The UK government has accepted a Competition and Markets Authority recommendation to bring the heating oil market into formal regulation for the first time. Ministers presented the decision as a response to weaknesses exposed during the recent price shock, when households relying on heating oil had limited protection if supplier behaviour changed after an order was placed. The policy significance is straightforward. Heating oil has sat outside much of the consumer protection architecture that applies across the wider energy market, leaving expectations dependent more on industry practice than on a clear regulatory framework. The proposed regime is intended to change that.
The immediate trigger was the disruption that followed rising oil and gas prices during the Middle East conflict cited in the government statement. Ministers said some suppliers cancelled orders after prices increased, leaving customers to place new orders at higher rates. The CMA later found that 1,700 households were owed compensation because cancelled orders forced them back into the market at a worse price. The government had already provided £53 million in immediate support for vulnerable heating oil customers, but it is now arguing that one-off assistance is not an adequate substitute for stronger market rules.
According to the government, the new regime will be developed with industry and is intended to protect consumers while promoting competition. The stated objectives are to formalise the standards customers should expect, strengthen safeguards for vulnerable households and give consumers clearer routes to compensation when suppliers fail to meet those standards. That is particularly relevant in rural areas, where heating oil remains a basic household fuel rather than a discretionary purchase. Energy Consumers Minister Polly Billington said the government would hold suppliers to account and improve confidence that consumers will receive a fair deal.
The short-term changes are more limited but still material. Ministers said consumer protections will first be strengthened through revised Codes of Conduct while the longer-term regulatory regime is designed and implemented. The government also said it will review industry practices that set minimum order volumes at 500 litres for some customers. For households managing tight budgets, that issue has a direct cost effect, because larger minimum deliveries can require people to buy more fuel than they need at a single point in time.
The announcement also sits alongside the government's separate programme of reform for Ofgem. Although heating oil is outside Ofgem's traditional remit, ministers presented both measures as part of a wider effort to make energy regulation more responsive to consumers and better suited to current market conditions. In parallel, the government linked consumer protection to decarbonisation policy. Households that use heating oil are eligible for a larger Boiler Upgrade Scheme discount, with the heat pump grant increased to £9,000 for those customers.
The government said demand has already risen following that change. July application numbers for heat pumps were reported to be 81% higher than a year earlier, and 1,042 voucher redemptions paid in August were for the £9,000 heating oil grant, accounting for 32% of the month's total. Taken together, the package points to a two-track policy approach. One track is stronger consumer protection in the existing heating oil market; the other is financial support for households that choose to replace heating oil with cleaner heating. The next substantive test will be the design of the regulatory regime, the revised Codes of Conduct and any enforcement or redress arrangements that follow.