Lorem ipsum dolor sit amet, consectetur adipiscing elit

Lorem ipsum dolor sit amet, consectetur adipiscing elit

Lorem ipsum dolor sit amet, consectetur adipiscing elit

Lorem ipsum dolor sit amet, consectetur adipiscing elit

Tarriff Enquiries

The unprecedented increase in global energy prices has had dramatic effects on the cost of living across the UK, and we know that this is affecting all our customers. Firstly, we want to assure you that we are doing all that we can to help mitigate the impact of rising prices and secondly, we wanted to share more about how our tariffs are managed as part of your heat network.

Receiving your heating from a heat network such as East London Energy comes with many benefits, offering improved efficiency and reduced carbon emissions when compared to a localised gas boiler. However, this does mean that you are restricted in choosing your energy supplier, this does not mean that we do not offer you competitive tariffs.

How are tariffs calculated?

As each heat network involves significant upfront investment in the infrastructure of buried pipework and central energy plant, long-term energy supply contracts are needed to allow that investment to be recovered over time, 40 years in the case of ELE. Accurately projecting costs (especially fuel) over that time is very difficult as prices constantly change (similar to petrol prices on a forecourt station) and can be affected by global events or economic shocks.

To keep prices affordable and competitive for the customer across the duration of the scheme life, operators use a controlled process agreed at the point of construction for the management of tariffs. This takes a baseline tariff at the time of first occupation and provides for the tariff to be changed after agreed time periods in accordance with a prescribed price control formula using published indexes or 12-month energy price forecasts. The Pricing Control Formula agreed with LLDC under the Concession Agreement and calculated considers a series of Relevant Factors that are defined on the RSA, considering the following factors among others:

  1. Increase in Retail Price Indexation (RPIX)
  2. Increases in the BEAMA Labour and Material Indices
  3. Fuel Price Indicator (ICIS HEREN offer price for NPB Gas

Tariffs comprise of fixed charges (to cover the cost of operation and maintenance and life-cycle plant replacement), variable charges (to cover the cost of energy/fuel consumed) and common heat availability charges (CHAC – dependant on heat losses across the network). Each component of the tariff uses different indexation mechanisms to determine what changes are justified at any one periodic review.

More specifically and regarding the CHAC charges, it is worth noting that heat losses are experienced in any centralised heating system. As shared with our residents in the past, the CHAC calculation attends to the same formula and variables shown in our 2021 communications. We will look to share more detail on this element as we progress towards regulation on the next tariff review exercise. Whilst the standard tariffs include 15% heat losses in ELE’s model, any further additional heat losses are charged via the CHAC element of your tariff. This is calculated using annual data collected from the bulk meter (located where the heating systems connect to the development network) and the annual accumulated residential meter data.

After reducing the annual bulk meter data by 15%, ELE subtracts the residential meter data from the remaining 85% leaving the CHAC in kWh for the system. This figure is multiplied by the appropriate rate to obtain a monetary value, pence/kWh.  This value is then divided by the number of residential properties on the system and then divided by months in the year to give a CHAC value for each residential property for that month.

The biggest impact on tariffs this year has been caused by the price of wholesale gas which is suffering from an enduring price spike. The cost of gas we procure has increased, which has caused the increase in variable rates you are now facing and being faced by householders across the UK.

Why am I not protected by the OFGEM price cap?

Heat networks operators procure their gas supply through commercial markets, unlike large residential energy suppliers who procure through the wholesale market, which is typically less expensive.  As such, heat networks are classified as commercial supplies and therefore the OFGEM price cap does not apply.

The Government is proposing legislation that would provide OFGEM powers to improve consumer protection for residential customers of heat networks, including powers to regulate tariffs. This is a decision that we support, and we are working closely with the government and industry bodies on the topic.

Our tariff is set for 12 months. However, residential customers protected by the OFGEM price cap are likely to see a further material rise in energy costs in October of this year that will not affect you.

What are we doing to help reduce the impact of rising costs?

We are determined to seek the best market prices for our gas to offer you the best tariff we can, this combined with the 12 months fixed price for your heat offers advantages not available to other residential customers.

We are also managing the increase in the price of gas in line with the requirements and guidelines of the Heat Trust Scheme, which is a self-regulation initiative that recognises best practice and champions customer protections specifically for the district heating industry.

What other support is available?

 The Government has launched a number of initiatives to help manage the recent energy pricing challenges, that we recommend you access if applicable. These include:

Also, if you are struggling to keep up with costs or manage debt and personal finances, you can contact the Citizen’s Advice Bureau and StepChange for free support and advice.

We want to assure you that we are continually reviewing the current situation and are actively working on initiatives to support our customers. If you have any questions, please contact us. In the meantime, we will make sure to keep you up to date with any further changes.