Latest News

Sector leading knowledge and experience of heat networks

Heat network energy prices – bridging the cap

Oct 17, 2022

Update: On the 17th October 2022 (a week after we first published this blog), it was announced that the energy price guarantee would be scaled back from 2 years to 6 months, ending in April 2023, when energy support measures will once again be reviewed by the Government. We’ll blog again with another update as soon as more details become available!

Amidst the turmoil of ongoing rising energy costs and concerns over consumer protection – particularly as winter looms – the Government announced the Energy Bill Relief Scheme (EBRS), which provides energy bill relief for non-domestic customers. This scheme has been announced in-line with the Energy Bill Support Scheme (EBSS), which provides eligible domestic households with a £400 discount to their energy bills.

The announcement of the EBRS was welcomed by many but raised a number of questions, mainly will this really be an equivalence for heat network customers?

To answer this question – lets first unpack support which has already been announced and where that puts the sector:

1. For regular domestic customers, there is:

  • Energy price cap introduced on 1st October
  • £400 EBSS – paid as a deduction in electricity bills over the next 6 months
  • Further support for other households in need (means tested benefits, pensioners, disabled etc.)

2. For heat network domestic customers there is:

  • The EBRS which will cap the wholesale price of gas at 7.5p/kWh for six months. Non-commodity costs will still need to be added in to ascertain the commercial price that you will pay. The price cap applies to contracts agreed on or after 1st December 2021 (a little win already, as it was originally contracts from 1st April 2022)
  • £400 EBSS – paid as a deduction in electricity bills over the next 6 months.
  • If you don’t have an electricity bill (e.g., private wire or where utilities are included in rent) then the £400 will be matched through the Energy Bills Support Scheme Alternative Fund (EBSSAF), probably delivered through local authorities
  • An additional £100 ‘heat network support payment’
  • Further support for other households in need (means tested benefits, pensioners, disabled etc.)

So it’s cautious good news, although we still need further details on both the EBSSAF and the heat network support payment. The £100 heat network support payment will go some way to plug the ‘equivalence’ gap caused by heat network inefficiencies. The payment mechanism for both this and EBSSAF is going to be critical, and is likely to require heat networks to be registered in order to benefit.

More details should emerge as the Energy Prices Bill, published last week, works its way through Parliament. The Bill also introduces critical powers to protect heat network customers, ensuring that ‘intermediaries’ passed on benefits of the EBRS to end users, with the Energy Ombudsman appointed to investigate complaints of failed pass-through requirements.

What does this mean?

The issue of ‘equivalence’ of heat network customers and domestic customers is shrouded in technical and industry limitations. Legislation is beginning to recognise this and begin to offer a level of protection, but more needs to be done.

If you are a housing provider or local authority who operate or own heat network schemes, it is your responsibility to ensure your heat network customers benefit from the EBRS price cap through the service charge or heat tariff. The main way to ensure pricing is fair and that charges are minimised is to optimise your heat network performance. Do you know how efficient your system is? Poorly performing networks penalise customers who live on them, yet they are helpless to make the improvements needed.

For metered heat network schemes – if your contract prices are due to renew and you are likely to be impacted by price hikes, ensure your tariffs are reviewed when contracts are procured, and factor in passing on cost savings to customers

The sector has some way to go to operate in-line with existing utilities, but this journey starts with optimisation and ownership. If you need the lid lifting on price caps – please reach out and contact us at Chirpy Heat