Government action urgently needed to protect consumers during the decarbonisation of heating, says Citizens Advice

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Government action urgently needed to protect consumers during the decarbonisation of heating, says Citizens Advice

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Friday 12 July 2019

The lack of a credible plan to decarbonise the way homes and businesses are heated risks failing consumers and undermining public confidence, according to Citizens Advice.

The charity is calling on the government to close gaps in the regulation of decarbonisation innovations such as heat networks.

Heat networks are a significant part of the government’s efforts to reduce carbon. They are distribution systems of insulated pipes that takes heat from a central source and delivers it to a number of buildings.

While just 2% of households currently get their heating and hot water through a heat network, this will rise to an estimated 1 in 20 homes by 2030. By 2050, more than five million homes could be heated in this way.

In a report published today, Citizens Advice sets out the need to regulate heat networks and create a consumer advocate for heat network users.  Some of the common problems it helps people with include:

  • Billing errors – consumers don’t receive regular bills, which can lead to high ‘back-bills’ or incorrect bills

  • Standing charges – consumers are confused about standing charges and can feel unable to reduce heating costs because of high, and increasing, standing charges.

  • Lack of information – many people don’t understand how their heat network operates, how their bills are calculated, or where to turn to complain

The charity is warning that, because heat networks are not regulated, many more people risk being exposed to the same issues unless reforms are put in place.

Citizens Advice believes that problems experienced by heat network customers demonstrate the importance of managing the decarbonisation process properly.

Despite the immensity of the challenge, there is no credible UK-wide strategy to achieve the government’s decarbonisation targets – including how consumers will be protected as new innovations are introduced, and where the costs will fall.

With most of the costs to decarbonise the energy system currently paid for through energy bills, Citizens Advice is warning that those on low incomes could end up paying a disproportionate share of that cost.

To address this, the charity is calling on the government to:

  • Establish an independent commission to determine the fairest way to pay for the energy transition, including the shift to low-carbon heat

  • Legislate to extend Ofgem’s powers to regulate heat networks and establish an independent consumer advocate for heat networks in the forthcoming Energy White Paper

  • Consult on a strategy to decarbonise heat, which includes plans to improve energy efficiency of existing and new housing stock.

Gillian Guy, Chief Executive of Citizens Advice, said:

“The way we heat our homes needs to undergo a major transformation. How we manage that process, and fairly distribute the costs, needs the urgent attention of government.

“An independent commission is the only way to make sure the pathway to net zero is assessed in a rigorous, transparent and timely way.

“Consumers must be at the heart of the process, with the right protections built in for them now. The Energy White Paper is the perfect opportunity to fill the regulation gap for heat networks, and set the standard for future innovations.

“We need to get these decisions right now to prevent the bad practice of today becoming the standard practice of tomorrow.”

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Energy customers pay the price for the collapse of energy companies

Friday 21 June 2019

British energy customers are facing a potential bill of £172 million from the collapse of 11 suppliers since January 2018. On top of this, thousands of people who owed money to failed suppliers lost out on consumer protections and faced aggressive debt collection as a result, according to a new report – Picking up the Pieces – by Citizens Advice.

Energy suppliers pay a number of industry bills, these cover things including renewable generation, infrastructure costs and metering costs. The charity’s research shows that £172 million in unpaid industry bills was left behind by failed suppliers, which will likely be paid by consumers through their bills.

Citizens Advice also estimates that at least 32,000 have been left open to potentially aggressive debt collection practices by the administrators who took over these companies.

When energy suppliers fail, Ofgem’s Supplier of Last Resort (SoLR) process appoints a new supplier for customers to ensure a continued energy supply, while the old supplier is taken over by administrators.

Administrators are not bound by the same rules as suppliers licensed by Ofgem. This means they can pursue debts much more aggressively than usually allowed and customers can see the amounts they are being chased for go up overnight.

This leads to people, including those in vulnerable circumstances, being contacted by debt collectors and asked for sums they can’t afford at very short notice.

This can cause serious stress and anxiety for those caught in this situation. Since January 2018, Citizens Advice has helped over a thousand people with debt issues related to failed suppliers, with average debts of £250.

Case study

An elderly person helped by Citizens Advice had agreed to pay £10 monthly towards their debt, following a decision from the Energy Ombudsman.

After their supplier failed, the administrators requested the full amount of nearly £350 and threatened to bring in bailiffs. The customer didn’t understand what had happened and was left feeling distressed and anxious.

Closing the protection gap

The charity is calling on the government to use the forthcoming Energy White Paper to fix the protection gap for customers who owe money to energy suppliers when they collapse.

It wants the government to take action to make sure administrators of all energy companies have a duty to consider consumer interests and follow the same rules as suppliers.

It is also calling for legislation to ensure more regular payment of industry costs – in particular the Renewables Obligation (RO) – by suppliers, to stop the build up of big debts that are then paid by consumers.

Gillian Guy, Chief Executive of Citizens Advice, said:

“Consumers shouldn’t have to foot the multi-million pound bill left behind when companies collapse – and they certainly shouldn’t lose their usual protections in the process.

“The Energy White Paper is the perfect opportunity for the government to close the gap in protections and limit the cost to consumers of any future supplier failures. It must act now.”