Heating oil firms told to compensate customers over Iran war price hikes

More than 1.5 million households reliant on heating oil need stronger consumer protection, a regulator has warned, arguing that prices should be the same as those provided to gas and electricity customers as price fluctuations could become increasingly common.

The Competition and Markets Authority (CMA) has called on the UK and devolved governments to step up safeguards for these homes. Its recommendations include price quotes, cancellation procedures and support for vulnerable consumers.

The regulator found that recent price increases following the conflict in the Middle East largely reflected rising wholesale costs. Although suppliers did not make a financial profit, the CMA concluded that heating oil users lacked the robust protections of those connected to the national grid.

It launched a market study for the heating oil sector after conflicts in the Middle East caused severe disruption and caused average retail prices to rise by 92%.

Harriet Cross, Conservative MP for Gordon and Buchan, wrote to the CMA in March calling for an investigation and demanding the Energy Secretary Ed Miliband also demand the Government help households who cannot afford the sudden price rises.

Heating oil customers fall outside Ofgem’s energy price cap protection, which currently fixes prices until the end of September.

Ms Cross said she had been contacted by several rural residents affected by price rises from £500 for 700 liters of heating oil in January to over £1,000 with long delivery times since the start of the war.

Unlike mains gas and electricity, heating oil is often purchased in large quantities; This means households could be faced with bills of around £500 or more at a time.

The CMA found that prices tend to be lowest in Northern Ireland, where more than 60% of households rely on heating oil, but those in many remote areas, including parts of Scotland, often have fewer supplier options and face higher prices due to the rising costs of serving these areas.

The CMA warned that this lack of protection for households becomes “particularly problematic” during periods of volatility, for example when demand increases due to more severe weather or supply is disrupted by geopolitical developments; “Both may become more common in the future,” he warned.

It recommended that governments require suppliers to record and meet minimum standards, including how prices are set, how cancellations are managed and households are provided with access to independent dispute resolution.

Suppliers should also clearly state available payment plans and minimum purchase volumes and create a register to facilitate the protection of vulnerable households.

The CMA also recommends reviewing rules and regulations on minimum order volumes to allow people to buy smaller quantities of heating oil.

CMA chief executive Sarah Cardell said: “Heating our homes and having reliable hot water are basic needs.

“While the home heating oil market is generally competitive, this is not enough to ensure good results for everyone.

“Stronger action is needed, including regulatory oversight and better support for vulnerable consumers, as well as communities living in parts of the UK that are particularly exposed to higher and more volatile prices.

“These practical changes will help ensure people receive fair treatment, clear information and appropriate support when disruptions occur.

“We also found that approximately 1,700 customers were left in limbo by some suppliers after orders were canceled as the crisis progressed.

“While it is encouraging that some suppliers have agreed to compensate customers, some companies still have not done so.

“We will pressure them to do so and are preparing to impose sanctions if they fail to do so.”

Chancellor Rachel Reeves said: “When conflict in the Middle East led to a sharp rise in heating oil prices, I acted quickly to provide financial support to oil-dependent households. I also asked the CMA to investigate the market to ensure consumers were treated fairly.

“It’s reassuring to know it’s a competitive market, but it concerns me that these households are not being protected, so we’ll be looking very seriously at what can be done.”