Decision Maker: Deputy Chief Executive
Decision status: Recommendations Approved
Is Key decision?: No
Is subject to call in?: No
To set the District Heat Network Heat Tariff
to be charged from 1 June 2022.
The heat supply agreement with residents allows CBC to review the heat tariff on practical completion of the DHN (estimated to be 18 May 2022) and then annually thereafter.
This annual process gives us the opportunity to review the current tariff which was set in May 2021 and adjust this to reflect any changes in operating costs (eg gas and electricity prices) striking a balance between affordability and commercial viability.
On 29 April 2022, the Deputy Chief Executive
(in consultation with the Leader of the Council and Cabinet Member
for Environmental Services and Sustainability) agreed the proposed
Heat Tariff from 1 June 2022 from 1 June 2022 to 31 May 2023 is
Incl VAT Fixed Charge £/year Variable Charge p/kWh
- Social Tenant £133.51 (£237.36 paid by landlord) - based on 11.73 p/kWh
- Owner Occupier/Shared Ownership £370.87 - based on 11.73 p/kWh
This at the lower end of Heat Tariffs from other District Heat Networks in England that are typically charging 11.5 to 18.5 p/kWh from April 2022.
The fixed charge has been increased by 5.96% in line with the change in RPI (from start of heat supply in September 2021 to March 2022) and this reflects the increased operation and maintenance costs.
The key principles for setting the heat tariff
- The heat tariff has to be affordable for all tenants, so CBC is targeting a heat tariff that is no more than the equivalent gas heating price. This is determined by referencing the Heat Trust Gas Comparator price and the Ofgem price cap for gas (as at 1 April 2022).
- It has to be affordable for current John Brackpool Court residents, who have been paying their current heating bills for over a year.
- It has to be commercially viable for CBC, realising an acceptable IRR over 40 years
Over the past months, gas prices have risen exponentially, with the costs incurred by Crawley Borough Council increasing by 71% and with a further rise in this price set to be implemented in October this year. The Council is working to fix the gas price for the remainder of this financial year, so that there is certainty in the operating costs. The DHN tariff has been set using worst case scenario gas price modelling to minimise commercial risk. In future years, the gas for the DHN will be purchased ahead for the full DHN operating year to give increased certainty.
In order to evaluate the affordability of the proposed heat tariff, it was compared to the equivalent gas price using the Heat Trust gas comparator tool and the April 2022 gas price cap, considering the typical heat consumption of the different property types. The Heat Trust comparator cost includes the full cost of maintenance, repair and lifecycle replacement for a gas boiler system, and is compared to the bills that would be experienced by owner occupiers liable for the full fixed heat charge.
Publication date: 29/04/2022
Date of decision: 29/04/2022