Scottish consumer group welcomes Competition Commission probe into un-regulated district heating schemes

A Cube Housing Association district heating scheme in Glasgow.
A Cube Housing Association district heating scheme in Glasgow.

Citizens Advice Scotland has welcomed the Competition and Markets Authority investigation into the market in district heating networks – where heat is supplied to multiple homes from one central source.

District heating can be more efficient than individual systems, and be powered from renewable resources, with potential cost and carbon reduction benefits – unlike ‘traditional (and diminishing) North Sea gas.

Unlike electricity and gas, there are no specific, comprehensive statutory consumer protections for district heating consumers.

The proportion of households in Scotland using district heating doubled between 2008 and 2014, from 0.7% to 1.4% (35,000 households).

The Scot-Govt wants to increase the use of district heating, with an initial target of 1.5 TWh, or 40,000 households, by 2020.  A UK Government report suggested 7% of Scotland’s total heat demand could be met by district heating by 2025.

But in order for the sector to expand, it will be important to build consumer confidence in the technology – effective consumer protection will be central to this.

The Competition and Markets Authority (CMA) is concerned that many customers, a large proportion of whom live in social housing, may be unable to easily switch suppliers or are locked into very long contracts – some for up to 25 years – and that there is a risk they may be paying too much or receiving a poor quality of service.

It will now be thoroughly examining a range of potential issues in a new market study into the sector. The CMA is planning to examine three broad themes:

  • Whether customers are aware of the costs of heat networks both before and after moving into a property.
  • Whether heat networks are natural monopolies and the impact of differing incentives for builders, operators and customers of heat networks, and:
  • The prices, service quality and reliability of heat networks.

Kate Morrison, energy spokesperson for the Consumer Futures Unit at Citizens Advice Scotland, said:

“District heating has potential benefits to warmth, cost and carbon reduction, and the sector is set to grow significantly in Scotland. However, unlike gas and electricity, district heating is currently un-regulated, and it isn’t possible to switch between suppliers.

“Earlier this year the CAS Consumer Futures Unit called for a statutory licensing scheme for district suppliers to protect consumers as the sector expands and we therefore welcome the CMA investigation into the community heating market.

“We see cases relating to issues with district heating in our local CABs. These can include problems such as sudden price rises and huge unexpected bills, with no option to switch supplier.”

12 Dec 2017

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