Energy Price Cap: Residential Buildings with Communal Heating Systems

Sharon Hodgson Excerpts

Wednesday 20th April 2022 Westminster Hall

[Nickie Aiken (Cities of London and Westminster) (Con)]

It is a pleasure to serve under your chairmanship, Mr Pritchard. I start by thanking the hon. Member for Hackney South and Shoreditch (Dame Meg Hillier) for securing this important debate. I declare an interest: I live in a building that has shared heating, although I do not have that shared heating—I have my own heating system. We are all affected by the increase in energy prices. However, it is being most keenly felt by those who are not protected by the energy price cap because they live in apartments within buildings served by heat networks. Indeed, those affected are now facing, or are due to face, a staggering increase of around 300% in their heating bills. It is incredible how many people in Cities of London and Westminster and constituencies like mine are affected because their buildings, whether mansion blocks, social housing blocks or new, larger developments, are part of heat networks. I can assure you, Mr Pritchard, that this is a very real issue for my constituents.

Many have outlined the positives of such heating systems, and while I appreciate the potential of heat networks and the fact that many blocks are commercial enterprises with their own targets, their end users are ultimately residents, not businesses. Those residents, through no fault of their own, are fully exposed to extreme market changes, with little recourse to any help. This cannot be left for any longer. Right now, Europe faces its worst energy crisis since the Arab oil embargoes of the 1970s. In turn, consumers and landlords operating heat networks are consistently reporting extreme examples of energy price rises to me. Figuratively speaking, people whose homes have communal heat networks are being charged up to four times their previous energy bills, purely because their building has one communal heat source.

It is for that reason that I was grateful to meet recently with the Minister in the Lords, Minister Callanan, alongside my hon. Friend the Member for Kensington (Felicity Buchan), to discuss these issues for central London in more detail. It was a very interesting discussion, made all the richer for having some of our constituents in attendance to speak directly with the Minister about how difficult it is for them at the moment. I thank Richard Cutt and James Wright for their time representing Cities of London and Westminster on this matter. It was promising to hear from the Minister that the Department for Business, Energy and Industrial Strategy is considering looking at options to legislate for Ofgem to be given powers to intervene when prices are significantly higher for consumers. I would welcome such powers, which would go a long way to protect residents in buildings with communal heating.

That said, the question that remains is how long it will take for legislation to resolve the issue. As I have said, I have spoken to those affected, and I do not think residents can afford such a long lead-in time for the relevant laws to come to fruition. I appreciate that we need to wait for the Queen’s Speech, which I hope will contain the much anticipated energy Bill. However, even if we prioritise that Bill, we will only see results on the ground within a year or two. After all, BEIS will need ample time for policy development. We would then legislate for transparency on costing, so that we can see what organisations are paying and Ofgem can then make sure that consumers are not ripped off, so there is a huge time lag in this.

[Mrs Sharon Hodgson (Washington and Sunderland West) (Lab)]

The hon. Member is making an excellent speech. In my constituency of Washington and Sunderland West, I have over 1,000 properties attached to one of these heating systems, and they do not benefit from the energy price cap or anything like that. I agree with her that the Government need to bring forward that legislation, but in the meantime those people need help now, as she is saying. Does she have any suggestions for what that help could be from the Government?

[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.