Energy bills could double for 500k households as Iran war bites | Personal Finance | Finance
Energy bills for around 500,000 households are feared to rise sharply due to rising global prices linked to conflicts in the Middle East. Homes connected to heat networks, which provide heating and hot water to multiple properties from a central source, are seen as particularly at risk as they do not fall within the domestic energy cap set by Ofgem.
Unlike standard gas and electricity customers, those on the heat network cannot switch suppliers if prices increase. The amount they pay can also vary significantly depending on how the energy is purchased; Some providers are tied to more expensive commercial contracts.
The pressure on prices has intensified as the disruption in global supply has increased the costs of gas and oil. Transport through the Strait of Hormuz has been restricted, while damage to major gas infrastructure has led to a decrease in supply. Most UK households are protected by a price cap in the short term, but heat network customers are facing this price cap more quickly.
Providers often purchase energy in bulk through contracts that can be renewed at different points in the year, allowing higher costs to be reflected more quickly.
Figures from the Heat Trust show households on these systems typically pay around 10 to 15p per kWh for gas. During the last energy crisis some saw prices rise above 5p per kWh, leading to dramatic rises in bills.
The London Assembly Environment Committee warned that a similar situation could arise again and called for urgent action from the Government.
Leonie Cooper, Committee Chair, he told The Sun Increasing global energy costs are likely to be reflected in households. He said it was fair for those on heat networks to receive support equivalent to other consumers benefiting from the price cap.
Campaigners argue tying support to the cap, which will drop to £1,641 a year from April, would help protect households from sudden increases.
Heat networks were regulated earlier this year after previous price rises left some households facing increases of up to 450%. The new rules mean Ofgem can step in where pricing is unfair and customers can seek compensation through the Energy Ombudsman if services fail.
But the system is still being promoted, and many customers are being exposed in the meantime.
A spokesman for Ofgem said the regulator was working with providers to assess the impact on consumers and stressed companies were expected to treat customers fairly.
Households concerned about rising costs are advised to contact their supplier as early as possible as support such as payment plans may be available.
