The heating oil market is to be better regulated under plans to ensure households using the fuel are treated fairly, the Government has announced.
The Department for Energy and Net Zero (DESNZ) confirmed it would accept the Competition and Markets Authority’s (CMA) recommendation to strengthen regulation in the heating oil sector.
The CMA launched a market study into the sector after the Middle East conflict sent the cost of heating oil soaring to record highs for households across Britain.
It found that price increases after the Middle East conflict largely reflected rising wholesale costs but that, although suppliers had not profited materially from the crisis, consumers were not as well protected as those connected to the grid.
The CMA found that 1,700 households were owed compensation after they were forced to reorder heating oil at higher prices when their orders were cancelled by suppliers.
Heating oil customers fall outside of Ofgem’s energy price cap protection, which currently fixes prices until the end of December.
The Government said stronger consumer protections would ensure families who rely on heating oil are treated fairly, especially when global pressures cause prices to rise.
Minister for energy consumers Polly Billington said: “Thousands of heating oil customers felt they had nowhere to turn when they paid the price of rising oil and gas costs earlier this year.
“We won’t accept that.
“Energy is an essential good and people should not have to think twice about whether they’re protected in the market.
“That’s why we will reform the sector, holding heating oil suppliers to account and giving consumers confidence that they will get a fair deal.”
Gordon and Buchan Conservative MP Harriet Cross raised the matter in March (Michal Wachucik/PA)
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In the short term, households will also have strengthened protection in the form of a code of conduct, while industry practices setting minimum order volumes at 500 litres for some consumers, requiring them to pay for more heating oil than they may need, will be reviewed.
Gordon and Buchan Conservative MP Harriet Cross wrote to the CMA and the then energy secretary Ed Miliband in March calling for an investigation, as well as to request that the Government help households who could not afford the sudden price hikes.
Ms Cross said she had been contacted by several rural residents who had been hit with price increases, rising from £500 for 700 litres of heating oil in January to more than £1,000 since the start of the war, with lengthy delivery times.
Unlike mains gas and electricity, heating oil is typically bought in large volumes, meaning households can face bills of around £500 or more at a time.
The CMA found that prices tended to be lowest in Northern Ireland, where more than 60% of households rely on heating oil, but those in many remote areas – including parts of Scotland – generally had less choice of suppliers and faced higher prices because of the increased costs of serving these areas.
The lack of protection for these households became “especially problematic” during periods of volatility – for example, where demand increases as a result of more severe weather conditions or where supply is disrupted by geopolitical developments – “both of which may become more common in future”, the CMA warned.
It recommended that governments require suppliers to register and meet minimum standards, which include how prices are quoted, cancellations are managed and giving households access to independent dispute resolution.
The CMA also recommended a review of rules and regulations around minimum order volumes to allow people to buy smaller amounts of heating oil.