Sutton Decentralised Energy Network

Elliot Colburn Excerpts

Friday 4th February 2022 Commons Chamber

[Elliot Colburn (Carshalton and Wallington) (Con)]

Colleagues in this House will have heard me speak many times about the problems facing residents living in New Mill Quarter in Hackbridge and the issues surrounding the Sutton Decentralised Energy Network, or SDEN. Before I go on, may I particularly welcome that it is this Minister who is on the Front Bench? The Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend the Member for Sutton and Cheam (Paul Scully), will know much of what I am about to say, as my constituency neighbour and as the MP for the second half of Sutton, which we both represent.

For the benefit of the House, I would first like to go over some of the background to SDEN. It was set up in 2016 and is still wholly owned by Sutton Council. It was set up to provide heating and hot water to properties, as part of a heat network, across Sutton but also neighbouring boroughs. The energy for this project was to be generated by the Beddington energy recovery facility—in other words, an incinerator that is the largest polluter in the London Borough of Sutton. Put simply, the incinerator will burn waste, and the energy produced will provide heating and hot water to nearby properties.

The first phase of this project was to provide energy to New Mill Quarter, which is a new build estate in Hackbridge. It is still partly under construction, but when it is completed it will total approximately 800 properties. Residents started moving into New Mill Quarter in 2019, but since then they have been absolutely plagued by problems, with a number of issues surrounding technical aspects of SDEN as well as management by Sutton Council causing financial and mental distress to the residents who live there. I would like to go over some of the issues they have been facing in more detail.

The first and most important issue has been the extremely regular blackouts that have occurred. One resident tells me that, since 2019, they have had a total of 26 heating and hot water blackouts, and two incidents that required call-outs from the London Fire Brigade because of problems to do with the technical nature of SDEN. Until fairly recently, SDEN promoted its services as “100% 24/7 resilient”, but as residents living at New Mill Quarter can attest, the service is anything but resilient, as they continue waking up to freezing cold homes on a regular basis. I was particularly shocked at a meeting, which the council tried and failed to block me from attending, when it was claimed that residents should not have expected it to be 100% resilient, despite the marketing material claiming that it was, as this was clearly just a promotional piece of literature. I personally fail to see how this does not fall foul of the law, but I do not have time to go into that right now, so I will move on.

The regular blackouts have been particularly difficult during covid-19, as of course people were ordered to stay in and work from home, but many of them suffered regular outages of their heating and hot water while they did so. For most of us, hot water and heating blackouts would occur very infrequently—once in a blue moon—if the boiler is on the blink or a heat system does not work. But for residents in New Mill Quarter, it really is a daily guessing game as to whether or not they will wake up to have any heat or hot water. Many residents are having to pay extensively for additional or alternative heating devices, but in response to this, SDEN has only offered residents a pitiful compensation package of just £54.

The second issue with SDEN surrounds the pricing model. The council was again so keen to keep information about the pricing model quiet that it took freedom of information requests and a ruling from the Information Commissioner to even get hold of it. What it actually revealed is that residents in New Mill Quarter are indeed paying above average energy prices, despite claims from SDEN that they are on parity. The pricing structure of SDEN is split into two categories: a variable rate, which is the usual daily rate; and the standing charge, which covers maintenance and repairs. Based on the pricing model that has been provided by SDEN—finally—the New Mill Quarter Residents Association has calculated that the costs were likely higher than the market by £2.9 million across the entire estate over the term of the contract.

The final issue—again, potentially one of the more important parts of this—is that residents can do absolutely nothing about this. They are trapped by the infrastructure that is there, because properties in New Mill Quarter do not have individual heating sources such as boilers or heat pumps. They cannot vote with their feet and switch energy providers, so ultimately SDEN has a monopoly on energy in New Mill Quarter, and residents are tied into a 25-year contract that they cannot get out of.

Since becoming the MP for Carshalton and Wallington, I have basically had to deal with SDEN issues since day one, so I have been curious to look at whether these were exclusive to SDEN, but sadly it appears they are not. There are other case studies from across just the capital here in London. I hear that the Pembroke Park estate in Hillingdon has suffered failures, as have the Oval Quarter in Lambeth, New Festival Quarter in Tower Hamlets and multiple estates in Southwark, all of which have suffered hot water and heating outages. But nothing in my research comes even close to the absolute shambles presided over by Liberal Democrat-run Sutton Council.

