Why district heating schemes must be regulated

If operated effectively, there is no doubt district heating schemes can be more efficient, lower cost, and emit less carbon dioxide than gas or other alternative heating models.

However, there is a real risk that the environmental benefits of district heating are being undermined by systemic problems within the district heating industry.

At least seven district heating schemes currently operate locally at New Capital Quay, The Movement, Greenwich Square in East Greenwich, Enderby Wharf in East Greenwich, Greenwich Millennium Village (GMV) on the Peninsula, Woolwich Central on Love Lane, and Royal Arsenal Riverside in Woolwich.

Over the past 23 months, I have amassed a bulky file of correspondence from constituents who are served by these networks, and who believe that they are being unfairly charged and that there is a lack of transparency about what is covered in their bills.

The systemic problems that have been brought to my attention include:

  • Inconsistencies in charging with regard to reported consumption and billing;
  • A general lack of billing clarity and transparency;
  • Stark disparities between customers on the same block/development with regard to monthly levels of standing charge;
  • Significant variation in standing charges over consecutive months;
  • A general lack of effective communication with regard to the rationale for, and the varying monthly levels of, standing charges.

The UK district heating market is still in its infancy and so low levels of consumer confidence might be expected. What exacerbates the low levels of consumer confidence in this area is the absence of consumer choice. If district heating customers enjoyed the same freedom of choice that others on the grid do, they could respond to concerns over pricing and transparency by switching supplier. Instead, they are locked to monopolies from which there is no escape.

The current state of affairs cries out for effective statutory regulation. The most recent consultation on district heating regulation occurred in 2014, and little appears to have moved on since the Government’s initial decision not to regulate the market on the basis that it would drive investment in the sector by avoiding red tape.

District heating suppliers have sought to build trust and confidence in the market by establishing the Heat Trust, an initiative sponsored by the Association for Decentralised Energy (ADE). Given the levels of consumer mistrust that now exist, this industry-led approach can only ever be an interim solution. First, the voluntary nature of the Trust does not guarantee universal coverage for all district heating consumers. Second, it will do little to reassure customers that the market operates on the basis of fair and consistent pricing, particularly when one considers that the Heat Trust’s pricing formula is benchmarked to gas networks that utilise very different technologies. Third, it is not an adequate substitute for the redress provided by a sector Ombudsman.

I first raised this issue on the floor of the Commons on 19 November 2015. I have since campaigned for greater regulation of the industry and I asked the Competition and Markets Authority (CMA) to investigate. More recently, I worked with the Guardian on a piece exploring the impact of district heating schemes on customers.

As things stand, only a political decision by Ministers will resolve these concerns. I will continue to monitor the issue, seek to raise awareness about it, and to press for much-needed reform of this industry.