How to recover costs from heat networks while ensuring residents pay fair price
Community and district heating suppliers in the UK often struggle to manage the twin challenges of recovering investment and operational costs while ensuring low and fair pricing for residential heat customers.
Community heating specialist Switch2 Energy has published an infographic guide to effective tariff setting. This is the start of the company’s wider information campaign to help heat network owners and operators set the heat tariff for the resident.
Switch2 recommends setting the customer tariff at the early stages of project planning to prevent heat suppliers from running into debt, while ensuring that customers are charged fairly to reflect precisely how much energy they consume.
“Creating the heat tariff must achieve a fair and transparent charging structure for all customers while also covering fixed costs, such as capital expenditure and network operation, as well as variable costs, such as the price of fuel,” said Ian Allan, Head of R&D at Switch2.
“It’s a delicate balancing act, which requires careful thought and planning at the start of projects, rather than towards the end, as is often the case. A high standing charge and low unit charge penalises low users of heat, while the opposite hits high users harder. So it’s vital to develop a more sophisticated costing structure that takes many factors into account and suits every resident and their circumstances.
Ian continued: “Smart metering at the point of use is crucial as this ensures that customers pay their fair share of the collective bill and can see how much energy they consume, which encourages residents to use energy more carefully. New generation prepayment billing can also offer increased protection for landlords and developers, while providing better control and choice for residents.
“The Heat Network Regulations, which are making metering mandatory wherever possible, are forcing out the historic practice of flat rate charging.
In our opinion there are much better alternatives, preferably using final customer metering, that we would recommend. These methods take into consideration all lifetime charges and share these equitably according to residents’ level of energy usage. We will be explaining some of the best pricing models in a series of blogs and eGuides, which will help housing associations, local authorities and other heat suppliers to balance financial viability with a fair deal for customers.”