ACM: Uncertainty surrounding affordability is a large obstacle when switching to heat networks

Housing corporations must inform their tenants properly before their homes are connected to a heat network. When informing them , they must provide information about the company that will supply the heat as well as about the costs. A study by the Netherlands Authority for Consumers and Markets (ACM) reveals that, due to uncertainty surrounding the costs and tariffs, it is often not possible for housing corporations to give tenants long-term guarantees regarding the affordability of heat. For social housing tenants in particular, uncertainty surrounding long-term affordability is an important obstacle when switching to a heat network.

In the National Climate Agreement (in Dutch: Klimaatakkoord), it has been agreed that natural-gas use must be phased out in all homes by 2050. A large share of those homes are owned by housing corporations. As such, housing corporations play an important role in the energy transition. In many cases, replacing the gas connection with a connection to a heat network is the most efficient and sustainable way to reach those goals. In most cases, housing corporations must ask their tenants for consent before homes are connected to a heat network. ACM regularly receives questions from tenants about the rules with which housing corporations must comply in that context. ACM has published extra information about this topic on the website of ACM’s consumer information portal ACM ConsuWijzer (in Dutch) in order to offer tenants and housing corporations clarity about this.

In addition, ACM conducted a study into the provision of information by housing corporations, and, as part of that study, interviewed housing corporations and tenants’ organizations, the Dutch umbrella organization for housing corporations Aedes, the Dutch Housing Corporation Authority (Aw), the Dutch tenants’ rights organization Woonbond, the Rent Tribunal (in Dutch: de Huurcommissie), the Association of Netherlands Municipalities (VNG), and the Dutch Ministry of Housing and Spatial Planning (VRO). On the basis of these conversations, ACM has identified that, generally speaking, housing corporations do their best to inform tenants. These conversations also reveal that the uncertainty surrounding long-term affordability is an important obstacle. Since housing corporations cannot offer guarantees regarding affordability, tenants are reluctant to give consent. That slows down the heat transition. 

Tariff regulation by ACM

Each year, ACM sets the maximum tariffs for heat. Heat companies are not allowed to charge more for their heat than these maximum tariffs set by ACM. The way in which ACM determines these tariffs has been laid down in law. Over the next few years, the maximum tariffs for heat are still linked to the average price for consumers that use natural gas for their heating needs (the so-called ‘no-more-than-otherwise’ principle). The Dutch Senate will soon vote on the bill for the Dutch Collective Heat Act (in Dutch: Wet collectieve warmte, WCW). The Dutch legislature plans to gradually phase out the no-more-than-otherwise principle. The tariffs for heat will subsequently be determined on the basis of the efficient costs that heat suppliers incur.

Cost-based tariffs are not a guarantee for affordable tariffs, and do not automatically make heat the most attractive alternative to natural gas. Over the next few years, heat suppliers need to make major investments for expanding their heat networks. They are allowed to recoup these efficient costs through their tariffs. The WCW guarantees that heat consumers do not pay more than is necessary for recouping these efficient costs. The Dutch House of Representatives has also arranged with an amendment that, before the switch to cost-based tariffs, it will be looked into what this change means for the height of the tariffs. The Dutch legislature is then able to take measures, if necessary. ACM already drew attention to the affordability of heat in an earlier Feasibility and Enforceability Assessment (UHT) as well as during a technical briefing in the Dutch House of Representatives.