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Newcastle City Council (202215649)

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REPORT

COMPLAINT 202215649

Newcastle City Council

27 March 2024


Our approach

The Housing Ombudsman’s approach to investigating and determining complaints is to decide what is fair in all the circumstances of the case. This is set out in the Housing Act 1996 and the Housing Ombudsman Scheme (the Scheme). The Ombudsman considers the evidence and looks to see if there has been any ‘maladministration’, for example, whether the landlord has failed to keep to the law, followed proper procedure, followed good practice, or behaved in a reasonable and competent manner.

Both the resident and the landlord have submitted information to the Ombudsman, and this has been carefully considered. Their accounts of what has happened are summarised below. This report is not an exhaustive description of all the events that have occurred in relation to this case, but an outline of the key issues as a background to the investigation’s findings.

The complaint

  1. The complaint is about the landlord’s:
    1. Handling of the resident’s reports of increased unit usage for district heating.
    2. Complaint handling.

Background and summary of events

  1. The resident is a secure tenant of the landlord. The landlord is a local authority and the property is a 1 bedroom flat within a building owned by the landlord. The landlord has no recorded vulnerabilities for the resident.

Landlord’s obligations

  1. The signed tenancy agreement from May 2014 says the rent is due weekly. It explains how a landlord may change rent, including any payment for services, by giving 4 weeks written notice.
  2. The landlord’s tenancy agreement booklet includes a section for the ‘services including hot water, district and group heating’. This says the total amount of rent owed will include any other charges which may include hot water, district and/or group heating charges.
  3. The landlord’s heating energy charge calculation explains how heating energy charges are calculated. It says they are based on historical consumption and what is expected to be used in the coming year. Within this the landlord provides examples to demonstrate how it calculates charges. It also explains that:
    1. Heat and hot water meters are installed in most of its ‘district and group heating’ properties. It says they accurately measure heat and hot water consumption.
    2. A fixed energy charge is applied to the rent account, but this is reconciled against the actual meter readings annually to determine any under/overcharge.
  4. The Heat Network (metering and billing) regulations 2014, regulation 9 explains that:
    1. Where meters or heat cost allocators are installed, the heat supplier must ensure that bills and billing information for the consumption of heating, cooling or hot water by a final customer are accurate, based on actual consumption and compliant with the requirements of Schedule 2.
    2. Schedule 2 says that at least once a year a bill must be issued to the final customer on the basis of actual rather than estimate consumption.
  5. The Office for Product Safety and Standards guidance for the Heat Networks (metering and billing) regulations 2014 (as amended in 2015 and 2020) explains that:
    1. Heat suppliers should periodically visit sites and visually check meters, remotely monitor usage and address any anomalies.
    2. It strongly advises that any re-calibration or testing activities be carried out by a manufacturer of the relevant meter, or by an organisation accredited by the United Kingdom Accreditation Service.
    3. The heat supplier must ensure that bills and billing information for the consumption of heating, cooling or hot water by a final customer are accurate, based on actual consumption.
  6. The Ombudsman’s ‘cold comfort’ spotlight report on complaints about heating, hot water and energy published in February 2021, made the following recommendations, amongst others:
    1. Landlords must provide clear information about the heating arrangements before the start of the tenancy and again if these change. Residents should know their rights and obligations and the cost of the heating service.
    2. Landlords should ensure that timely and clear heating bills are provided.
    3. Residents should be given clear information about whether they can disconnect from a heat network and change provider.
    4. Landlords should keep abreast of evolving policy regarding heat networks, including consumer rights, and ensure they meet best practice.

