Energy Price Cap: Residential Buildings with Communal Heating Systems

Mark Pritchard Excerpts

Wednesday 20th April 2022 Westminster Hall

[Nickie Aiken]

I hope that the Minister might address that very well made point. We can live in hope.

Through all the good and necessary steps that the Government are taking to protect consumers through the energy cap, the timescales are quite difficult for our residents who are facing the cost here and now. It will be interesting to hear what the Minister has to say about what help, if any, can be given to those on heat networks now. I hope that if there is a consultation and it is a quick one, it will also throw up lots of secondary concerns. For example, how can we address the detail of meters? Can any price cap in this area take into account different monitoring systems as technology evolves? Can we have a cap on the wholesale price for consumers as well as domestic users with a single supply? It is not an easy task to resolve this.

Right now, we in Parliament need to ensure that there is interim support that takes into account the nuances of those locked into heat networks—they are literally locked into this. Indeed, I was concerned to hear reports from some of my constituents who are currently excluded from the otherwise comprehensive package of support being offered by the Treasury, precisely because they are on a heat network.

I am sure that the Minister will be relieved to hear that I do not think that a solution will necessarily require more money. We just need to ensure that Government support is allocated fairly and takes into account the complexities of people locked into heat networks with no price caps.

I hear time and again that transparency is key to resolving this matter, and right now I am concerned that Ofgem does not quite have the capacity to target the support that is needed to residents who are affected. In fact, that was brought up in the responses to the Government’s “Heat Networks: Building a Market Framework” consultation. It seems that some of those previous concerns are now transpiring, and I suspect that we are seeing the additional complexity of a top-down approach when the market really requires a bottom-up approach.

To conclude, I hope that the Minister can address a few of the concerns that I have mentioned. I know that the Government are committed to making heat networks a key part of their energy policy. After all, heat networks have the potential to offer low-cost, low-carbon heat. But without intervention now, hundreds of thousands of families are facing horrendous and unaffordable heating bills. What is important here and now is that we must not leave families living on these schemes behind.

[Mark Pritchard (in the Chair)]

I do not wish to impose a hard time limit, but quite a few Back Benchers would like to contribute and we would like to hear everyone if possible, so I would be grateful if Members could practise self-regulation and stick to about four minutes if possible. I call Rushanara Ali—[Interruption.] You are on the list. Okay, you have withdrawn. I call Sharon Hodgson—[Interruption.] Well, you are on the list. We are going to go home earlier; that is fine by everybody, I am sure. I call Janet Daby—[Interruption.] You are on the list as well, but that is fine. Siobhain McDonagh, I know you will want to speak.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

Thank you, Mr Pritchard. Anyone would say that I was garrulous after those comments.

I thank and congratulate my hon. Friend the Member for Hackney South and Shoreditch (Dame Meg Hillier) on bringing forward this really important debate. For households across our country, the cost of living is soaring. We have seen the biggest tax hike since the 1940s, the largest drop in living standards since the 1950s, public sector net debt reaching the highest level since the 1960s, and real earnings growth facing the largest one-year drop since the 1970s. Rising inflation, a hike in national insurance, and rocketing energy costs are putting unprecedented pressure on the pockets of hard-working families in all our constituencies.

However, as we have heard, approximately 150,000 housing association residents have heating and hot water delivered to their home via a communal or district heating network, rather than an individual boiler. Their way of paying energy is not regarded as domestic but business use. When it comes to energy payments, some might call them non-doms—perhaps we had better not go there. The Ofgem price cap does not protect those residents, so housing associations face the prospect of either absorbing soaring energy costs or passing them on to tenants and leaseholders.

This issue was first raised with me by my constituent Mr Johnston at the beginning of the year. He was worried that the lack of price cap protection and the soaring costs of energy may mean that he and his neighbours at Sadler Close in Mitcham could face an up to tenfold increase. They currently pay an estimated cost, with leaseholders paying through service charges and tenants through their rent. Mr Johnston lives in a Clarion-owned housing block and, despite my recent criticism of Clarion, I was delighted and relieved to learn that it has a commodity-capped agreement in place with its energy provider for another two years, so tenants and leaseholders will experience little increase, if any, in their gas charges. I am, of course, concerned about what will happen in two years’ time.

Right now, however, other tenants in similar situations will not be as fortunate. On 16 February, I wrote to the chief executive of Notting Hill Genesis regarding the Meadows estate on Mitcham Common to seek clarity that my constituents in those blocks would not face the same issue. Given the urgency of the energy price rises, I had hoped for a speedy response but, unfortunately, two months later I am still awaiting a reply. Even if those tenants are fortunate, thousands of others will not be.

The problems of unregulated energy supply are threefold. First, the monopoly of supply means that customers in shared blocks may be locked into long-term contracts with no way of holding suppliers to account on quality or price. Secondly, there is a lack of transparency. Residents often do not know that their energy will be supplied by a heat network. I took it upon myself to share the Clarion information outlined earlier in my speech with my constituents, fearful that many of them may not be aware of the impact of energy costs on their income. Who would have thought that a letter saying that their energy prices would be the same for two years could be heralded as such brilliant news? Thirdly, higher ongoing operating costs caused by property developers trying to cut the up-front costs of installing a network may simply result in higher costs for customers.

Minister, we need to examine the cost increases faced by residents in shared blocks and consider who has been hit disproportionately. We need to look at the regulation of energy costs paid in this way and quickly, because the clock is ticking towards the next big price hike in October. Warm words will not ensure warm homes, and without action the problem will get worse very quickly.

[Mark Pritchard (in the Chair)]

Do we have any other takers?

[Matthew Pennycook (Greenwich and Woolwich) (Lab)]

I will be incredibly brief—I think we will be voting shortly—and will pick up on a couple of points made by others in this debate. I have been raising issues about the lack of consumer protection for customers of communal heat networks since I was elected in 2015. It is a very long-standing issue, and there has been a tangible lack of progress in addressing it.

The first issue is the statutory regulation of the sector. We have come a long way. I remember raising this matter when I was a member of the Select Committee on Energy and Climate Change before the Department was abolished, and Ministers would tell me that statutory regulation of the sector was not required, that introducing it risked strangling an emerging industry at birth and that they were not going anywhere near it. I remember asking the CMA—[Interruption.]

[Mark Pritchard (in the Chair)]

Order. I have to suspend the sitting for a Division, and I understand that we will be having a lot of them. The first suspension will be for 15 minutes, but it will be 10 minutes for subsequent votes. If Members could make their way back a little faster after the final vote, we can get off to a quick start.