CMA Recommends Regulating Heat Networks

According to the Competition and Markets Authority’s (CMA), District Heating Networks still suffer from lack of transparency and high operational costs due to upfront cost cutting. To address these issues the CMA’s provisional view was that the sector should be regulated.

A study conducted by the Department of Energy & Climate Change (DECC) in March 2013 identified Developers’ difficulty in “persuading occupants to accept communal heating”, “lack of generally accepted contract mechanisms for operation” and inability to “find suitable consultants” as key barriers to entry into District Heating Networks.

Since then, the sector has seen some efforts (Heat Trust, RHI) to bring District Heat Networks to a higher standard, both from a technology and customer care perspectives. Now, however, a stronger call for the implementation of regulation has been made.

A study published by the CMA on 10^th May pointed out what appear to be the consequences of the risks identified by DECC five years ago: low transparency to customers, monopoly of supply and lack of commercial experience by Developers in bringing forward these solutions leading to higher ongoing operational costs to be supported by customers. Regulation, the CMA believes, is the answer. Although still on the drawing board, it is likely that the regulations will affect heat suppliers who, in turn, are likely to start requiring more from Developers to comply with the regulations. Furthermore, greater transparency from suppliers may lead to higher administration costs which are likely to adversely impact ESCo investment.

Whilst no dates have been put forward, the CMA is currently working with the UK government to develop their recommendations in search of a more transparent and efficient sector.