Heat networks will play an increasingly important role in the transition to a low carbon future, but in order to build consumer confidence the introduction of fair pricing protections must be a priority.
What is a heat network?
Heat networks supply heat from a central source to households and businesses and can cover large areas such as towns or cities or can be local, supplying individual blocks or groups of buildings such as housing estates. There are already around 30,000 homes and 3,000 non-domestic premises connected to over 1,000 individual heat networks in Scotland.
Because heat networks supply heat and hot water to households through a network of insulated pipes this avoids the need for individual gas boilers or electric heaters in every dwelling. However, unlike gas and electricity consumers, customers on a heat network cannot switch supplier to get a better deal.
Consumer concerns over unexpected bill increases
Heat networks form a key part of Scottish Government’s plans for the future energy system, and local authorities in Scotland are currently drawing up plans for where more low carbon heat networks could be built.
There is currently no price protection for heat network customers, and Consumer Scotland is aware of instances where consumers’ bills have risen sharply with little or no warning. This is often the result of the heat network operator passing on costs to consumers when the price it buys gas for on the wholesale market goes up. This has left some consumers in debt or stuck on unaffordable tariffs.
From January 2026, Ofgem will become the heat networks regulator in Great Britain, and it has recently outlined its initial plans for identifying and preventing disproportionate pricing in the sector. This includes developing benchmarks which heat networks’ prices can be compared against, analysing operators’ profits and developing guidance on how costs can be allocated on customers’ bills.
These are important first steps in the development of pricing protections for heat network consumers, and we are particularly supportive of Ofgem’s efforts to build consumer confidence by improving billing transparency.
Improving price protection for consumers
However, in our response to Ofgem’s regulatory consultation we have highlighted a number of areas where we think they could go further including:
- Introducing new rules on what customers can be charged for in their bills including what makes up the cost of unit rates and standing charges
- Ofgem must be ready to take action from January 2026 if it suspects or is alerted to bad practice related to pricing
- Ofgem should monitor the cost of fuel purchased by heat networks to improve their procurement practices and drive down prices for customers
Conclusion
Heat networks consumers can now access dedicated advice through Advice Direct Scotland (ADS) at energyadvice.scot and consumers requiring additional support can be referred by ADS to the Extra Help Unit at Citizens Advice Scotland. Alternative dispute resolution is provided by the Energy Ombudsman.
If heat networks are to become an affordable, alternative heating solution that has the confidence of consumers in Scotland Ofgem must act decisively to introduce the additional protections outlined by Consumer Scotland.
As the statutory advocate for heat network consumers in Scotland, Consumer Scotland will also continue working to ensure the needs of consumers in Scotland are reflected as these important improvements are introduced.