400,000 households unprotected by energy price cap

The National Housing Federation is warning today that 400,000 households in England^[i] are not protected by the government’s energy price cap because their energy is supplied through a communal heating system.

Without the domestic cap, the price these people will pay for energy will depend on the commercial contract their housing provider negotiates with the energy company. Recent contracts are as much as 500% more expensive than the previous year, with bills in low usage homes projected to rise by as much as £68 a week.^[ii] This increase alone is £1,130 per year over October’s energy price cap.^[iii]

Over half of households on communal heat networks (227,848) are living in social housing and on low incomes. Nearly three-quarters (72%), are older people over the age of 55.^[iv] This is likely because a large proportion of people on communal heat networks live in supported or sheltered housing, a form of social rented home for people on low incomes with support needs.

Residents on heat networks have their heating supplied through a central boiler that supplies all homes in the building, rather than an individual boiler in their home, and pay for their heating bills via service charges. In usual times, heat networks save residents money, as housing associations can secure cheaper prices than individuals on domestic contracts by bulk buying energy.

Many housing associations are actively looking at whether they can cover some of the cost from other funds, rather than pass on the full increases to residents. However, since housing associations are not-for-profit, this would mean cutting back on other services for residents, or reducing investment in their homes.

Heat networks are not regulated by Ofgem, who sets the domestic gas and electricity price cap. The uncapped energy price increases will be felt as energy contracts come up for renewal, either yearly or every few years.

Earlier this month, following campaigning from the National Housing Federation and others, the Government confirmed that residents on heat networks will now receive the £400 energy rebate, though it is still to confirm how this will be administered.^[v]

The National Housing Federation is calling on the government to act urgently to ensure people on heat networks receive the same protection as customers on domestic gas supplies:      

• By either allowing heat network operators to purchase gas at the capped domestic tariff rates and pass on the saving to consumers.
• Or by providing additional payments to residents or heat network operators to compensate for prices increases above the cap.

Kate Henderson, Chief Executive of the National Housing Federation said:

“It is unjust that hundreds of thousands of people, through no fault of their own, are exposed to uncapped heating bills just because of the way they pay for their energy. Worst still, the majority of those affected are vulnerable people on the lowest incomes in this country, who will already be struggling to pay for food and essentials.

The government has a duty to act urgently and fairly to protect these people in the same way as the rest of the country. With the price cap coming into force in October it is essential that the government acts now and negotiates with energy companies to ensure every resident is protected from rising energy bills."

^[i]English Housing Survey, 2018/19, dwelling sample by tenure in England, weighted by households
^[ii]Figures from Brunelcare. Energy contract increased from £1.5m last year to £7.7m this year. Service changes projected to increase from £22 a week to £90 a week.
^[iii]Ofgem Energy Price Cap: £2406.1 based on average annual usage for flat or 1 bedroom house with 1-2 people
^[iv]English Housing Survey, 2018/19, dwelling sample by tenure and age in England, weighted by households
^[v]Households on heat networks will not miss out on the £400 winter energy discount