Summary of events

  1. It is understood that in 2016 the resident and landlord were in communication about incorrect charges. The landlord accepted there were incorrect charges and in April 2017 it offered to reimburse the resident £753.63 in full and final settlement of the incorrect charges made at that time.
  2. It is accepted that in February 2019 the landlord changed the meter at the property to retrieve automated usage readings.
  3. The evidence shows the landlord provided a number of quarterly heating system statements between July 2019 and November 2022. It also provided the following yearly statements:
    1. A statement for the period 8 April 2019 to 5 April 2020, this showed consumption as 2,316 kWh.
    2. A statement for the period 6 April 2020 to 4 Aril 2021, this showed consumption as 5,253 kWh.
    3. A statement for the period 5 April 2021 to 3 April 2022, showed consumption as 5,654 kWh.
  4. The resident made a formal complaint on 6 September 2022. Here he said:
    1. The first charge for district heating was £11.07 in May 2014, where he was told an adjustment would be made when the usage could be accurately calculated.
    2. In April 2016 the landlord accepted the meter for the property was not working correctly from when the tenancy started in May 2014. He said in April 2017 he refused an offer of £325.81. The landlord later offered £753.63 which was accepted by the resident.
    3. He said that since 2016 the landlord had failed to adhere to Regulation 9. He said that bills were not accurate, were not based on actual consumption or compliant with Schedule 2. He quoted the landlord’s guide for tenants on district and group heating and said:
      1. It had not read meters regularly.
      2. He said the meter reading on 26 May 2014 was 1556 and the reading in February 2019 was 17433, amounting to a usage of 15877 for 248 weeks. A new meter was fitted in February 2019 which shows that from that date to 4 April 2021, 2395, units were used for 113 weeks.
      3. He told it that it recorded 5253 units for April 2020 to April 2021 and 5654 units for April 2021 to April 2022. The total of 10907 for 2 years. He explained that the increase of usage units was “not possible” and must mean there was a fault on the system.
    4. He explained the meter readings over a period of 7 years, the increase in unit usage and how it was “simply not possible”. He accepted that he was obliged to pay the charges under the tenancy agreement but disagreed with the charges because there was no logical foundation to the increase.
  5. On 12 September 2022 the landlord acknowledged the resident’s complaint and said it would respond within 10 working days by 21 September 2022.
  6. The landlord provided its formal response on 22 September 2022. It said:
    1. It accepted it previously offered a payment of £753.63 in April 2017.
    2. Most of the readings were direct and a true reflection of actual consumption, a comparison with the previous year was not necessary to calculate the energy consumption.
    3. The resident may build up a credit on the account during the summer which is used during the winter months when energy consumption increases. It said an annual reconciliation process takes place which allows credit built up to be refunded. It said it found it was compliant with regulations.
    4. Its district and group heating guide for tenants was “slightly” out of date and said its contractor no longer provided a meter reading. It explained how meter readings were sent to it directly on a weekly basis since the meter was replaced in 2019. It said it would look at updating the guide.
    5. In November 2021 the resident told it the meter readings were incorrect and questioned the reliability of the heating equipment. It said it awarded £282.80 at that time, due to problems with the equipment. It explained how it tests and investigated the equipment and said the system was off for 13 hours where the meter reading did not change. The landlord said this indicated the equipment was working correctly.
    6. A final check took place in March 2022 and it found the heating system in the property was working correctly. It explained the meter readings it received were not estimates and met its energy consumption profile.
    7. It concluded that it did not uphold the complaint and said the charges were accurate.
  7. On 13 February 2023 the resident escalated his complaint. He said:
    1. The landlord said it received direct readings from his property. He told it how he felt the readings taken were not a true reflection of his actual use and that he did not believe there were any provision in the regulations to “build up credit” over the summer months.
    2. It was in breach of regulation 9 schedule 2 of the Heating Regulations, which set out details that had to be complied with including “actual” rather than estimated consumption at least once a year.
    3. The landlord did not issue statements for the period 8 April 2019 to 3 April 2022.
    4. The landlord chose to ignore his complaint about it failing to adhere to regulation 9. He said the bills were not accurate or based on actual consumption. He said the landlord accepted that its publication on group heating guide was out of date and despite this it was the landlord’s guide at that time and it was not adhering to it in not providing a statement every 3 months showing the amount he had been charged.
    5. A supplier cannot back bill more than 12 months since 1 May 2018 and this should be set out in its terms and conditions. He said he was made aware of this in October 2021 and as such should not have been back billed for charges before 8 October 2020.
    6. He told it how 5838 units were used between April 2016 and February 2019, for 151 weeks. But 13223 units were used between April 2019 and April 2022 for 156 weeks. He said it was “impossible” that his average usage could vary by an increase of 118%, according to his calculations.
    7. The landlord had breached regulations and overcharged him for faults that should have been noted and repaired years before. He said the landlord should apply a rate of 39 units a week until its system had been repaired and said he should be compensated for overpayments.
  8. On 15 February 2023 the landlord acknowledged the resident’s complaint and said it would provide a full response within 20 working days, by 10 March 2023.
  9. On the 8 March 2023 the landlord apologised that the resident had to complain and said it wanted to check the meter and heating controls were working properly. It asked the resident for a convenient time to carry out the checks.
  10. On 9 March 2023 the resident told the landlord that he had questions about the meter and heating control checks that it wanted to complete. He asked if the test were the same as those completed a year ago, how long it would take to complete the tests and if he would have to pay for the test.
  11. It is noted that the landlord confirmed the tests were the same as those conducted a year ago, they would take 6 hours and it would monitor the results during the day. It confirmed there would be no charge and that the tests would start in the morning.
  12. On 13 March 2023 the landlord told the resident its complaint response would be delayed. It said it needed more time to investigate and formulate its response. It apologised for its delay and said it would provide its response by no later than 20 March 2023.
  13. In an internal email from 13 March 2023 the landlord said it was arranging to check the heating meter on 14 March and it would complete its complaint response after this.
  14. On 15 March 2023 the landlord provided its final response. It said:
    1. It had received accurate readings for the meter from 7 April 2019 to February 2023. It explained the readings were sent remotely and were a true reflection of actual consumption and the charges were based on these. It said it attached monthly reading and confirmed the resident had only been charged for usage. It said the monthly payment was the same to cover all seasonal changes. It said it arranged for a check on 13 March 2023 which found that the equipment was working correctly and it confirmed the resident was charged based on usage.
    2. It provided copies of all statements sent to the resident since April 2019 and said how it did comply with regulations that require it to issue billing information at least once a year based on actual consumption.
    3. It was in the process of reviewing its group heating guide and would publish this.
    4. It explained how it calculated weekly payments over the year so the amount paid was the same.
    5. It did not uphold the resident’s complaint and referred him to the Service.

