HANSARD
Energy Price Cap: Residential Buildings with Communal Heating Systems
- 5:24 pm
- I beg to move,That this House has considered the energy price cap and residential buildings with communal heating systems.It is a pleasure to serve under your chairmanship, Mr Pritchard. I should declare an interest, as I live in a leasehold flat in a block with a communal heat network. I also represent a constituency with one of the highest numbers of multiple dwelling blocks in the UK, a number of which have community heat networks.The problem is very simple. I think I should lay that out, and then I want to lay out what I am asking the Government to do and hope to get a positive response from the Minister. Quite simply, we all know about the cost of living crunch and the increased price of energy bills, and of course the Government have put in certain measures to try to mitigate that, but constituents who live in residential buildings with communal heating systems—also known as heat networks—are not protected by the energy price cap as other energy purchasers are.
- In my constituency there are many Barratt homes that have district heat networks and I have continually raised that issue in Westminster Hall and on the Floor of the House. Does my hon. Friend agree that it is even more important that the Government introduce regulation to put protections in place for residents where they have these heating networks, given the fuel crisis experience that the country is going through and the increases in fuel costs?
- My hon. Friend is absolutely right. About half a million people, as an estimate, live in such blocks—not only new developments such as those that she has highlighted, but some older developments that would take a lot of retrofitting to get individual heating systems in place; but that is not the answer and I will come to that in a moment.
- I thank the hon. Lady for securing this debate. She is right, and such bodies as Ginger Energy have highlighted that domestic customers of communal heating networks should be included within the energy price cap’s protection. The Government were committed to introducing legislation. This affects some 14,000 heat networks in Great Britain—2,000 district heat networks and 12,000 communal heat networks. Half a million customers suffering, half a million homes unheated, half a million reasons for us to take action. Does she agree?
- The hon. Gentleman is absolutely right. When I get to my asks of the Government, I shall be very clear, as the hon. Gentleman and the hon. Lady have highlighted, that the issue has been raised in the House before—indeed, it has been raised since 2018. I will get on to the timeline, and my question to the Government is this: we know about this, so why is it taking so long to resolve it?The key issue is quite a simple definitional issue: the energy price cap sets a price limit on domestic supplies of electricity and gas, but not on domestic supplies of heat. So developments of the type that my hon. Friend the Member for Lewisham East (Janet Daby) referred to will often have wood-chip burners or an equivalent in the basement, or some other source of supply, and they provide heat to the home, but it is purchased for the building and then sold on to an individual. Ofgem, as we know, regulates the supply of gas and electricity but not, at present, the supply of heat. That means that while the supply of gas to a heat network is regulated, the supply of heat from the heat network to homes is not, because Ofgem classifies supplying heat to a heat network as a commercial arrangement, not domestic. But let us be clear: the end user of this is someone living in a home—a flat, an apartment—who benefits from the communal heating system, often arranged for good reason, sometimes in an attempt to provide green energy, but it has actually left individual residents, whether they are homeowners or tenants, in the lurch.
- I want to cite an example. There are many such cases in my constituency. A junior doctor who wrote to me said that her heating price went up by a staggering 400% and every day she has to pay an additional £7 a day. She wrote to me in the winter, in December, because of this policy, and up to half a million people are affected. This is not a difficult thing for the Government to address—to make sure that the regulator can encompass heating in this form so that they are protected—so I hope the Minister will address it and will have some good news for us today.
- My hon. Friend highlights another important point, which has been mentioned by other hon. Members—that of course the individual, the resident, gets a bill that is directly related to their property, to their energy use, so it is very personal, yet that is seen as a commercial supply and clearly it is not; it is about someone living in their home.One of my constituents, based in the East Wick and Sweetwater development, has their heat supplied via a heating network from East London Energy. From April, this month, East London Energy is increasing its usage fee by 103%, and other Londoners on heat networks are reported to see price increases of over 700% in the worst cases.The National Housing Federation, which has a lot of these properties in a portfolio of housing associations generally but represents housing associations at a national level, says that around 150,000 of the people affected are housing association residents. These are people on lower income, of course, but we also know that there is a strong correlation particularly between new tenants of social housing and the ability of a household to pay.Peabody, a large landlord in my constituency—obviously it is also a housing association—has 172 operational heat networks across its whole portfolio, and it says that in general the price of energy has increased by over 300% since April 2021. Peabody has managed to mitigate up to a point by buying multi-year deals from its supplier. However, that is not universal and clearly it does not always help, because it depends at what point in the market the energy is bought. There are 32 of Peabody’s operational heat networks that cover over 100 homes each, so these are quite large scale. Someone could live in a development next door to a person in another development; one could benefit from the energy price cap while the other, by accident of housing allocation, bought a property with a communal heat network, not realising what the consequences would be. We would not have predicted that the energy prices would have increased so much. Nevertheless, that is the problem now.
- 5:34 pm
- 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.
- 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?
- 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.
- 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.
- 5:43 pm
- 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.
- Do we have any other takers?
- 5:47 pm
- 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.]
- 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.