Homes that heat with oil, which means much of rural Carmarthenshire, Gower, the valleys and Pembrokeshire, are to get a regulator for the first time.
The UK Government said on Tuesday it will accept the Competition and Markets Authority’s call for rules covering heating oil suppliers, after a spring in which the price in Wales rose from 64p a litre in February to 106p in March.
That is a rise of two thirds in a month, by the CMA’s figures. Prices eased over the summer, but comparison sites put the UK average back above 120p a litre with VAT by mid-September, and it was around 121p on Tuesday.
Around 100,000 Welsh households, 7% of the total, rely on heating oil, according to Senedd researchers. Unlike gas and electricity it has no price cap, no regulator and no ombudsman.
Orders cancelled, then re-sold at the higher price
The spike followed the outbreak of conflict in the Middle East. Some suppliers cancelled orders already placed, then sold the oil again at the new price, the CMA found.
The CMA found around 1,700 customers caught that way, and estimated they paid £150 to £350 more for replacement oil than they had agreed.
Those suppliers have now agreed to pay up, the CMA said in August. Customers who bought replacement oil get the difference refunded, and those who did not get their original order at the original price.
Around 800 customers had been contacted by then, and the CMA says the rest will be. Nobody needs to apply, but anyone claiming for a replacement order should keep the receipt and delivery note.
Sarah Cardell, the CMA’s chief executive, said: “Heating oil isn’t a luxury, it’s a necessity that many people rely on to have hot water and warm homes.”
What the new rules would cover, and the 500-litre minimum
Across Britain a typical 500-litre order went from about £320 in February to about £520 in March, the CMA said.
The CMA’s market study in July found the market generally competitive, with the price rise driven mostly by wholesale costs, and no evidence suppliers made unusual profits from the crisis.
Its recommendation, now accepted, is for suppliers to register and meet minimum standards on quoting prices, handling cancellations and giving customers access to independent dispute resolution.
Ministers say they will work with the industry on the regime, and in the meantime the voluntary codes of conduct suppliers sign up to will be strengthened. No date has been given for the rules.
The practice of setting a minimum order of 500 litres, which forces some households to buy more than they need in one go, is to be reviewed.
Domestic tanks typically hold 1,000 to 2,000 litres, so a 500-litre minimum is a quarter to half a tank at a time.
Polly Billington, the Minister for Energy Consumers, said thousands of customers “felt they had nowhere to turn when they paid the price of rising oil and gas costs earlier this year”.
She added: “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.”
No price cap, and prices still close to double last year’s
What the plan does not do is cap the price. The charity National Energy Action has called for the Ofgem price cap to be extended to heating oil, and there is no sign of the government proposing that.
Prices remain close to double what they were a year ago, and one customer told the BBC this week he had been quoted 111p a litre.
The latest climb is driven by the same thing as the spring one. Tankers are still barely getting through the Strait of Hormuz, global stocks are down by more than 500 million barrels since February according to the International Energy Agency, and refiners are prioritising diesel, fuel distributors say.
Tim Buckman, chief executive of the comparison site BoilerJuice, told the BBC that regulation on its own “is not going to reduce the price for customers”, and that taking VAT off heating oil would.
£53m of help, and the £9,000 to get off oil altogether
The government put £53m into emergency help for low-income heating oil customers during the spike, paid out through councils, which set their own rules on who qualifies. Wales’s share was announced in March as £3.8m, at a time when rural homes were also being warned about thieves draining tanks.
In Wales that became a £200 payment for households on the Council Tax Reduction Scheme who heat with oil or LPG, and a higher Discretionary Assistance Fund limit of £750 for others in hardship, according to a Senedd Research briefing in May. The Welsh Government‘s Nest service gives free energy advice.
Households on oil can also claim £9,000 off a heat pump under the Boiler Upgrade Scheme, a grant raised from £7,500 in July and available until March next year.
Applications hit a record 8,150 in July, up 81% on June, according to the Department for Energy Security and Net Zero. In August, 1,042 of the grants paid out were the £9,000 oil-to-heat-pump rate, a third of the month’s total.
One of them went to Anne, who replaced the oil boiler in her off-grid Victorian cottage in Wales. “When the price of oil suddenly doubled, I thought, ‘Well, this is just bonkers,'” she said.
The CMA also recommended a register of vulnerable households so suppliers know who to prioritise when deliveries are short.
