that a significant minority of heat network consumers experienced high prices, frequent outages and a lack of transparency. Therefore, we committed to the Competition and Markets Authority’s recommendation of regulating the market and, last year, consulted on establishing a heat networks market framework.

The framework will include introducing consumer protection rules to combat cases of detriment, such as the outages being experienced by the residents of New Mill Quarter. We want heat network consumers to have comparable levels of service and protection to those using electricity and gas on individual contracts for their homes. As part of the market framework, we will introduce quality of service standards requiring notification periods for planned outages and compensation for all outages.

Consumers will have access to an independent redress scheme and a consumer advocacy body, which will provide a consumer helpline and priority services for consumers in vulnerable circumstances. The regulator will have powers to enforce price transparency, introduce guidance on fair pricing, set requirements on cost allocation and conduct investigations into heat networks where prices are disproportionately high. Finally, consumers will be provided with a minimum level of easily accessible information and guidance on heat networks at the pre-contractual stages of property transactions and during residency. There will be requirements on the provision of heat supply agreements and billing information.

We are preparing to introduce legislation to regulate the market, but, as colleagues have mentioned, there are some measures already in place to improve standards for heat network consumers. The Heat Trust provides an independent market-led voluntary standards scheme and consumers on heat networks registered to the Heat Trust benefit from terms of service similar to those in the gas and electricity markets. They can also access the energy ombudsman if they have a complaint against their heat supplier. In 2019, BEIS wrote an open letter to all heat network operators encouraging them to register their schemes with the Heat Trust and we continue to encourage schemes to sign up to raise standards now and to prepare for regulation.

[Alan Brown]

The work on the regulation framework the Minister is talking about seems well advanced, so can she give us a timescale for when legislation will come forward?

[Anne-Marie Trevelyan]

If only I could do it tomorrow, but I think Prorogation would stop me. We have also supported the Heat Networks Industry Council in its work to establish the consumer protection agreement and the heat network emergency responders group in response to the covid-19 pandemic. We encourage heat suppliers to sign up to that agreement and we have written to signatories urging them to do more to tackle outages and improve compensation standards for those outages. Although these schemes have benefited many consumers, we recognise that regulation is needed to drive up consumer standards across the heat networks market. I therefore reiterate our commitment to that regulation today, but I am afraid that I cannot give a precise date.

The Government have introduced several schemes to support heat network deployment. Our heat networks investment project has made £320 million of capital funding available for investment in heat network projects through grants and loans in England and Wales. That will be succeeded by the green heat network fund in 2022, which will support and incentivise the use of low-carbon heat sources in heat networks. Both investment projects will ensure adequate consumer protection measures are in place by requiring projects to demonstrate Heat Trust or equivalent standards, which will ensure that taxpayers’ money supports only heat networks that deliver fair pricing and which are well designed, efficient systems.

Furthermore, we have been carrying out work on improving performance across a number of existing heat networks. That provides an evidence base for the development of the heat networks efficiency scheme, which will part-fund operational performance improvements and carbon emission reductions in existing systems. Further details will be announced later this year.

It is essential that heat network consumers are provided with clean and reliable heat at an affordable price. As such, we are developing the heat networks market framework that will place consumers at its heart, deliver sustained investment in the sector and maximise heat networks’ potential economic and environmental benefits. We committed in the energy White Paper to legislate for the market framework by the end of the Parliament.

We are working closely with the industry and consumer groups to ensure that regulation delivers positive outcomes for consumers, and we will shortly publish the Government’s response to last year’s consultation. I look forward to working with all colleagues on the proposals that we will bring forward. In the meantime, I wish my hon. Friend the Member for Carshalton and Wallington and his constituents well as they seek redress from their council, whose failure to meet the standards that residents could have reasonably expected is motivation indeed for the Government to get protections in place.