Thanks to a motion in Sutton Council by the Conservative group, an independent review into the financial model of SDEN was conducted. The Chartered Institute of Public Finance and Accountancy conducted the review over the summer, and its findings were nothing short of shameful. It concluded that Sutton Council had made false assumptions in its financial modelling to gain approval for its heat network. It was essentially a fake news business document. The model falsely included 75 dwellings that do not exist and funding grants that were never obtained. The report concluded that SDEN was “not financially stable”. To improve the financial resilience of SDEN, the report suggested two things: increases in the tariffs charged to customers, who are already paying above the market rate for energy prices; and, revising the funding available from the taxpayer to pick up the pieces.

The second thing I want to look at is the fact that SDEN is dependent on the Beddington incinerator to operate, but that creates a paradox. SDEN claims to be a low-carbon energy provider, but SDEN was used as a condition to get approval to build an incinerator, which is the largest polluter in the borough. Those two statements just do not add up. The heat network relies on the burning of waste to keep it going, yet the Lib Dems are claiming that they can increase recycling rates this way. Incineration is not conducive to our net zero targets, and it is the Government’s policy to phase out incineration in their waste minimisation strategy.

As recycling levels increase, along with “reduce and reuse”, the amount of waste that the borough produces, and the amount of waste that other boroughs send to SDEN to burn, will inevitably reduce. That can mean only one of two things: either SDEN will have to import waste to the Beddington incinerator to keep it operational, or the incinerator will become obsolete, as there is no waste to burn, and therefore homes will be left with no source of heating. I do not think the latter is likely any time soon, because the operators of the Beddington incinerator, which was approved by the Lib Dem council in 2013, are now looking to expand its capacity. They are applying for an increase in the amount of waste it can burn, and much of that will be imported from outside the borough. More waste equals more vehicle movements, equals more incineration, equals more air pollution, equals more carbon emissions.

To add insult to injury, there has been a complete lack of any understanding, empathy or action from the Lib Dem-run council, including the Lib Dem councillors representing the area, which may explain why it seems most of them are jumping, like rats leaving a sinking ship, rather than daring to face their electorate for re-election in May. The Lib Dems are still touting this scheme as a huge success—as proof of their competence and a demonstration of how well they run things. If this is how they run things, it is no wonder that more and more lifelong Lib Dem voters are telling me that they simply cannot put them back into the council in May.

This is where we need the Government to try to help. This relatively new form of energy is almost entirely unregulated, so new consumer protections are needed. I welcome the work that BEIS is doing to regulate heat networks. I support the decision for Ofgem to act as the regulator, with Citizens Advice acting as advocate for customers and the energy ombudsman responsible for resolving disputes. We need regulation and consumer support as soon as possible. To reach our net zero ambitions, heat networks are set to increase by 800%—that is a lot of growth in a short period of time.

To protect and help current and future heat network customers, regulation needs to be expedited. People are trapped in homes, unable to sell due to the well-known issues with heat networks. The regulators need to have enough bite to resolve the issues that customers are experiencing, including, importantly, providing compensation for historical complaints, ensuring that these projects can be future-proofed.

Some problems are yet to be addressed. In the case of SDEN, there have been failures by the public sector local authority and the private sector developer/energy provider, which needs cross-departmental support. Sutton Council, as I have already said, established this heat network under false pretences and has failed to manage its finances, so I would be grateful to hear how BEIS and the Department for Levelling Up, Housing and Communities can work together to ensure that rogue and incompetent local authorities are not failing consumers and to prevent them from conducting these projects without legitimate financial models. Wider conversations need to be had about how we can liberate the heat network market so that they are not monopolised, to the detriment of customers trapped in long-term contracts.

SDEN has been a catastrophic failure. It was founded on fantasy, it is not working and now local residents are going to be asked to foot the bill for this vanity project. At the heart of this are residents trapped with nowhere to go. They cannot change provider because of the monopoly of heat networks such as SDEN, so we need tougher regulation. We need the energy price cap to apply to heat networks, and when things go wrong we need compensation and assurances that incompetently run councils, such as Lib Dem-controlled Sutton, are not the final arbiter.

The Lib Dems are not going to help these residents. They just do not care. I hope that the Government can step in with tougher regulations to protect SDEN customers from the disaster that they have been left with.