Manchester City Council (202401237)

Background

1. The resident’s rent includes a weekly charge for fixed heating. Following an increase in heating charges, the resident complained about how the landlord was applying the energy price cap, set by the energy regulator (Ofgem). Within the landlord’s stage 1 and 2 responses it explained how it calculated heating charges.
2. Following the end of the landlord’s internal complaints process the resident remained dissatisfied and referred his complaint to us for further consideration. He has told us that while he understands that the landlord can increase charges, he is unhappy with its use of language which suggests it is ‘in line with’ the Ofgem price cap. He does not believe this is the case.

What the complaint is about

3. The complaint is about the landlord’s:
   1. Response to the resident’s queries about the energy price cap.
   2. Complaint handling.

Our decision (determination)

4. We have found that there was:
   1. A service failure in the response to the resident’s queries about the energy price cap.
   2. No maladministration in the landlord’s complaint handling.

We have made orders for the landlord to put things right.

Summary of reasons

Response to the resident’s queries about the energy price cap

5. While the landlord did attempt to explain the increase in heating charges, its response could have been clearer and it would have been more suitable for it to have compared unit rates to demonstrate charges.

Complaint handling

6. The landlord’s complaint handling was in line with its complaints policy.

Putting things right

Where we find service failure, maladministration or severe maladministration we can make orders for the landlord to put things right. We have the discretion to make recommendations in all other cases within our jurisdiction.

Orders

Landlords must comply with our orders in the manner and timescales we specify. The landlord must provide documentary evidence of compliance with our orders by the due date set.

Recommendation

Our recommendations are not binding, and a landlord may decide not to follow them.

Our investigation

What we found and why

The circumstances of this complaint are well known by the parties involved, so it is not necessary to detail everything that’s happened or comment on all the information we’ve reviewed. We’ve only included the key information that forms the basis of our decision of whether the landlord is responsible for maladministration.

What we have not considered

7. Within the resident’s complaint, he raised concerns about the increased rent due to heating charges. He also raised concerns about a price cap set by Ofgem and if it was applied. We do not investigate complaints that concern the level of rent or the amount of rent increase. The Energy Ombudsman or court are more likely best placed to consider this given their powers and expertise.

What we have considered

8. The tenancy agreement explains that the resident’s rent includes an amount for heating charges. It says that rent may increase or decrease, usually once a year, and the landlord will provide at least 4 weeks’ notice before any rent change.
9. The resident complained to the landlord on 7 March 2024, about inconsistencies in how it applied the energy price cap to heating charges. Within the landlord’s stage 1 response it said it had reviewed heating charges to “close the gap” between expenditure on gas and income from residents. It explained how its charges were based on anticipated prices for the future and use from the previous year. Its intention was for heating charges to reflect the actual costs of gas used. It said the increase to heating charges were so it was “in line with the price cap”.
10. The landlord’s stage 1 response explained its calculation of charges in detail, including the reasoning for an increase. It said that there was a significant under recovery of gas costs from residents. The tenancy agreement allows the landlord to increase charges in such circumstances.
11. Within the landlord’s stage 1 response it said the price cap for January 2022 was £1,277. It said this was “the maximum a household could pay for energy costs based on typical usage”. It is important to note that the price cap set the maximum price, not the maximum payment amount. As such quoting the maximum a household could pay may have caused some confusion and the landlord’s response could have been clearer.
12. The resident has said the landlord’s use of the phrase ‘in line with’ the price cap was not correct. While the landlord did attempt to explain how it calculated its charges, its use of the total illustrative figures instead of the unit price may have caused confusion. It would have been more suitable for the landlord to have compared both unit prices to clearly demonstrate the differences and show the resident how it was ‘in line with’ the price cap.
13. It is important to explain that the Ofgem’s price cap applies to licensed energy suppliers. Here the landlord has charged heating costs through rent and there is no evidence to show that the landlord was a licensed energy supplier. In such circumstances we would expect the landlord to follow the terms of the tenancy agreement.
14. It is noted that the resident has raised concerns about the landlord referring to the price cap when there was a price increase but not when there was a decrease. Without evidence to show the landlord was required to apply the price cap, it did follow the tenancy agreement and made some attempt to explain the reasons for any increased charges. However, for reasons mentioned, its explanation could have been better.
15. Overall, there was a service failure in the landlord’s response to the resident’s queries about the application of the energy price cap. Its responses would have caused some confusion as the resident remained unsure how heating charges compared to the price cap and how the landlord decided they were “in line with” the price cap.
16. When deciding an appropriate remedy our remedies guidance has been considered alongside the landlord’s compensation guide. A compensation amount of £50 has been decided as appropriate to acknowledge the impact of the landlord’s failings. This amount falls within the service failure banding of our remedies guidance.

17. The landlord’s complaints policy says it will issue a stage 1 response within 10 working days. It says a stage 2 review will be issued within 20 working days.
18. The resident raised his complaint on 7 March 2024 and the landlord appropriately issued its stage 1 response on 12 March 2024. This was in line with its complaints policy.
19. The resident escalated his complaint on 18 March 2024 expressing unhappiness in the landlord’s response. The landlord issued its stage 2 response within 20 working days. This was also in line with its complaints policy.
20. While the report has highlighted what the landlord could have done to improve the content of its responses, this has been addressed and has not been repeated here. The landlord’s overall handling of the resident’s complaint was reasonable and in line with its complaints policy. There was no maladministration.

Learning

21. The landlord may wish to consider how it can clearly explain its heating charges to residents in similar circumstances. It may find it beneficial to compare similar figures (unit costs).

Knowledge information management (record keeping)

22. There were no knowledge information management issues identified in this investigation.

Communication

23. There were no communication issues identified in this investigation.