Flat residents are facing energy bill rises of as much as 700% because of small print in their terms that prevent them from choosing their gas supplier and deals that aren't covered by the energy price cap.
Ofgem’s energy price cap will rise by a staggering 54% in April, but an estimated 800,000 homeowners and tenants are not covered by it because they are on communal networks that heat large buildings.
These tariffs are negotiated for all residents collectively by freeholders and managing agents.
And because the contracts are classed as commercial, not domestic, residents are not guarded by the cap.
Many more flat owners and tenants will also be hit with increases to electricity bills to cover communal lighting and the energy used to pump water to higher levels of buildings, campaigners have warned.
The government has confirmed that while the “vast majority” of leaseholders will qualify for a £200 discount on bills – a measure announced by Rishi Sunak last week – some will not.
“There are no technical standards for heat networks. A lot of contractors that install them don’t have the right expertise,” said Stephen Knight, director of the Heat Trust, a voluntary body that oversees the sector.
“If your system is using 10 kW of power to generate 5 kW of heat – as many networks do – you end up paying for twice as much energy as you need to.”
Mr Knight said that without government intervention, almost all of the estimated 800,000 customers on communal heat networks will see increases of around 400% from April as contracts come up for renewal.
“This is a sector that is crying out for regulation,” he said. “There really is not good news here.”
For years, the government has promised statutory regulation of the sector, but it has failed to deliver.
A government spokesperson said: “We recognise that leaseholders and heat network customers are currently only protected by the energy price cap for the gas and electricity they buy directly from an energy supplier, which is why we are giving Ofgem new powers to regulate prices in this sector in the future.”
Rising energy bills have helped push inflation up to a 30-year high, leaving the government under pressure to intervene.
Last week, Rishi Sunak announced that the repayable £200 discount on bills in England, Wales and Scotland would come into effect from October.
There will also be a further £150 council tax rebate for most households in England, with additional cash for the devolved nations.
Labour criticised the plan, calling it a "buy now, pay later scheme".
The government's support package comes ahead of a 54% rise in annual energy bills from April, with people set to pay an extra £693 a year on average.
Mr Sunak has admitted "even those on middle incomes will feel the pinch".
The council tax rebate will apply from April to homes in council tax bands A to D, benefiting about 80% of households. It will be made directly by local authorities and will not need to be repaid.
The Institute of Fiscal Studies (IFS) said the package would not stop average incomes and living standards from falling over the coming year, but added that lowest paid workers would benefit from National Living Wage and Universal Credit increases.
Martin Boyd, chair of campaigning charity Leasehold Knowledge Partnership, said the measures spell bad news for flat residents who have no control over what their freeholder landlord decides.
He added: “There is also no Ofgem price cap to protect them from soaring costs, and so many are currently facing gigantic price hikes due to providers passing on runaway wholesale gas costs in full against the backdrop of the Russia-Ukraine standoff and a Europe-wide gas crisis.
“At LKP, we’re seeing flat leaseholders come to us concerned that their freeholder or freeholder-appointed managing agent has dumped commercial-rate VAT and the climate levy onto their utility bills, which should not be happening. As with everything leasehold, the flat owners pay but have no say.”