Assessment and findings

Scope of investigation

  1. The resident’s complaint includes concerns about the increase in district heat charges and not being accurate. The resident has also alleged that the landlord has failed to apply ‘back billing’ rules for charges over 12 months. He explains that he should not be charged for usage more than 12 months before due to the landlord’s incorrect bills.
  2. It is important to explain that it is not for the Service to decide on the reasonableness of a heating charge in itself or to determine what the charge should be. It is clear this has been a difficult and confusing time for the resident and concerns about not applying back billing rules would be best directed to the Energy Ombudsman. However, it is within the Service’s jurisdiction to consider how the landlord responded to the resident’s reports of overcharging and this will be considered further within this report.
  3. It is also noted that the resident and landlord were in communication about incorrect district heating charges in 2016. The concerns at that time related to charges from the start of the tenancy in May 2014 and concerns about agreeing to a fixed charge which was not detailed in the tenancy agreement. However, it is noted that in April 2017 the landlord accepted its failings and some incorrect charges. To resolve the issue at that time, it offered to reimburse £753.63 in settlement of the issues, the resident accepted this.
  4. In such circumstances the Ombudsman would expect the resident to have raised these issues as complaints within a reasonable time, normally 6 months. While this report does refer to unit charges from 2014, this is for background purposes and the report will focus on the concerns about overcharging following the change in the meter post February 2019.

Handling of the resident’s reports of increased unit usage for district heating

  1. It is not disputed that in February 2019 the landlord changed how it collected meter readings for the property by installing a new meter. This meant readings were sent remotely to the landlord and it has said that it charged based on the readings.
  2. The evidence shows that following the change in the meter the resident raised his complaint in September 2022. Here he told the landlord about charges from 2014 to demonstrate his usage and explain how his usage units had significantly increased. He said that between 26 May 2014 and February 2019 15,877 units were used for almost 5 years. He explained that between April 2020 and April 2022 the landlord recorded 10,907 units used for 2 years. He told the landlord how this increase in usage was “not possible”.
  3. Within its response from September 2022, the landlord explained how it was collecting weekly meter readings since February 2019. While it accepted there were inaccuracies in November 2021, it explained it awarded £282.80 due to issues with its equipment. It was appropriate for the landlord to award a refund when it found errors with the meter.
  4. It is noted that the landlord tested the equipment at that time, with the last test being in March 2022. When considering the complaint related to readings up to April 2022, it was reasonable for the landlord to refer to its testing in March 2022 in such circumstances.
  5. While the landlord’s response explained it had previously tested the equipment, it failed to explain or provide reassurance to the resident to show that the significant increase in usage was accurate and how it would monitor usage going forward. This was not appropriate.
  6. The evidence shows that the resident’s usage in April 2020 to 2021 increased by 2,937 kWh, this was more than double the usage of April 2019 to 2020 (2,316 kWh) usage. Despite the resident’s queries about the significant increase in usage, the landlord has failed to explain the increase to the resident in a meaningful way and instead it told him that the usage was correct. The landlord’s failure to explain the increase in usage and provide the resident with clear information on this meant the resident was not able to effectively manage his accruing usage and the associated charges. This was not appropriate.
  7. This meant the resident had to contact the landlord again and repeat how he felt the readings were not correct, were not based on his actual usage and how he felt it was “impossible” that his usage could vary as much as the landlord had said. In its response it was appropriate for the landlord to offer to check the meter was working correctly. Despite requests, the Service has not been provided with a copy of the inspection and it is unclear whether the check involved the signalling device and whether it was completed by an appropriately qualified officer.
  8. It is noted that the resident feels the landlord has failed to adhere to the relevant regulations and says the bills were not based on actual consumptions. While these comments have been considered, the landlord’s use of an automated system demonstrates its attempts to comply with the required regulations. However, this does not remove its responsibility to ensure the automated system is correct and provide reassurance of this.
  9. It is also noted that within the resident’s complaint he referred to the landlord’s guide for tenants about district and group heating. Within its response from September 2022, the landlord said the guide was “slightly” out of date following the change in the meter from February 2019. It repeated this position in March 2023. The landlord’s failure to update its guide for over 4 years was also not appropriate.
  10. Overall, the landlord’s handling of reports of overcharging for district heating was not appropriate. The resident repeatedly told it that the significant increase in unit usage was “not possible”, while the landlord completed some checks it failed to provide clarity on the significant increase in usage when compared to previous years or provide clear information to the resident on how to manage his usage. This meant the resident was repeatedly caused some surprise when he received statements on his usage amounts.
  11. The landlord also failed to update its guidance to residents and has failed to provide evidence to show checks of the heating system were completed by a suitably qualified operative as detailed in the Ombudsman’s spotlight report on cold comfort published in February 2021.
  12. The landlord’s failings here amount to maladministration.

