District heating

Energy prices - FAQs for homeowners

What is the energy price cap and the new energy price guarantee?

Ofgem has historically set a price cap to limit how much energy companies could charge customers who failed to shop around for the best deal. This mainly limited how much energy companies charged for their most expensive rates. Due to sharp increases in wholesale energy prices, most suppliers now charge at or around the maximum allowed under the price cap.

The cap is normally referred to in terms of an annual energy bill for an average user. In reality, there isn’t an annual price cap but a cap on what energy companies can charge people for their standing charge (pence per day for being connected to the service) and for each unit of energy used (pence per kilowatt-hour or p/kWh). So the price cap doesn’t limit how much you pay overall – if you use more energy, you’ll pay more. (1 kWh is the amount of energy used in an hour by a 1,000 Watt, or 1 kW appliance running continuously.) 

The energy price cap was set to increase on 1 October 2022 from £1,971 per year to £3,549 per year – a huge 80% increase, which is why so many are concerned about the affordability of their energy bills. However, in September the government intervened to create a new “Energy Price Guarantee” which supersedes the price cap. This will limit average bills to £2,500 - an increase of 27% compared to the previous cap. Though high users will still pay more and low users less.

The table below shows what the energy price cap and price guarantee are in terms of standing charges and unit rates. The figures are for those paying by direct debit. Other payment methods have slightly different figures.

^{*District heat networks have one large gas meter which incurs a higher standing charge that is split amongst all residents. This is financially similar or less to individual standing charges for people with their own domestic meter.
**Price cap increased by a further 12% in October 2021.}

More information about the Energy Price Guarantee can be found on the UK government website

Energy Bill Support Scheme

In addition to the price guarantee, the government is also providing a £400 benefit spread over winter 2022 to 2023 via the Energy Bill Support Scheme. This benefit is available to all domestic customers including those on district heating. Most people will receive this benefit automatically via their electricity supplier, regardless of whether they pay by direct debit or via prepayment.

How does this affect residents on district heating?

For those who do not purchase gas for heating directly, but instead are served by one of the council’s district or communal heating systems, the situation is slightly different. The £400 energy bill support scheme money will be paid to you in the same way, but the energy price cap will not directly affect you. Instead, the council buys all of the gas for its district systems through our corporate account.

Will my service charges for heating increase next year?

We sent estimated bills to all homeowners before the start of this financial year, but due to the exceptional increase in gas prices, we now expect the actual bills will be higher than the estimates provided.

Will my heating and hot water costs be capped by the government?

The price cap announced by the government for domestic users doesn’t apply to communal heating systems, whereas the more recently announced caps on business use do apply. However, it is important to note that the rate that is being paid for gas by residents on communal systems is substantially lower than the capped amount. See previous table.

We don’t yet have details of the position for the financial year 2023 to 2024.

Note that the cap applies only to gas and electricity costs, not to the full cost of heating and hot water, which includes the cost of repairs, maintenance and management of the system.

When will I start to pay higher fuel costs for my heating and hot water charges?

Estimates for the next financial year will be issued in February 2023. We are working with our suppliers to get a reliable indication of what the fuel costs are likely to be. Although we can say that they will be below the average fuel cost available to the domestic user, they will rise substantially from what we have paid in previous years, and this will be reflected in the estimated service charges.

Actual adjustments for this current financial year will be issued in September 2023. Although we anticipated an increase in fuel costs in the estimates, the actual costs are still higher than the estimate that was issued. So when the actual charges for this year are issued in September 2023 you can expect to see an increase of around 180% in the fuel element. Although costs have increased, the kilowatt hour cost of fuel on communal systems is still lower than the government’s Energy Price Guarantee Cap.

Note that heating and hot water charges include the cost of responsive and planned maintenance and repairs, and the cost of managing the system, as well as fuel costs, so the amount that you are charged is also affected by these costs.

How do Southwark’s corporate gas costs compare with what domestic users are paying?

The below table compares the kilowatt hour rate that the council pays which is reflected in the communal heating charges, with the capped domestic rates and the government’s price guarantee.

What happens in the next financial year?

The government is currently capping business prices until April 2023. Further announcements will be made within the next few months to say what assistance will be available beyond that point.

My heating is provided by SELCHP. How am I affected?

Some of our housing estates have heat networks which are primarily run on waste heat from the South East London Combined Heat and Power (SELCHP) plant. Since heat in these networks does not come from gas, price rises are linked to the Retail Price Index (RPI) instead, which means prices have remained more stable. Homeowners connected to these networks should not see substantial increases from the estimates previously provided.

Can I still get the government support of £400 as I’m on district heating and I don’t have my own meter?

The government is paying the £400 via the account associated with your electricity meter and this will be automatically added back to your account. If you do not have your own electricity meter, then please see the government website link below for more information.

Further information and support

In addition to the Energy Price Cap and Energy Bill Support Scheme, there are some other sources of additional funding available to those on certain benefits, of pensionable age, or with a disability. Links to each of these areas of support are available towards the bottom of the Energy Bill Support Scheme website.

Page last updated: 05 December 2023