Some energy customers are facing eyewatering bills of more than £2,000 a month because they are stuck on controversial ‘heat networks’ and cannot change supplier, i can reveal.
While many UK households are struggling with bills this winter, they have had at least some protection from spiking gas prices via Ofgem’s cap and the Government’s Energy Price Guarantee which limits how much customers can be charged.
However, there are believed to be around half a million people who live in properties where gas, and sometimes electricity, is supplied to multiple homes via a single system, often called a heat network.
All residents in the network – which can vary in size from as little as half a dozen homes to more than 5,000 – are billed by the same supplier and do not have the choice of switching provider.
The network operator has to buy gas at commercial rather than residential rates and customers are therefore not covered by the cap or the Energy Price Guarantee.
They are entitled to £400 via the Energy Bills Support Scheme but with commercial rates for gas having increased astronomically, it will make little difference to some.
‘Our bill for February is £2,387’
Budenberg Haus, an upmarket development of 215 apartments of varying sizes in Altrincham, Greater Manchester, opened in 2005.
In a post on its website, design firm Fosters and partners said it has a “central Combined Heat and Power plant – one of the first such applications in a private housing development in the UK – produces more than half of the energy required by the two blocks and the retained Budenberg building.”
However, many residents have been left furious after being sent eyewatering energy bills for February.
One couple living in a two-bed apartment on the site have been charged £2,387 for the month.
That is up from around £180 a month between October and December.
The customer, a blogger aged 30 who asked not to be named, told i: “We were warned the prices were going to increase last year, and in January they doubled.
“We thought ‘well, we can’t do anything about it’. When we got the February bill, I was just in shock.
“We’ve not been using the heating that much, we rarely use the lights, we’re generally saving energy… we can’t understand how it happened.”
She said the bills have caused uproar in the Budenberg building and many residents are refusing to pay their February bills.
“People are very upset,” she added.
“We’ve had to pause our direct debit and we’re not going to pay the bill until we get some answers.”
Another resident, a 25-year-old man living alone in a one-bed apartment, told i he received a bill for almost £600 for the month of February.
He says he is considering whether to pause his direct debit but fears he may have his supply cut off.
“There’s quite a lot of uproar,” he said.
“I was shocked and then when I heard about some of the other bills over £2,000 I just thought that’s even crazier.
“I am fearful of being cut off [if I don’t pay], I don’t whether I will change my direct debit before it’s due to come out or not.
“I just don’t have the time to be dealing with it and I’m sure other residents are the same. People have said they will have to leave.”
Like many buildings with heat networks, there have been issues with energy bills at Budenberg Haus for some time.
Switch2, a company that specialises in managing heat networks, was brought in by developer Urban Splash to manage billing in an effort to reduce debts and according to a post on Switch2’s website, improvements to its heat supply and efficiency reduced debts at Budenberg Haus by 85 per cent.
Switch2, Urban Splash and Fosters and partners were contacted for comment.
Stephen Wright, director of Heat Trust, a voluntary organisation that helps heat network customers, said there are increasing signs of customers getting in to debt and self-disconnecting.
“It’s extremely worrying. We’ve certainly had at least one set of residents where they’re paying over £500 a month,” he told i.
“Debt levels were pretty high during Covid, in the last set of data they hadn’t risen that much but we haven’t had any data since October.
“I suspect we are likely to see a rise in debt levels, we’ve already seen a rise in self-disconnections. I think there are early signs of debt problems and that is likely to get much worse.
“The problem is there isn’t much [government] intervention, in terms of heating they’ve not had any price protection.”
Historically, heat network operators have been able to buy gas at commercial prices as low as 2 pence a unit and therefore some residents paid below-average bills.
But since the spike in gas prices – caused by factors including Russia’s invasion of Ukraine, a lengthy winter in 2020-21 and low storage levels – operators have been paying close to 15 pence per unit.
Mr Wright says many heat networks are also hugely inefficient due to poor design and installation meaning they waste a lot of gas.
“It’s a perfect storm of the two factors,” said Mr Wright.
“In some cases, the fault was in the early stage with property developers who built these buildings in the first place.
“There was a set of voluntary standards introduced in 2015, though many of these heat networks were built before that.
“A lot of developers also contracted engineering firms who probably didn’t understand how heat networks should be designed and installed.
“The Government has accepted part of the problem and has offered some money to operators to improve efficiency. But it’s a drop in the ocean, it’s £30million over two years. You could add a zero to that and it probably still wouldn’t tackle the problem.”
Mr Wright said the scale and complexity of the problem facing heat networks is comparable to the cladding crisis that has affected millions of leaseholders following the Grenfell disaster in 2017.
“For many residents there’s an issue about long term costs with sorting out the poor performing heat networks, much like cladding,” he said.
“People are in a situation where they moved in to a new-build five to ten years ago and the heating system really isn’t fit for purpose.
“The developer will say ‘well it was built to prevailing standards at the time’ and they may have even sold the freehold on to someone else.
“Residents are left looking at the long term costs because everybody is passing the buck in a circle.”
In December 2021, the Government announced Ofgem would become the designated regulator for heat networks in the UK, but Mr Wright believes it could be another two or three years before that takes place.
In the meantime, a Government initiative to try and reduce wholesale gas prices for heat network operators was “largely ineffective”, he added.
“The Government has promised to look at a heat network support scheme for 1 April which they say will be more efficient but we will wait and see,” Mr Wright said.
“To do it properly they will need to put a lot more money in. Also, heat suppliers are having to fix their prices now and they don’t know if the support is coming.
“My big message to government is to put in place a properly funded support package for the half a million households who are facing prices they simply can’t afford.”
A Government spokesperson said: “We know this is a difficult time for families, which is why the Government has covered around half of the typical household’s energy bill this winter.
“Heat network customers are receiving support through our Energy Bill Relief Scheme and the law requires heat network suppliers to pass on savings to residents in a just and reasonable way.
“Heat network customers will continue to receive a discount on their energy bills until 31 March 2024 through our Energy Bill Discount Scheme.”
A new energy scheme which will benefit heat network customers is due to implemented when the Energy Bill Relief Scheme ends in March, it is understood.