Over 350,000 renters are at risk of being evicted if they fall behind on their energy bills due to a “dangerous loophole” in the way they are charged for heating, Citizens Advice has warned.
The charges relate to households that are connected to heat networks, a type of communal heating that is typically used for blocks of flats or a group of houses.
Around 500,000 households in the UK are currently connected to heat networks, around a third of which are in London. This number is expected to increase dramatically as part of the UK’s net zero drive; by 2050 it is estimated around one fifth of homes will be on heat networks.
The “murky” way in which many households on heat networks are charged means they are at risk of eviction if they fall behind on their bills, Citizens Advice has warned.
This is because a third of heat network customers pay for their heating within their rent or service charge via a practice known as “bundling”.
In this type of system, households are charged for energy by their landlord, building owner or billing agent, who has a separate contact with an energy company, sometimes via a complex chain of subcontractors.
Unlike an energy company, which cannot threaten a customer with eviction for non-payment of an energy bill, landlords and managing agents can use eviction proceedings to recover energy debts.
The Department for Energy Security and Net Zero (DESNZ) said it was currenly looking at options for “unbundling heating bills from service charges”.
‘Who can pay that?’
This loophole is particularly concerning as there have been reported issues of heat network customers being overcharged for their energy use.
Many older heat networks, such as those on council-owned estates, have been poorly maintained, leaving customers paying high bills for a faulty system.
Alice Clarke has lived in a two-bedroom home connected to a heat network in Cambridge with her two children for 17 years.
She said they have had issues with the heat network for the majority of these years, leaving them without heating and hot water for periods in the winter.
Even if her heating isn’t working she still has to pay for it via her rent. The charge is based on a share of the entire estate’s usage rather than her individual consumption and she has no control over whether the heating is turned on in her home or not.
In the winter, she regularly racks up monthly electricity charges of £1,000 as she says she is forced to use expensive plug-in heaters due to the faulty system.
She often has to choose between paying her electricity bill, which is charged separately, or paying the bundled rent.
“I’m getting in trouble if I don’t pay [electric], but then I can’t pay both. I can’t pay rent, council tax and £1000 electric and feed my kids so something has to give,” said Clarke, who worked as a professional chef until recent health issues left her unable to work.
When her bundled rent arrears hit £1,000 it automatically triggers eviction proceedings with her housing association, a scenario that happened last year.
Clarke has tried to dispute the heat network charges but said this is difficult “as it’s all bundled in as one”.
She was able to fight the eviction threat with the help of a lawyer, but is already worried about what will happen next winter.
The threat of losing her home “is really depressing and it just feels like you’re trapped,” she said.
Heat network customers not protected
Many households that are charged as part of a bundled deal are not covered by Ofgem regulations designed to prevent households from racking up too much energy debt.
This includes rules that prevent energy companies collecting debt that is more than one year old if they failed to bill you properly, as well as rules requiring companies to provide accurate billing at least once per year.
Heat network customers are not protected by Ofgem’s energy price cap and some households saw energy bill hikes up to 450 per cent following the surge in gas prices as a result of the war in Ukraine.
Earlier this year Ofgem officially became the regulator for heat network customers, affording them greater protections. However, Citizens Advice is warning that there are still significant gaps that are leaving customers vulnerable.
A survey of heat network customers found over half (52 per cent) of bundled customers are not receiving a breakdown of their bill and 58 per cent don’t know what kind of tariff they are on.
“It is entirely unacceptable that hundreds of thousands of people face the threat of losing their home if they fall behind on their bills, simply because of how they pay for their heating,” said Dame Clare Moriarty, Chief Executive of Citizens Advice. “The Government must urgently close this loophole.”
A DESNZ spokesperson said: ““Heat networks can lower bills for people across the country, while strengthening our energy security.
“We’ve introduced new rules to ensure customers on heat networks receive fair and transparent billing and installed Ofgem as a regulator with powers to act on unfair price hikes.
“We are exploring options for unbundling heating bills from service charges to provide further protections for those on heat networks.”
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