Energy Price Cap: Residential Buildings with Communal Heating Systems

Siobhain McDonagh Excerpts

Wednesday 20th April 2022 Westminster Hall

[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?