The UK’s competition watchdog has launched a heating oil compensation scheme that will pay out to roughly 1,700 customers whose orders were cancelled when prices surged following the outbreak of the US-Israel war with Iran. The Competition and Markets Authority (CMA) announced on 28 August that suppliers had agreed either to compensate affected customers or to honour the original orders at the prices agreed before the spike.
Around 800 people have already been notified, with hundreds more still to be contacted. The CMA said it pressed suppliers to join the scheme after raising concerns about possible breaches of customer contracts.
What pushed heating oil prices so high?
Wholesale gas and oil prices surged when the US-Israel war with Iran began at the end of February. Average heating oil prices rose by 92% at their peak, and, according to The Guardian, the price reached 123p a litre in April. Some suppliers responded by cancelling existing customer orders rather than fulfilling them at the lower agreed price, leaving those customers with no choice but to reorder at the inflated rate.
The CMA said some customers ended up paying between £150 and £350 more for replacement heating oil as a result. Others simply found themselves without fuel and did not reorder at all.
Who gets what under the heating oil compensation scheme?
The scheme works in two ways, depending on what happened after a customer’s order was cancelled. Customers who paid more for a replacement order will receive a payment covering the difference between the original agreed price and what they actually paid. Customers whose contracts were cancelled but who did not go on to buy a replacement will have their original order honoured at the price they were originally quoted.
Sarah Cardell, chief executive of the CMA, set out why the watchdog had moved quickly on the issue. ‘Heating oil isn’t a luxury, it’s a necessity that many people rely on to have hot water and warm homes,’ she said. ‘During the price spikes earlier this year, hundreds of customers were left out of pocket or without fuel after their orders were cancelled. That’s why we’ve pressed suppliers to put it right. They’ve now agreed to compensate those affected by issuing compensation or honouring their original contracts.’
As MoneySavingExpert reported, the CMA’s order on 28 August marked the formal point at which suppliers were directed to act, with the estimated total of around 1,700 affected customers drawn from the watchdog’s own assessment of the scale of cancellations.
Why heating oil matters to UK households
Heating oil is not a fuel most town and city dwellers think much about, because most urban homes are connected to the gas grid. But around 1.5 million UK households use it as their primary source of heat and hot water, and for many of them there is no easy alternative.
The regional picture in Northern Ireland is particularly striking. Around 60% of homes there rely on heating oil, compared with just over 5% across the UK as a whole. That means a price spike of the kind seen earlier this year hits communities in Northern Ireland disproportionately hard, at a time of year when demand is already picking up ahead of autumn and winter.
For households affected by the cancellations, the CMA’s compensation scheme offers a direct remedy: either a cash payment for the extra they spent, or delivery of the fuel they originally ordered at the price they originally agreed. The CMA said it is continuing to contact the remaining customers who have not yet been notified, so anyone who had a heating oil order cancelled during the price surge and has not yet heard from their supplier should expect to receive information shortly.