Complaint handling

  1. The landlord’s overall complaint response timeframes was reasonable. It acknowledged the resident’s complaint and set timeframes for when it would respond. When it could not meet its timeframe, it appropriately notified the resident of a revised timeframe. Its approach was reasonable.
  2. Paragraph 5.6 of the Ombudsman’s Complaint Handling Code, published in 2022, says that:
    1. Landlords must address all points raised in the complaint and provide clear reasons for any decisions, referencing the relevant policy, law and good practice where appropriate.
  3. The resident’s main concern was about the significant increase in his usage. He made this clear in his complaint and escalation request. Despite the resident’s repeated requests, the landlord failed to explain how the usage had increased as much as it did or how the usage increase was accurate. While it did complete tests, it failed to address the resident’s concerns and repeatedly told him that the usage was a “true reflection of actual consumption”.
  4. Both the landlord’s stage 1 and 2 responses failed to provide clear reasons for its decision and ultimately did not address the crux of the resident’s concerns about the significant increase in usage. This was not appropriate and amounts to maladministration.

Determination (decision)

  1. In accordance with paragraph 52 of the Housing Ombudsman Scheme, there was maladministration in respect of the landlord’s:
    1. Handling of the resident’s reports of increased unit usage for district heating.
    2. Complaint handling.

Reasons

  1. While the landlord conducted some testing of the district heating system following the resident’s reports of overcharging. It failed to explain the significant increase in the usage units following the installation of its new meter in February 2019. It failed to provide clear information to the resident on how to manage his usage or update its guidance in a timely manner. This means the resident has been left not knowing how to manage his usage or the associated costs.
  2. The resident told the landlord that it was “impossible” that his usage could increase as much as it did. The landlord repeatedly missed opportunities to explain how the usage had increased or satisfactorily address the key aspect of his complaint.

Orders

  1. The Ombudsman orders a senior manager at the landlord to issue an apology to the resident within 4 weeks of the date of this report.
  2. The Ombudsman orders the landlord to pay the resident a total of £350 compensation within 4 weeks of the date of this report. Compensation should be paid directly to the resident and not offset against any arrears:
    1. £250 for the distress, inconvenience, time and trouble caused by the highlighted failings when handling the resident’s reports of increased unit usage for district heating.
    2. £100 for the distress, inconvenience, time and trouble for its complaint handling failings.
  3. The Ombudsman orders the landlord to investigate the resident’s concerns about the district heating meter within 6 weeks of the date of this report. This should include:
    1. An inspection of the resident’s meter and its signalling devices. This inspection should be conducted by the manufacturer of the relevant meter or an organisation accredited by the United Kingdom Accreditation Service. It should provide a copy of the outcome of its investigation to the Service and the resident.
    2. If the landlord finds an error with its system it should calculate the appropriate charges and refund any amount due to the resident, providing a breakdown to the Service and the resident in writing.
    3. It should investigate and explain to the resident and the Service, the increase of usage from 8 April 2019 to 5 April 2020, which showed usage of 2,316 kWh, and the usage from 6 April 2020 to 4 April 2021 which showed usage of 5253 kWh.
    4. It should explain how it will monitor usage going forward while working with the resident.
  4. The Ombudsman orders the landlord to update its guide for tenants on district and group heating, if it has not already done so.