New-build homeowners across the country are being denied the chance to save hundreds on their energy bills because they are trapped in long-lasting contracts with a single supplier.
In the new town of Cranbrook near Exeter in Devon, residents pay nearly twice as much as the cheapest available tariff, yet they will not be able to switch for 71 years.
This is because the housing development gets its heat and hot water from an unregulated ‘district heating scheme’ run by Big Six provider, E.on.
Locked in: Cranbrook resident John Clements fears his energy bills will rise as he is trapped in a 71 year contract with E.on
The energy centre, half a mile from the small town, allows households to heat their homes without the need of a boiler — potentially saving homeowners £300 a year on maintenance costs.
But the heating scheme can only be run by one supplier, meaning all 2,000 homes are signed up to E.on for their heating, under an agreement which is currently in place until 2090. And a further 1,500 homes are set to be built in the growing East Devon town.
Suppliers of the environmentally friendly schemes also do not have to be regulated — so their tariffs do not have to stick to watchdog Ofgem’s price caps.
John Clements moved into his £300,000 property in Cranbrook with wife Katie, 39, a police officer, in March 2015. The couple, who have a six-year-old daughter, now pay E.on around £70 a month for their heating.
John, 56, a semi-retired child safeguarding professional, says: ‘Once you realise there isn’t any other option of switching supplier you do become concerned about the fact someone has a monopoly. You’re at the mercy of rising prices.’
Their bills are made up of a service or ‘standing’ charge — which covers the fixed costs of supplying your home including maintenance to the network — and the household’s energy usage.
Ofgem’s energy cap currently stands at 4p per kilowatt hour (kWh) for gas and £96.80 for an annual standing charge.
Yet the Clements are paying 8.7p per kWh, up from 8.19p per kWh in April 2018. And last year the couple’s standing charge went up from £196 to £205.
E.on was instructed to provide the heating in an agreement with East Devon District Council and developers, which include Taylor Wimpey and Persimmon Homes.
The heating scheme can only be run by one supplier, meaning all 2,000 homes are signed up to E.on for their heating, under an agreement which is currently in place until 2090
District heating systems distribute heat through insulated pipes, in the form of hot water and steam, after producing it off-site in an energy centre.
As the homes are all supplied by the centre, they are currently tied to the energy provider that runs it — unlike those who have a boiler of their own.
Single mother Boh Magassouba, 29, pays around £42 a month to heat the Cranbrook property she shares with her three children — the youngest of whom is four months old.
The former Exeter College cleaner, who will be 100 by the time she can switch supplier, says: ‘When I moved here five years ago, I didn’t realise I wouldn’t be able to switch provider.
‘It’s so unfair that I’m stuck with them. Sometimes when I see how much I am spending on my bills I feel like crying.’
E.on says it surveys local gas prices, standing charges and boiler maintenance packages, and prices its heat and service bills in line with them.
As these providers have to stay under the price cap, it claims its own charges are directly affected as a result.
But data from comparison site uSwitch shows the average household in the area could pay as little as £493 for a 12-month gas-only tariff with SSE.
The households are able to switch their electricity suppliers, as this utility is not supplied by the district heating system.
E.on, which operates around 60 district heating systems across the country, says Cranbrook will one day save 13,000 tonnes of CO2 a year.
The Competition and Markets Authority (CMA) says there were 14,000 heat networks across the country last year, supplying 450,000 customers.
Around 2,000 of these heat networks were district heating systems. The rest were smaller communal networks, which supply individual buildings, such as a block of flats.
But the CMA report also cited concerns that ‘some networks may be offering poor value for money’ and concluded that district heating networks should be regulated.
David Goatman, head of energy at estate agency Knight Frank, says: ‘District heating systems have only become more prevalent in the past ten years.
‘In the next five or ten years I suspect that most new developments, especially larger ones, will probably be supplied by a district heating system.’
E.on, which operates around 60 district heating systems across the country, says Cranbrook will one day save 13,000 tonnes of CO2 a year
The Committee on Climate Change estimates that around 18 per cent of UK heat will need to come from heat networks by 2050 if the UK is to meet its carbon targets cost effectively.
Richard Neudegg, head of regulation at comparison site uSwitch, says: ‘The concept of district heating networks is sensible if we are ever going to reduce emissions from heating our homes.
‘But if households are locked in to just one provider they’ll have no escape route if they find they face higher prices.’
Mark Todd, co-founder of energyhelpline, says an advantage of the scheme is households avoid paying for and maintaining a boiler, which could be around £300 a year.
But he says: ‘Being a captive customer must be worrying to some residents.’
An E.on spokesman says details of the scheme were clearly set out to residents, adding: ‘We hope customers feel reassured by having a secure, more sustainable and cost-effective heating supply.’
E.on is a member of the Heat Trust, a voluntary self-regulating scheme which provides district heating scheme households with access to the Energy Ombudsman.
It said its usage charges were not directly comparable to Ofcom’s cap partly because district heating is more energy efficient.
Cranbrook customers pay on a tiered system for usage whereby charges drop from 8.29p per kWh after the first 3250 kWh to 5.02p per kWh before VAT is added.
But while it is supported by the Government, as the Heat Trust is not a regulator with statutory powers, it cannot set price caps.
In April, Energy Minister Claire Perry wrote to heat network owners and operators advising that a policy consultation later in the year would set out plans for future regulation of the sector.
A Taylor Wimpey spokesman says the provision of a district heating system was a requirement for the planning permission issued by East Devon District Council.
He adds: ‘We are continually working to ensure that our customers benefit from both improved choice and flexibility.’
A spokesman from East Devon District Council says research commissioned in 2007 demonstrated it would be more cost effective to meet ‘increasingly stringent carbon performance targets at Cranbrook’ through a district heating system.