Can heat networks get away with raising the prices for something you've already used?
Have you ever been to get a haircut, picked the £15 trim then, once you’re admiring your new look in the mirror get asked for £100? Or have you ever gone to a restaurant, eaten the £20 tagliatelle only to get a bill for £140? Well that’s what happened to me and my neighbours when we got our heating bill this year.
In our East Croydon block of flats, we get our heating and hot water from a “heat network” - a very sensible idea that means instead of 150 flats owning their own inefficient, unreliable, dirty boiler, we all share a single boiler system. Water is heated to around 70C in the basement, pumped around the building where individual heat exchangers pass that heat onto each flat’s own plumbing. The heat energy transferred is metered and billed by the freeholder.
According to the government, “Heat networks are vital to making net zero a reality in the UK. In high density urban areas, they are often the lowest cost, low carbon heating option.”. But in practice, many residents like myself are discovering the opposite is true.
From February 2023 until February 2024, none of my neighbours received a bill for our heating; eventually informed that there was a “tariff review” ongoing due to the rising wholesale gas prices. As the months dragged on we grew suspicious and demanded to know what our tariff was to no avail.
Then at the start of this year, we got the letter we’d all dreaded: “Unfortunately, as a result of the new gas supply contracted rates and the nationwide energy crisis, you will see an increase in your tariff from 1st January 2023.”
That increase? From 4.8p per kWh to 37.5p per kWh - a 775% price rise. Applied, for our convenience, to energy we’d already used.
And generously, they offered to spread a whole year’s worth of energy bills, multiple thousands of pounds, across…a month.
The Guardian has reported that hundreds of other tenants and leaseholders are stuck in the same position: faced with bills at a price they’d have never agreed to. And they’ve got nowhere to turn.
Unlike regular energy providers, heat networks right now are not regulated by Ofgem. You cannot turn to the Energy Ombudsman when things go wrong. You lack the standard protections preventing back-billing from more than 12 months ago. In short, you’re left out to dry.
It’s not a new problem: innovation has moved faster than regulation.
The Energy Act, passed in 2023, finally gives the government power to assign a regulator to protect consumers on heat networks. They’ve chosen OFGEM to take on this role. But those worried about poor freeholders being shackled by consumer protections shouldn’t fear: the government is still “analysing your feedback” from a “consultation” that ended in October so regulation isn’t coming any time soon.
Now, as a consumer expert, I believe that none of this regulation or lack thereof changes the fundamental fact that businesses do not have the power to retroactively raise prices for a service already provided.
Part 2 of the Consumer Rights Act 2015 places a requirement for contract terms and notices to be fair and states that unfair terms are not binding. Retroactive price increases are included in the list of consumer contract terms that may be regarded as unfair (in Schedule 2, Part 1, para.14):
“A term which has the object or effect of giving the trader the discretion to decide the price payable under the contract after the consumer has become bound by it, where no price or method of determining the price is agreed when the consumer becomes bound.”
But you don’t need to know the law inside out to know that RMG and these other freeholders have not discovered an infinite money glitch. We know we don’t live in a world where there’s nothing stopping someone from suddenly deciding that the flat white you just drank now costs £1,000,000.
So for now, we sit in the gulf between having rights and actually being able to use them. We all fear that failure to pay will result in bailiffs, a county court judgement or even eviction. We also know that if we just give in and pay, we’re unlikely to see that money back, even if the rules do change. We know that negative publicity from the press has no power over a business whose clients don’t actually get to choose them. We know that this is one minor battle in a war that pits leaseholders against a feudal system.
My only hope: a very wealthy, very bored solicitor gets a bill for last Christmas’s hot water through the post and declares: “bring it on”.
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