CMA Calls for Enhanced Protections for Households Using Heating Oil in the UK

Approximately 1.5 million households across the United Kingdom rely on heating oil for warmth and hot water, yet these consumers lack the same level of protection afforded to those using electricity and gas. In response to this disparity, the Competition and Markets Authority (CMA) has proposed a new regulatory framework aimed at enhancing consumer safeguards in the heating oil market.

Need for Enhanced Consumer Protection

The CMA’s recommendations encompass crucial aspects such as the standardisation of price quotations, the management of cancellations, and improved support for vulnerable consumers. The authority is also actively working to safeguard around 1,700 households whose orders may have been wrongfully cancelled, potentially incurring additional costs of up to £350 for those affected.

This market study was prompted by significant price volatility in the heating oil sector, particularly following recent geopolitical tensions in the Middle East, which saw average retail prices soar by as much as 92%. Many households, especially in rural and off-grid areas, purchase heating oil in bulk, often incurring bills of £500 or more at once, which can lead to financial strain.

Market Insights and Price Disparities

The CMA’s investigations revealed that the surge in heating oil prices was largely driven by escalating wholesale costs rather than supplier profiteering. While the market is generally competitive and consumers have options, those relying on heating oil do not enjoy the same protections as gas and electricity users. Notably, households in Northern Ireland, where over 60% use heating oil, generally benefit from lower prices due to reduced delivery costs stemming from closer proximity between homes.

Conversely, residents in remote areas, including parts of Scotland, often face limited supplier choices and higher prices, exacerbated by increased service costs. The CMA identified significant gaps in protections for heating oil consumers, particularly regarding support standards for vulnerable individuals and access to alternative dispute resolution mechanisms.

Recommendations for Regulatory Reform

To enhance consumer outcomes, particularly during times of volatility, the CMA has urged the UK and devolved governments to implement a proportionate regulatory framework for heating oil suppliers. Key recommendations include:

• Establishing a registration system for suppliers to ensure they meet minimum standards, including transparent pricing and cancellation management.
• Providing clear information on available payment plans and minimum purchase volumes.
• Creating a register to identify vulnerable households for better protection.

Additionally, the CMA has suggested a review of regulations concerning minimum order volumes to allow consumers to purchase smaller quantities of heating oil, thereby alleviating financial pressure.

Addressing Contractual Breaches and Compensation

The CMA’s study has also investigated potential breaches of contract by a small number of suppliers who cancelled customer orders during the crisis. Analysis indicated that around 1,700 customers were affected, many of whom had to reorder at significantly inflated prices or were left without fuel, leading to additional costs between £150 and £350.

In response, several suppliers have agreed to compensate affected consumers. Those who incurred additional expenses for replacement oil will receive payments to cover the difference, while customers who were unable to purchase replacement oil will have their original orders fulfilled at the agreed price. Unfortunately, not all suppliers have committed to this compensation scheme, prompting the CMA to engage with those firms and prepare for potential enforcement actions.

Future Steps Towards Improvement

Sarah Cardell, Chief Executive of the CMA, emphasised the importance of reliable heating and hot water, stating that while competition exists in the heating oil market, it is insufficient to guarantee positive outcomes for all consumers. She advocates for stronger regulatory safeguards and enhanced support for vulnerable populations, especially in areas facing higher and more volatile prices.

As part of its ongoing efforts, the CMA is also reaching out to suppliers of liquefied petroleum gas (LPG) to remind them of consumer protection laws, given that LPG serves a similar market as heating oil. Moving forward, the CMA will collaborate with governments, industry stakeholders, and regulators to implement its recommendations and ensure that consumers receive fair treatment and appropriate support in times of need.

For additional information about the CMA’s market study, please visit the dedicated CMA case page on the heating oil market.

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