Heat Networks Leaving Customers Vulnerable?

Energy customers have been vocal in the news recently that they have been left with soaring bills. These complaints come against a backdrop of rising prices UK-wide, but these customers feel increasingly vulnerable due to their energy arrangements.

This is due to the geographical areas that these customers live in, densely packed households in urban estates can often form part of a heat network. All households get communal heating using just one main boiler and are not protected by the energy price cap.

Most UK households will be affected by the rising price cap coming into force in early April – with an estimated 18 million homes on standard tariffs paying an increase of £692 and 4.5 million households on prepayment tariffs will see an increase of £708.

These rises, although incredibly costly, are outstripped by the higher bills likely encountered by customers on heat network arrangements. Many of these customers have only recently found out that their supplies are not protected by the price cap.

Heat Networks Explained

An estimated 800,000 households across the UK are currently on a heat network arrangement and find themselves in a vulnerable position. Most live in estates or blocks of flats where management companies, housing associations, or local authorities are responsible for the running of communal heating systems.

These companies, organisations, and associations will purchase their gas on the open market which currently comes with a heavy price tag. Recent price increases are not capped in this scenario, and are much more exposed to the current energy crisis and subsequent price volatility.

The Director of The Heat Trust, Stephen Knight, had this to say about the rise in bills –

“…is because of what’s happened to wholesale gas prices… and that is really hitting people on these communal heating systems at the moment… We’ve seen examples of where residents have been told their prices were going to go up by 700%.”

Heat networks are currently not regulated by the energy watchdog Ofgem, although plans to change this have been announced by the Department for Business, Energy, and Industrial Strategy.

Unfortunately, Stephen Knight does not believe this will happen for at least another three years –

“Proper regulation under Ofgem is what’s needed but it’s too far away to protect the consumers affected right now so we do need urgent action from the government.”

Relative Vulnerability to Bill Changes

However, it is not just those customers part of heat networks that do not feel the protection of the price cap.

The entirety of Northern Ireland is in a similar position, with no such cap present here.

An estimated 1.5 million rural and isolated households that use oil to heat their homes aren’t protected by the cap. Further to this, some green energy suppliers are exempt from it according to Ofgem. The situation is clearly massively complex.

If you are unsure if you are affected by the price cap you can check here.

Time to Stick or Twist

During this time of incredible uncertainty, it is not just suppliers that have been affected – but also all of the ancillary businesses in the energy industry.

Comparison websites have long been a part of the energy buying process for both domestic and commercial customers, but the soaring energy prices in combination with new rules on insurance sales mean that it is challenging times for the businesses they advertise for.

As customers search the market in an attempt to cut their soaring bills, the websites have found themselves without any deals to offer on energy as suppliers generally are not offering ‘cheap’ tariffs. The comparison sites earn a small deal of commission when customers switch to them via the website, estimated at £30 for some energy contracts and £40-59 for insurance policies.

MoneySupermarket recently recently reported a 25% fall in profits last year, and revenues from home services were down 34% – with the company expecting zero revenue from its energy business in 2022.

Their direct rivals, GoCompare found themselves in a similar sticky situation – describing 2021 as a year like no other and paused that strand of its comparison service entirely in September. A spokesperson for GoCompare had this to say –

“At the moment, there aren’t any competitive deals available for people to compare but we are hopeful that we can offer this service again in the near future and get back to helping our customers save money on their energy bills.”

Another comparison site, USwitch decided to advertise to their customers the advice that they should stay put with their current providers and to refrain from using their energy service until further notice. A move that nobody could have predicted previously.

It is not just price volatility that is affecting this facet of the industry, but new rules banning loyalty penalties on home and motor insurance. These regulations set by the Financial Conduct Authority came into play on the 1^st of January 2022 and state that anyone renewing their policy with an existing provider should pay no more than they would as a new customer. This has led to prices for customers who switch regularly going up, while those who stay with their providers have generally benefitted and pay less.

When these rules were first announced, the shares in MoneySupermarket and GoCompare’s parent company fell – which led to experts suggesting that the incentive to shop around for the best deal had drastically reduced. Rising interest rates have also meant some of the best deals on loans and mortgages have disappeared, exacerbating woes for comparison sites.

What Now for Price Comparison Sites?

This doesn’t spell out the end for these businesses, just some heavy turbulence.

MoneySupermarket has already planned out how to recoup losses, a plan that includes sending customers prompts when savings could be made on products and adding a car insurance comparison to MoneySavingExpert – which it owns.

They also recently bought the cashback site Quidco, which offers a range of ways to save money on products via their website. This acquisition took place in November.

Uswitch too looks to bounce back strongly, stating that there were still products that people could save money on. They advised customers to start the process off by haggling directly with their current providers to see if a better deal is available before turning to a comparison website to act as a middleman.

Ultimately, the current challenges facing comparison websites will come to and end in the future. When it does, experts have stated that the switching market will recover.

Customer Billing – Will I Be Affected?

For UK energy customers, it is difficult to say how your bills will be affected due to the serious volatility in the energy markets. It is important to remember that energy prices as a whole are rising, and this will be passed onto consumers through energy bills, making it something to keep a close eye on.

Different suppliers will feel the pinch in different ways so it is crucial to be aware of the current situation your energy supplier finds themselves in. Energy Solutions keeps up to date supplier profiles for all of the energy suppliers in the UK, which you can find here.

At a time where bills look set to rise due to market volatility, it is also a good idea to ensure that you are not being overcharged for any of your utilities. It can be a tricky task to navigate but Energy Solutions has curated online tools to remove the hassle.

You can find our free online Gas Bill Calculator here.

You can find our free online Electricity Bill Calculator here.

Energy Solutions by Us, for You 

At a time of great uncertainty in global energy markets, it is easy to feel lost in it all.  

Keeping up to date with developing situations and the associated ramifications is a tricky and time-consuming job. It is also one that is not likely a priority for you and your business.

So, what do you do? 

You partner with energy procurement experts to take the load off of your desk. 

Energy Solutions have been trusted brokers for countless businesses for over twenty years, which means we know how to navigate the energy markets during a time of uncertainty. 

Website: https://www.energybrokers.co.uk/ 

Email: nick@energybrokers.co.uk 

Call Us: 0131 610 1688 

WhatsApp: 07757 400 788 