LGA urges Government to take council concerns into account when developing heat network regulations

The Local Government Association (LGA) has warned that new regulations on consumer protection for homes served by heat networks should not impose excessive cost burdens on councils.

In its submission to a Government consultation, the LGA said around half of heat network customers lived in social housing, including council housing, and “it is critical that councils’ experiences and concerns about heat networks are taken fully into account as regulation is developed to make sure it works for those it is trying to support”.

Proposals to change the regulatory regime arose from a Competition & Markets Authority investigation of the heat networks market.

This recommended a statutory framework to underpin the regulation of heat networks.

Heat networks supply heat from a central source via a network of pipes to either individual buildings or in some cases across a substantial area.

The authority recommended that at a minimum residents should be given a comparable level of protection to customers of regulated gas and electricity suppliers and this should include price, quality of service, transparency and minimum technical standards.

Energy sector regulator Ofgem “would be well placed” to become the regulator, the authority said.

The LGA said it supported better consume protection, especially for those whose heat networks were managed by others, “where protections to date have in some cases been poorer than we would like to see”. 

It said the proposed regulations would create additional financial and administrative burdens for local authority housing providers who run heat networks, which would be “particularly challenging at present given cost of living and inflationary pressures impacting housing revenue accounts”.

Government should undertake further engagement ahead of new regulations to raise awareness and to ensure they worked for registered local authority providers of social housing.

Since social housing was already regulated by the Regulator of Social Housing, it would be “critical that the heat network regulations complement the ways in which councils are already evidencing consumer protection, and not create additional administrative burdens”, the LGA said.

Most councils ran their heat networks on a not-for-profit basis and the “very significant costs of regulation will have to be passed through to the tenant in addition to any compensation payments. 

“The alternative is that schemes will be run at a loss, which is not sustainable.”

Proposed timescales for the changes were short, and many councils were not equipped to respond in time.

“Awareness of the regulations is still low in the housing sector and those who do know, often don’t appreciate the amount of work that will be required,” the LGA said.

Mark Smulian