Residents in blocks of flats up and down the country are being hit with energy bill increases of as much as 700 per cent because they are not protected by Ofgem’s price cap.
The cap will rise by a record 54 per cent in April, but an estimated 800,000 homeowners and tenants are on communal networks that heat large buildings. The contracts are negotiated for all residents collectively by freeholders and managing agents. Because the contracts are classed as commercial, not domestic, residents have no protection from rising prices.
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.
Residents of the Pan Peninsula development near Canary Wharf in London received a letter in December quoting a 1,000 per cent increase in the unit price for gas used in their communal heating system. The quote was reduced after wholesale prices decreased in January, but tenants and leaseholders are still facing a 450 per cent increase in their gas bills.
“People are seeing some shocking increases to their bills,” said Andy, a member of the residents’ management committee for the development. He counts himself as “fortunate” because his flat is on the 33rd floor and benefits from heat rising from lower floors. The heating contract is negotiated by the owner of the building, which means residents have little say.
Adding to consumers’ woes, many heat networks are inefficient, unreliable, and use much more energy than they would if they were well designed.
“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 per cent in the coming weeks and months 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.
The said that the “vast majority” of leaseholders would receive a £200 loan to reduce their energy bills in October, and a further £150 council tax rebate in April.
It is not just communal heating networks that are being hit with price-cap-busting bill increases.
In Birmingham, Ray Illingworth has just received notification that his communal electricity bill will more than quadruple, from 15p per unit to 65p. That’s more than double the Ofgem price cap amount of 27p.
Mr Illingworth estimates that it will cost him and other residents between £600 and £1,000 extra per year. The cost comes on top of thousands of pounds that they have been forced to pay to fix dangerous cladding and other fire safety defects.
To make matters worse, he has recorded temperatures below 12C inside his flat, because cladding and insulation has been removed and is yet to be replaced.
“Anyone in a building over four storeys tall is going to be hammered by these bill increases. It’s pretty awful,” he said.
“Why should these residential blocks be charged commercial rates? It doesn’t make sense other than to allow people to make more money out of us again.”
Martin Boyd, chair of campaigning charity Leasehold Knowledge Partnership, said consumers 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.”
