Exploring consumer protection in the district heating market
District heating consumers are tied to one heat supplier via their heat network. Yet unlike most monopolies, the supply of heat is largely unregulated. As a result, there are very few protections for district heating consumers with respect to any of the issues typically addressed in regulated markets, such as prices and standing charges, performance standards, billing, dispute resolution and rights to redress. The contrast with the gas and electricity markets is stark.
With a major expansion of district heating planned in Scotland over the next few years, Citizens Advice Scotland (CAS) commissioned Changeworks and the Centre for Sustainable Energy to explore what consumer protections might be needed in future and the options available to secure them.
You can download the research report, Different Rules for Different Fuels: Exploring Consumer Protection in the District Heating Market and CAS Insight report which responds to the study, from the CAS website.
Alongside interviews with district heating suppliers and a stakeholder workshop, the study included a review of the consumer protection measures in place in several other European countries – the Scandanavian countries, Germany and the Netherlands. These countries all have a longer history and higher penetration of district heating yet a range of different approaches to regulation and consumer protection. The study team also drew up a definition of ‘consumer needs’ with respect to district heating to provide a framework for considering the different options (refer to page 17 of the report). These are listed below.
- 1. Fair price
Consumers should not be overcharged for their heat
- 2. Warmth, control and comfort
Consumers should be provided with sufficient warmth, reasonable controllability and not suffer from over-heating
- 3. Standard of service
Consumers should be receiving services with good standards:
a. Faults being dealt with effectively and efficiently
b. Debt handling (sensitively)
c. Billed regularly and accurately
d. Fair heat contracts
e. Appropriate support for vulnerable people
- 4. Easy access to redress
Consumers should be able to get compensation and/ or dispute resolution readily if agreed standards are not met, including effective complaints handling
- 5. Information providing reassurance
Consumers should receive or be able to easily access information and a level of transparency that proves they are receiving 1 – 4 above. This relates to:
a. Billing and pricing information
b. Contractual information
The resulting report, published by CAS 26 May 2017, maps the different options against these needs, examines the pros and cons of each, and provides feedback from stakeholders. The 16 possible options identified include approaches such as price caps or not-for-profit supplier requirements, such as exist in Denmark, as well as clearer service standards for fault handling and existing voluntary approaches such as the Heat Trust scheme.
Changeworks Courtney Peyton, Senior Consultant (Energy and Sustainability), commented: “What was encouraging was the sector wide support for greater consumer protection measures – a clear need highlighted by the research. This is about ensuring consumers get a fair price, sufficient warmth and comfort at home, and access to an independent dispute resolution service.”
Craig Salter, Policy Officer at Citizens Advice Scotland, said: “The findings of this report have been illuminating, and while it shows us that there are many examples of good practice from existing district heating suppliers, there is a clear need for greater and more consistent consumer protection for those using district heating.
“District heating has the potential to play an important and positive role in eliminating fuel poverty, but in order for this to happen, consistent consumer protections must be in place.
We hope that the findings of this project, and the recommendations that have come out of it, will help to ensure that an expansion in the use of district heating in Scotland has the interests of those using it at its heart, and will help to allow it to play a meaningful and proactive role in alleviating fuel poverty.”
CAS has submitted the report, together with an insight report which draws on it, to the Scottish Government for consideration.
It will also be provided to Ofgem (which has recently explored the future decarbonisation of heat) and the Department of Business Energy and Industrial Strategy which, like the Scottish Government, is seeking a significant expansion of district heating in England.