Boiler manufacturers face competition inquiry over price hikes

The four largest gas boiler manufacturers face a competition inquiry after imposing price hikes of around £100 on customers to offset potential fines for missing clean energy targets, the government has confirmed.

In a move first reported by Sky News last week, energy secretary Claire Coutinho has asked the Competition and Markets Authority (CMA) to investigate the home heating market.

It comes amid concerns over the response of Worcester Bosch, Vaillant, Ideal and Baxi, who between them control 90% of the market, to government plans to meet targets for electric heat pump sales or face fines.

In January, the companies added around £100 to the cost of new gas boilers, characterising it as a 'boiler tax' caused by the government's approach.

Those targets have been now pushed back 12 months to April 2025 in a compromise that follows intense debate between ministers within the Department of Energy and Net Zero.

Under the Clean Heat Market Mechanism (CHMM), originally scheduled to begin next month, boiler manufacturers will have to sell a proportion of electric heat pumps, starting at 4% and rising to 25% by 2028. For every boiler by which they miss the target they will be fined £3,000.

Ms Coutinho was minded to scrap the policy altogether, apparently persuaded by the industry's argument that the air source heat pump market is not large enough for them to hit the targets.

She is understood to have faced opposition from junior ministers Graham Stuart and Lord Callanan, as well as resistance from the Treasury, which has earmarked fines to offset the cost of installation grants of £7,500.

After months of uncertainty the department has committed to the policy starting 12 months late with fines levied on sales below the second year target of 6%. Its implementation will now fall to the next government.

In a written statement to the Commons Ms Coutinho said the policy has been "scrapped for a year".

In a sign of the continuing tension, Lord Callanan has not submitted a similar statement to the Lords. He is understood to believe the language is misleading as the policy has been delayed, not scrapped.

Last year 1.5 million gas boilers were installed, compared to just 60,000 heat pumps. To meet the target gas boiler manufacturers will have to sell 60,000 electric pumps, a rate they say they cannot meet as new-build installations do not count towards the totals.

The Government target is for the installation of 600,000 air source heat pumps a year by 2028.

While the ministerial compromise saves face and avoids the prospect of resignations at a sensitive time for the government, the delay has angered all sides of the home heating industry.

The MCS Foundation, which oversees the certification of low-carbon home heating, said: "It is extremely disappointing to see that the government has postponed one of the most important policies for getting the UK off fossil fuel heating.

"The Clean Heat Market Mechanism is crucial to the rollout of heat pumps, which are the only viable option to decarbonising at scale the 17% of UK emissions that are created by heating our homes."

Mike Foster, chief executive of the Energy and Utilities Alliance, which coined the term "boiler tax", said gas boiler makers were now considering how to reimburse customers who had been charged more to cover fines they will not have to pay.

"This decision is clearly political, not about heating policy. The government have set a trap for a future administration, which according to the polls is likely to be Labour, knowing the boiler tax from 2025 is likely to be around £200.

"But it is an obvious trap, so obvious it has warning lights and bells attached. It could be up to Labour Ministers to decide whether to go ahead with the boiler tax, but they have been warned, the public don't like it; it hits the least well off the hardest and the whole policy needs to be revisited before it harms British companies and British workers."

Requirements for homeowners to meet certain insulation standards before being eligible for a £7,500 grant towards the cost of replacing gas boilers with an air source heat pump have also been dropped.

-sky news